How do you grow an online business? Take one small orange…

Single small orange

We have all heard of the amazing success of some online business. One common theme is their ability to apparently do more with less and avoid the large size and cost of the ‘bricks and mortar’ business’.

One stellar success is Wikipedia, the product of Wikimedia. The success story goes something like this: In 2007, Wikimedia was based in a shopping centre with fewer than 10 employess, raised under $3 million annually, and had total assets of over $5 million. Today, Wikimedia has roughly 160 paid employees, raised $25 million from 1.2 million donors, and has total assets of over $49 million. So what did they do right?

Maybe we should be asking, what did they do wrong? Apparently, their first version was called Nupedia and users had to fax copies of their credentials AND pass a seven-stage review to prove they were qualified to contribute. Unsurprisingly, it was a total flop – but provided the lessons required to make Wikipedia the success it is today.

The success of Wikipedia and other online business can be explained by one of the Web 2.0 patterns proposed by O’Reilly of ‘lightweight models and cost-effective scalability’. Although O’Reilly was focused on programming, this can also be applied to business models, development models and technology solutions. The main idea is to do more with less and focus on small low-cost startup, scale in a responsive and cost-effective way, and fail fast and correct quickly.

Since we all know Wikipedia has got it sorted, I’d like to take a closer look at another small startup and see if they are headed in the right direction.

A Small Orange is a small web-hosting business that is getting good recommendations in the web-hosting space but have only 30 employees who serve tens of thousands of customers around the world with 24/7 support.

They started 10 years ago with 2 employees and have grown to be named in the top of the web-hosting options  and have gained a reputation for having over $1 million in revenue, are profitable and didn’t take venture capital. So how do they do it?

A Small Orange has spent the last 10 years working towards the best-practices of the pattern:

  • They scale their pricing and revenue models with a small up-front and sliding costs for more reliable servers.
  • They outsource their servers and recommend other services (eg HootSuite at http://hootsuite.com/) so customers can manage and track their accounts.
  • They scaled their business model with the recent introduction of the ‘affiliates program’ to reward customers for recommendations.
  • They market virally, with their chief executive creating quirky and commercial YouTube videos.
  • They ‘fail fast and scale fast‘ when they were suffering from poor servers and bad customer reviews in 2008 leading to a server upgrade in 2011 and 2012 and improved customer reviews.

A Small Orange highlights some of the benefits of the pattern with their faster time to market and faster return-on-investment due to the lower initial costs and avoiding the need for venture capital.

But they have also experienced some of the problems. Their low staffing has resulted in some slow customer service and their outsourced servers left them exposed when the servers were not proving adequate.

They could also capitalise on some other ideas like outsourcing some customer support by using ‘crowd sourcing’ to let other customers provide solutions or suggestions to reduce the drain on customer support staff.

Overall, they have proven success from this pattern and look like they are headed for more success in the future.

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An example of this light-weight and scalable pattern being implemented as a business initiative within a large organisation is this example of innovation, crowd-sourcing and the concept of ‘fail fast, fail cheaply’ within AMP, Australia:

http://youtu.be/i7bkuPjJUZI  

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UPDATED 24 May 2013: How does the Tumblr acquisition by Yahoo fit the ‘scalability’ approach?

UPDATED 25 May 2013: Tumblr users are fleeing

What happens when social media meets sales in the ‘long tail’?

Techlicious on LuvocracyHow would you run your business if you could rent shop fronts for free, paid nothing for delivery, and had products that cost nothing to make? Let me introduce you to Web 2.0 selling and leveraging the long tail of sales.

This strategy for success was proposed by O’Reilly as one of the key patterns for Web 2.0. The secret is to use the internet to remove the physical costs of selling, so the amount of inventory and range of products is unlimited and the market is global. This means business’ can avoid chasing the popular high-volume sales at the front of the sales curve, and capitalise on the niche products and the longer selling window of the ‘long tail’ – and Amazon is a classic example. The Internet is perfect for capitalising on the benefits of leveraging the long tail, as O’Reilly explains:

Small sites make up the bulk of the internet’s content; narrow niches make up the bulk of internet’s the possible applications. Therefore, leverage customer-self service and algorithmic data management to reach out to the entire web, to the edges and not just the center, to the long tail and not just the head.

A classic example of the virtual shop and unique product sales is iTunes and ringtones which cost nothing to sell or deliver and very little to make. The idea of selling ringtones was seen as ‘the next big thing’ back in 2001  and although they faced some challenges they are still making money in the long tail of sales – even though you can create your own!

Image: JISC Infonet

The benefits that the internet offer to leverage the long tail are unique:

> Producers can reach a wider audience with new micro-markets built off small sites
> Customers have a wider range of products not just the popular but also the unusual and niche
> Business and customers profit from reduced costs of online commence and internet delivery

So how do you get some share of the money? One recent example is a spin-off from the Pinterest concept, by a new startup called Luvocracy. Their concept is to ‘find people you trust and shop what they luv’…where social media meets sales in the new marketplace!

Curated shopping at Luvocracy

Luvocracy is a great example of O’Reilly’s leveraging the long tail pattern and meets most of the recommended best practices:

* Use the three forces of the long tail to make the tail longer with an unlimited supply of goods highlighting only those for sale, makes the tail fatter by growing the customer size with the social networking, and drives supply and demand by the recommendations of users and the easy purchase options.

* Use both algorithmic data management behind the scenes to bring product sales to the attention of users and uses an architecture of participation to match supply and demand through their users and their followers networking their finds and purchases which leads to curated shopping – where you buy what others recommend.

* Use low-cost strategies to allow both business’ and users to manage their own accounts and use the low-cost advantages of an online site to reduce business overheads.

Luvocracy seems to have successfully harnessed a lot of the integrated strategies identified by research (Lee, 2010) where retention and co-creation, product reviews, cross-marketing and word-of-mouth all rate highly in the new marketplace.

Although this site is only in beta, there has been some push back on possible issues:

*  Lack of attribution to the original content owner is causing some copyright concerns,

* Offers for others to make copies of the handmade originals when they are out of stock seems to breach the original owners rights,

* Opportunities for both the blogger and the product maker to make money is upsetting product makers and opening a new discussion around marketing channels.

So, do you luv it, or not? Let me know what you think.

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More information about the Long Tail:

Hervas-Drane, Andres, Word of Mouth and Sales Concentration (February 13, 2013). NET Institute Working Paper No. 07-41. Available at SSRN: http://ssrn.com/abstract=1025123 or http://dx.doi.org/10.2139/ssrn.1025123

Lee, T. (2010). Head or tail? an integrative analysis of customer value and product portfolio. International Journal of Business and Management, 5(12), 51-61. Retrieved from http://search.proquest.com/docview/821639654?accountid=13380

What has blogging done for you?

Image: Sean MacEntee

Image: Sean MacEntee

I’m new to blogging and worried that I will make all the mistakes in the book…but I can’t find ‘The Book’. I have found some great sites like ProBlogger  and tips from successful bloggers like Penelope Trunk .

Although there is lots of advice on ‘how to blog’ and ‘how to make money blogging’ they don’t explore what else you get or learn from blogging. So I thought I’d ask you all. What has blogging done for you?

My answer would be about pushing myself. It has pushed me into a public space, pushed me to research and critically consider topics, pushed me to closely listen to others opinions and explain my opinion, and pushed me to do all of this in a professional and respectful way. Being on your best behaviour all the time is exhausting  for me – but character building. So that’s me, but what has blogging done for you?

Is ‘perpetual beta’ a good thing?

Do you remember when software came in a box with discs and instructions that you installed on your PC then parked on your shelf? This is a fading memory with software on the web and continuous updates, but is this ‘perpetual beta’ a good thing?

When you hear about ‘beta versions’ of software you probably think about “a pre-release version of software”, which rings alarm bells about constant changes and buggy code.

But there’s more to it than that with advantages like faster time to market, continuous improvement and high-responsiveness to user needs. This is the ”perpetual beta” pattern  identified by Web 2.0 guru Tim O’Reilly as a key indicator of success for Web 2.0 applications, where:

product is developed in the open, with new features slip-streamed in on a monthly, weekly, or even daily basis

It’s no longer a ‘throw it over the wall’ approach to your customers but a continual conversation with them. This has ups and downs for the business – with ups like reduced costs to release and opportunites for close relationships with your uses balanced against downs like avoiding feature overload, thrashing and poor quality. But, it can be painful and challenging as GateGuru found out through a cycle of poorly received releases. Which highlights the highs and lows for customers – with highs like easy updates and no-cost upgrades but also lows when the product doesn’t work or makes changes you don’t want!

So if you think ‘perpetual beta’ might be a good thing, then read on and see how PDF Expert rates against the best practices of O’Reilly’s pattern. PDF Expert from Readdle is a clever solution which allows you to read, sign and annotate PDFs, fill out PDF forms on the go, and even synchronise with Dropbox, SkyDrive or any WebDAV storage.

PDF Expert ticks a lot of the best practices of the ‘continual beta’ pattern:

PDF Expert

PDF Expert from Readdble.com

  • They release early and often with their agile development and automatic test, as their release history shows.  The favourable user reviews proves they can get their product out quickly but also make sure it meets acceptable quality standards.
  • They engage users as co-developers and real-time testers by reading their user reviews on the product site but also through an open thread to their customers and using their blog to help their users.
  • They then implement the feedback and instrument their product to match as their press releases explain and have also gone further to incrementally create new products to both offer their customers new products but also capitalise on their in-house skills.

PDF Expert has also avoided some of the common problem areas:

  • They have avoided the feature excess issues some of their competitors faced but unfortunately this has left them with a no-frills label as the conclusion of this review suggests
  • They have done better than the unfortunate example above from GateGuru and avoided release thrashing but they have not been so responsive as their frequency of releases is a bit uninspiring but at least they have success and manage their first impressions nicely as some reviews highlight

Where is mobile banking taking us?

Image: 401 (K) 2013

Image: 401 (K) 2013

One survey says that ‘by 2017, an estimated one billion people will use mobile banking, and it has already become a way of life for many of us‘.

A driving question for banks and application developers is ‘where can we take mobile banking’ but a more significant question for mobile users is ‘where can mobile banking take us’?

Web 2.0 guru, Tim O’Reilly,  proposed back in 2005 that successful Web 2.0 applications needed to be ‘above the level of a single device‘ and be device independent. The device independence of many applications is now an accepted part of everyday life.

But O’Reilly went further in 2012 to suggest that really successful Web 2.0 applications of the future needed to be seamless or ubiquitous and be virtually transparent in their ability to satisfy the users needs.

The idea of ubiquitous software still needs more work but advances are being made to develop softare which can be applied seamlessly across multiple devices.

Banks are well aware of the need to satisfy the users needs as studies in the UK and USA prove the strong demand from bank users, especially the young mobile users who ‘hate their bank but love their phone‘.

“banks needed to make the banking experience seamless for customers”

The benefits for the banks if they can go above the level of a single device is the ability to offer their customers access to applications everywhere, but also to capture information that is location or context aware and give the mobile banking user an experience they can’t live without.

 

The major Australian banks have gone mobile with a passion but with varying degrees of success in the eyes of their customers. To help understand the O’Reilly pattern, I will look inside the banking suite for any signs of the O’Reilly ‘best practices’.

Current banking features

Transactions processed:

  1. Enable data location independence and seamlessly synchronise data across devices – banking systems have long had this covered with branch, phone, internet, mobile, ATM and transaction processing, but a quick look at some bank websites shows they still see these as discrete bank functions rather than a seamless ‘money management’ experience.  An example would be to start a loan application online and then complete in a branch . Something similar is currently possible with online Australian passport applications.
  2. Design from the start to share data across devices, servers & networks – banking systems have evolved into multiple interfaces for transactions, payments and viewing customers’ accounts, but again these are not sharing data in a seamless manner.  There may be infrastructure or technology issues, but at least some banks are exploring innovative solutions.
  3. Extend web 2.0 to devices – banks moved from plastic cards to magnetic stripe to new chip technology which now allows chip-enabled cards to function seamlessly such as the “tap-and-go” payment options. Unfortunately, their level of sophistication is still rather raw since the customer can’t control who has access to this information – it is an all-or-nothing approach. This also requires devices in retail premises but customers are also wanting the ability to transfer funds between individuals by mobile phones.
  4. Leverage devices as data and rich media sources – banks have a wealth of information that could be used to improve the customer experience.  Some small steps have been made such as the NAB Money Tracker and St George Money Meter , but there are many more opportunities that utilise the data of previous transactions and can tell you that your water bill is up, electricity bill is down and you had twice as many coffee shop visits last month!
  5. Use power of network to take load off device – the mobile banking applications seem to have addressed this successfully, but the field is wide open for other devices to be used as well.
  6. Make one-click peer production a priority – banks are obviously aware of the ‘need for speed’ and offer quick logons to mobile banking applications such as the NAB who has replaced the userid  and password with a single mobile passcode.

Transactions pending:

  1. Think location aware - one best practice that hasn’t made a strong appearance is more location aware banking applications. One example: if they know you always buy pet food and you are there now, why not send you a text suggestion?

Future issues and opportunities

When you consider Banking and Web 2.0 the question remains: ‘where can mobile banking take us?’. The answer is anywhere and we’ll get there quicker if we stopped talking about ‘banking’ and started talking about ‘seamless asset administration’.

Who said we can’t keep our home asset register, repair log, photo memories and warranty records closely related to our savings and spending? Who said banking is a reactive activity without any reminders or prompts from the bank? Who said only banks should handle our money?

Traditionally the banks have told us what is possible – but the tables are now turned in the customers favour and new customer experiences are possible.

For a high-energy view of the ‘brave new world’ start the YouTube video at 6:00 and enjoy!

And another take on the possible future of banking and retail.

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Further Reading:

Barkhuus, L., & Polichar, V. E. (2011). Empowerment through seamfulness: Smart phones in everyday life. Personal and Ubiquitous Computing, 15(6), 629-639. doi:http://dx.doi.org/10.1007/s00779-010-0342-4

Singh, S., Puradkar, S., & Lee, Y. (2006). Ubiquitous computing: Connecting pervasive computing through semantic web. Information Systems and eBusiness Management, 4(4), 421-439. doi:http://dx.doi.org/10.1007/s10257-005-0003-8

Warren, P. W. (2004). From ubiquitous computing to ubiquitous intelligence. BT Technology Journal, 22(2), 28-38. Retrieved from http://search.proquest.com/docview/215203661?accountid=13380

How is a ‘rich user experience’ a winner?

Award Winning Application (Image: RealEstate.com.au)

Award Winning Application (Image: RealEstate.com.au)

The new iPhone & iPod application for RealEstate.com.au  turned out a real winner for the ASX-listed REA Group with their award for ‘Best mobile expanded service or application’ at the 2012 Australian Mobile Awards.

This joins their suite of mobile applications providing access to their property services for users looking to buy, rent or find share accommodation. It also offers users a wide range of complementary products from loan calculators, renovation tips, property reports, virtual tours and map functions.

This award is a bonus for their business but what they have achieved is worth analysing by other business’ who want to capitalise on the thriving mobile application space and develop a ‘rich internet application (RIA)‘.  This success can be explained by their ‘rich user experience (RUE)‘, a pattern which says Web 2.0 success comes from giving users a high-function experience that is ideally suited to their needs and delivered in a high-performance format.

Best Practice strategies

Function rich (Image: RealEstate.com.au)

Function rich (Image: RealEstate.com.au)

RealEstate.com.au strongly delivers in all best practice areas of their mobile applications:

* Delivers a function-rich application with good performance like a desktop application combined with platform independence and multiple interfaces to complementary applications,

* Targets the users-needs and offers complementary functions like advice, calculators and maps in an easy-to-use and integrated service,

* Offers both comprehensive  searches based on property attributes as well as site structure to highlight functions for buying, selling, sharing and advertising,

* Allows content addressability to link to properties, connect with agents, and use functions like email and virtual tours,

* Remembers users preferences and offers features like saved searches and email alerts giving users an adaptive and personalised experience.

Range of services (Image: RealEstate.com.au)

Range of services (Image: RealEstate.com.au)

User Interface issues

While RealEstate.com.au delivers a rich user experience, they seem to hit some common interface issues:

* the sheer volume of features can clutter the user interface but this doesn’t seem to cause performance issues,

* the useful map functions occur at a number of layers of the application but they don’t seem to flow seamlessly.

Benefits to the business

Their online and mobile applications offer RealEstate.com.au some real business benefits:

* higher user satisfaction equates to increased visits, improved sales and enhanced satisfaction and creates true business value,

* extensive functions and complementary services attracts a broad range of users and encourages regular, repeat and extended visits,

* wide range of product offerings can sustain visits even when parts of the business experience downturns.

Their impressive February 2013 statistics are a testament to their success:

  • “had 18,914,431 total visits, which was 11,225,360 more visits than the closest competitor
  • generated 103 page views per person, which was 53 more page views per person than the number two competitor
  • visitors stayed on realestate.com.au for an average of 9 minutes and 27 seconds, which is 3:30 minutes longer than they stayed on the closest competitor’s property site”

Their parent company, REA Group, attributes their recent success to the strong uptake in mobile applications. Any business that wants to achieve that level of success in social media applications should aim to offer their customers a ‘rich user experience’ and maybe learn from others experiences.

Why B2B Businesses Should Leverage the Potential of Social Media in 2013

bronwynsc:

I liked this infographic – it shows who is leading the social media pack.

It doesn’t really tell you why or how you can capitalise this info for your own business though, so maybe read some of my posts where I analyse each of them using O’Reilly’s Web 2.0 patterns for success.

It is pretty cute though, and deserves reblogging!

Originally posted on Infographics Submission Hub:

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