Building Web Apps from A to Z, Part 1
This is the first article the series on how to build web apps. Today, we’re tackling the important issue of cashflow and the financial viability of your web app.
We’ve learned a ton about this issue because when we built DropSend, our first enterprise web app, we faced the same question; will it make us money? DropSend currently has 17,000 users and we’ve gained those in just over five months. It uses six servers which are co-located at 365 Main in San Francisco. It’s LAMP based and was built by three developers and one designer (with help from myself and my wife Gill). We had desktop apps for both Mac and PC built and both use our private API. It has taken us nine months to build, from conception to launch. The whole thing cost £35,000.
With so much at stake we had to be sure that DropSend would be financially viable and not just a bunch of web-candy for people to play with.
Is your web app going to make enough money?
Unless you are a large corporate company with money to burn, or a bedroom coder who is ‘just doing it for fun’ then before you begin building your web app, you need to ask yourself the most important question of all - will people pay money for it? It’s not materialistic to think about the money. If you don’t devise some kind of revenue model behind your app, you’re not being realistic. Let’s clarify that statement. If your app is just something that you’re building for fun, then it doesn’t need to be financially viable. If it turns into something valuable in the future, then great. Delicious is a good example of this.
However, if you’re putting a lot of time into your app and you plan to make a living out of it, it’d better have a solid financial model beneath it.
You’ll get 1% - 2% paying customers
If you’re offering a free plan to your customers (for example DropSend offers a free plan that enables users to send 5 free sends a month before they start paying) then expect to get around 98% or 99% of your customers on that plan. That means that you can only really bank on 1% or 2% of your total customers on the paying plan. In our experience this is true and other major players in the web app industry have agreed. This is about the industry average.
Many people (including ourselves before we built DropSend) vastly overestimate the number of paying customers they’ll get. Do the math. If you estimate that you will have 2000 customers in the first 6 months then work out how much money you will bring in if only 1% are on your paying plans. It’s that simple. Then, just to be on the cautious side, estimate how much money the app will bring in if you only get 65% of the signups you need. See our example cashflow spreadsheet below as an example. You can download it here.
The almighty cashflow spreadsheet
In your quest to find out if your web app is financially viable the first thing to do is create a cashflow spreadsheet. This can be done in Excel, but you can also use many free online spreadsheet tools like Num Sum.
A cashflow, for those of you who are not familiar it, is a simple document that helps you determine how much cash your company will have at any one time. Essentially, it just adds up your income for each month, subtracts your expenses for that month, and tells you if you have any money left in the bank. It’s definitely not rocket science, but it is essential to the success of your business.
The reason for creating a cashflow, is to help you see cash shortages coming, long before they hit you. This gives you time to adjust before you go out of business. If you would like more information on creating cashflows, there’s an in-depth article on cashflow at Signal Vs Noise. If you’re a small company, your cashflow should cover the current month and three months into the future.
Once you’ve created your cashflow spreadsheet, you need to plug in your expected revenues, month by month, and make sure you’ll make enough money to stay in business. Be painfully realistic. Be cautious and then reduce your expected revenue by another 35%. If your company is still cashflow positive (you’ve got money in the bank) even with this pessimistic outlook, then you’re good to go! If not, be very careful about proceeding.
Minimize the risk
A great way to minimize the financial risks of launching a web app are to build it as a “side project” to your paying work (be that a company, day job or whatever). If your company is already doing something that is bringing in cash, then keep doing that while you build your new app. This means you can launch your new app, hold your breath, and see if it takes off. If it flops, you’ve still got your bread-n-butter income coming in and you won’t go bankrupt.
The Credit Card Test
A great litmus test of the financial viability of your app is what’s called the “Credit Card Test”. Ask yourself if you would actually get out your credit card, punch in the numbers, start date, verification code and name. Is your service valuable enough for people to fork over their hard-earned cash, or is it just useful? There’s a big difference! If your app is not aimed at you then try to empathize. Put yourself in your users shoes and try to imagine what would stop you punching in the numbers. If you feel confident that your app is valuable enough that people will actually go through the hassle of paying for it, then it’s time to get busy building it!
Research?
The other factor that may affect the financial viability of your web app is competition. Do your research. How many other products are out there? Can you make yours better/different? Is a bigger company than you planning to launch the same thing? When will that happen? What is their ‘route to market’? Do they have marketing channels already in place? Take all of this into account. But the most important thing is don’t let it put you off. Remember, everyone thought there were enough search engines in the world, and then came Google. Everything can be improved upon.
In Part 2 …
In the next part in this series, we’ll talk about how to project manage the building of your web app and give you some tips and tricks for speeding things up. As always, please feel free to agree or disagree, by commenting below.
This looks set to be a great series, Ryan. The 1-2% figure is useful and frightening in equal measures, as we’re in the process of putting together a forecast for an upcoming app at the moment.
I’d be interested to hear your thoughts regarding a ‘free forever’ plan over a 30 day trial, and particularly what made you go for the former with Dropsend? It would be interesting to see if you’d have had more paying subscribers if you’d gone for a 30 day trial style affair?
I use the free Dropsend account myself quite regularly (but not quite enough to upgrade to the paying accounts), and can honestly say I would have paid up if I knew it were expiring after 30 days. This isn’t intended as a criticism at all - I’m just curious as the pros and cons between the two “hook” methods, and really value your thoughts.
My Opinion is, not to buy hardware first, start with a hosted Root Server, there are Root Server for about 10 € a month. And if you are about to reache 80 % of performance you may also have enough you so you could buy your own server.
Ps.: i like the interviews and the trainings, but i don’t like that more than the half is just music i don’t want to listen to.
OOps… this should reffer to the Scalling tips
In response to Nick C’s comments, I have to say that I never bother with anything that has a 30 day trial, but have upgraded to a pro account on Flickr having played with the indefinate free trial. Same for Last.fm, which I pay for a month every now and again. So different strokes for different folks, and all that.
But yes; I’d be interested to hear the decision process that a company makes when it comes to free trials.
[…] [«] Artikelserie auf Viamin Will Your Web App Make Money? Geschmacksberater ist nicht verantwortlich für die Inhalte externer Seiten. […]
Hey Nick,
We decided to go with the “Free Forever” plan simply because I hate 30 day trials. You have to enter your credit card in, which I think is a massive barrier to entry.
We’re probably going to offer a coupon to make it cheaper to upgrade. In my interview with Jason Fried, he said it’s been very helpful in encouraging upgrades.
I used to run a CMS hosting business back in the day that had free subdomained sites. Once things got rolling, I noticed that %1 started growing to more and more as word got around.
However, the big problem for me at the time was not enough automation. I had to do a lot of things by hand and emailing back and forth with clients ended up taking up a lot of time. So by the time I landed a client, I had already sunk in hours of time for little revenue. My bad I know, and today things would go a lot different. New technologies etc. I think it is something to think about, trying to eliminate how much personal time you have to invest in each customer. Then your revenue is not limited to how many hours there are in the day. Or, making the price you charge reflect that time.
Thanks a lot for the thoughts everyone. I think the web development community could learn a lot from the flickr setup, wetwebwork. A two tier system is certainly refreshing.
I can definitely see what you mean about the credit card barrier, Ryan - it’s likely I’ll end up coughing up for Dropsend soon enough anyway, so you’re payment model is doing it’s job!
The figures and spreadsheet really are golddust and I can’t thank you enough for sharing them. I frequently see “we now have xx,000 users” blog posts across the development community, but few are willing to share more useful information. (37s say that Basecamp has over 250,000 users but how many of those actually pay, and how many of those accounts are inactive? Of course the 37s bunch know, but perhaps it’d be overly generous to share that sort of info. I’m still curious though…)
It’s reassuring to hear that the 1% started to grow, Scott. It was a bit of a shock to hear the 1-2% banded about at first - even direct mail has a 2% conversion rate! I would’ve thought a web-based marketing effort would be higher, but it’s good to learn otherwise early on.
Ryan, excellent post. I feel like I’ve just gotten a free nuts-and-bolts lesson from someone who’s been there. I’m an editor for the Know More Media blog network and we are certainly grappling with many of the questions you addressed here. Looking forward to reading the next installment.
I wonder - are there any formal studies that back up that 1-2 percent statistic you mentioned? Just curious.
By the way, whoever designed this site did a phenomenal job! Very eye-pleasing.
Hey guys,
Thanks for the kind words. Glad the article is proving useful! Hopefully it’ll help everyone create realistic cashflow spreadsheets.
Nick, we look forward to your upgrade ;)
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Cash flow and more…
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Great article & workbook Ryan, thank you! I realize the workbook is an example, but there’s a couple points to keep in mind:
- Online expenses such as AdWords and Feedburner need to be budgetted.
- In the US, startup expenses can be written off now.
- Handle the basic bookkeeping with your choice of quicken/money, and find an accountant who knows the small business scene and can provide you with professional advice.
One more point: your attention budget. Put another way, what things will your startup do (blog, public beta, great vitamin articles :), to build attention and how long will it take?
[…] Ryan Carson: Will your Web App Make Money? Ryan Carson, one of the developers behind DropSend, a well-known service for sending large files over the Web, in a piece called “Will your Web App Make Money”, talks about how people vastly overestimate the number of paying customers they’ll get when deploying a web app: […]
[…] There’s a great new site for developers, micro-ISVs and web designers now live: http://www.thinkvitamin.com. I fully intended to work on something else early this morning, but the great articles by Ryan Carson on Will your Web App Make Money and Jason Fried’s How to Shut Up and Get to Work! happily distracted me. […]
Bob - great points. You’re right about the “Attention Costs”. It takes an absurd amount of time building and monitoring these things!
Hi Ryan,
I loved the article and, as some fo the other comments have already said its very refreshing to hear your statistics and views.
I’ve also been following your podcasts from Carson Workshops - they’re excellent and most inspiring.
I was also interested that you went with a LAMP setup and why you don’t consider Ruby on Rails over PHP. I expect it is because it would have been easier to hire developers, but are there any other reasons you didn’t choose this technology, and would you choose it now (assuming you could get developers at a reasonable cost)?
Many thanks, and keep up the good work - Nick C is right, you’re site looks very smart.
BE…
Ben,
Glad you’re enjoying the podcasts :-)
We decided to go with LAMP because it was what I was already familiar with. We didn’t want to take the time to investigate an new technology.
It’s pretty much all about doing things quickly!
Have said that though, we are considering Rails for future apps as it sounds wonderful.
Fantastic article!
I can confirm that the 1%-2% estimate is brutaly true.
We chose the Free Forever model for freecrm.com as we wanted to grab as many users as possible so that 1-2% actually means something. Our free model offers a cut down version feature-wise and with ads showing.
Our Pro accounts get a much more ‘enterprise’ feature seat, as well as the ultimate in features - support. We find that support is one of the key ‘features’ clients need in a online app and they are willing to pay for it.
Great site you have here.
Harel
Great article. Some actual numbers and real experience to read about is fantastic.
I’m developing a simple app at the moment and its more of a hobby but I want to give it a go. I was wondering if anyone can comment or direct me to the answers to two questions. I really want to do it absolutely DIRT cheap, I’m not banking on or expecting it to make me a huge profit. Just the accomplishment of launching something some people can use.
Anyway…
1) Legal. Not to sound too low-quality but how can I best get round this?
What do I NEED and what can I get away with being a little bit shoddy whilst I hopefully make a little money to pay for the things like this.
Privacy Policy? - can I use an online generator/write one myself?….they always seem kinda short.
Terms of Service? - these seem longer. What’s the cheapest way to do this?
I’m not going to be selling anything or getting any credit card info. Just a free service so hopefully that’ll avoid some legal trouble.
2) Hosting - this is where I realise some money needs to be spent. I plan to build slowly as to not oversaturate what I can afford to support. My site will be serving some static HTML, a few small images, couple of SQL login and user requests, PHP search. That’s about as advanced as it gets. There’s no huge storage or bandwidth requirements. Will a base cost dedicated hosting package be good enough to start with? What about Virtual Dedicated? Is this significantly better than Shared? Dreamhost offer $99 a month, 4TB bandwidth etc dedicated for instance.
I realise my questions are from a slightly different persepctive but its really hard to gauge what is possible so just needed some input.
Obviously ideally, I would get more money and there’d be no probs with hosting costs or legal fees. But I need to make money to spend it. I won’t be living off the app so I can afford to spend nearly all I make from it to cover things once its up. I just need to know how I can get it up and running whilst spening very very little.
In response to Easton Ellsworth, regarding 1-2% rule. It is sort of a Rule of Thumb in marketing. I am not exactly sure where it came from, but according to my research, it is a common percentage in marketing campaign, such as: flyers, adwords, banners.
Every 100 sheets of flyers you throw, only 1-2 people will actually make you money :)
Good write ups Ryan
Hi Ryan, great posts. I’m in the same boat with planning a web startup, so this information is gold for me.
Just a thought - he you considered having some kind of limited forums on this site? Seems like a lot of folks could help out with questions like those above. Maybe something like the JoS forums, but for web 2.0 folks..?
Keep it up, glad it’s going well for you.
We’ve decided not to go down the forums root, as it requires quite a bit of policing - which we don’t have to do. Thanks for the idea though.
Good job! I’m waiting second part. Greatings from Russia, Ryan!
Nice..
though, “the credit card test” is a rough one for some of the old timers online.. build enough webapps, you know that most credit card info is not exactly secure with a smalltime shop.
my test is usually… is this something that if I saw it, I would write my own version of it and opensource it, or would it be too much trouble to do that (i.e. Flickr)
Usually, the only places that get experienced developers CC#’s are domain name registrars, rackshack, paypal and a few hardware vendors.
But, experienced developers are not the norm, so, in my case I would probably ask one of the non-tech coworkers who just got into blogging. :)
[…] Before you start coding, Ryan Carson recommends you ask yourself, will your web app make money? This is the first article the series on how to build web apps. Today, we’re tackling the important issue of cashflow and the financial viability of your web app. […]
[…] Will Your Web App Make Money? […]
Just when I am thinking of creating a business web app of my own, I came across Vitamin and your article. Got some insight from it. Esp the one on 1-2% are paying customers. Totally spot on. Thanks a lot.
Ryan, want to ask your opinion on this old strategy: Generating traffic (free access) to use your web app and selling ads as revenue, do you consider this as a huge money-making web app?
Thanks for the info on the 1-2% ‘rule’ on paid subscribers. I am glad I found this site, it is chock full of brilliant information.
I must say though, that I have seen a bit of feedback showing surprise at the 1-2% response. From what I can tell, this percentage is the take up rate for paid subscribers. I am sure that the actual ‘response’ rate of people signing on for the free account is very high.
When we talk about 2% ‘response’ rates for direct mail, that is referring to the people who bother to call or write back based on the mailing piece. How many of those then convert to paying customer is something else again…
Devan, you’re right. I was referring to paid subscribers. Not Free accounts. We get a huge amount of free account signups and the response rate is quite high.
Simon, we have ads on our Free plan, but they generate next to nothing in revenues. In fact, we’re probably going to ditch them. It’s really hard for Google to parse a DropSend page and come up with any relevant ads.
Ryan, It looks like I, along with most of the people posting here, are working on a ’side line’ web app whilst holding down a day job.
This, as you can imagine, can be frustrating, especially when the client demands on your ‘everyday’ job mean that you spend less and less time on the ‘fun’, ‘creative’ app that you are building in order to change the world.
It would be good to see an article or discussion group on how we can maintain the balance, and keep the energy levels up whilst weighing up the prospects of making a solid dollar NOW, vs launching a killer app down the track…
Great article. I have spent time devloping an idea whilst holding down a day job (Bubblesnaps) - We’re not expecting anyone to pay - though your article is interesting with respect to our plans for further development. Our main issue has always been to get eyeballs and exposure - which has proved to be more difficult than we first thought. Any future articles tackling this would be gratefully received!
[…] On that note: Will your web-app make money? Find out here. […]
For me its College and a Web App on the side. I’m planning on a business when im done with my CS degree. But thats far away as of this moment. This side app is really for myself (practice with programming and the daily college hassles), but I think it would be very popular if nothing gets in my way. I really enjoyed the article, very informative and usefull in all aspects.
Very interesting post, especially with emphasis on cash flow. So many people focus on just the income statement, but you can make a profit over twelve months and still go broke after three.
One other thing that would be interesting to see is what kind of reasonable growth in signed up users (free or payong) should one put in the projections.
I enjoyed the post and after having our product running for a few months now, we see the same trend of free vs. paid. Have you given any thought about putting in what a good response rate(unique visitors/signups) would be? I didn’t see that mentioned in the article. I did notice in the comments that you said your response rate was quite high.
Great feature - thanks for posting it. I’ve found the spreadsheet especially useful. I had started a similar spreadsheet, but it was far less realistic. I liked mine better - ignorance is bliss, but you can’t always take that to the bank. :)
Question about the cash flow spreadsheet - In the Cash Flow tab, there is a line for Income: Other. In the March 2006 column, some income starts showing up in the Income: Other line. I assume that represents consulting income, unrelated to the web app (at least, that’s what it would represent for me). I wanted to see what the web app earnings would be like alone (without my consulting income), so I set this line to $0, and I also zeroed out other expenses that didn’t directly relate to the web app. This really changed the cash flow graph. Looking at the numbers this way, it almost doesn’t seem worth doing - even with optimistic numbers, the web app doesn’t seem to earn enough to support even one developer without an infusion of cash from consulting activities.
Looking at it this way, the web almost seems like an extra burden - a minor cash cow that you have to continually feed by infusing other income, but that doesn’t actually pay enough to justify the time, effort, and money that goes into developing it.
So my question is: am I missing something? In your experience, does your web app earn enough to pay for its own existence and the time that it takes to develop it? (I’m asking this of everybody, but especially of you, Ryan, with DropSend.)
Is 37signals the only company that is able to focus exclusively on their web apps without relying also on consulting cash? If so, what is the difference, and how did they make the transition? If not, are there other examples?
Thanks for the great article, and thanks everybody for the great comments. This has all got my brain working a little too hard, so I’ve got lots of questions!
Everyone here’s talking about hosting - what about payment solutions? I’m also based in Europe and would like to accept credit cards online in realtime just as you do it in DropSend - I really like your implementation!
Can you give any tips and share some info as of how to set up a payment solution for a web app? I’m using PayPal but I just don’t want to depend on PayPal.
Would really appreciate some info as this is the key to any web app that’s designed to earn money - a good and stable payment solution. Please let us know if you can share some of your experience, especially that you’re based on Europe too… and most payment solutions I know are for US businesses only.
Anyway, thanks for the useful information you’re sharing here.
Greets - Michael
Ryan - glad you found the spreadsheet useful. Ignorance is not bliss ;-) Regarding the web app paying for itself: It takes time. Plain and simple. It took us around five months for DropSend to pay for itself and it’s only now profitable. It’s hard, but it’s worth the wait. Don’t be discouraged. However, until then you’ll definitely need to fund the biz with other things.
Michael - We use Secure Trading for our payment processing. They have a great tool called Xpay, that allows you to do recurring transactions. Their tech support is great, as well.
[…] Will your web app make money? One of the first articles from Vitamin, working through the calculus of running your own web apps. […]
Ryan! Thanks for sharing info about payment system, I will definitely contact them. Again, thanks for writing such content-rich posts - just added your blog to my RSS reader ;-)
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[…] D’un autre côté les services gratuits qui prolifèrent sur le web peuvent ils survivre, même avec des coûts de maintenance des plus faible qui autorisent justement les initiatives les plus farfelues mais qui en aucun cas ne peuvent augurer de la pérennité de ces sites. La solution est peut-être celle qui semble se généraliser et qui propose un niveau de service supérieur (type premium) en contrepartie d’un abonnement mais comme le souligne un article de ThinkVitamin, ces abonnements premium ne représenteraient qu’un maximum de 2% des connections et il faut donc un nombre global d’utilisateurs conséquent pour pouvoir absorber le coût des “gratuits” avec les revenus générés par les “premium”. […]
[…] Focusing on things that bring in more cash will extend your business’ longevity. The real question is, “Will my product make money?” Currently, there are two popular models for web applications: […]
[…] Vitamin Features » Will Your Web App Make Money? (tags: business startup web2.0 tips) […]
[…] Vitamin Features » Will Your Web App Make Money? (tags: sales startup website ideas business tutorial) […]
[…] 1 - Vitamin Features » Will Your Web App Make Money? (tags: startup web2.0 article business entrepreneurship) […]
[…] Vitamin Features Will Your Web App Make Money?We ve learned a ton about this issue because when we built DropSend , our first enterprise web app, we faced the same question; will it make us money? DropSend currently has 17,000 users and we ve […]
[…] Will Your Web App Make Money? : at Vitamin […]
[…] Unos pocos amigos saben exactamente qué es lo que estamos haciendo ahora mismo. Uno de ellos me envió hoy una nota interesante de los creadores de dropsend, que se titulaWill Your Web App Make Money?. […]
[…] Vitamin Features » Will Your Web App Make Money? Much as I realise Vitamin is part of the Carson Workshops suite, I think it’s wonderful to see Ryan sharing thoughts about money so openly. I think it’ll save a bunch of people ruining themselves over a doomed app — and equally help others take the plung (tags: business webapps web2.0 startups tips money management strategy pricing) […]
[…] Will Your Web App Make Money? es un interesante artículo sobre modelos de ingresos con aplicaciones Web. […]
[…] To launch our web development magazine, Treehouse, we gave out the first issue for free in order to generate a little buzz. Even though thirty thousand people downloaded the free issue in its first week, only about 300 of them felt it was worth paying for. According to Ryan Carson, cofounder of Dropsend, that’s a lot closer to the norm than we previously believed. “If you’re offering a free plan to your customers then expect to get around 98% or 99% of your customers on that plan. That means that you can only really bank on 1% or 2% of your total customers on the paying plan. In our experience this is true and other major players in the web app industry have agreed. This is about the industry average.” […]
[…] To launch our web development magazine, Treehouse, we gave out the first issue for free in order to generate a little buzz. Even though thirty thousand people downloaded the free issue in its first week, only about 300 of them felt it was worth paying for. According to Ryan Carson, cofounder of Dropsend, that’s a lot closer to the norm than we previously believed. “If you’re offering a free plan to your customers then expect to get around 98% or 99% of your customers on that plan. That means that you can only really bank on 1% or 2% of your total customers on the paying plan. In our experience this is true and other major players in the web app industry have agreed. This is about the industry average.” […]
[…] 原文链接：Will Your Web App Make Money? 原文作者：Ryan Carson […]
[…] 原文链接：Will Your Web App Make Money? 原文作者：Ryan Carson […]
Mr. Carson,
Good morning！
We are the famous website of economy and management (WWW.CUROO.COM) in China, and appreciate your article very much. We want to translate your article into Chinese to release it on our websites for free, which can improve your popularity, OK? And could you introduce yourself to us? It will promote our cooperation in the future.
We are looking forward to your earlier reply!
Mr. Xue
E-mail: xuehaibo886@163.com
Mr. Carson,
Good morning！
We are the famous website of economy and management (WWW.CUROO.COM) in China, and appreciate your article very much. We want to translate your article into Chinese to release it on our websites for free, which can improve your popularity, OK? And could you introduce yourself to us? It will promote our cooperation in the future.
We are looking forward to your earlier reply!
I had to do a lot of things by hand and emailing back and forth with clients ended up taking up a lot of time. So by the time I landed a client, I had already sunk in hours of time for little revenue. My bad I know, and today things would go a lot different. New technologies etc. I think it is something to think about, trying to eliminate how much personal time you have to invest in each customer.
[…] The problem with this is that users are incredibly averse to paying for services. Big media providers and smaller web app startups agree that the actual number of users willing to pay for services hovers around 1% of total users for any given website. […]
Great article. That is true most users will want things for free. If they believe that its a quality app they will be willing to pay for it. Eg games and programs that is free but ask for donations if people like the product. From there if popular then push up the price a bit. (eg licence selling to major pubishers)
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This was a very helpful article. It makes you think and keep statistical data as well. Thanks very much for it!
Like others here, I appreciate this post too. Great real-life experience info that you can’t get from reading “How you should do it” types of stuff.
I recently heard a podcast from a company that does web analytics. They get logs from ISPs and generate popularity reports based on where people are going online. I apologize, I don’t remember the name of the company.
But the one HUGE thing I took from it was they said their back-end real-time stats were very popular and helping to distinguish them from competition. Their customers could log in and see real-time stats on their site’s popularity.
I think I’ve put too much emphasis on the front end of apps. Certainly the flow, the look , the usability and how all that works is of great importance, but I’m starting to realize that the back end tools you give users/members that can give them a unique look at how they use a site or service can make the deal.
Especially if you mix that with a free trial. Walk them through the candy store as my former partner used to say… If the tools are compelling enough, that will increase the possibility of them paying to keep from losing them.
And as I’m finding, these analytical tools are not that hard to come up with or code. Some simple queries can let a user know the popularity of an image upload, to follow a popular example. You could give them a ranking or a raw number of visits to their content. Or both.
To get some good ideas, just imagine what data you would like to see on some of the sites you use. Real-time stuff is always kinda cool.
Of course the point is to make it useful and make you stand out.
I’d like to see some comments on how others have used back-end member tools to help seal the deal.
Bob Wilson
[…] On the other side of the equation, going from free users to paying users usually doesn’t work so well as an after thought. Deciding on paying users from the beginning is important in answering the question: Will Your Web App Make Money? Free users help get the momentum going. At some point, user count reaches critical mass and your idea is validated. The pay for use plan kicks in. To early and you can drive away users, which drives away momentum. To late on the announcement and you’ll have difficultly transitioning enough free users into paying customers. […]
[…] Ryan Carson’s article on vitamin provides some nice detailed metrics in answering the question Will Your Web App Make Money? TechCrunch also has a nice article title Web apps 101 that’s worth a look. Free users help get the momentum going. At some point, user count reaches critical mass and your idea is validated. The pay for use plan kicks in. To early and you can drive away users, which drives away momentum. But how do you know when the time is right? […]
Great post, I really enjoyed reading it!
Hi,
Will we get this series continued? I haven’t noticed any Part 2,3 etc yet.
Thanks in advance.
Great article, anticipating the next part, but it is key that you can keep your head above water when building a web app, i would also say its frightfully important to check, check and check again to ensure that it hasn’t already been done, or there has been talk about doing it. That could be bad.
[…] This is one of the widely used business model in the industry of Web 2.0, specifically for those web apps that provide “uniquely” useful services and don’t have so many scary competitors. Usually those that uses this approach will also provide FREE subscription plan but with limited functionalities. This strategy is implemented just so that the users will be able to try out their services before deciding later on whether they want to upgrade to a paid subscription if they need the extra functionalities. Some people upgrade because they want to remove ads and other types of annoyances in their account. According to Ryan Carson, in most cases 98% of the users will be on the FREE plan and only 1-2% will actually upgrade. However, if you have a REALLY huge user base, 1-2% may actually be worth it. Basecamp, Freshbooks, DropSend and Shoutmix (a Malaysian shoutbox provider) are some of the famous Web 2.0 startups that uses this approach. […]
to make money with your app you need to invest a lot of time. if you will be lucky you will win…
[…] 原文链接：Will Your Web App Make Money? […]
I had a very quick look at the spreadsheet. The 1-2% fugire is humbling, but also a great challenge. My question is this: is churn factored into the numbers of signups in the spreadsheet? By that, I mean, the number of people who decide NOT to continue paying for your service each month.
Cheers :)
Michelle
Obviously a lot of jaw’s dropped at the 1-2% figure.
I imagine that would depend on what’s in the free version and the value add of paying, and also the type of application you make and the market you’re targeting.
I’m more interested in conversion rates as I haven’t been able to find any decent stat’s on them.
I’m talking about the % of people that sign up (to any account) after coming to your site from google adwords. (Once again probably dependent on how well you market your landing page/product).
Would it be safe to assume 2-4% sign up … or am I way off here?
[…] Will your web app make money? Un article qui insiste sur l’importance du business model d’une application web et qui présente une approche très simple pour estimer son cashflow (c’est-à-dire pour calculer ses flux de trésorerie). […]
Any suggestions, services or tutorials about how to enable your website to receive payments?
I’m really interested in how this process works and how to make it custom and secure. If there are any services that will handle most of the hard work for me… Just a matter of me getting the new accounts, canceled accounts and credit card information to them.
Much Thanks
[…] We have some really cool companies using Beanstalk including Digital Web, Hashrocket, and Blue Flavor. When I read Carson’s article about the 1 - 2% paid plan conversion rate I really took it seriously and planned for it. Today, we are seeing a 3.53% conversion rate from free to paid plans. Awesome! […]
[…] Ask yourself - would you pay for your application and do you think other people would? If so, then that’s all you really need to go ahead. I have found it very hard to conduct any meaningful market research into the viability of web applications - existing customers don’t know what they want and it’s not practical to poll people. […]
The article says this the first part. I can’t seem to find other parts.. Am I missing something?
The suggestion that the conversion rate might be one percent was worth the price of the click through right there :)
It is a matter that I our site is considering right now. Having some outside guidance is infinitely better than working with internal guesses.
For us, the ethical goal is to add a income stream while taking nothing away from the terms under which the users have signed up.
From looking at the dates, this thread has taken on a life of its own.