I have a background in Information Security and these are some of the security projects I am involved in.
– WordPress security, the latest vulnerabilities. Featuring Marvin the wordpress security plugin.
What is cost per acquisition?
A quick explainer for those not familiar with the term. Cost per acquisition is the cost of an activity that generates traffic to your website or downloads of your app. If I buy a banner advert (who buys banner adds these days?) for $60 and 3 people click on that banner add per day and visit my website then the cost per acquisition is $60/3 = $20. My Cost Per Acquisition (CPA) is therefore $20 per customer/user.
You may have heard people say “do things that don’t scale when starting out”, this means doing things that are resource intensive that you know you couldn’t scale because it wouldn’t make financial sense.
So why do non scaling stuff in the early days?
You are seeding your startup trying to build momentum so you can afford to do things that will not scale because you know or believe their will be a tipping point where momentum takes over and you no longer need to put as much effort in to meet your targets. Think of it like pushing a giant rock down a hill, getting it going requires huge effort probably by a group of people pushing with all they have but once it starts to roll it requires little effort to keep it going.
In the early days of testing an idea you are acquiring customers/users to test your hypothesis and iterating the product based on the feedback from those customers/users. Therefore you are also going to be doing things that don’t scale to acquire those customers/users (social media, blog posts, content marketing etc) and if you are looking for quick tests then you are almost certainly going to have to do some paid acquisition. Given that you are in testing hypothesis mode and you are in no way optimising your customer acquisition strategy there is no need to measure your cost per acquisition. Of course it does start to give you some valuable data and some ball park figures but its far from accurate and shouldn’t be used to base your financial model around.
It is very possible to go from $10 cost per acquisition down to $0.20 after you learn what works and optimise your strategy. So to base your financial model on $10 when it could end up at $0.20 is going to make it way out, of course if the financial model works at $10 per customer then its going to kick arse at $0.20.
Therefore while you are in the early stages don’t worry about the cost worry about which methods are effective, spend your time tracking which blog post and which tweets were more effective rather than the relative cost. By effective I mean activity which drove traffic to your website or to downloaded your app.
I sat down with the CEO of a tech startup who has a mobile product for large corporates and we got chatting about security startups. “No one cares about IT security, well accept the people who’s job it is to worry about it and those people who have just been effected by an incident (hacked) but that is a short term caring that fades quickly. So we are left with a small bunch of people around the world that actually care, but the vast majority don’t give a ****”. That was his opinion and i have to agree, security has always been a fear, uncertainty and doubt (FUD) sale, that has not changed in years.
So if you are thinking about launching a new product into the security market how do you deal with a niche market and an apathetic audience, I think the answer lies in not selling security you have to sell something else doesn’t matter how you brand it just don’t sell it as security. We have all been buying insurance and burglar alarms for years because we understand the consequences if it all goes wrong and how insurance and a burglar alarm may help, with IT security its very different. Most people don’t understand the cost of loosing data from them personally or a business, its difficult to quantify until it happens. Therefore the vast majority of security sales happen after an incident and not before.
Will security ever become a product people understand and want to buy whether that be a consumer or a business, I think yes and as the digital world evolves this day will come. Today most Microsoft Windows users now buy antivirus software because they understand the risk and so follows they will start to understand the bigger risks and buy services to mitigate these risk as well. The question is as alway when? I think consumers are at least 5-10 years behind enterprise and enterprises are not all there yet so we have a while to wait.
It’s true that the cost of starting a tech startup has plummeted over the last ten years; now all you need is a couple of talented people, internet access and a laptop or two. Once upon a time you would need servers, offices, expensive hosting and bandwidth, and lots of time to write bespoke code from scratch. In years gone by you would build the product with every feature you can imagine before you launched. Minimum viable product wasn’t even on the radar.
So now it’s easy right? Anyone can start the next big tech startup, no problem. Well I think this brave new world has created a new barrier and that barrier hits you a bit further into your startup journey.
Getting started is relatively easy and the number of new startups being created across the world shows this. We have millions more startups than we did this time ten years ago, particularly in the case of tech startups.
What’s the problem then?
You can get started, build a minimum viable product, test the idea with early beta testers in quick time. The biggest barrier facing startups today is acquiring customers. There is so much noise that getting your message (signal) through is becoming increasingly more difficult and expensive. If you are a Business to Consumer (B2C) startup, then you need a budget of hundreds of thousands to get any sensible market penetration. The days where £20k from an accelerator would get you there are well and truly over.
The world of startups has developed mechanisms to help with this new barrier and it all loosely comes under the heading of ‘growth hacking’. Growth hacking techniques help you acquire customers cost effectively. The problem with growth hacking is at the moment it’s very labour intensive and slow, compared to paid acquisition of customers. Time is often not a luxury a startup has, and in the words of Ben Franklin, “Time is money”. That’s not to say paid acquisition is not a great bootstrap technique – because it is – and in most cases it’s the only option a startup has for customer acquisition.
How best to tackle this problem then? I think the collective wisdom in the industry (particularly out of Silicon Valley) is that you should build an amazing product and concentrate on that; the users/customers will follow. Whilst I don’t disagree with that wisdom, I think it lacks a few stages of detail on the path to ‘just build a great product’.
Building a great product is only achieved in conjunction and with feedback from customers, it is never done in isolation. With a B2C product that means talking and listening to thousands of customers to help build your great product. I believe you should be fanatical about getting customer feedback and your first hire or co-founder should be an experienced growth hacker. The difference between someone with experience in growth hacking vs a few co-founders giving it a go is quite remarkable.
After founder divorce the biggest killer of startups is not being able to acquire enough customers at the right price. Therefore, when starting out, think about how you will solve the customer acquisition problem in as much detail as possible. Don’t just say, “We will growth hack it” – that lack of detail is a sure fire path to failure.
The question for lots of startups is whether to Pivot or Persevere on your journey towards product market fit. A pivot is a change in strategy and comes in many different flavours, it could be a technology pivot (web to mobile), it could be a market pivot or more likely its a business model pivot. You thought your users would pay for x but all the data says they will not so you need to try something completely different.
Persevere means continue to iterate the product making small changes based on customer feedback. The difficult question to answer is always are users not paying for the service because its not quite right and a few more iterations will fix that or are they not paying for it because they never will, it doesn’t solve a problem that’s painful enough for them to part with money.
Pivoting for the first time is a little like admitting defeat because you sold the business on your initial plan and research, now it turns out it wasn’t correct and you are admitting it by changing direction. In reality no amount of planning or research can predict or replace customer engagement, what you now have is live data to base decisions on.
I have recently spoken to two startups who have both pivoted and asked them what took them so long to figure it out (one took 12-months the other 24-months) and what data finally made them realise they needed to make the pivot.
In both cases they were tracking all the metrics you could think of so it wasn’t a lack of data or the wrong data it was simply knowing which data really mattered. So in both cases the acquired user figures were rising month on month at healthy rates. The issue was around retention, the retention figures were not good in either case, they had the classic leaky bucket, they were putting new users into the top of the bucket but they were leaking out the sides before generating any revenue. Both startups could see this was the issue and both interpreted that data as meaning they were missing a feature or some of the existing features needed improving, while this might be a reasonable assumption it can lead you into an iteration loop. An interaction loop is where you just keep iterating and you are moving a metric but very slightly each time so you are encouraged and think a bit more iteration will keep this moving up. This can lead to months of iteration and months of lost time when what you should have done is pivot. The difficult thing is still knowing if you need to iterate or pivot.
The answer is that at the point you have a retention issue you should talk to customers again, work out what they want, what they are using and why. Dig deeper with customers as this data is the most valuable, get them in your office, go sit next to them, get a very deep understanding of their needs.
To show you a worked example of this problem I sat down with Jeremy Walker, CEO of Meducation (https://www.meducation.net/) who has just pivoted after 12-months fighting the iteration loop. Here is his breakdown:
We have the following per month:
New users per month = 1000
Returning users = 2000 (from previous signups)
Total active users = 3000
But the devil is in the detail because if you break the monthly down into day/week/month you get this:
Daily active = 200
Weekly active = 500
Monthly active = 3000
Which gives you a 1/5/15 ratio. So although the monthly looks like a good figure it is skewed by the 1000 new users per month, you really need to look at the daily & weekly to get an accurate picture. The 200/500/3000 tells you that the product is not that sticky you don’t have regular returning users (of course it does depend on the product type to know if this is really a problem) but as a general rule if people are using it regularly (daily/weekly) they will pay for it and its solving a problem.
Jeremy suggests, If we’d had 200/300/400 or something similar, we’d have been on much more solid ground, even though our actual numbers would have been lower. Because then it would have just been a scaling problem where as 1/5/15 as a ratio means it’s a retention problem. I’d aim for 1/2/3 as my minimum successful ratio now.
As a startup your focus should be on retention and not user/customer growth, work with your customer to solve a problem and once you are doing that your product becomes sticky. Once sticky stick your foot on the gas peddle and go hell for leather on growth.
Developers are in short supply and everyone has the next big thing and wants a developer to join them for free or an equity share. Finding developers is never easy but I planned to pay for them that way you get delivery on time and on budget (well if managed well). I have used Guru.com and elance.com before to hire freelance developers and designers so understood the process and how hit and miss it can be. This time I opted to use oDesk.com because I had worked with a few startups that had used it and found some great people via it.
My general advice is you seem to get good quality developers from Eastern Europe and developers from India & China are a bit more miss than hit. Because of this I filtered the people via location and invited a bunch of people who I thought based on their profile and example work could deliver what I was asking for. This process takes several weeks so don’t expect to signup on day 1 and have a team working for you on day 2. I needed an iOS developer then a backed developer who could write the API, database connect and do the scraping of car data I was going to need.
After a couple of weeks I had Yuriy from the Ukraine who was an iOS developer & Michael who was based in the UK and a php developer. I shared with them the FluidUI mock ups and a trello board with a list of features to be developed.
First job was to list out a bunch of features I thought the app should have in the first version
– Find Vehicle details (Reg, Make, Model, Colour, Fuel Type, engine size, BHP)
– TAX renewal reminder
– MOT renewal reminder
– Insurance renewal reminder
– Breakdown recovery details (AA, RAC, GreenFlag)
Next was to start to produce wireframes for the app. For the wire framing I used FluidUI to map out the various iPhone screens and the user journey through the app. Once in Fluid you can then push it to an iPhone to test it on an actual device, although the backend functionality is not there it massively helps you work out what works and what doesn’t. I was also able to push it to other people’s phones to then peer over their shoulder why they tried things out. Once I was happy with the layout I then shared it with a designer for him to design the individual screens, I was then able to go back and add them to FluidUI so it looked as close to the real thing as possible.
Finding a designer?
I felt that the design of the app was critical to it being adopted and used by users, if it looked good it was going to be much easier to sell. I therefore decided that I wanted to use someone I trusted and could sit with to go over the designs and my vision for the product. Luckily I new just the chap and we set to work. It only took him a few days to come up with the concept which I loved he then took a few more days to complete all the various screen layouts.
I am always having ideas for mobile apps but don’t have the time to learn to code to create one. I also spend lots of time with startups who are creating mobile apps and I have no direct experience of publishing and promoting an app which means I am relying on stuff I have read and stuff I have learn’t second hand. It was time to get some real world experience by building and publishing my own app. I will document my journey via blog posts.
Mobile App Idea?
My idea was a simple one, all car owners have a bunch of things they need to remember to do each year like MOT, TAX, Insure and service the car and lots of people forget. So the app automates reminders for all your cars, you never forget those important things again.
Which Mobile platform to launch on?
First choice was what platform do I build the app for to launch upon. Most startups publish iOS first and Android second with Windows and Blackberry not even a consideration, but when you look at the number of handsets using Android versus iOS there is no comparison, Android has significantly more.
The challenge with Android is that you have over 12,000 different devices to support which makes it almost impossible to test your app across all these devices. The biggest reason people don’t start with Android is that monetization of an app is much simpler on iOS. A Distimo report said that in April 2013, the Google Play vs. iOS app revenue balance stood at 27% to 73%, that is hugely significant.
The other factors that influenced my decision were iOS/iPhone’s are expensive devices and my app was for car owners so my assumption is that more iPhone owners will also be car owners than Android users. The second factor is that I have an iPhone so if I want to test it then it would need to be iOS. Decision made it would be iOS.
Next step was to get the app designed.
Being a techy with a new born it goes without saying that I would need a gadget riddled baby monitor for our baby. I set about comparing baby monitors to work out which had the best features for the money. We had a bunch of must have features and a few nice to have so that would be our selection criteria.
– iPhone/iPad app
– Works on wifi
– Works away from home
– Plays music
– Night light
– Temperature gauge
– Two way voice
|Feature||BabyPing||iBaby||Withings||Tommy TF550||Foscam FI8910W|
|Two way voice||No||Yes||Yes||Yes||Yes|
Clearly the Withings product looks amazing and is feature packed, but it is £100 more than the other products so you would expect it to be something special. The killer for most of the video enabled products is that because they rely on the wifi to transmit the video they become difficult to move between houses, so a trip to the grandparents would require re-configuring them each time which is less than ideal. The Withings gets around this issue by being able to store 3 wifi networks and if all else fails it can work off of bluetooth.
Looking at this comparison made me think you are paying a lot for video and I wonder how much it will actually get used, what does make sense though is using your phone as the device to receive the audio and video. I can imagine with the likes of the Tommy the receiver will always be in the wrong room, you are sat in the lounge and you left it in the bedroom, you get the picture, where as your phone is always next to you (if you are male at least).
In conclusion if you are willing to pay over £200 you can have everything but if you are not you have to compromise quite considerably, the sensible thing to do would be to buy two a cheap Tommy like device that you can move between houses and buy a BabyPing or iBaby for use at home. Ultimately I know the decision is not mine but the wife’s so I will let you know what we (she) decides.
I came up for this idea a while back but did little with it mainly because of the cost of a quadrocopter. I noticed that a Dutch entrepreneur has done a little more and also coined the phrase CoffeeCopter, they have built a prototype and performed a test flight.
Starbucks has also recently announced they are to use drones for delivery, but at the moment it looks like jumping on the bandwagon rather than a credible option.