Micro ISV - Don't Quit Your Day Job!

It's been one quarter (i.e. 3 months) since I launched my micro isv venture. The three week report can be found here.

When I started this project my expectations were quite low (as it should be). I figured that it would take a minimum of three months to get a realistic gauge of the market size. Well, it's been three months now and from that sample, the revenue from the product did not even meet my original already low expectations. Now let's not forget, the product was meant to be quickly developed and released out the door as fast as possible. It may not be the best product in the world but I believed it to be good enough (and better than the competition).

Some notable notes about the product. The product has been purchased by customers in 5 continents with the exception of South America (maybe it's time for a Spanish version) and Antartica (I guess they don't code in Eclipse over there). It's been purchased by an Eclipse Strategic Developer member, a prestiguous European research laboratory and a bestselling Java book author (who loves emacs).

As part of my experiment I played around with pricing. The first month I sold it at $19.95, the second month at $24.95, the third month at $17.99. The price drop on the third month was meant to coincide with a big event (i.e. EclipseCon), I had hoped that it would encourage more buyers. Nevertheless, it appears that the revenue didn't appear sensitive to the price changes. Therefore, I reset the price and the product now sells at $30 even. The strangest thing however is that sales hasn't slowed down since, and if the trend continue, I could actually surpass revenue of previous months.

I had initially sold the product through Amazon calculating that the additional convenience of not having to re-enter billing information and familiarity (therefore trust) would be a plus. I stopped doing that and went to a lesser known payment processor. The use of Amazon apparently had no effect on sales that would justify their monthly charges.

So, so far, the conclusions have been unintuitive. Pricing doesn't matter, in fact the higher price the more purchases. Important to note about the latest price is that it is a whole number. It could have an additional effect, however lets see how the experiment goes. Also, I found that a well known trusted payment processing service doesn't add a significant increase in revenue.

Now let's move on to advertising. I use Google AdWords to draw some traffic to my site. Here are some statistics, my costs have averaged $23 a month and has drawn in an average of 400 viewers per month. Unfortunately, I don't have any statistics on conversion rates. I also add domain specific content to the website to draw traffic, in the last 30 days I have averaged around 350 unique visitors a day. I've added an RSS feed so that people interested in this technology and potential customers could keep themselves updated. I don't use an email notification system, I'm unsure how effective this would be furthermore I would like to avoid being branded as a spammer. I also have a free trial that is viewed by 10 unique visitors a day. In short, I get a healthy amount of traffic at an extremely low cost.

Let's assume for a moment that traffic is proportional to revenue. Then based on my calculations the revenue generated by this venture is slightly lower than revenue generated by adverts on a per unique visitor basis. That's a pretty telling story to tell, its still a apples to oranges since the content is slightly different. However the product is conceptually the same (i.e. selling information). Selling THE customer appears to be more lucrative than selling TO the customer! Anyone want to take a crack at the theory behind this?

Finally, I have to comment on what I perceive to be my biggest mistake. My mistake was that I created the product to cater to the status quo. That is I supported Eclipse 2.0 rather than aiming for the future in Eclipse 3.0. I knew true well that the environment was changing extremely rapidly, however because of that decision I had to do unnecessary work to make upgrades. The moral of the story is this, when you have extremely limited resources, one should aim for future revenues and not current revenues. That is always aim for the long haul and the recurring revenue stream (i.e. obsolete products don't sell).

I have tried to automate as much parts of the business as possible. The idea of course is to be able to run these kinds of businesses on "auto-pilot" with minimal human intervention. Yes, you can't quit your job today and hope to make a living on this stuff. However, like most business, unnecessary work is created by the edge cases. That is customers who have old or misconfigured environments and customers who have antiquated purchasing procedures.

To summarize, was it worth the effort? Despite revenues being below expectations, it's quite a different thrill to see people actually fork out their hard earned cash to pay for one of your creations. That thrill and the fact that I now have a new platform for future products makes me think that the effort was worth while. What about fail fast and quickly? Yes, that holds true, when the numbers start coming in you can trottle the amount of resources dedicated to a project. I've given is three months and obviously I would be reducing the effort. Nevertheless, there's one final word of advise, always build something that you can build on later.