Tag: Marketing

Investing Lessons from Running a Startup

[This is an edited version of a talk I recently gave at a MOI Global event.]

I’d like to share some of the lessons I learned from being a startup founder, and how these can be applied to investing:

Lesson 1: I’m a better investor because I was a founder

As Warren Buffett famously said: „I’m a better investor because I’m a businessman. And I am a better businessman because I am an investor.“

This rings very true to me, and I can confirm it based on my own experiences.

I was in the middle of my startup, back in late 2008, when I discovered Warren Buffett and Benjamin Graham. My main takeaway for my business was that I realized how bad our gross margins were. At the time, our gross margin was around 30%, and we were burning money. Then, when applying this insight over a period of 3 years, we were able to double the gross margin to 60%, which helped us to achieve break-even and ultimately lead to selling our business. Without those gross margin improvements, it would have been much more difficult.

Lesson 2: “Creative accounting”

The second lesson is what I call „creative accounting“.

We were sending our investors monthly updates. But, brained-washed by the venture capital industry, and suffering from our own insecurities, we believed that everything that didn’t go „up and to the right“, was hurting our story. So we made a conscious effort to keep the story going, by applying what we called „creative accounting“.

We took advantage of the grey areas, and applied somewhat loose and not very consistent accounting practices. We played with the capitalization of certain expenses, to move them off the profit and loss statement. We recognized revenues in different ways, sometimes at the start of a project, sometimes in the middle, and sometimes at the end of a project.

In good months, we rolled over revenues to the next month, to have a head-start and create a cushion. In bad months, we scrambled to recognize everything we could, to avoid reporting bad news.

So based on these experiences, I’ve learned to become more sceptical of accounting statements, because there is always room for “creativity”: adjusted numbers, not expensing stock options, playing with accruals, playing with revenue recognition, and similar tactics.

Lesson 3: Seek owner-operated businesses

The next thing I learned is what it means to be an owner-operator.

I’ve been a founder of my own startups, but I’ve also managed startups that other people have founded. A founder is an owner-operator. He holds a large stake, and the whole responsibility lies on his shoulders. There is „skin in the game“ and a sense of „ownership“. It’s a different quality than managing someone else’s company.

When the company is mostly you, you cannot escape. You have to „go forward or go under“.  We had very tough periods in our startup. On multiple occasions, I was very close to giving up. But I didn’t, because I was an owner-operator. As a manager, you can quit much more easily. It’s a different situation.

That’s why in my investing today, I gravitate towards owner-operators. I’ve been one, and I understand them much better than hired managers. 

Lesson 4: Strong sales organization

Number 4 on Phil Fishers 15 point checklist is: “Does the company have an above average sales organization?“

I had to learn this the hard way. For the first two years, I was the only sales person in our company. It wasn’t working well. I had no prior sales experience, and I wasn’t enjoying the job. I realized that we need to build a sales team.

So I took a deep dive: I read sales books, went to sales seminars and hired our first sales manager. We ended up hiring 4 sales managers in one year, and quadrupled our revenues.

So today, I have a much better sense for what Fisher means by „above average sales organization“.

Lesson 5: Strong marketing & lead generation

A sales organization cannot be effective without a strong lead generation. If all you do is cold sales, you likely won’t get very far. You need qualified prospects and hot leads. 

Here we had an advantage. Because it was one of the areas we were above average.

Our core product was sponsored postings on blogs, what today is called influencer marketing. To not be misleading, we required every blogger to label their sponsored posts. And not only label them with something like „This is an ad“. Instead, we branded the label with our company name, and most importantly, included a link to our website. So each campaign for our clients, be it NIKE or RedBull or Disney, turned out to be a free campaign for ourselves. It was a marketing flywheel. And it was our #1 lead generation source.

So, in order to assess the sales capabilities, you need to be able to understand the whole marketing & sales funnel.

Lesson 6: The Flywheel Effect

Ever since reading Good to Great by Jim Collins, I keep thinking about flywheels.

I’ve learned that great companies have a strong, self-perpetuating and ever-increasing engines. Our viral marketing tactic was a one example. Network effects are another example.

So my lesson is: look for strong flywheels.

Lesson 7: Innovator’s Dilemma

The Innovator’s Dilemma describes why established companies have great difficulties to cannibalize and re-invent themselves, and why startups can be so disruptive.

It was one of the favorite business books of Steve Jobs, and he was a master of solving the dilemma. 

In times of ever faster technological change, it’s important to keep this concept in mind, and seek companies that have demonstrated that they have the courage and stamina to solve this dilemma.

Lesson 8: Certain things don’t show up in the accounting statements

I’ve learned that certain things don’t show up in accounting statements.
Hiring procedures, HR practices, company culture, early R&D experimentation all don’t show up at all, or only much later. 

As a startup, we had a strong company culture. It was a matter of necessity. We couldn’t afford to pay market salaries, and the job required every team member to put their heart & soul into the company.

Startups not for everybody, but if done right, they create a strong culture and a high level of productivity. If a company can preserve this startup ethos, it can be a huge asset. 

So the lesson is: don’t forget the soft factors.

Lesson 9: All eggs in one basket / Take something off the table

As a founder, especially a young founder who has no meaningful assets outside his company, you are not only concentrated, you are hyper-concentrated. All your eggs are in one basket, and as this would‘t be enough, the odds are stacked against you. 8 out of 10 startups fail.

It’s not a healthy situation, because you are over-exposed. That’s why it can be good to take a portion, say 10 or 20 percent of your stake, off the table, if you have the opportunity, to reduce the psychological pressure. Not right away of course, but maybe after 2 or 3 years, depending on how your startup develops.

So while insider buying is usually a good sign, insider selling doesn’t need to be bad. It could be prudent from a personal capital allocation perspective, and also a risk-taking perspective. If essentially your whole net-worth is tied up in your company, it might be hard to take the necessary risks to maximize long-term potential. So you need to understand the motive of insider selling before drawing conclusions too fast.

Lesson 10: Be a Learning Machine

Books have been super important for me. Whenever I faced a problem, I ordered the best books on a the topic, and tried to apply the best practices. That’s how I learned how to organize myself, how to build a sales team, how to build a positive company culture, and much more.


Posted on by Remo Uherek

Why I created a Facebook page

Inspired by Rolf Dobelli’s book, I stopped using Facebook six months ago. Mainly because I was addicted, and also because the constant social comparisons and the instant gratification treadmill became toxic for me. (I’m still using Messenger/WhatsApp for one-one-one contact.)

The downside of leaving Facebook was that I lost a distribution channel for my content, and the people who were following me on FB suddenly stopped seeing my updates.

Reading Crush It! and Crushing It! by Gary Vaynerchuk convinced me that this was not wise if I wanted to maximize my impact, which I want.

So recently I changed my Facebook strategy and created a personal FB page.

Why a FB page?

#1: More reach: 1.52 billion people use FB daily. I want a slice of that.

#2: Compatible with social media software: I am using Crowdfire (they have a completely free plan, by the way) to manage my social media channels. You can only use such software with FB pages, not with personal profiles. This allows me to manage the page without having to actually log in to FB (which is what I don’t want).

#3: I can outsource my social media management: You can give third parties access to manage pages. So eventually I can completely outsource this channel.

#4: More options to customize: I can customize a page much better than a personal profile.

#5: Reply to private messages by email: I receive an email whenever somebody writes a message trough my page. I can answer by email, without having to log in.

#6: You can boost individual posts with ads. I’m not intending to do this, but it might be a good way to promote your business.

Final note on my private use of Facebook
I’m feeling a clear pressure to log back into FB occasionally. Some of my friends publish exclusively there (e.g. in private groups for travel notes), so each month or so I log in to check the updates of those selected people.

Also, less than 24 hours since creating my page, I received the first message from an acquaintance who missed my updates (and I his). I now make an effort to occasionally reach out to those people one-to-one. Since leaving FB, I ramped up my calls/lunches/dinners/coffees, which is socially much more rewarding anyways.

Follow me on Facebook.


Posted on by Remo Uherek

Why You Should Go Hyper-Niche

Since the agricultural, and more recently the industrial revolution, specialization has been one of the key drivers of human economic progress. It allows for a unique win-win situation: You focus on what you do best. I do what I do best. Then we trade. In total, we produce better and more things, which keeps increasing our standard of living.

No matter how big your ambitions, whether you want to build a large company, or a side project, I believe one of the best strategies available is to go hyper-niche. Picking a niche of a niche of a niche.

Don’t be the “plant person”. Become the “baby spinach guru”.

Don’t do “asset management”. Offer “value investing for entrepreneurs in Germany with a net worth between €5 million to €25 million”.

Don’t do “book reviews”. Do “reviews of artificial intelligence science-fiction audiobooks”.

Why?

  • You have a chance to stand out
  • You can leverage your unique skills and experiences
  • You have a chance that your hyper-niche is not taken yet
  • It’s easier to find your first customers, because you exactly know who your audience is
  • It allows you to focus on just one thing, and not be “everything for everyone”
  • It helps you to say no to clients and opportunities, because you’re not that person, sorry
  • You have the chance to fill your hyper-niche globally and become a hyper-monopoly
  • Customers gravitate towards the most specialized provider. If you have eye problems, do you go to your general physician, or an eye specialist?

Your market entry strategy depends on the product you want to offer. If you offer a highly personal and professional service, you might want to start locally. If you want to build an authority website covering your topic of interest, you might want to start in one language. After you have succeeded in one segment, you might expand.

Personally, the more I think about it, the more I’m feeling the itch to go hyper-niche too. To create one (or multiple) side projects, and to create real value in a narrow segment. I had several side projects in the past 10 years, some with moderate success, and others failed miserably. That, too, is part of the game: Fall down, get back up, and learn!

I think it’s a great model for entrepreneurs. And especially a great model to build lifestyle businesses that provide value, are fun, and profitable.

(I keep re-learning this lesson from Seth Godin, Gary Vaynerchuk, Chase Andrews and others.)


Posted on by Remo Uherek

Podcast Ads 101: How to Succeed with Podcast Sponsorship

My own experience shows that sponsoring podcasts can be very effective in driving awareness and sales. I have bought many things triggered by podcast ads, including supplements, clothing and even a new mattress.

Here are the success factors that made those sales happen:

A trusted host
Podcasts are very personal, and loyal listeners spend countless hours listening to their favorite hosts. I would only work with hosts that have earned a high level of personal connection and trust with its audience.

Let the host read the ads
When the host reads the ads, they feel much less intrusive and may even be perceived as useful information. Bonus points if the host ads his own twist to the ad text.

A product loved by the host
The absolute best conversion rate can be achieved when the host uses and loves your product, and includes his own experience/testimonial into the ad text. Most of my own purchases have been triggered by this factor.

A juicy coupon code
This serves two purposes. The consumer has a powerful call to action, and the advertiser can measure the effectiveness of the campaign.

A separate landing page
Sometimes, the company creates a unique landing page, e.g. yourproduct.com/john if the host goes by the name John. This can increase the conversion rate, because a testimonial or special promotion can be added.

Repeat the call to action
The call to action and URL should be repeated multiple times.

Frequency is key
It can take a long time for people to get the message. That is what frequency is for. Don’t book just one or two placements. Book 8, or 24 or 52 placements, spread out over a long period of time. Don’t stop when you or your employees are tired of hearing the ads. Consumers need regular reminders, even if they have purchased from you before. If you want repeat purchases, don’t stop the campaign.

Consider Media for Equity
Some entrepreneurs form a joint venture with podcast hosts. In such a deal, the podcast host gets a share of the business in return for its audience and influence. One such example is Onnit which has partnered with Joe Rogan.


Posted on by Remo Uherek

Falling in love with Android

Last week, my 72 year-old aunt who is living abroad visited me in Switzerland. Thanks to her I am finally starting to understand the power of Android.

It all started with her friend who saw a deal for a “free” Android tablet. He immediately jumped on it, not fully understanding that he just entered a two-year data plan. He told my aunt who rushed to the store to buy the same device. She understood the two-year contract and was a bit uneasy about it, but the recommendation of her friend was stronger.

Lesson #1: Manipulative promotions sell.

Lesson #2: Word-of-mouth is a massive driver of sales, and can even overwrite uneasy feelings towards the deal.

Now, after decades of buying daily newspapers, she stopped (!), and uses Google instead. She says that the cost-savings fully cover her data plan, so in the end she is not paying more than before.

Lesson #3: Newspapers are dead. Seriously.

When she thinks “Internet”, she thinks “Google”. The fact that it’s so prominently integrated into Android is Google’s secret weapon. She doesn’t have an email address and doesn’t care about apps (other than Camera and Gallery).

To download an app, I had to create an email address for her (not a great user experience by the way). She doesn’t even know her address and won’t use it.

Lesson #4: Email is not dead, but certainly needs to be complemented by Whatsapp, Messenger and similar apps. Businesses should start thinking about it.

Instead, I installed Facebook and Messenger, so we can stay in touch. Messenger is Facebook’s secret weapon, because it’s so deeply integrated. She doesn’t need any other communication app.

Lesson #5: Facebook, Messenger, Whatsapp, Twitter, Snapchat all don’t require an email address to sign up anymore. A phone number is enough. Businesses should start thinking about that.

Calls are now possible on Messenger and Whatsapp. Skype was absolutely gone from my top-of-mind. Never would I recommend Skype in such a circumstance. It’s been successfully disrupted from this segment!

The device only has 1 GB of space, so I had to delete many pre-installed apps to free up space. Pre-installed apps seem to be a solid business model on Android. And a great distribution channel for app owners.

Lesson #6: My aunt would have never figured all this out on her own. Don’t underestimate personal assistance and service! It unlocks a whole new user experience that would have not been possible without such help.

We just launched our Android app for Exsila, and I was using a Samsung Galaxy S5 for testing. For a long time I have been using a Galaxy S3 for testing and had trouble to get adjusted to Android.

Now with a solid device, and the experience with my aunt, I am slowly falling in love with Android. It’s a solid platform, especially for the low-end of the market. And of course I sold my old Galaxy S3 on Exsila — for in fact a much higher price than I would have gotten elsewhere. This is the secret power of Exsila!


Posted on by Remo Uherek

What I learned building the ZenFriend meditation app

This log is inspired by the fantastic developer log by Amir Rajan, developer of #1 game A Dark Room (buy it to support Amir, but don’t play it, it’s super-addictive, you will thank me ;).
ZenFriend is a meditation app. The same way that Amir inspired us, we wish to inspire others by sharing our experiences with this app project.

Check out the ZenFriend meditation timer website or download the free ZenFriend app for iOS or Android.

Jan 13, 2014: An idea is born

Since May 2013 I’ve been using Runkeeper. I don’t remember the exact date, but after one of my runs in early 2014 I had an idea: I wanted a similar app like Runkeeper for my meditation practice! On January 13, I have created a proto.io account and started working on an interactive prototype. If you’re not familiar with proto.io, it’s the best tool that I have found to build fully interactive app prototypes that you can test on your phone. I absolutely love this tool and recommend it 100% if you want to create a quick app prototype.

Feb 6, 2014: Naming ain’t easy
Picking a name is never easy. For the past weeks I have been looking for the perfect name. My early favourites were ZenMotivator and ZenTracker. Today I have decided to do something that I’ve never done before. I have made a list of my 60 closest friends, family and entrepreneur friends, send them an email and asked them for feedback. Within a few short hours I received a whopping 20 (!) answers. ZenMotivator and ZenTracker didn’t get much love. Instead ZenMate and ZenFriend emerged.

Feb 10, 2014: Recruiting developers
After about 30 hours of work, I had a fully working prototype made out of 72 screens that contained all the details and text. Today we posted the job on Elance, Odesk and Freelancer.com. We used Derek Sivers’ advice and included two filters into the description. (1) “Please sign and upload our NDA (Non Disclosure Agreement) first (see attachment)”. (2) “VERY IMPORTANT: To separate you from the spammers, please write “I AM REAL” as the first line of your bid. We will delete all bids that do not start with this phrase, since most bidders never read the requirements. Thank you for being one who does.” These two filters served us very well, as we were able to immediately rule out lots of bidders that never read the requirements or are too lazy to print out, sign and upload an NDA. The most funny NDA’s came from China. Instead of properly printing and signing, they just pasted their signature as a picture and sent us back the .docx file. Nice try, but no thanks.

Feb 17, 2014: Hand-shake with developer
Out of the more than 100 bids we only chose a handful to evaluate deeper. Our own experience as well as experience from other developers had shown us the challenges with freelancers in the far east (India, China, Vietnam, …). So we made a decision to only consider bidders from Eastern Europe (Ukraine, Romania, Bulgaria, Poland, Czech Republic, Russia, …). We were looking for a small company that also had a designer in-house. We didn’t want a one-man operation, but we also didn’t want to deal with the complexity of a large firm. We wanted a company with 5–15 employees. We sent them our interactive prototype and detailed requirements. We messaged with them on Skype. We asked for designs and references whom we could call. Quickly we had 2–3 finalists: one from Austria, one from Ukraine and one from Russia. It turned out that we liked the Russian company best. It is a small company with about 10 people, and the CEO oversees all projects personally. We liked his responses, and we also had a phone call with two of his clients, as well as himself. There also was a personal component. The CEO had done projects for Swiss clients before and had visited the country several times. One of the reference calls was with one of his Swiss clients. Both references were very happy, said that the company was very hard-working and delivered always on time and on budget. That was all we needed to know. We shook hands with the Russian company.

Feb 28, 2014: Buying domains
In the meantime we have decided to name the app ZenFriend. Both zenfriend.com and zenfriends.com were already registered, but were both for sale by HugeDomains.com. The price was okay, and we really wanted to own those domains, so we bought both of them today. However this step was not necessary. We could have easily started with an available domain like zenfriend.co or similar. The purchase was mainly done to have peace of mind, to stop thinking about those bloody domains :) but also to set up the project properly from the beginning, as changing a domain later is always a hassle. A word of caution: If you are super-short on cash, please don’t spend money buying domains! Pick a variation that is available by adding suffixes like app, hq etc. (e.g. zenfriendapp.com or zenfriendhq.com). On a sidenote, I kinda like the HugeDomains concept. They have over 300.000 very high quality domains that are for sale for very fair prices. I rather pay a few hundred or thousand dollars to such a company than having to hunt down an anonymous domain holder in the Philippines who might have an outrageous asking price, if I’m lucky enough to even find him.

Feb 20, 2014: First mockups
We received the first design mockups.

Mar 4, 2014: First build
We received the first build. The Design has been mostly finalized in the past days.

Mar 15, 2014: Collecting emails with landingpage
Launched a first landingpage on zenfriend.com to collect email addresses from interested people. Installed the SumoMe plugin to maximize signup rates. Started some marketing. Spent $10 on StumbleUpon without a single conversion. Then started a Facebook ads campaign based on Noah Kagan’s Facebook Ads blueprint which converted immediately. I knew that this time I didn’t want to base this project on pure luck. I wanted to build a waiting list of early adopters.

Apr 8, 2014: Having a mailinglist still rocks
We now have over 300 people on our waiting list, and just passed 100 FB Likes as well. Based on the Facebook experience that I have gained over the last couple of years, I would never spend money to buy likes. Buying website clicks was very successful so far, and as a side-effect we could generate “free” Likes for our Page as well. Also please don’t overestimate the effect of a Facebook Page or Twitter Profile. The traffic you can generate is very low. Focus instead on generating email addresses. Emails usually offer a much higher engagement and response than social media postings.

Apr 23, 2014: Truly a global product
We now have over 500 people on our waiting list. Most popular countries: USA, Italy (very surprisingly #2), Portugal (surprisingly #3), Canada, Switzerland, Australia. Most popular cities are Lisbon, Rome, Istanbul and Melbourne. We’re loving it!

May 19, 2014: Version 1.0 is ready for review
We loved the quick development cycle by our developers. On average, we have received two builds per week, and interated quickly. Up until now we have spend around 500 hours designing, developing and testing the app. 27 builds later, Version 1.0 was ready to be uploaded to Apple for review. It was a bit scary, but also exciting. For a total of about $900, we have built a waiting list of about 900 people (and as a side-effect have got 400 FB Likes). We were ready to launch! Originally we wanted to set the price to $1.99 or $2.99. We decided to say thank you to our early adopters and friends and ultimately set a special price of $0.99.

May 21, 2014: In-app-purchase metadata rejected
I don’t like being patient. Waiting in line for the app to be reviewed by Apple was not my favourite part. There was just nothing I could do. Then this morning, Apple wrote us that they rejected our In-app-purchase metadata, and that I should visit the Resolution Center in iTunes Connect. I crafted my response very carefully, and hit send. Fully expecting the possibility to be rejected completely, having to create a new build a go through review again.

May 22, 2014: We are live!
Waking up, I received several push messages from iTunes Connect. Checking my Gmail I couldn’t believe my eyes: The app was ready for sale! I did a quick search on the App Store and here we were, ZenFriend was live. We did it! What a wonderful morning. First thing I did was buying the app. Second thing, I meditated with it for 20 minutes. Third thing, I started my launch process. Sending out newsletters to all my friends and business acquaintances, and to our waiting list. In total I’ve sent the news to about 1300 people. I had no idea what the conversion rate would be, but figured that a conversion rate of about 25% would be satisfactory, so my hope was to get 300 downloads.

May 29, 2014: Results of the first week
– May 22: 131 paid, 2 free
– May 23: 32 paid
– May 24: 29 paid, 3 free
– May 25: 15 paid, 2 free
– May 26: 35 paid, 28 free
– May 27: 19 paid, 7 free
– May 28: 7 paid, 2 free
– May 29: 2 paid, 9 free

Similar to what Amir Rajan experienced, the results were rather disappointing and slow. Given that we had 900 people on our waiting list that explicitly expressed their interest (and that we paid $900 for), the first day was rather disappointing. The following days even more. As I’ve learned from Amir, he was working a lot with promo codes and Reddit giveaways. So on May 26 I did a promo giveaway on Reddit which helped a tiny little bit. It also helped because I received some valuable feedback from it. Unfortunately this aproach is not scalable. I also did some other giveaways, burning quickly through my 100 codes. Only about half were redeemed. On May 28 I’ve raised the price to $1.99 with the intention to test this for 4–7 days. I quickly realized that this was not working. I had to lower the price, and I’ve decided to make the app free for a couple of days.

In the first week we also realized that on some devices there were ugly bugs. The app was crashing and there were some issues with sound quality. We had clearly work to do. We had contact with plenty of users and quickly identified a list of more than 20 improvements and bug fixes that we need to ship soon. The developers started working on Version 1.1.

Here are the numbers of our launch newsletter to our waiting list: 54 percent open rate, 32.5 percent click-rate. From previous newsletters I knew that the more links there are in the newsletter, the more the clicks would spread out. So I included only the download link and nothing else. From those 284 people that clicked I guess that around 50–70 have bought the app. That means that almost 70 percent of the subscribers didn’t even click. I guess that’s just the way the newsletter business works. Therefore the effective Cost per Install was around $15 for our 50–70 early adopters. We also sent a follow-up newsletter to all people that did not open or didn’t click the launch newsletter (that’s a very cool Mailchimp feature: when creating a campaign select Send to new segment > Campaign activity). With that we squeezed out another 47 clicks, but it doesn’t make much difference for above numbers.

Inspired by this post of Noah Kagan I’ve sent a follow-up newsletter to all people that have clicked the link, and sent them a survey, asking why they DIDN’T buy. The most common answer was that people were interested, but they didn’t want to pay for the app or expected the app to be free. One person said that it would have been smarter to make the app free for a limited time at the beginning and with that make a big push. I agree. It was a huge mistake to set the price to $0.99. Free would have been the much better choice. With this information, we decided to do a second launch the next day, and set the app to Free.

May 30, 2014: Big push aka Second Launch
Today was a big day. The first independent review of our app went live, written by Buddhist teacher Bodhipaksa. We also decided to make the app free today, and make a big push. I’ve sent the news to our waiting list, and posted two announcements on Reddit in /r/Meditation and /r/ZenHabits. With the last one we have hit the jackpot. Quickly we rose to the #2 spot and received lots of positive feedback. We love Reddit!

One thing that is frustrating with iTunes Connect is that they update download numbers only once a day. I quickly found out how to bypass this. As we have a server-side, I can simply monitor our user database. At the peak, we were growing with 20–30 users per hour, effectively doubling our user base from 300 to more than 600 in just a few hours. Now we’re talking!

When sending out the newsletter to the waiting list, we decided to play it fair. We included a Money-back Guarantee for users who have already paid for the app (thanks David for the idea). It was not about the money, it was about trust. Those early users have given us their trust and we didn’t want to abuse this trust. So we included a link to a survey where people could ask for a refund and enter their PayPal email address, the other option was they could ask us to give the money to a charity. We immediately received several emails thanking us for this option and telling us that they were happy with paying for the app and didn’t want a refund. Learning: Money-back Guarantees can be a great tool. And the actual refund rate is usually quite low.

Jun 2, 2014: Bad news from Twitter

This is a notice that your application, ZenFriend, is no longer allowed to perform write operations.
Please make sure that your application follows Twitter’s API Terms of Service
To request that your application be re-enabled for write operations, please visit our support form.

Jun 3, 2014: Good news from Twitter

Twitter has automated systems that find and disable abusive API keys in bulk. Unfortunately, it looks like your application got caught up in one of these spam groups by mistake. We have reactivated the API key and we apologize for the inconvenience.

Regards,
Twitter Platform Operations

Jun 3, 2014: A nice gift
What a nice gift by one user. After answering some of his questions by email, he surprised us by replying that he just became a Gold Supporter ($29.99) and that he just rated our app with 5 Stars. WOW, we are blown away! With that, we climbed to #15 Top Grossing in the Health Category in the Swiss App Store, so I suppose that you need revenues of $60–150 per day to get to Top 10 Top Grossing in this category in Switzerland.

June 4, 2014: Results of the Money-back Guarantee
7 people responded to our Money-back Guarantee offer. One person asked for a refund which we refunded one hour later, three people asked us to donate the money and three people said it’s fine we can keep it. We have made a donation to the Deworm the World Initiative.

June 4, 2014: Results from our Second Launch
The big push was very successful. My guess is that the newsletter and the popular Reddit posting were generating the bulk of the downloads. Here is the break-down:
– May 30: 645
– May 31: 217
– June 1: 178
– June 2: 75
– June 3: 68

As you see we had an additional 1000 downloads in just a few days which is fantastic. What you also see is that the level didn’t sustain. Our Reddit posting continued to be on the first page during this entire period. The ‘new normal’ seemed to be around 60–70 downloads per day.

June 4, 2014: Losing the Ranking, Wrong Timing
I knew already from Amir Rajan that you lose your rankings when you set your app from Paid to Free. The app disappeared into a black hole and it took more than two full days until we started showing up in the Free category, and close to 4 full days until it felt normal again. That means that our push from May 30 was timed wrongly. Next time I would do it like this: First set the app to Free, then wait 3–4 full days until the app ranks, and then start the marketing push. On our big day we had 645 downloads and 450 from the US alone. I don’t know what ranking would have been possible in the Health category with 450 downloads, but certainly better than not appearing at all. We certainly lost some extra downloads. Definitely a valuable lesson. Our launch score is not very good yet: Two attempts, two major mistakes.

June 5, 2014: Social media sharing
Social media sharing is quite disappointing. Only 27 out of 1420 users have given the Twitter permission, that is less than 2 percent. Facebook percentage is better, about 350 or almost 25 percent. Out of 1163 sessions, only 89 have been published to Facebook (7.6 percent) and only 31 to Twitter (2.7 percent) while 12 out of those 31 have been by myself which means that only 1.6 percent of the sessions have been shared by users other than me. Not sure what the percentages for similar running apps like Runkeeper are, but I expected them to be certainly higher. My hope was at least 10 percent. What’s cool is that 60 percent of all users have registered an account. Out of the people who registered, 55 percent have done so manually and 45 percent have chosen Facebook Connect. But still that means that 40 percent of all users have no account, which means that they keep seeing the registration screen every time they open the app and have to tap ‘Remind me later’ to get access to the timer. We have decided to change that in the future: the default screen will be the meditation timer. Therefore we hope to improve the experience of those 40 percent not registered users. It will be interesting to see whether the registration percentage will decrease with this change. In the Apple guidelines, there is a clear suggestion to let the user go straight to the functionality and avoid having to register for as long as possible. We will embrace this suggestion.

June 6, 2014: Doubling Downloads
Just received the App Annie newsletter with yesterday’s stats. For the past days, we’ve had about 75 downloads per day. And yesterday we doubled to 153. Wow, what a nice surprise! After a quick look at App Annie’s Daily Ranks, it looks like we’ve gained popularity in France, Germany, Brazil and Poland. The app business is a rollercoaster. 15 days after launch, our total downloads are now at 1730, resulting in an average of 115 downloads per day. Sounds smooth, but it isn’t, as our lowest number was 9 and two days later we hit our all-time-high of 643 in one day. I guess our median would be around 60–70 per day.

June 10, 2014: First Apple Financial Report for May 2014
– Total Units sold: 311
– Total payout: $246

June 11, 2014: Translation offer
What a nice gesture from one user. He offered us to translate our app voluntarily to his mother-tongue. We are blown away! Unfortunately currently we don’t have any immediate plans to roll out any new languages as we are updating the app very frequently and each language adds complexity, especially if we don’t speak this language ourselves. It’s good to know however to have translation support by our users when needed!

June 14, 2014: 2000 users!
We now have 2000 users that opened the app at least once. We have total downloads of 2310, that means that about 14 percent of the people downloaded but not opened the app so far.

June 16, 2014: Version 1.1 is live!
It took a full 10 days for the new version 1.1 to be reviewed by Apple. We submitted right during WWDC so maybe that was the reason for the long waiting time.

Also this time, I didn’t test the in-app-purchase before releasing the app. This was a mistake as I just discovered: a bug causes the app to crash when a user attempts to buy an upgrade. Not good. Learning: always test everything.

Today we have passed 2500 total downloads, meaning an average of about 100 per day since going live.

June 16, 2014: First Downtime
Apparently the database connection got lost. The issue was caused by a database update that we performed after Version 1.1 went live. Unfortunately there have been some complications so the app lost the connection with the database for about 90 minutes. Just before that I have sent a newsletter to all our users announcing the update. One user thought that the update erased all his stats. Very bad timing. Our devs reacted fast and could fix the issue soon. Such things happen.

June 16, 2014: Cleaning up database
We had some issues with duplicate session entries. So today I manually went through more than 2000 meditation sessions and deleted duplicate entries. I like clean databases and I guess our users like clean stats as well.

June 17, 2014: First Day Results After Update
The app business is a rollercoaster. I was told that updating an app gives a boost, because you are featured in the New section and new apps supposedly are favored by the App Store algorithm. The opposite was the case. Downloads fell to just 39, an almost 50 percent decline compared with the “new normal” of the past two weeks. Is this because the reviews have been reset? Or just a random swing? I have no idea. On the other hand we had 3 people choosing to become upgraded members, which is nice. A whopping 1183 — meaning 47 percent — of all users have updated the app on the first day. The iOS 7 auto update feature rocks. On the other hand, most people don’t notice that an update has been installed. Manual updates were a bad user experience, but at least they ensured more awareness of the update.

June 18, 2014: Reddit promotion
After the disappointing download numbers of yesterday I have decided to do some Reddit promotion. And it worked! Yesterday we had 142 downloads :) Unfortunaltely I cannot do this every day as I don’t want to spam Reddit. But it’s still nice to do it once in a while to get some boost.

June 19, 2014: Another Fan
The effect of great customer support: Just turned a frustrated user that thought about deleting the app into a gold-member ($29.99), friend and fan that referred his friends. Just by solving his problem in a fast, friendly way. All within 2 short days. Love it!
Learning: if a user actually takes the time to contact you, he probably really cares about the product. Take advantage of that chance.

June 19, 2014: Lean Analytics
Google Ventures Lean Analytics Workshop. Very good inputs regarding “What kind of metrics matter?” and Lean Startup Methodology: https://www.youtube.com/watch?v=uIG1H_EQ6WQ

Examples of Baselines to strive for:
– A good growth rate during YC is 5–7% per week, 10% is exceptionally well. At revenue stage, measure growth in revenue, before that in active users (Paul Graham, baseline for YC companies)
– 30% of all Users use site/app each month, 10% per day, 1% concurrently (Fred Wilson)

→ So far we are reaching Fred Wilson’s baseline (more than 10% of all users open the app at least once a day), but not yet Paul Graham’s, as our weekly growth stagnated slightly.

July 2, 2014: Lean Startup Presentation
Today I have held a presentation at an i-net event about my experiences with Lean Startup, Bootstrapping and Growth Hacking. I have used ZenFriend as a case study. Here are the slides http://de.slideshare.net/remouherek/lean-startup-experiences

July 15, 2014: Marketing Strategy
The past weeks have been rather disappointing. Downloads kept going down and started to stabilize at 15–25 per day. Given the 3000 downloads of the first month and our hope to get 100.000 downloads within the first year, the current numbers were brutal. On the one hand: Yes, that’s an organic growth of 600 users per month, which isn’t super bad. On the other hand: Of course we want to see growing, and not declining numbers. I can only speculate about the reasons:
– One obvious reason is that with our update we have lost all our reviews, so when you visit the app on the App Store, instead of saying “Average rating 5 stars” it said “No ratings”.
– Another reason probably is the removal of the annoying but probably effective download link in the messages that people share on FB and Twitter.
– And lastly, that word of mouth obviously isn’t working yet, probably because we only have a very small number of consistent daily users

After a period of low motivation and frustration we have decided to do the following:
1. Contacted some users and asked them to review the app until we had our 5 star rating back
2. Becoming a user in meditation forums and introducing the app or commenting on existing discussions
3. Restarting our FB Install Ads campaign with great success. In the past few days $49 have bought us 83 downloads, therefore a cost per install of $0.59. Yes we’re losing money doing that, but hey it’s almost 100 users for only 50 bucks! Not too shabby at all.

With all that we are back on a 50–60 a day level (30–40 organic). Not yet what we want and need it to be, but certainly better than 20.

July 16, 2014: We love our users
Today we have sent out a newsletter and asked to participate in our user feedback survey. A whopping 13 percent of all people that viewed the email have completed the survey. We love it and will consider every single piece of information that users have given us. Lots of great ideas in there!! While most people finished the survey in 2–4 minutes, some people have taken 15, 20 and even 30 minutes to give us detailed feedback. WOW!
70% of all participants have given us permission to follow up and request clarification by giving us their email. What a fantastic user base and what fantastic potential that this has opened up! 60 percent of all participants have already recommended the app to one or more people, so apparently we were wrong that word-of-mouth isn’t working.

July 17, 2014: Peek free usability testing
We have done some free usability tests. Very cool to observe users interacting with the app. Here are the results:
http://peek.usertesting.com/result/0541826068445?autoplay=true
http://peek.usertesting.com/result/1131825984664?autoplay=true

July 23, 2014: Some random tips
1. Create a closed Facebook group (or similar) with your evangelists/ambassadors/fans/betatesters. It’s very important to have instant access to a network of supporters. Be it if you need some more reviews to make the 5 review limit per country, be it some upvotes or comments for Reddit/Blogposts/HackerNews.
2. Don’t localize too soon. We now have two languages and honestly, I wouldn’t do it again. It just makes things more complicated. Start with English, find a working business model, and then once you reach a certain stage, invest in localization. Doing everything in multiple languages is quite a pain: app description, keywords, screenshots, website, marketing. You just can’t do it all. Focus on one language and maybe even on one country. Don’t spread yourself too thin. Focus to reach critical mass at least in one area.

April 17, 2016: Short update after a long time :)

  • Total downloads will soon hit 40.000 for both iOS and Android.
  • Android has proven disappointing with less than 5.000 downloads and much less revenue per user than iOS.
  • We have shifted the business model away from a yearly upgrade to a slightly more expensive $9.99 lifetime upgrade. This has improved revenue per user substantially, as most users chose the $4.99 upgrade before.
  • Our main issue remains the retention rate. We have less than 5.000 monthly active users and less than 1.000 daily active users. These two metrics are the most important. You can have millions of downloads. If your users don’t come back, you have an issue. To be fair, most apps have this problem. So it’s not unique to us. I actually believe that our numbers are above average.
  • We keep maintaining the app for now, and plan to do one or two updates per year. We are also thinking about selling the app to someone with fresh energy who would like to tackle and solve those challenges. We have collected lots of data on what worked and what didn’t, which is very valuable. Now this data needs to be put into action. Unfortunately I’m now focused on my CEO role at Exsila so I don’t have the time and energy to reinvent ZenFriend. If this challenge excites you, email us hello@zenfriend.com. Maybe we can find a way to work together or to take over the project.

Posted on by Remo Uherek