Episode 95 | When Freemium Fails, 36 Rules of Social Media, Negotiating on oDesk and More…

Show Notes


[00:00] Rob: This is Startups for the Rest of Us: Episode 95.

[00:04] [Music]

[00:11] Rob: Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.

[00:22] Mike: And I’m Mike

[00:23] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Mike?

[00:29] Mike: I’ve talked about my Altiris Training site for the last couple of weeks and things are starting to, it looks like some of my trials are actually starting to convert now so I had my second trial convert yesterday.

[00:38] Rob: Awesome.

[00:39] Mike: I’m only up to I think four or five customers but they’re recurring customers. It’s not like it’s a small price point. So I think the minimum price at this point is $100. So the first two people…

[00:51] Rob: A hundred dollars a month?

[00:52] Mike: Yeah, a hundred dollars a month. So I’ve got I think four or five people on there so far. The fifth one actually paid me for six months upfront. Needless to say my first month’s conversion is pretty nice. I mean I haven’t had many people, actually I haven’t had anybody cancel yet so.

[01:09] Rob: So what do you think this says. I brought this up like casually one time and you and I kind of laugh about it. But it was like you’ve been working on AuditShark for a couple of years and your deadline is actually coming up about 12 days out from kind of your beta.

[01:22] Mike: Uh-huh.

[01:22] Rob: But what does it say like Altiris Training you came up with the idea maybe two or three months ago or that’s the first time you mentioned it to me and then you crank it out and you build it fast, outsource and stuff. And you just got it going. What are thoughts kind of the difference between these two and if you were to do AuditShark again could you do it differently or is this just a completely different product?

[01:42] Mike: Yeah. I think it’s a completely different product. I mean don’t get me wrong. The website itself took some time. I handed it off to somebody else and said here implement this. The reality is that it didn’t take a whole heck of a lot to put together. I mean the whole thing was put together in — I’m trying to think how much I actually paid for the website development and was probably 60-70 hours’ worth of work maybe 80 tops. There’s like $10 or $11 an hour or something like that. So it cost me around $800 for that. And then I got a $100 a month Wistia subscription and then everything is going through stripe and then beyond that it’s just a matter of cranking on the videos. So in terms of my time investment, I don’t think it’s very high. But also the fact is that it’s not a high traffic site. I mean it’s very very specialized, very niche and I don’t expect a lot of traffic.

[02:27] Rob: Right. So this is much more along the lines of like the true blue micropreneur approach where it’s a very small niche and it won’t get a ton of traffic but it’s easy to out market the competition. It’s not that you don’t have any but they really don’t know what they’re doing. And if you go to your competitor’s website it’s just all over the place. You go to yours and actually it looks like a reasonable thing that you take a tour or buy. I mean it’s the basic sales funnel. Whereas AuditShark is a bigger, like a bigger idea, a bigger endeavor, all that stuff, bigger market as well, bigger potential.

[02:58] Mike: Right. I mean the other thing that, I mean part of the reason why I even bothered to go down the road and try to launch altiristraining.com was because I was looking for a way to vet a developer and I needed a project to put them on. So I basically went out and looked for somebody, hired them, put them on this project and it worked out really well. So I actually in a way promoted him into doing stuff for AuditShark. So at this point, you know, he’s got a bunch of task. They’re lined up to start working on and stuff for AuditShark. But I actually let go of somebody last week who was working on AuditShark, who I hired directly onto it which in retrospect was probably not the greatest idea in the world. But the same kind of thing happen previously with somebody that I had hired and had them working on some stuff and then essentially promoted him onto AuditShark and that person worked out fine. It’s just the person who was hired directly into it, you know, just didn’t work out very well.

[03:50] Rob: Right. So have you considered focusing on Altiris Training and trying to grow it, grow it big to get to the level you want it to or do you view as a, I won’t say a side project but a project that maybe will take a backseat to AuditShark long term.

[04:03] Mike: No. I think it’s definitely a take a backseat. I don’t have any preconceived notions that it’s going to grow into some giant thing. I mean I’ve talked to a lot of people who are in the Altiris world and things are changing dramatically. Symantec just recently had their CEO leave. So things are kind of up in the air in terms of what Symantec is doing and there’s a lot of question marks over what the future of Altiris actually is.

[04:28] So people are not necessarily jumping ship to other project but they’re certainly giving other products a serious look. And I do know a consultant out there who is based in Australia who he has had problems finding work in finding doing Altiris work because their costumer based is leaving and they are going to other products. So he would like to see Altiris Training succeed because that’s one of the people’s main complaints is that there’s not enough training out there or not enough quality training, but at the same time I don’t know is that my future is there either. It’s not something I really want to upkeep.

[0:05:01] I mean the way I see it is what I’ll probably do is I’ll probably grow it kind of on the side and for the time being just to kind of squeak out whatever revenue I can. And then as I build it up if I get to a point where it becomes any sort of a distraction at all, I’ll look to unload it to one of the existing Altiris partners and just say you can have all this. You can have the customerbase and everything else that goes with it.

[05:21] Rob: You watch it’s going to get huge. It is going to totally outstrip AuditShark it’s going to be like Doh!

[05:27] Mike: Well I mean if that happens then I can hang on to it but I just don’t see that in its future. The interesting thing is that almost with no marketing I ended up landing on the front page of this website called alteregos.com and they are, I’ll call them a third party community site for Altiris and Altiris administrator. I don’t know who did this or why but you go to their website and bam right there on the front is you know a link to my training site.

[06:02] Rob: I see that. That’s crazy.

[06:03] Mike: I don’t know how that happens. I don’t even know who run the site. I mean that right there basically double my traffic.

[06:09] Rob: Geez. Awesome. And this is from June and it continues to send traffic for you. What a fortuitous little event there.

[06:16] Mike: Yeah. So I’ve been getting inquiries here and there from different people and I’ll be reselling some other people’s instructor based training on my website. I actually have that on my development server right now. I haven’t fully tested it yet or check to make sure that I can accept payments for that. But I bundled it with another partner who they’re going to give a three month subscription of my site to everybody who goes through their instructor based classes and for that they’re going to give me $250 for each person.

[06:45] Rob: I’ll tell you what, Mike. There are some potential here. It sounds like people are coming out of the woodwork to promote you and tie in with you. I mean that’s a sign that you really met an unmet need with this thing.

[06:56] Mike: I know I’ve met an unmet need it’s just it’s a matter of my interest level in it.

[07:01] Rob: Yeah.

[07:02] Mike: That’s one of those things where it’s, you know, you have to look at these things and when you’re trying to identify a business opportunity it’s like you hope for something that you know is not only profitable but you’re going to enjoy. And this isn’t something I particularly enjoy but it makes money. So you know who am I to complain about it.

[07:19] Rob: I hope to hear more about it as things kind of unfold with it. It sounds like it’s on an upward trajectory already.

[07:25] Mike: Speaking of fortuitous media what’s with this comment in the Wall Street Journal.

[07:32] Rob: Indeed. So the Wall Street Journal contacted me. A couple of reporters contacted me and ask me about freemium.  They wrote up HitTail and it was like a three or four paragraph mention and its inbetween, like Dropbox, Evernote, iPhone Apps company I’ve never heard of and it’s like a games company and then HitTail and I think one other. So I’m among pretty good company. But the funny thing is two things. One, they say my name, Fresno, California all that stuff. But right away they misquote. They say he is struggling to make freemium work for HitTail. And I didn’t say that. I just commented that there was a free plan when I purchased HitTail and then I shut it down. But they kind of inserted the word struggling and I’m like huh? I didn’t. I mean I shut the free plan down within a month or two of buying it. I’m now actually struggling to make it work. I’m not even trying to do freemium.

[08:20] Mike: [Laughter]

[08:21] Rob: And then the other thing is they mentioned all the companies. They don’t hyperlink out at all. I think the only two hyperlinks are two if they mentioned a public company’s name and they link to the Wall Street Journal’s stock page for that company that shows their quote and everything. But all the other people including HitTail zero links which obviously the hyperlinks would be worth a lot of authority from them but second to that I would love to have seen how much traffic this drove. Because I can’t tell because if people came to the site they either typed in the name directly or they did a Google search for the company name.

[08:51] Mike: Uh-huh.

[08:52] Rob: So I really don’t know. I would guess it didn’t drive that much. I can kind of see a spike in trials and it was so-so. But it wasn’t like some amazing boost in trials but I wouldn’t expect that from an article like this. But it was cool. They did get my favorite quote in there. I likened freemium to samurai sword. I said if you’re a master then you can do great things with it. But unless you’re a master you can cut your arm off. And the reporter is like that’s great. I’m going to get that in there.

[09:17] Mike: Yeah. I really like that quote.

[09:20] Rob: So this appeared in the print Wall Street Journal paper print edition which is pretty crazy.

[09:22] Mike: Wow. Did you get a copy of that?

[09:24] Rob: I didn’t.

[09:25] Mike: [Laughter]

[09:28] Rob: I don’t know. What would I do with a copy of the newspaper? I could start a fire with it.

[09:31] Mike: I would probably have taken a picture of it and said yeah I got I got in Wall Street Journal but that’s about it.

[09:35] Rob: Yeah. How about you, what else is going on?

[09:36] Mike: This week and next week I’ll be working on AuditShark almost exclusively. Aside from a couple of videos I have to build cause people have actually started requesting something for the Altiris Training site but, let’s see here. What was it? Last night I had a conference call with a prospective partner and they’re going to start tapping into their existing costumer based and trying to identify at least a couple of people who we can possibly install AuditShark on for the early release.

[10:04] And then in addition to that I had two conference calls earlier today. One was with a hosting company and then the other one was with a managed services provider. And I think both calls went really well. I definitely learned some things but essentially what I did was I called them up and I had a list of question that I wanted to run through and ask them all my questions and most of them I didn’t really learn a lot from them, but there were certain key pieces that I did learn that I found out that some of my assumptions were just wrong or a little bit off in terms of how they run their business and what sort of things they’re looking for and how they do budgeting.

[10:38] And what I found really interesting was that they were more than happy to talk specific products and specific numbers of what they were paying for some of those other products. So that was definitely intriguing from I’ll say a positioning standpoint.

[10:52] Rob: Absolutely. It’s almost like you’re able to research both your customers and your competitors at the same time. That’s really handy.

[10:59] Mike: Uh-huh. I got another scheduled for Thursday and tomorrow I’ll mostly be working on probably code and I got two developers who are working right now on AuditShark. And I’ve got a documentation writer who is going to be starting probably later this week. I promised her I put together a screencast later today but I just haven’t had time to do it yet. Somebody is going to be building some policies for me later this week as well. I have to give them over the desktop client that allows them to actually build policies but he’s going to be working on that. And he’s got a lot of experience with this kind of things so I’m not too concern about him being able to put those thing together.

[11:34] Rob: Very good. Yeah. HitTail is doing well. I’m continuing with the paid acquisition I’d talked about. No real news there except for I hit the point where I have more trials in my cue with 38 trials going on at any time since I’ve owned it. I would guess more paid trials at any time since HitTail was started six years ago. Things are looking up. I’m hoping to be able to continue this growth. It’s a fairly scalable traffic source. I’m excited to see what happens.

[1:59] And this month did in fact it looks like it’s going to be on pace to match last month and last month I had a $1,000 article order that was just a one off thing. So I’m pretty please with, cause I didn’t start the advertising until well after that. And so none of that traffic has converted yet and it’s still going to grow to keep up with that pace, you know, the $1000 in a month so.

[12:23] Mike: Very cool.

[12:24] Rob: Yeah. I’m pretty pleased with it. I’m trying not to, you know, I’m always cautious optimistic with this stuff right. I never want to, there’s so many things can happen. I’ve had a bunch of trials in the cue and my conversion rate just plummets because the trials were basically from traffic sources that weren’t actually interested in buying. And so making projection is so difficult but at the same time it’s nice to have more than I’ve ever had in the cue and with the possibility with being able to continue that moving forward.

[12:50] Mike: Now have you turned off those advertising avenues that were not working out nearly as well. I think you’ve said that there were two or three that were working really well between 7 and 10 that weren’t working out so well. Have you turned off those other ones and kind of focus just on those two or three?

[13:06] Rob: I have. So everything that wasn’t working, you know, there were a few that I had to purchase. You have to purchase three days at a time but it wasn’t ridiculously expensive so I did it. But everything else I was able to turn off between, you know, basically 24 hours of discovering. Hitting the point where I was like wow zero conversion and 500 visitors. This one is not going to make it even if I get a few conversions all of a sudden. It’s still going to be a crap traffic source.

[13:30] So yup everything else at this point is turned off. I am doing some new experimenting now. I’m swinging back to one. Since I’ve learned so much about buying clicks and demographic and stuff that are converting well now, I’m circling back to one other site that I think I could potentially improve upon and just see if that works this second time around. But aside from that I am focusing and I’m not going to be, I don’t plan to revisit any of the other traffic sources that didn’t work out.

[13:58] Mike: Uh-huh. Cool.

[13:58] Rob: So I saw this thread on Quora. I think someone linked out to it. I think maybe Dan Andrews had linked out but the thread is called, is anyone here a member of the Dynamite Circle/Tropical MBA? And Dan Andrews runs a lifestyle business podcast and then he has essentially it’s kind of like a private social net call that the Dynamite Circle or the DC. And it’s a still membership website basically. It looks like its three months for $97 or $388 a year. And asking the question of course is it worth paying, is it worth the price? It seems kind of pricey with a forum with 400 members.

[14:30] And I love, there’s a whole discussion after this but basically it’s like 10 or 15 Dynamite Circle members come out and say it’s ridiculously cheap. This question is hilarious cause it’s so worth the value. But Dan’s, I love just the way he handles this. He says my sense is if you came to Quora to post this question rather than risking the Benjamin, you aren’t the target market for the DC who are mostly highly engaged followers of our work who have established businesses. Our free information is just as good or bad depending on your view. You aren’t going to learn anything there earthshattering. It’s about networking and sharing information with likeminded entrepreneurs.

[15:05] And someone comes back and says well just someone is cautious about their money doesn’t make them unfit to do anything and kind of almost acts offended. But there’s a really intelligent discussion that follows. And frankly I love so many of the DC-ers coming out the members of the Dynamite Circle coming out and being most of them at least being respectful. Saying no if you aren’t willing to risk $97 then you shouldn’t join. It was an interesting discussion for all and I like the way that Dan had handled the question.

[15:32] There’s a lot of ways you can go with it right when someone says it seems kind of pricey but you can like try to defend the value of it and defend all the things that are in it and what you’ve done to put it together. But he basically eh, he makes it more exclusive by his answer and he comes off as classy.

[15:48] Mike: Yeah.

[15:49] Rob: Well it’s the response that I wanted to start giving. You know when we first launch MicroConf like there were people complaining like $499 for a conference is crazy. And I remember thinking like man if you’re not willing to do it you shouldn’t come. But I didn’t say that to people. And now in retrospect I totally wish you had. I think this is going to be my new line when I launch something because I know the value, you know, the stuff that I or we release or work on has. And I really do think that not trying to please everyone is just a better way to go.

[16:16] Mike: Yeah. It’s just the more I look at things with either my training website or with AuditShark I mean there’s, AuditShark can do a lot of different things but I definitely realized that I don’t want to do too much with it. I really need to just focus on one small area and basically master that because trying to branch out basically leads you into these larger solutions that are more geared to the enterprise that do everything and don’t solve anybody’s problems really well.

[16:45] Rob: Yup. Exactly. So it’s about be a niche and if someone says you’re too expensive or you’re too cheap then you just tell them hey maybe this isn’t the solution for you.

[16:53] Mike: Uh-huh. So speaking of cheap, I decided that I was going to upgrade the RAM on my desktop because I installed Backblaze and I was doing everything locally. I have a NAS device that I was backing everything up to. And I said, well, you know, I should really get this stuff offsite because I got enough important things that I would like to have it offsite. So I installed Backblaze and I have some I’ll say memory issues. It seems like when I leave it running for too long the memory usage tends to escalate and it doesn’t free it up so it seems to me that it got memory leaks. I don’t know for sure if does or not but it just seems like that’s what’s going on. I was looking at my machine and I was like well I only got 4G of RAM. This machine is actually pretty old. I went back and looked and found out that I’d actually purchased this machine in 2006.

[17:40] Rob: Wow. Yeah.

[17:43] Mike: So I was like well can it even support more RAM cause I don’t know. I got Window 7 64bit on it and I was like well I’ll take a look and it turns out I can support up to 16G of RAM. I’m like oh great. I’ll just go buy a new RAM. It’s $400 to buy 16G of RAM.

[17:56] Rob: What. That is crazy. That is much more expensive that I would have thought.

[18:01] Mike: The computer itself is not worth $400 that’s the problem.

[18:04] Rob: I was going to say that’s insane. Yeah.

[18:06] Mike: So.

[18:07] Rob: Cause I bought, I mean geez I bought 8G of laptop RAM for I thought it was a $100.

[18:11] Mike: Right. The thing is that’s not for a computer that’s six years old. I mean the problem that I run to is that its DDR2 RAM not DDR3.

[18:20] Rob: I see. It’s old. It’s not made any more or something.

[18:24] Mike: I don’t think so. I don’t know if they’ve stopped making it or whether they’ve just scaled back on it so much that you know it’s just not around. But that’s kind of the highest end of the DDR2 RAM that they kind of offer. So I don’t know what else I can do.

[18:37] Rob: Yeah. I would check out crucial.com. Crucial may have it. That’s probably the only other place. I would check and then I would ponder just buy a new computer for $400.

[18:47] Mike: Yeah. And buying a new computer I’m just looking at and saying well do I really want, you know, to go that route.

[18:52] Rob: Yeah. I know.

[18:53] Mike: Yeah. I mean I would love to have more RAM right now but at the same time I got so many things going on with AuditShark that I don’t want to have to rebuild my machine either.

[19:01] Rob: Right. Well you can also just upgrade to 8G. So for listeners who have never heard of Backblaze it looks like it’s a backup service just like Mozy.

[19:08] Mike: Uh-huh.

[19:09] Rob: Is that right. It’s a just a little less expensive. So, Mozy starting jacking their pricing structure. I’ve been a member of Mozy or customer of Mozy for I don’t know four or five years and they used to be unlimited for $5 a month and then they become not unlimited. And so suddenly my bill jumped. You know I was backing up two computers. It was $5 a month per computer. It was about $120 a year and it doubled to like $220 because of how much space we’re using. And we weren’t even using that much space. So I jumped over to, I was going to do Carbonite. But Carbonite does not backup video or exe files by default and you have to go individual, you can’t do right click and say back up all these. You have to individually click a checkbox next to every one of them. Ain’t that crazy.

[19:48] Mike: Ouch.

[19:50] Rob: Yeah. So people, like there were people giving them bad reviews. They say its unlimited backup but they don’t tell you that and so I used it for about a week and was like no, I’m not going to do that. Now I use CrashPlan and I have never heard of Backblaze but this would be an alternative cause I think the pricing for these two are similar. So if you’re out there and you’re not backing up your machine you really need to look at Backblaze or CrashPlan. All it is you download a little exe to your computer that runs, you set it to run it at 2 a.m. every night and its $4 a month or $5 a month depending on how far out you pay. I think I even paid out three years with CrashPlan.

[20:24] And for me it’s $10 a month over the course of three years for all of the computers in my house and it’s unlimited storage. So assuming they don’t screw with that unlimited, it really is great. And my wife had an issue actually. Her computer failed. We got nice Toshiba Ultrabook and about 60 days in the thing just failed. The screen stop working and we can’t access anything. And so luckily all her stuff is in Dropbox. Some of it is in Dropbox her working stuff and then everything else is in CrashPlan. So even if they have to scrap it we’re going to be able to get her stuff back.

[20:53] Mike: Yeah. I went with Backblaze. I think I’d looked at CrashPlan a little bit and I forget what it was that made me not go that direction. I don’t recall off the top of my head.

[21:03] Rob: So hey we have a new review on iTunes. I want to thank Ken Brodhagen. He just reviewed us a couple of days ago. He says this is a great podcast with a lot of practical tips. Mike and Rob also have a great chemistry that makes the show entertaining as well. I listen to 25 episodes or so and I’ve just downloaded the whole backlog of archive so I can listen to them all. And of course Mike and I recommend that you do the same if you haven’t heard those glorious first 50 episodes.

[21:26] Mike: [Laughter]

[21:27] [Music]

[21:30] Rob: So I came across this cool article. It’s actually just a one page thing from this September issue of Fast Company. But it’s the 36 rules of social media and it’s kind of just they surveyed a bunch of social media people like the guy behind Radian6 and one at Percolate, VPs of marketing of different web company and all that. And they got these 36 rules that they put in this graphical display and a lot of them are boring. We’re not going to go through all of them. But I wanted to mention a few here that I thought were either clever or just ironically true. The first one is if you all do is respond to complaints that’s all people will send you. Another one is everyone says they don’t want to be marketed to; really they just don’t want to talk down to. And then this might be my favorite. Don’t try to be clever, be clever.

[22:16] Mike: I’m not going to respond to that and try to be clever.

[22:19] Rob: I know.

[22:21] Mike: [Laughter]

[22:24] Rob: See just a couple more. One is people would rather talk to Comcast Melissa than to Comcast.

[22:28] Mike: I don’t think anybody wants to talk to anything Comcast.

[22:31] Rob: it’s okay to drive people to your site instead of Facebook. And that’s an interesting one. So several people who I talked to when I was talking about gearing up on paid acquisition and a couple of folks who’d used Facebook said oh yeah don’t send the traffic to your site. You really want to send them to your Facebook page because Facebook jacks up the price of the ad as soon as you send them to an external URL. And I wasn’t super comfortable with that. I mean there is HitTail Facebook page and of course you drive them over there and then you try to get them to like you so that it’s viral.

[23:00] And you try to get them to go from there to then your external website. And then that certainly is a long term thing. I’m going to look into. But I wanted to see if I could get people to convert straight away from the site. You know have a compelling enough value prop for them, a compelling enough ad that they click through and then a compelling enough value prop on the site that they convert. So I like that one because I think kind of the common wisdom of today is send them to Facebook because that’s what Facebook wants you to do. So they make your ad click cheaper and make it easier.

[23:26] Mike: I didn’t realize they made it cheaper to do as well.

[23:30] Rob: I haven’t done it. I think that’s pretty much, several people told me that so I’m assuming that’s the case.

[23:36] Mike: Wow. That’s crap.

[23:38] Rob: That’s Facebook.

[23:39] Mike: As told by their stock price.

[23:41] Rob: Yeah and that’s a whole other discussion probably.

[23:43] [Music]

[23:46] Mike: Why don’t we answer a listener’s question.

[23:49] Rob: All right. This is from Gerald Briones. He’s with Ganda Studios and he says hey I’m a big fan of the show especially like the podcast on Marketing a $1 App. Any tips of negotiating with contractor via oDesk? I’m hoping to develop a project but I’m on a limited budget. The programmer I currently used has declined to do my next project due to low budget. I’m probably going to try contacting other programmers on oDesk. Cheers and happy podcasting.

[24:15] Mike: So I think that when you’re working with contractors via oDesk it’s probably going to be a little bit challenging to negotiate with them on price. And I think the reason for that is because when you’re going through oDesk you’re already asking them to compete against each other. And unless you have set forth a very specific budget for the project and then post it out there as a fixed price project I think that you’ll probably going to run into issues.

[24:44] And you know this question doesn’t necessarily say whether the projects are being done on an hourly basis or on a fixed price basis. So I don’t know. I think it’s a complicated situation. I mean why don’t we just discuss it as opposed to me giving an answer that we can talk around quite a bit and then go from there. Cause there’s a couple of different sides. The first one is whether it’s a fixed price contract or whether you’re doing something on hourly project right.

[25:09] Rob: Yeah. I mean the big difference is if it’s a fixed price and you negotiate them down they’re going to cut corners, right? I mean that’s what they’re going to do. Contractors are not going to sit there and then work the same amount of hours and take less pay. And I think the problem is hourly, yeah, to me it’s a bad idea. I mean I think you can always try to squeeze dollars out of people but I would look more at cutting scope or somehow trying to come up with money through other means basically. You know when you’re boat strapping you can do all types of crazy stuff to come up with a few dollars.

[25:42] But I think try to cut down the fixed price one like I said the person is going to cut corners and then you’re going to get in fight over that if the app doesn’t work or whatever. And if its hourly and you’re negotiating down, I mean as a contractor when I was consulting, I never let people negotiate. If they wanted to ask to pay less I would just say you know what this is my rate period and you can pay it or leave it. And I wasn’t a jerk about it but that was what my time was worth at the time. And I had plenty of people who would pay it.

[26:08] The flip side of that is even if you get them to agree to drop their rate, as soon as they have other work that pays them the better money, they’re going to prioritize that higher than yours. And so you’re always going to be the person they don’t want to be doing your work. They don’t want to do more work for you. They want to do it for other people. I think it’s a short-term mentality to think about negotiating for something like that.

[26:27] In fact, when I hire contractors I’ve done this for a while. If I find someone who is good and who does solid work I actually increase their rate. I’ll negotiate against myself after a while once I know that they come through because I want me to be priority. I want them to think of working for me as the no. 1 highest priority because I’m actually the highest paying guy that they’re using. And I did this even before I had a lot of success cause I knew early on that finding good people was important.

[26:53] Mike: Yeah. I would agree with everything you said. I mean it’s just I don’t know I would have a hard time especially on oDesk trying to convince people to cut their rate. Because when you go onto oDesk if you’re doing like an hourly project I haven’t done a fixed price project there but if you’re doing an hourly project then you’re already providing a rang. And they can come in and they can say, let say you get a range to $8 to $18 an hour for whatever the project is. If you come in and somebody says well I’m going to charge $20 an hour or somebody else comes in and says they’re going to charge $6 an hour there’s I think a certain level of quality difference that you’re going to get between those two people as well.

[27:37] And it may be substantial and it may not be and it’s up to you to try and figure out what those differences are. And when you get into the hourly projects I mean that kind of get rid of any sort of fixed price project. I think when you’re talking about people on oDesk one of the issues is that you just dot want them to start negotiating because as you said I mean if they have to negotiate with you against the rate that they’ve already tried to persuade you to give them, you know they are going to cut those corners.

[28:05] Rob: All right, Gerald. Thanks for the question. I hope that helps.

[28:08] [Music]

[28:12] Mike: If you have a question or comment, you can call it in to our voicemail number at 888-801-9690 or you can e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control” by MoOt, used under Creative Commons. You can subscribe to this podcast in iTunes by searching for Startups or via RSS at StartupsfortheRestofUs.com where you’ll also find a transcript of each episode. Thanks for listening. We’ll see you next time.

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3 Responses to “Episode 95 | When Freemium Fails, 36 Rules of Social Media, Negotiating on oDesk and More…”

  1. Great Episode.

    I’m also really looking forward to episode 100. I already tweeted it to Rob, but want to re-iterate it here: Instead of a wife’s episode a la TechZing you could do a kids episode – if the kids are old enough for that.

    That sounds like you’ve really found something that is making you some money. I’m excited to see/hear where this side project takes you.

  2. I think the freemium model has gotten a bad rap lately, (*cough* http://www.softwarebyrob.com/2010/08/18/why-free-plans-dont-work/ *cough*).

    I have a successful freemium business (www.analystratings.net) with 20K free subscribers and 600 paying customers (each of which is worth ~$105.00 per year to me). The cost of maintaining my free subscribers is approximately $300 per month in SendGrid fees. Every action that free subscribers can take (signing up for a premium subscription, unsubscribing) is self serve.

    My free newsletter is an integral part of my conversion funnel. The strategy is to get people on the free list (minimal friction, one text box and one button to sign up), deliver them value via the newsletter, then offer to deliver them more value via the paid service.

    I think it works, it’s just a matter of limiting the expense of the free option and maximizing the opportunity in marketing to free customers.

  3. I don’t have conclusive evidence that Backblaze is truly unlimited, but I have 869,636 MB (73,000 photos) backed up with Backblaze and I’m happy with the service. I don’t experience throttling or any other degradation.