Kalzumeus Software

A few weeks ago a mail ended up in my spam box.  It ended up sandwitched between one “Mr. Wiggly”-type spam and one “Hot Japanese girls are looking for you!”.  Odd how my spam seems to come in complimentary themes.  Anyhow, I fished it out because it had a business proposal which, on reflection, actually interested me.  The email was a pretty good example of selling to someone you’ve never met before, incidentally, and if the writer gives me permission I’d gladly step through it with the reasons why it didn’t get the delete key.

Anyhow, here was the business proposition in a nutshell: “We run Bits du Jour, the woot of software, and we’d like to feature Bingo Card Creator as part of our back-to-school week”.  Now, I’ll be perfectly honest, I had no clue what woot meant aside from something my roommate used to say after putting an AWP round through someone’s head in CounterStrike.  Apparently woot is a website which essentially sells overstocked items.  The catch is that they sell exactly one item at a time, for a 24 hour period, and the supply is sharply limited.  So it creates basically a one-day “event” sort of sale… which repeats every day.   As I write this the sale is $145 for a kick-booty video card (sold out, sorry!).  And apparently they make piles and piles of money.

Bits du Jour takes the same basic structure and applies it to software, minus the scarcity angle.  They feature one piece of software a day, sold at a deep discount (40% is their minimum), and sell as many copies as humanly possible.  Or rather, they help the author sell copies — they rather strongly pitched that I wouldn’t have to change a thing about my existing shopping cart, which would have been a deal-breaker for me.  In return for driving the traffic to you, they get a commission similar to an affiliate site’s.  As I recall they said their standard was 30% but they’re not at full-scale operations yet (having only been open for a few months) and so were willing to go down to 20% for me.   Doing the math, that means on a discounted $14.95 sale of Bingo Card Creator that would net them $2.99 (and me a hair above $11.50).

Now, frankly, I had no plans to do anything with affiliates.  Here is the rationale: I have a $23.93 incentive to sell one marginal copy of my software ($24.95 – Paypal’s cut).  Any given affiliate has, say, a $5 incentive.  $5 doesn’t motivate someone to put any investment or thought into actually getting my software in front of people who need it: it just gets them to list my software on a spammy site with 100,000 other products competing for attention.  And in return for this I get to deal with more hands in the pot and having to track affiliates, send out commissions, and what have you.  Thanks, but no thanks.  I’d much rather spend the affiliate’s commission on AdWords, where I have total control of the experience from beginning to end and only have to deal with myself.

I was about to write the same to Bits Du Jour but, well, that letter was darn persuasive.  I would have to do very vanishingly little work (it turned out to take less than 10 minutes of my time to set up, all told — I created a new product on e-junkie, set up an affiliate system for it, and mailed her the proper link) and they said they would trust me to do the math on the affiliate stuff rather than having to go through any involved setup.  It turns out the setup wasn’t too involved, but as I’ve mentioned previously in regards to customer service, nothing motivates people like the words “I trust you”.  Particularly when its “I trust that we will have such a successful relationship that you will choose to pay me at the end of it”.

Am I expecting great things to come out of my day in the sun?  Not exactly.  As opposed to most of the products Bits du Jour sells (which seem to trend towards generic system utilities), I sell to a niche among niches.  I don’t know what their traffic is like on any given day, but unless it includes hundreds of teachers or parents of elementary school children I don’t see myself making a gigantic amount of sales.  (I’m personally betting on 2, which means about $23 for me and $6 to Bits du Jour — I actually mentioned that to them and they said they were happy to experiment).  And, hey, its not going to cost me any sales I was going to make already or take more than ten minutes of my time.

I believe D-Day is September 8th.  As usual, I’ll be sharing the results of the experiment.  The kind folks at Bits du Jour said they would be perfectly happy with that, which is the sort of transparency that many Internet companies brag about but few actually achieve.

Oddly enough right before I went on vacation I ended up on Slashdot for my recent musing on crippling trial versions. It being Slashdot, many people were shocked and amazed that someone would have the gumption to actually sell a program of the complexity of Bingo Card Creator. There was also, shall we say, a weeeee bit of animosity. Similarly, if you go to the Business of Software forums, every time the subject of OSS (open source software — to sidestep a debate which is essentially religious, OSS can be most easily understood as “software which you can use and modify for free”) comes up some folks have a weeeeee bit of animosity towards it. And when I say a weeeeee bit of animosity, its like saying that Israelis and Arabs don’t quite see eye-to-eye on that little land dispute they’ve had running for a few years.

Now, personally, I don’t understand quite why this is. Open source coexists quite readily with uISVs (micro independent software vendors = people, like me, who sell software without the backing of a “really big company”) and will continue to do so indefinitely. I say this as someone who both has contributed to OSS software (namely, I did bugfixing and optimizations for the best online version of the classic Battletech boardgame in existence), use OSS constantly in both my day job and my uISV, and sell proprietary software. So when I hear myths like the following I get a good chuckle.

OSS backers are crazy Commies. Most people who have installed Firefox are, in fact, not Communists. Most of the folks who, for lack of a better term, find themselves politically or spiritually fulfilled by the OSS movement (as opposed to a particular piece of OSS software), are in fact not Communists. Many of them do have irrational takes on the actual economics of software (c.f. Richard Stallman’s GNU Manifesto, which suggests at one point that all computer users be taxed to fund software development, an idea which would lead to overpriced computers, a crushing undersupply of new software, and a gigantic transnational boondoggle of a government agency to administer the tax, and thats just for starters). However, the movement is too fractured, too corporatized (see below), and too lacking in bullets-in-the-back-of-the-head-for-all-who-oppose-us to be fairly called Communist. Of course, its entirely possible that some OSS developers are honest-to-badness Commies, but thats far from universal.

OSS software is written by tiny developers working in their spare time out of the goodness of their hearts. This is every bit as much a lie as the Commie bit. Here’s a dirty little secret: most big-name OSS projects (including Linux, Firefox, Eclipse, take your pick) are produced primarily by programmers at large corporations working at the direction of their bosses in exchange for cash money. “Anyone can contribute to Linux!” is, if not a lie, a gross misstatement of the facts: getting a patch into the Linux kernel requires getting it past a series of gatekeepers who are getting paid for their time. And thats probably a good thing. Why IBM et al spend billions of dollars (in money and donated labor) on funding the Apache Software Foundation, Mozilla, et al are outside the scope of this post, but they do. And they’re hardly alone — more than half of the developers working on Sourceforge at the behest of the people signing their paychecks.

OSS will reach every niche in the software world and there will be no space for proprietary software. O rly? Allow me to give a +5 insightful to guy on Slashdot who said “If that was true, why hasn’t OSS produced something of quality comparable to Bingo Card Creator?” Oh, there are a lot of answers to that one.

Have you ever noticed that programmers seem to be able to find almost anything they need on Sourceforge and that everybody else really has to hunt for it? This is a reflection of the most fundamental truth of software development: you can’t program if you’re not a programmer. Programmers are very good at producing software for their own needs… and a lot less good at producing software for other’s needs. But the rest of the world keeps needing software to run their chimney sweep operations, make bingo cards, plan their weddings, and write their aquisition forms for a new laptop to replace the one that just exploded. And so there is a market for software development expertise, where people who don’t have it pay people who do money so that they can get back to doing the things they do best. Like sweeping chimneys, teaching children, looking at overly expensive wedding dresses, and blogging.

Open source means all bugs are get fixed and all features get implemented… in some dreamworld where all open source projects are under active development. Back in the real world, the overwhelming majority of open source projects are inactive. Development has ceased, the original maintainer (and the only person who knows how the code works) cannot be contacted, and mails/forum posts go unanswered. Take a look at the closest OSS competitor to my program, bingo-cards: it hasn’t seen a patch since 2004. (And its more active than 75% of the projects on SourceForge.) This is despite some minor usability niggles such as the fact that if you try to install it on a Windows PC it will crash.

Here’s another myth held by many in the uISV community: OSS developers will instantly clone any successful application because they’re crazy zealots. I’m sure any competent C developer could take the bingo-cards codebase and make it the equal of Bingo Card Creator in less than a man-week. I’m equally sure that they won’t. Sure, lots of the folks on Slashdot said variations of “Oh, I’d clone your program just to spite you”, but I have the strong suspicion that, as the Texas saying has it, they have a lot of hat but no cattle. And most uISVs produce programs with vastly higher barriers to entry than Bingo Card Creator — I shudder to think at how much I’d have to learn about chimney sweeping to outdo ChimneySoft, and there’s probably an order of magnitude more code to write there.

IBM is no more interested in bankrolling bingo-cards than they are interested in rolling out their own Proprietary Bingo Solution (TM) because the niche is just too tiny. Most teachers are incapable of coding and don’t have a week to spend doing it at any rate. Most one-man OSS teams don’t exactly have their intrinsic motivation fire lit by doing the unchallenging, boring coding tasks like making sure that bingo cards are printed correctly. Enter the uISV, who has the skills and the motivation ($$$) to solve this task, and everyone profits. Little kids learn to read, teachers spend more time teaching and less time preparing, I earn money to fund my cocoa habit, OSS developers write software they’ll actually enjoy writing.

Oh, while we’re at it, here’s another myth both OSS backers and many uISVs suffer under: Most of the work done in producing a quality piece of software happens in an IDE. If a tree falls in a forest, does it make any sound? If the perfect solution to the problem facing you can’t be found on a Google search, does it matter that it exists? Most successful uISVs have long since learned the lesson that writing the program is about 10% of the battle: you’ve then got to get it in front of prospective users, write documentation, help them with their problems, market market and market some more, etc. These take time and money, and most OSS developers hate them. With a burning passion. Intrinsic motivation only takes the typical OSS developer as far as closing the IDE.

bingo-cards, for example, gets about 5% of my downloads primarily because I spent time making a website which attracts teachers who have a problem like “I need to play sight word bingo with my first graders tomorrow but don’t want to spend hours making cards” and gives me the opportunity to tell them “Yep, install my software and you’ll be done in five minutes”. One way of several is I just got charged $90 by Goooogle for clicks on contextual advertising. Probably 99.9999% of OSS has an advertising budget of nothing. The developers also don’t typically take even rudimentary, free steps such as writing a description of their software which explains to real, honest-to-God users what their program actually allows them to accomplish. Not to pick on bingo-cards, but let me quote literally the entirety of what you can learn about their software without downloading it:

GPL bingo card printing program (numeric, letter bingo and picture bingo). Also prints a calling sequence (equivalent to the output from a barrel full of balls). XML output for later linking to multimedia engine.

Thats full of scary acronyms, irrelevant information, and about three words which are actually of use to an elementary school teacher. You can’t tell from that description that bingo-cards will even allow you to print Dolch sight word bingo cards (it will, incidentally, although you’ll have to supply the list yourself).

Compare this to a random three sentence snippet from a page on my website about Dolch sight word bingo:

This is a page of free resources for teaching how to read Dolch sight words which we put together as a resource to educators. You’ll probably want to have a set of sight words bingo cards ready to go to use these activities. If you don’t have one, you can make one in under five minutes if you download the free trial of Bingo Card Creator, which comes complete with all five Dolch sight word lists (pre-primer, primer, first grade, second grade, and third grade).

Only one of these two pages is responsive to the needs of our busy first grade teacher, and only one of them gets hit by Google searchers about 200 times per week.

[Edit: “Boondoggle” is a very hard word to spell.  I have no clue where “misunderstatement” came from, but I do love the charming Dubyaesque quality of that coinage.  Sadly, I was forced to rectify it to avoid enraging my readers who are English teachers.]

I just got back into the office this morning roughly an hour ago.  I’m currently typing this up on a Linux box which is not my main development machine, because my main development machine just went up in a puff of acrid smoke.  It turns out that in the four days I was not in the office they lost 3 machines to exactly the same symptops (laptop reacts like a PC which just got unplugged, acrid smoke pours out the back, hard disk data fine but internal components BBQed).  Now, I don’t know, after losing $10,000 of hardware I personally would have, hmm, tried to isolate the cause of the problem before frying additional machines but, hey, thats why I’m an engineer and not management.  A bit of whining and “Hey, boss, I took an electrical engineering course in college.  Maybe the socket here is getting power spikes” (the first is technically not a lie, although the extent of my electrical engineering experience is designing half-adders and I was terrible at it) got someone to actually bust out a voltmeter and measure our outlets.  “Ha, ha, good thing nothing was plugged in here, otherwise your computers would be yakiniku.”  (Yakiniku = a delicious Japanese dish which involves taking raw meat, basting it in delectable herbs and spices, and then burning the heck out of it.)  “Well, actually, the reason we have no computers plugged in on this table is that they are all yakiniku.”  “You’re not serious.” boggles the electrical guy.

Well, to make a long story short, the odds of me meeting my day job’s next deadline are now about 10,000:1 against (100% of my team is now idled) and I get a day or two to catch up on blogging.

I had a lovely weekend hanging out with my brother, although it was a weeeee bit more expensive than I had expected it to be.  In general terms, a day trip to a major Japanese tourist destination like Kyoto means I budget about $100 for myself.  Two people, five days, lots of travelling, well, you do the math.  Luckily, the cost of the trip was somewhat defrayed by waking up every morning to a sale.  I really love that feeling: “Hey Tim, Suzie from Ohio just bought us lunch!” (ok, most of lunch).

I highly recommend having a web mail service so you can quickly bang out the customer contacts while you’re away.  I dealt with about 5 emails, mostly “Can your software do this?” (No, but working on it), questions about bingo in a large group (hey, I guess I am the de-facto expert now), and a refund.

August sales are now $300 and climbing, and I just sent Robosoft’s author his $99 as promised.  I also promised a post-card but wasn’t smart enough to scan it before mailing it, so imagine you see an Edo era painting of a really gigantic wave with the enscription “Thanks for the excellent piece of software.  Sincerely, Patrick McKenzie, Bingo Card Creator”.  Incidentally, if you’re reading this and not already using his service: what are you waiting for.  Seriously.  $99 might sound expensive but it paid for itself in about a week and thats not even counting the increase in organic search rankings that about 100 links will get me.

Hideho everybody.  My little brother is coming to Japan tomorrow afternoon for bit to hang around with me, and when he leaves I’ll have to take an annual business trip out for the day job to a small hotel which is approximately 20 miles from the nearest functioning computer.  As a consequence, expect blogging to be lighter than usual for the next 6 days or so.

Last update before I leave: crickey, business is picking up in a major way.  Literally every single time I have checked my email the last couple of days its been You’ve Got Money.  When I’ve got some time after I get back I’ll explain what has been going mostly right and what has been outperforming all of my expectations.

(Edit: Hello, Slashdotters. Thanks for coming. Please don’t mind the mud, the Diggers yesterday were a rowdy bunch. :) I kid, I kid.  The conversation I refer to in my first paragraph, which ranged over many topics in a monster-thread, began here.)

Recently I (foolishly) allowed myself to be drawn into a conversation about software piracy on Slashdot, where I said something to the effect of “My software has the least restrictive registration scheme I could devise, just enough to keep honest men honest”. This is not very popular at Slashdot, where the consensus is that you should put up a Paypal button and ask for donations and if you’re worthy you’ll make even more money.

This is, well, complete and utter rubbish. If you intend to make money by selling software, you need to limit your trial version. The only question is how. If you’ve got altruistic motives, if don’t like charging money, you can do whatever you want.

In the days of yore when shareware was a bright new idea on the scene and the ASP had an ironclad “no crippling” policy, Colin Messitt performed a brilliant experiment. He took a utility which had just written and had it secretly flip a coin on first installation: it would either function in unrestricted mode without being registered (and have two nag screens for donations) or it would be feature-limited (and have two nag screens offering the upgrade). When orders came in, Colin was able to track whether the order had been generated by the limited or unlimited version of his software. Keep in mind that this is a perfect experimental design: there is a control group which is guaranteed to be indistinguishable from the experimental group, and nobody but yourself knows whats going on.

Anyhow, to make a long story short, the limited version outsold the unlimited one. Five to one. Colin calculates that the experiment cost him $17,000 in sales versus having 100% of the installations be limited. Crickey.

Lets look at another example: Movable Type. Its a wonderful program and powers thousands of blogs across the Internet, including some of the biggest names out there. Movable Type was once donationware. Do you know how much the average donation was for? Note: average donation, not donation per user. Of all the people who thought Movable Type was worth paying real honest-to-God money for, the average donation was… 38 cents.

So if you’re going to limit your software, would you rather limit it based on features or based on elapsed time? I have a feeling this is highly specific to the actual software you have designed. For example, Bingo Card Creator gets used in many classroom once or twice a month. A full-features trial for 30-days is out of the question — “Oh, I only used that twice, why should I pay $25″? And I was worried that teachers would use Bingo Card Creator like they do many teaching supplies — fire it up, print up one master copy of all the included lessons (30 cards for each subject they need), and then just store those against need later in the year (and they can then just photocopy the cards and keep the master copy around for next time).

So here was my plan: I provide cards for free on my website and Bingo Card Creator will happily spit out cards for you, but there is no way to get enough cards to teach an entire classroom on anything. After you print out 15 copies for any particular word list you’re gently disallowed from printing more, told the reason, and if you attempt to circumvent the block you’ll find you keep getting the same 15 cards no matter what you do.

You can see, after Bingo Card Creator prints out 15 cards, that they will work for your classroom (or you can see that they won’t — I think its important that folks know exactly what they’re getting into). But you can’t teach class without 10 more cards, and those 10 cards cost you $24.95. And after you’ve made the leap saying “Well, I really want to play bingo on next Tuesday” you can justify it by saying “And hey, I can play bingo another 5 times this year and if I do this is really, really cheap”. (Making a set of bingo cards takes an hour, buying a set for class costs $10-15.)

The reason I can limit my software like this is because I know enough about my target market to know what feature I can disable which will keep the software attractive but render it very close to useless. For software which appeals to more people, this can be rather difficult. What feature would you knock out of Direct Access, for example? I’m at a loss — you could disable, say, autotext but many people don’t need autotext, and the folks who do need it would likely not use the rest of your program without it. So Direct Access is a timed trial — and, if you’ll pardon me tooting someone else’s horn, its absolutely brilliant at it. You see, if you’re the kind of person who really needs Direct Access, after you’ve used it for a week you can’t. Live. Without. It. If I didn’t have Direct Access installed on my computer it would hurt my productivity as much as losing my tab key. So when you run into that 30 day limit and the convinience you have been relying on for 3+ weeks just shuts down, you whip out the credit card. Plus there is an investment in using Direct Access, in that you’ve configured everything so its exactly to your liking, and if you had to investigate one of his competitors or Launchy (OSS with a similar feature set) you’d have to go through all the configuration again.

(P.S. Full disclosure: I bought Direct Access, at a discount to other Joel on Software readers he was offering, approximately 72 hours after installing it. The author doesn’t pay me to flog it and my opinions are totally my own. That being said, I love it love it love it.)

Edit: A few minor English improvements and more in-depth explanation of my “crippling” scheme. This got hit by a couple hundred people and I was embarassed about, e.g., spelling the man’s name “Colon” at one point.

I love both my jobs, actually.  I just got my brain picked for an hour and a half by an elementary school student who had a school project to find a foreigner and ask them about schools in their country.  So he and his mother went hunting among everyone they knew asking “Do you know any foreigners?” and they eventually came to the team leader of another group at my company, who threw the request laterally to my group, which lead to me getting to chat about school uniforms (“We didn’t really have those”) and guns (“We didn’t really have those, either”) and To Kill A Mockingbird for an hour.

And while I was away from my desk I got two thank-you letters (“I’m telling all my homeschooling friends!”), a support request (“So how’s that Mac version coming along?”), and a sale.  This whole “get a sale every day” thing is starting to get a little overwhelming (yep, last 5 weekdays I’ve gotten 1 or 2 sales a day).  If it hasn’t just been a fluke I might have to break down and seek professional advice.  $24x30x12 > $8,000 per annum, and thats enough for, e.g., the government to start wondering “Hey, where is that all coming from”.  I’ll have to get legal before legal gets me.

Its been two weeks since my last numbers update so I thought I’d briefly summarize things.

First a brief recap: My first two weeks in business (July 1st through 15th) I saw one sale.  My next two weeks I saw 2 sales (through July 31st).  These past two weeks, lets see, 6 sales?  I’m going to shoot waaaaaaay past my personal goal for August, which was originally 4 sales.

Expenses: I recently upgraded my GoDaddy account to their next higher level of Linux hosting ($7 a month, egads!) and Traffic Facts (their analytic software… which is garbage, incidentally.  The only feature I find useful is the fact that they let me actually have my raw log files, which I can extract the important information out of with gawk and grep.)  Plus $30 a month on Yahoo and ~$70 a month on Google (budgeted for $90 but search volume isn’t always high enough to make that), and $5 a month for e-junkie.  I’m going to cut my spending on Yahoo from next month, as it seems to have stopped generating results.

Anyhow, going forward, thats ~$110 a month in expenses, or 4.5 sales.  I now feel rather confident that I can make at least 10 sales a month, consistently, for about as long as I want with rather little additional work.  By my quick back-of-the-envelope math, thats about $1,500 a year, which won’t exactly have me sipping iced cocoa on the beach.  Actually, check that, that is enough for me to afford a quick jaunt out to Okinawa every year.  And I couldn’t go to the beach every day — I burn in minutes, its terrible.

Alright, daydreaming aside:

Sales sources are approximately 50% Google (no purchasers from organic search as of yet, oddly enough), 25% download sites (don’t know which — whoops!),  25% one single teacher message board which apparently loves me.  (Seth Godin, a marketing genius whose key insight is “make it easy for people to tell their friends about you”, would be proud.)

My ballpark estimate for download-to-purchase conversion is 3%.  So one of my Ad Groups (average CPA: $0.30) costs $10 per purchaser and another ($0.45) costs $15, leaving me comfortably profitable with either.

Some other statistics:

Total number of support requests: 0 (1 if you count the 1 refund I processed, which is not counted in the above sales)

Total customer contacts: hmm, call that 3.  3 teachers read about me on the aforementioned message board and asked where they could get a copy of my program.

Total downloads per week: I’ve written before about how this is difficult to estimate, especially with my software being available on 100 sites now.  Some of them cache the installer so the download doesn’t end up on my logs.  I estimate that there are approximately 200 downloads per week.  Of these, I get confirmation that at least 30 installed successfully through use of my check-for-updates feature.