The Guide to App Store Marketing

Apple's Amazon

There aren’t two App Stores, differentiated by how price conscious users are- there’s three! Overall Top 100, Category Top 25, and The Great Unwashed. Since no one wants to be in The Great Unwashed, and most of us don’t have the cash to get into the Top 100, lets talk about how to get into your category’s Top 25.

The most important thing for an iPhone app is to be in the Top 25 of a category or sub-category- it doesn’t matter what that category is! As long as you are in the Top 25 of one, you’ll have a steady base of traffic.

The App Store is an Amazon River of money- pageviews, dollars, and clicks flow through in unimaginable volume. The New page at the front of the App Store gets the full torrent of that traffic- it doesn’t matter how terrible your app performs, if you are featured, you’ll get huge sales by volume alone.

We see this time and time again in the Books category- you’ll have a third tier app that’s been stuck around 50th place for months, Apple features them, and, poof! They’ll be #1 in Books and in the Overall Top 100 for about three days. After those three days they’ll slide off the Featured list and lose momentum quickly. Within another day or so they’ll be out of the Overall Top 100, and, within a week of being originally featured, begin their inexorable slide back down to the pits of the Books category.

Categories

Outside of hitting the jackpot and being featured, the best way to make money on the App Store is to focus on a category and get to the Top 25 of it. It’s almost impossible to stay in the Overall Top 100 for a sustained amount of time, without a sustained amount of advertising money. But, when it comes to individual categories and sub-categories, you can maintain a high position for quite a long time. We’ve been in the Top Ten of books for about six months straight at this point.

Categories make up the river delta of the App Store’s Amazon. From the flow of the Featured tab the traffic spreads into a dozen directions, and, from there, subdivides further in the case of Games. For Books, being in the Top 10 means $300 a day. For other categories you’ll be looking at anywhere from $50 to $500. Here’s the key, though- as long as you maintain rank, that’s money in the bank. It’s steady. It’s dependable. As long as you maintain your rank.

Even when talking about high quality, higher priced apps like Things, they still usually can be found in the Top 25 of their given category. After the Top 25 volume dissipates so quickly you might as well not exist.

Rank

Rank is everything.

The iPhone’s screen can only see four apps when pulling up a category. The fifth has only half visible. Below the Top Five, you have to swipe to reveal each additional app. After App #25 you have to reveal the next ‘page’ of 25 apps, destroying the quantity of eyeballs seeing your app’s listing.

When launching your app, your target should be to be in the Top Four- that’s where the money is, because people don’t have to swipe below the fold to see you. The #1 position in a category is obviously awesome on its own- we’re enjoying the fruits of it right now. We usually do $300-$400/day in 4th-6th place. Since going #1 we’ve been doing $700-$900/day, net. Not too shabby.

Rank to Rank

Ok, so category rank is important, and no one without TapTapTap’s advertising budget should focus in on the Top 100 right off the bat. But, given a focus on ranking in a category, how exactly do you do that?

Getting into the Top 100 of a category is the first step- if you don’t exist after the Top 25 of a category, you REALLY don’t exist after the Top 100. Fortunately, though, it doesn’t take a lot of sales to get into the Top 100 of most categories. 25/day should suffice for sneaking into 98th place or so.

It’s getting from 98th to 4th that’s the trick :)

Here’s the key- at no point are you competing with the 4th place app, until you are within a screen of them. If you’re within 2-3 ranks of them, you’re fighting for conversions. When you’re 60 spots away, it doesn’t matter. At every stage you simply have to out-convert the app in front of you.

The Three Factors

Here’s the second key- you only have control over three factors in this phase of the battle. Title, icon, and price. Based on those three factors people will decided whether to tap on your app or the app next to yours.

Seems obvious, but looking around at most titles, it seems like most folks don’t focus on this.

If you’re doing your own outside marketing, have a ball! Go with whatever you want. But, if you want to take advantage of organic App Store traffic, you’ll need to optimize the hell out of those three factors. If your title doesn’t describe your app effectively and interestingly, you won’t have a prayer of a chance of out-converting the next guy.

Further, your title is just as important in App Store search marketing as Google search marketing- the words you choose will help determine which App Store searches you show in. If you make up a word, people won’t be searching for you unless you do your own marketing.

It’s about brand versus product- if you’re a startup building a brand, you’ll want that brand front and center. If you’re releasing a product, you want to make money every month, and might not care about brand as much as conversion rate.

A great example is DailyBurn- their primary app is called - you guessed it! - DailyBurn. However, their side-product is called ‘FoodScanner’. Self-descriptive enough, it helps you keep track of what you eat. Simple, to the point, stands out in a list. People who know about DailyBurn can get DailyBurn straightaway.

People who have never heard of DailyBurn will notice FoodScanner, pay money, and get upsold from the product to the brand.

As for icon- does it describe your app? It’s one of the three things in your power at launch. Will someone have a good idea of what your app is about? Will it stand out in a list of other apps? Will it draw peoples’ eye when they just scrolled through eighty other apps? Stand out!

As for price- if you want a better shot at the Top 100, good money seems to be on 99 cents. But, again, are you really shooting for the Top 100? Are you going to be able to buy enough volume - at least 1000 sales a day - through advertising? Or, alternatively, do you already have a built-in audience waiting for your app? If not, price higher.

Being at $1.99, in our experience probably won’t hurt your sales much. And, almost assuredly, you won’t generate enough extra volume at 99 cents to justify the hit to revenue. At the very least, launch at $1.99 and see how things go. If you get into the Top 25 of your category, you’ll have significantly more revenue than an equivalent application in your slot. It seems from our testing that $2.99 can significantly hurt sales, but being 99 cents never increases volume enough to justify not being $1.99.

But… but… those are all low prices!

The App Store is about high volume, low cost distribution with a lot of software sales overhead removed. Take it or leave it.

Search

Three factors here- title, company name, and keywords. If you’re targeting something specific and have it in both your title and a bunch of your keywords, that will help you rank for the search term. If you have it in your title, keywords, AND company name, so much the better. It seems that search results are slightly weighted towards paid applications, with overall rank mixing with title/keywords/company name to determine your placement. Pick a good title, think through your keywords, rank high- search will then take care of itself.

Tools of the Trade

Appviz

The best sales tool around. Fetches your sales info from iTunes Connect, makes it look great, creates shiny grafts, and even provides a list of your app’s reviews.

Applyzer

The best rank tool around. For just a couple bucks an app it gives you access to your current rank in every market, shows you graphs of your rank over the past 30 days, and generally helps you keep tabs on what’s going on around the world. To make it even better, track your category competition as well :)

Appsto.re

You’d almost think companies like having ‘app’ in their name, or something. A free service that spits out a purchase link for your app and tells you how many of those clicks actually convert into purchases. You can do this on your own through LinkExchange and earn a 5% commission from Apple on your own app, but they make it so wicked easy I don’t bother.

Appirator

Install this in your app, immediately! It’s directly responsible for helping increase our rating rate among our most hardcore users, giving us the boost we needed to get to #1 in Books. And, yeah, it does look like App Pirator. Their name sucks, but install it anyways!

Tender

Not specifically related to the iPhone, but it’s phenomenal for support. Allows you to conduct your customer service entirely through email, but also provides a great web interface for checking your response time, checking in on outstanding issues, seeing who’s left in your support queue, and generally just making sure you don’t accidentally have an email fall through the cracks.

Heroku

We use them for our servers, so we don’t have to worry about our servers.

New Relic

Server monitoring that’s better than anything you’ll come up with for server monitoring. Pay up!

That’s it!

I’ll keep on updating this as time goes on, and keep the article at a constant URL here on Spreadsong.com. If you got some value out of it, link it up. And, naturally, if you have any questions, just hit me up via the ‘contact’ button at the top of the screen. Always happy to help.

Falling Forward- three failures on the road to profitability, and how we moved past them

I’m writing this from a hammock on a small Panamanian island, light breeze, gentle water washing up onto shore- life is damn good and sales are higher than ever. But, at the same time, there’s been a lot of near death experiences in the process of getting to a point of scalable profitability.

Here’s how we’ve screwed up!

1) Wrong market, wrong idea, wrong execution, wrong timeframe, wrong funding.

This should have killed us.

A year ago we set out to build a music company, Spreadsong, to make music free and free music profitable. Where dozens of companies fought tooth and nail to build businesses around a mess of RIAA lawsuits and licensing deals, we would blaze a trail forward into independent, free music- download everything! Spread the music! Tap into the Creative Commons and craft an amazing service.

The truth is, we did build a damn good service- just the wrong damn good service. We built the free service first and got it to the point where it was really, really solid. As we drew closer and closer to launching one big problem became apparent- the paid part sucked! It wasn’t useful, it wasn’t fun to use, and it was nowhere near as good as the free component.

Little detail: when dealing with music, freemium with 0% premium is a recipe for disaster. In recognizing this, after a year of hard work, we immediately took a deep breath, regrouped, and moved forward to build a side-business around another idea atop another platform. That side-business was Free Books, and its since become our entire focus. Something about profitability on a Panamanian island is kind of addictive, call me crazy.

2) Wrong structure.

This is a biggie- we originally brought on a third guy. Very experienced, background on the tech side of the music business, great backend skills, really into what we were doing. We agreed to vesting over IM, stating that we’d all work for equal amounts of equity. Little problem- nothing was written down.

After about four months he decided that he didn’t want to continue- the three of us weren’t gelling as a team, he had much higher fixed expenses that needed to be paid, there was a lack of distillation on what we were really building, and in general it was just a low point for the company. He announced without warning that he was going to quit- bad enough. But, to top it off, he intended to use our code for his own projects, despite the earlier agreement.

This elicited a moment of panic, given that this wasn’t what had been agreed to- we had all been working for a to-be-formed company in return to sweat equity, being paid for our contributions in equity and returning back the intellectual property of our work. But, we didn’t have a written agreement- just agreements spread through various conversations in email and IM.

We wound up getting properly incorporated, got vesting set up officially, and did indeed resolve the IP dispute. Doing so was expensive, however, and lots of time was eaten up, time that should have been used to get to market sooner.

Morale of the story- it’s ok not to incorporate, but you absolutely MUST have a written contract between all parties. Braindead simple, and I feel like an idiot for not having done so originally, but just get it done. Write it out in plain English, hit the major points- you’re all vesting into x% equity with a one year cliff, four years vesting, and all work done related to so and so belongs to a to-be-formed company. Boom, easy!

3) Not recognizing the signs of success.

After deciding to get revenue flowing before going back to work on Spreadsong, we set out to throw stuff against the wall left and right. iPhone apps, web apps, Adsense plays, even a Facebook app. Over the course of two months we just churned out concepts left and right working to get a hit.

The problem emerged when got a hit- Free Books’ sales started increasing. At first it was $10/day (cool, that’s half of rent!), then $20/day (rent’s paid, awesome!), $50/day (that pays for all expenses in Budapest, we’re ramen profitable!), and $300/day (shit, I guess we need to turn this into a business now!).

It’s that last step, “shit, we have to turn this into a business now”, that we didn’t execute on as well as possible. While we had support emails ready to go from day one, while we had a plan forward from day one, we basically shipped Free Books and then got to work on other things- back to churning things out.

But, as we hit the $100/day point, we didn’t immediately cut the other things- we kept on throwing against the wall until we were already at the $250/day. Problems became clear. We hadn’t tested the app thoroughly enough, first of all, and as a ‘throw it against the wall’ release some key functionality was missing. In general it was a first draft to prove an idea but, by waiting the extra two weeks, we screwed up the transition. In so waiting we allowed negative reviews to proliferate and wound up postponing an update much too long for comfort.

At this point, we are 100% focused on Free Books and other Free Books related work- we’re about to ship an update that does a deep, deep fix of all the various bugs that have appeared in previous versions, along with adding some really great features. Thoroughly tested, professional in affect, and just an all around high quality application, our next version is a properly realized version of our first draft.

However, in waiting too long to switch gears, and in failing to focus solely on Free Books after we shipped the update, we wasted too much time. Survivable, and revenue is doing just fine today, but I feel bad that we left folks hanging in our rush to get a hit. Our processes have improved, our focus has been tuned, and our path forward is clearer than ever. We’ve made it work. But that doesn’t mean we executed perfectly. We failed forward, we made mistakes, we screwed up, but we’re still standing- because, even while failing, we failed forward.

The ICBM Economy- global competition and the missile shield of travel

The world is a battleground of ideas- anyone, anywhere can launch a first draft of most ideas within a couple of weeks, leveraging years of work on a pay per usage basis. Ideas don’t occur in a vacuum, and when the idea to launch time window is measured in weeks instead of years, you damn well better have a better environment for idea generation than your competition.

We’ve gone from a world of cavalry charges to one of ICBM strikes- when the next guy’s missiles are arcing over the Arctic you better have yours firing back, and fast.

Travel as a missile shield.

Spreadsong’s a new company and there’s a million things that have to be done to keep revenue growing in the right direction. It means product launches, major updates, major initiatives, and just generally killing it across the board- it means having awesome ideas and executing better than anyone else. Because of this, I work a ton- Spreadsong’s growing fast, we have a lot of customers, there are support needs, emails to answer, strategies to execute on, ideas to test, new things to try. And that’s awesome! I’ve been working my ass off to make that sentence a reality for years, and it’s incredible satisfying to see it come true.

I’m not a Four Hour Work Week man, if but for the simple reason that I like what I do. However, in spending huge swathes of time building, it’s also easy to get lost in the swirling tide of crisis. It’s easy to have each day a Donnie Darko like line from bed to shower to breakfast to office to bed once more. That sucks. It’s no way to live, and definitely no way to come up with great ideas.

So, the question is, how do you come up with better ideas than the next guy? And, not just the next guy, but an entire planet? How do you come up with profitable ideas and then execute relentlessly on them?

Travel.

By being more aware, more interested, more engaged and excited about the day to day, it gets easier to create. And that’s what making money is about now- creation. Creating something new, whether derivative or original- creation. It’s being surrounded by other language, the moment to moment crush of the new- the combination makes it easier to be focused on the moment.

That brings us to serendipity- in being more aware, more opportunity comes. I’ve found it to be universally true while traveling, and friends who live abroad have found the same to totally true. It’s really all over the place- talking to people in cafes who don’t speak a lot of English I get enormously helpful feedback on how we phrase stuff, making for a more usable app. And just that act, getting to know people from other countries, in another country, opens up a huge swathe of opportunity.

An anecdote.

Just as I came in to the cafe I’m writing this from- one of the girls who works here waved and brought over a friend of hers. They had just been talking about what we’re doing, since I come in pretty regularly- as we all talked, her friend actually brought up something about the way book lists are distributed that I’d never even considered.

It had huge implications for the future. A random conversation with a Hungarian art student, but one with far-reaching implications. Will it turn into something big? I think so, because it’s the kind of small occurance that points to a broader, large-scale occurence. And it’s easy to test! So, as we move forward, as we launch our next few products, we have more information to act on, and better ideas to execute upon- we’ll be there before anyone else, because of a random serendipitous experience.

Travel is our missile shield- what’s yours?

Three Steps to Kickass Customer Service - and why it's the best investment your company can make

from paypalsucks.com

It absolutely blows my mind how terrible most companies are at customer service- form emails, useless responses, nothing personal, nothing actionable, just the dregs of mediocrity. Whenever I call Bank of America I’m put on hold for fifteen minutes as a robotic voice informs me how much of a valued customer I am. Really feeling the love, guys.

Maybe it’s just me, but I’d prefer they just hired enough people to not waste my time. And that’s for our corporate account! It’s even worse when I call a bank for my personal one.

On the other hand, whenever I email an early stage company I usually get a quick, personal, helpful response. It’s not any single thing that makes me walk away from the interaction feeling happy, but rather three core things- things that we try to apply in Spreadsong each and every day.

A lot of companies (hi PayPal!) seem to consider offering great customer service as a cost center to be minimized. Huh? Customer service is an investment in your company- it’s an investment in happy customers that stick with you for years, tell their friends about your products, and, most importantly, feel really good about their purchase of your product.

Customer service makes you money!

But only if done well.

1) Approachability

The most important thing, I think, is approachability- don’t make people feel bad for emailing you. This means taking every opportunity to answer questions and be easy to get ahold of. When we send an email we make it a point to tell people that while the email’s automated, their reply will go straight back to us. We sign the email with our names, not some vague “Spreadsong Customer Service” ridiculousness. On all contact forms we make it clear we want people to contact us- we even have a big Contact Us button within our app, Free Books for iPhone.

Exactly the same approach holds true for a large company- they’d be extremely well served to just sign each message with the name of a random person from their customer service department, complete with direct line phone number and email.

Make it easy for your customers to contact you, and take every opportunity to reduce friction.

2) Write like you talk.

Professionalism gone wild, what’s going on? It seems like a lot folks are afraid to actually sound like human beings when sending an email from their company. That doesn’t mean you should be rude, just that you should be friendly- like if you were meeting a new person in real life. Ok, you’ll want to avoid casually swearing, but outside of that it’s the same- you’d be yourself. You’d use their first name, you’d joke, you’d act like a human being. And, if you did something boneheaded, you’d be sure apologize and take responsibility. You’d have a conversation.

When a customer emails you, there’s usually one of two things going- something is awesome or something is screwed up. If it’s awesome, you want to thank them for their support and offer something cool- we usually ask people if they’d like to get early versions of the app, and are sure to ask if they have any suggestions. You want to thank them for making your company successful, and treat them like you would anyone who helps you out- offer to help them out! Especially when it comes to working in a feature request they have.

That doesn’t mean you want to integrate every request, of course. But it does mean you want to always be problem solving- the question isn’t the feature, the question is the goal. Do they want to read their own collection of quotes they’ve collected on their computer from Free Books? Well, they might ask for a desktop app, but what they really want is a way to get their own content onto Free Books.

We always try to figure out a way to work in customer requests into our development plan- if it’s going to be a long-term addition, I’m upfront with them about the timeframe and offer to let them be among the first to check it out.

3) Take responsibility, offer a solution, present a path forward.

But, wait, you say! It could be a feature request! If you get a feature request, something has gone wrong- your customer used the app, wanted something cool to happen, and that something cool wasn’t there. Suck. They then let you know about it- and, no matter how positive the email, something has gone wrong.

The most important thing here is to offer a path forward- a solution, a timeline, a quick explanation of what’s going wrong, and assurance that you’re on the job in fixing the specific issue at hand. And, in the case of a bug report, we usually have to ask for another piece of information to help track down the issue.

Even when someone requests that we add Twilight or Harry Potter to Free Books, I still like to explain how the app works with public domain content, and that, indeed, we’ll be trying to get the book onto Free Books as soon as possible, even if that’s sometime around the year 2071. “Jetpacks, hover cars, and Harry Potter- a good year all around!”.

This stuff isn’t rocket science, but it is critical to building a business. Make your company easy to reach, be a person, offer a solution, and present a path forward- easy!

Bootstrapping Abroad: why we do it and why it's awesome

Bootstrapping abroad, a wanderlust in two acts. Ira Glass eat your heart out.

There’s been a lot of buzz lately about travel and business, and not a lot of real hard info. It’s a bit of an out there thing, I guess- start your business from Argentina for the low, low price of $1,000 a month! Call today, supplies are limited! There’s a lot of mythologizing around travel, and a lot of dreams. The latter is especially dangerous, especially for folks who work on their laptops- I think most of us love the idea of living in a tropical paradise, working from the beach and creating to the sounds of surf sweeping up onto the sand.

So what’s it really like?

I’ve now worked for at least three months from three places internationally- Buenos Aires, Koh Tao, and Budapest.

Whenever the the topic of working abroad comes up, there’s usually a list of concerns everyone has in the back of their mind. Here’s the bottom line: everything is fixable with money, and if you managed to luck out by having savings in a strong currency, it won’t cost much. It costs less each month to work on the tropical island of Koh Tao, Thailand than it does to work in San Francisco, Austin, Boulder, or New York. I won’t count Seattle because the weather sucks and it’s always overcast, so whatever. Though it’s also true for Seattle. Not that I’m counting Seattle.

Anyways.

In general, if you choose to move on over to an emerging market like Argentina or Thailand, you can count on costs being cut by two thirds for an equivalent lifestyle to what you might have in San Francisco or New York- in reality, though, if you cut to a third you’ll be tempted to spend more, go out a bit more, and drink a bit more- you’ll really wind up with a net halving.

Most expats I know don’t live an equivalent lifestyle to what they had in the States, they live it up a bit in their apartment and their day to day life. Not a lot, but a little bit in every area across the board. So, while you can definitely cut costs to a third or a quarter, most wind up cutting by a half and improving their quality of life.

So, live better life, pay less money, double your runway! Fucking score, eh? A lot of this depends on what kind of lifestyle you want- if your business is selling products on the internet to consumers, without a enterprise or B2B aspect that requires you be able to go pitch the product in person, there’s an enormous degree of flexibility in the day to day life you can craft for yourself and your company.

Life in every place is different, there’s no broad ‘bootstrap abroad’ conclusion- if you want to live on the beach, give it a go! Koh Tao was beautiful but the environment didn’t really jell for me- there’s a lot of great people living there, but it’s like living in DisneyLand- everyone is there to forget about their troubles for a week, then return to their soulcrushing job at a big multinational.

You meet a lot of folks who have checked out in a lot of respects- working real estate, one day decide that they’re sick and tired of it, move to Koh Tao, get a job as a scuba instructor, and spend every day teaching people to surf and swimming through some of the most gorgeous reefs you’ve ever seen in your life.

Amazing gig! But not exactly the ideal atmosphere for building a new company. For me, it wasn’t a good fit- but for someone else it might be perfect. The fact is, there’s tons of amazing, beautiful emerging markets that would be great to live in- I can’t recommend Buenos Aires enough, for instance.

For me, the biggest benefit is intangible- when you live in one place for years, it starts to feel a bit stale. You drive on autopilot, you walk around without really seeing the beauty around you- normalcy. And normalcy is stifling, and uncreative. When I travel, everything is new- obvious, right? But if everything is new, you always have to be a bit more on your game, a little more aware, and a little more in the moment. It’s creative, and in its moment to moment creativity, there’s a moment to moment focus that makes starting a business feel like a more natural outgrowth… of lifestyle.

And that’s what it’s about- lifestyle. Imagine working your ass off for three years starting a business only to wind up having to commute 40 minutes into a downtown highrise every day. What’s the point? Transitioning from one high rise office to a slightly larger high rise office, albeit that you happen to cast a vote on a board in favor of?

Having a business is art, and I don’t care how off the wall that might sound. A corporation is a political entity- it brings together people to make shit happen, just like a nation-state does, except on a smaller scale, and sans F22’s. When you start a business you’re creating a new organization, and a new lifestyle- you have the opportunity to create something new in the world not just in terms of product, but in terms of the day to day of each and every employee. So create!

If you want to build not just a product but an organization, go where you’re most creative, go where you have the best shot at starting something new. Make something people want, to be sure, but put yourself in a position with the cards stacked in your favor. Living somewhere where you’re more creative on a day to day basis, moving somewhere you have a higher quality of life, moving somewhere where costs are a third- these are all good things. These are all amazing things. And, at the very least, these are all things worth trying- so book your ticket and give bootstrapping abroad a go!

Don't Be a Lonely Planet Entrepreneur- startup mythology and the death of capitalism

On starting this blog I decided to make a habit of writing for it- hell, that makes it sound like work. In reality, it’s a great excuse to take an hour out from the flow of the day, sit down in a nice sidewalk cafe and write down some thoughts over a espresso and a Heineken. It’s a nice habit and I’m really enjoying it- today, however, as I started walking to the cafe I was at a loss for what I would write about.

Walking along and trying to think of something to write about, I saw a group of backpackers walking out of their hostel. Surrounded by a beautiful boulevard in a great city, surrounded by activity and an atmosphere full of life, all three of them were nose-deep in their Lonely Planet guides. Eventually they started walking, glancing down at their guide every now and again, and at the end of the street, again buried themselves in their guide- Lonely Planet walking tour ahoy! In every city of the world you see it, people experiencing travel through the block by block directives of a four year old travel guide.

Three weeks ago I needed to renew my three month EU visa, so I took a week trip on over to Tunisia. I didn’t really know anything about the country, certainly not which cities would be cool to visit, spots that would be great to see. I just had some vague directions jotted down in my notepad on how to get to the Tunis hostel, deep within the medina of the city.

Arriving at 11pm, having procrastinated on packing until 3am and hopping a train to Vienna at 7, I hadn’t slept a wink- but, on getting in, I wound up going out into the city and hanging out with a couple of Algerian guys from the hostel, getting a recommendation to visit Hammamet, and, by chance, there attending a Michael Jackson trance tribute. This naturally got led me to meeting more new people, getting more recommendations, and so I wandered Tunisia, new friend to new friend, city to city, awesome experience to awesome experience.

I think there’s a lot of entrepreneurs who start their businesses like Lonely Planet travelers- Lonely Planet entrepreneurs, if you will. Move to San Francisco, apply to seed funds, get VC, scale operations, don’t worry about the business model, build something people want and roll with it, get profitable eventually, and go from there.

Somewhere along the way the tech world has left behind that whole ‘capitalism’ thing. The part where you make money, the part where you build businesses that generate revenue and scale operations and your product line as cashflow allows. This is mostly a matter of lag time- it takes about seven years for most major business success stories to develop, by IPO or by acquisition.

The major shifts in the economics of starting a business, cloud services, on demand, pay as you go computing, and lowered prices across the board, those shifts are recent. The businesses that have been built atop them have not yet had time to develop, so when people look to the past, when they look to mythology, when they look to the great companies of the past for guidance on how to move forward into a successful future, they look to companies built on a fundamentally different economic model.

Google, Ebay, Amazon, Facebook- venture capital, venture capital, venture capital, venture capital. The success stories of the past point in a direction certain, but that direction now serves to lead new companies astray. The facts of our industry, the costs of our industry, and the marketing methods of our industry have shifted and that shift serves to permanently reroute the pathways of success.

Let’s get back to capitalism, and, in so doing, leave behind Lonely Planet entrepreneurism at last.

Relentlessly Profitable- how the opportunity cost of a great idea destroys startups

It’s really amazing how many startups fail. Not that ideas fail, no, that’s a given- we only first began generating scalable revenue on our third - but that as the costs of running a business plunge ever lower so many smart people can’t cover their $4,000/month “don’t die” costs.

Part of it’s location, for sure. If you live in San Francisco there’s just some base costs that keep your base costs relatively high. Same with New York, or London- all the places with money, basically. If a place is a haven for raising venture capital, it’s probably a terrible place to become profitable, if only because the necessity of so many rich people in one area drives up the cost of living.

Part of it’s just giving up- talking to people who have their startups die and who go off to do the employee thing, it’s usually because things aren’t moving forward as fast as was hoped for, or the team isn’t working out. The latter is especially nasty, because you can’t really recover from it. Starting a business from scratch means working really long hours with the same people every day- if you don’t get along with someone you’re working with 12 hours a day, chances are things are going to unravel in a hurry.

But in a large part, I think great ideas kill new companies.

When you have a great idea you aren’t focused on making money, you’re focused on changing the world and creating this amazing thing. And, in the early days, the only thing that matters is cashflow. That this isn’t highlighted at the top of every startup postmortem is pretty surprising- cashflow, cashflow, cashflow! If you’re losing more money than you’re making, your company is dying. If revenue is going down, you’re dying. If revenue is going sideways, you’re dying.

Perhaps more importantly, if things aren’t going up, they are going down, because new companies are precarious buggers- gravity pulls towards death, and you’ve got to blast off in a goddamn rocket ship to escape that pull. Guess what the fuel for that blasting off is? Yup. Cash- and not just any cash, but cash on hand. We’ve had a fun time with that one over the past month, making the transition from startup losing money and slowly dying to company making money and growing revenue.

A lot of great companies start by building something totally unrelated to what turns out to be their core business. Microsoft started with Basic, the earliest venture of Jobs and Wozniak was selling phone phreaking blue boxes, HP started with esoteric scientific instruments, Intel began making SRAM chips. The things that made them famous, Windows, the Apple II, pocket calculators, CPUs, those all were funded with cash. They didn’t start with brilliant ideas to change the world, that was Step Two.

Step One was making money.

Icon Driven Development on the App Store (How we make $350/day without marketing)

How did we get an iPhone app to 10k/month in revenue without any outside marketing? Icon driven development- design by logo!

Our first app, Kindling, was stuck in the quagmire of app review hell, pocket vetoed into oblivion, with no communication outside of robo emails. It had already been 17 days since first submitting the app and we needed revenue- money was running out in three months and it was time to get profitable or face impending cashflow doom.

Sitting in a Budapest technical university, working with my co-founder Zsolt and playing faux-students to take advantage of the 100 forint espresso, it was time to put together a game plan. We took stock of our resources- we had already collected tens of thousands of public domain books, created a great interface for browsing them on the iPhone, and created the ability to email those books directly to a Kindle.

The Kindle part was in review hell, but could a simple book emailing application be acceptable? Nuke the Kindle support, add PDFs, and sell it as a separate, cheaper application. If we could get just 10-15 sales a day we’d be able to pay the rent and keep the lights on while building our main product.

As we deliberated on what to do next, the sense of impending cashflow doom wasn’t being helped any by the building’s stark, Soviet-built concrete interior. And, thinking of it, the duality of the whole situation was bizarre- here we were, figuring out how to make money off a bunch of public domain books, and here I was, on a Skype call to Apple developer support, trying to figure out what was taking so long, as we planned an app to distribute free books…

And there it was! Free Books! It was perfect- and, in an instant, everything changed. As a capitalist endeavor, the irony was too much to pass up. Free, public, sharing, no limits, available- and then is struck me. A google of ‘hammer and sickle’, a splash of red, a rounding effect, a bit of shine, a nice propaganda font… boom! The perfect distillation of Free Books.

The second we had that logo we knew we had a winner- and, with such a, shall we say, ‘eyecatching’ logo, there was no reason to not go all the way and build a reader component. And so it began- two weeks of extra development to get the reader done, tune the interface, and get the retooled Kindling out the door.

Submission, rejection for a bad genre icon, resubmission, acceptance, and the moment of truth arrived at last: how would Free Books perform?

Earth shattering? YES! If you live in San Francisco, maybe it costs $2,000-$3,000 to live acceptably. In Budapest, $1,000 is more than enough- cost of living is a choice, and we had already made the choice to operate Spreadsong, Inc. from the developing world. Simply by virtue of being out of expensive locations, our revenue effectively tripled. We gained the purchasing power of $30,000 from our $10,000- and that’s some serious, serious money for a new company.

In gaining revenue we transitioned immediately from startup scrounging for cash to a company able to cover month to month costs without debt, and even pay (gasp!) salaries. We gained a foundation upon which to build and increase revenue. The shift from startup to company is really the shift from chasing glimmers of success to planning cashflow, planning functionality, and getting to respond to paying customers.

And, in a very real sense, it all started with a logo- we didn’t do any outside marketing, not even submitting to review sites. We just launched the app and it took off on its own.

Why did it take off? It comes down to differentiation- not differentiation of feature lists and cool page turning animations, but differentiation of design. And not design in the sense of graphic design, but in the sense of clarity. There are tons of book readers, book stores, and book collections. Readers with beautiful page turning algorithms, readers with Harry Potter for sale, readers for individual books, readers for classic books. But, through it all, they were all the same.

Though we didn’t realize it at the time, browsing through the list of Paid Book apps, virtually every icon was a play on a bookshelf or an individual book. Everyone was focused on pretending to be physical books, leaving an opening for us to stand out with a big, obnoxious, ridiculous logo with clear-cut positioning. Free Books, click here! Want 10 painstakingly rendered books? Check out that book over that. Want 20,000 books with everything from Oscar Wilde to Andrew Carnegie, Poe, Mark Twain, and Shakespeare? Free Books! Click here.

As we build our next products and get ready to expand to other platforms, we do so with a profitable base to build off of- all because of logo-driven development.

Free Books 1.1! Resizeable font, color schemes, and loads of small improvement.

I’ll be honest- the response to Free Books caught us totally off guard! Initially we were thinking 10-15 sales a day would be beyond awesome. Within a week we were getting 200, and, as we watched the sales counter grow and grow, our initial shock turned to a realization that we had some serious scrambling ahead of us to get Free Books up to a condition we can be proud of.

This new update gets to that condition and then some, and we hope everyone loves. The feature side has loads of goodies, like a vastly improved reader (color schemes and resizable fonts), and a better all around interface. A lot of the changes took place from emails from our customers, things that weren’t clear, parts of the app we didn’t call out well enough, and labels that were confusing- thanks to everyone who emailed us!

On the bug fix side of things, we fixed all the crashes folks were reporting, creating a much more stable reading experience.

Massive, massive apologies to everyone that was crashing out in our first release- we’ve tested this version to kingdom come and back again, as we should have done with the first. Lesson learned- you can count on every future release from Spreadsong being much more thoroughly tested before release onto the App Store.

And, finally, we embedded a Contact Us button into the app- so far it’s getting us some great feedback, so don’t be shy in using it.

To get the new update just pull up the App Store, click on that big red Free Books link, and upgrade.