TWIS#4- This Week in SaaS

Events- I’ve got a fantastic pass to give away to TWIS readers which I’ll announce next week.

TWIS- albeit late (I’ve been away all week for meetings and a conference)

Josh Koppelman from First Round Capital wrote an absolutely brilliant post this week- “Let’s just add in a little virality”.

I then ask them, “So, how are you going to acquire customers.”  And that’s when it happens.  That’s when I realize that they’ve spent all their time focusing on the product/site, and aren’t nearly as innovative when it comes to their customer acquisition plans.  They view marketing as something they can “bolt on” afterwards.

The most disappointing answer is when they say “Oh, we’ll just make it viral.”  As if virality is something you can choose to add in after the product is baked – like a spell checker.  Let’s imagine the conversation at the marketing department of the wireless phone companies.  “Let’s see.  Should we spend $4 Billion on advertising this year…or should we just make it viral?”….

Customer acquisition (also called distribution) is the number one challenge facing consumer web properties.

I love that post- it reinforces everything I’ve been saying for ages about how important it is to consider Customer Acquisition Cost (CAC) at the ground floor when designing a SaaS product. With the consumerisation of business software- this is especially relevant to SaaS and not just consumer sites.  (Disclaimer- I worked for a First Round funded company this summer)

That post reminds me of the Startup Pyramid – Sean Ellis wrote the post weeks ago and I’ve been wondering how to fit it in here:

You should measure your product/market fit as soon as possible because it will significantly impact how you operate your startup. If you haven’t reached product/market fit yet it is critical to keep your burn low and focus all resources on improving the percentage of users that say they would be very disappointed without your product. Avoid bringing in VPs of Marketing and Sales to try to solve the problem. They will only add to your burn and likely won’t be any better than you at solving the problem. Instead, you (the founders) should engage existing and target users to learn how to make your product a “must have.” Sometimes it is as simple as highlighting a more compelling attribute of your product – but often it requires significant product revisions or possibly even hitting the restart button on your vision. For more on getting to product/market fit, I recommend reading Marc Andreesen’s full post via archive.org (it has been removed from his blog).

Personally, I think CAC should also be designed into that bottom layer- the “foundation” of the pyramid so to speak- Product/Market fit & Acquisition. Remember- its fine to “be crappy” and to “fail fast, fail often” because linear improvements yield non-linear results. Ash Maurya is blogging about implementing lean techniques and it’s well worth a read if you’re looking for practical ways to improve your app. This post on how he’s implementing Dave McClure’s AAARR metrics in his app is excellent.

This post over at Venture Hacks resonated with me, as recently I’ve seen people try and overcomplicate their SaaS offerings by focusing on features rather than the UI and CAC.

A lot of the people I’ve been speaking to recently have been broadly in the Enterprise 2.0 (E20) space- and I thought this guide for successful implementations over on CloudAve could be utilised by SaaS providers to think about enabling their customers path to success.

There is an undeniable trend towards mobile which I don’t think we, in SaaS, can ignore. I’ve been an iPhone fan for over a year but I’m taking more and more interest in Android since v2 and the Droid. Brian Davis over at brands create customers wrote a brilliant post Google Android: brand disruptor—and creator.

Google Android is a free, highly-capable and customizable smartphone operating system that intends to change the game in mobile brands. It’s designed to compete with the iPhone as a smartphone platform, and it’s ready for apps, Google Androidtweaks, skins and other enhancements by any company desiring a smartphone market presence. By being “free,” Android dramatically lowers the cost of entry into the smartphone market, the fastest growing and most profitable wireless sector. Thanks to Google, a new set of players can enter the smartphone arena, each one building a brand based on its own implementation of Android.

And the best bit- no 6 week app store approval process. Great for SaaS innovation. Time to think about developing for Android.

This week Bessemer made another smart move hiring a “Designer In Residence” from Mint.com reiterating the focus for SaaS on User Interfaces. I’d love to be working with them as my VC right now if I were in the market for one.

I don’t know whether you’ve been following the Google vs. Newspapers debate, but something about it strikes me as relevant to SaaS providers struggling to find the path to revenue. What do you think? While on Google- Gears has long been a great way to enable offline access for browsers. Google announced a couple of weeks ago it’s sunsetting Gears as the features have been included within the HTML 5 specification. HTML 5 is something that’s going to be on the radar for a little while now- but this lifehacker post is a great start in getting to understand what it means.

Still on lifehacker and Google- there’s a great guide there for how to get started with Chromium OS.

Back to SaaS- I found this great guide to model pricing discounts as volume scales looking at dropbox, basecamp and freshbooks. (via @lincolnmurphy) While on pricing- there was a nice piece on affordable subscription billing services by Chad Glendenin. Lack of Aria and Zuora noted.

We gave away 4 conference passes last week to group members for Business Cloud 9 and the Cloud conference in Israel. Tom Cogswell at Sift was generous enough to give me a pass to the Business Cloud 9 too and it was great to meet some group members in person.

There were quite a few interesting people there and a couple of things really stuck with me. First was Paul Cheesbrough (@paulcheesbrough) who said that the Cloud has enabled the Telegraph Media Group (a big newspaper in the UK) to totally shift their IT budget. Before the cloud, they spent 95% of their budget on maintaining the status quo. With the cloud they’ve been able to move 50% of their IT budget to innovation or enablement.

The other interesting thing was the Oracle SVP Anthony Lye said “Customers no longer trust vendors”. OK, they might not especially trust Oracle, but that’s a shift we’re all seeing in marketing technology.

I couldn’t resist posting this story- “The cloud ate my homework”

TWIS is going to be published on Sunday/Monday until Christmas then I was thinking about moving it to Friday mornings- what do you think?

In the Linkedin SaaS group:

• Exploration of SaaS Channels- Is there scope for solution companies to offer direct B2C SaaS solutions and Resellers and Distributors: what does cloud computing platforms such as Windows Azure mean to them?
• Payments as a Service?
• Loads of SaaS Jobs