nimbletoad blog

VinFolio’s recent financial troubles bring up some legitimate concerns for Web Application pricing models.  Too often web applications are built without consideration for sustainable revenue or long term impact on the user community.  Many companies such as Vinfolio built web applications as lead generation devices.  This method is wrong and too often ends badly when the generated leads fail to provide the anticipated revenue.

Like many web applications, VinFolio does not charge customers to sign up and use their cellar management tool,  VinCellar.  Customers can use this application to keep track of the wines in their wine cellar, receive real time cellar price evaluations, and interact with the VinCellar wine community.  Why does VinFolio offer all this functionality free of charge?  VinCellar is VinFolio’s lead generation device for wine storage and their wine auction marketplace.  VinFolio pays its bills and payroll through commission on wine sales.

Sounds like a win win.  VinFolio gets a steady flow of wines to sell and wine collectors get a great application to manage their cellars free of charge.

Not so fast.  What happens if wines stop selling? What is the price of free?  Now that Vinfolio is circling the financial drain, the future of VinCellar is in jeopardy.

VinCellar clients have invested many hours inputting wines into this system and adding tasting notes.

Vinfolio is not in the business of providing cellar management.  The web app was a fancy lead generation front. VinFolio gave the service away in the hopes of profiting from the sale of the user’s wines.  The problem is that the commission did not pay the rent.

VinCellar is a case of different primary benefits between the site owners and its users.

Users:
Primary – Keeping track of their wine cellars
Secondary – Interacting with the Wine Collector Community
Convenience – An easy way to sell wine

VinFolio:
Primary – Selling users wines through the marketplace and auctions
Secondary – Storing user’s wines for a fee

Unlike other sites such as Ebay and Amazon where the users and site owner share common primary goals, VinFolio’s goals were not aligned with its users.

At Nimbletoad, we firmly believe that a site’s goals should be aligned with the users of that site.  Web Applications  should derive their sustainability from the user community.  This can come either from subscription revenue as in the case of BaseCamp or Freshbooks, or from advertising such as Facebook and Myspace.

Just 120 days after launch, Caimeiju.com’s Google Pagerank has grown from a rank of 0 to a rank of 4.  This rapid rank increase stands testament to Nimbletoad’s functional site design built upon sound search engine optimization tactics.

Google’s Pagerank is based on a logarithmic scale.  So, the differences between levels gets geometrically greater as you go up the scale.  We get a lesson in logarithmic scales every time there is a major earthquake. Newsrooms around the world bring on experts to demonstrate how much greater a 4.0 earthquake is on the Richter scale than a 3.0.

Yesterday, we ordered some desktop calendars from Staples online.  Two 10 inch by 17 inch calendars were delivered today.

At first all we could do was laugh at the enormous box used to ship these calendars, but we quickly began to appreciate the symbolism.  Ironically,  we were working on a calendar module for one of our clients at the time.

Imagine this box as your website with all the blown up bags symbolizing excess code and fluff when all that you want is an easy to use calendar.  If a Nimbletoad engineer packed this shipment, your calendar would be delivered in a nice package appropriate to its size and weight.

The founders of Nimbletoad voted today to make available to independent wine retailers a free version of their new cellar management program, vinecat. The founders hope this program will help stores compete against those with greater financial and political leverage.

It becomes harder each year for the independent wine retailer to stay competitive. For nearly 20 years the founders of Nimbletoad have sided with the Davids as they fight the Goliaths.

First, it was allocations of sought after wines. Political ties and buying leverage quenched that. Since 1999 Costco has been the largest seller of first growth Bordeaux in the United States. As a wine buyer, one of the founders looked to other lesser known regions to help his store maintain a competitive advantage.

Next came the onslaught of private label wines, with Trader Joe’s Two Buck Chuck leading the charge. Private label wines offered the chain stores better margins and label exclusivity. In response, the founders formed a company to help smaller wine stores develop private label programs. Through these programs, stores were able to offer better wines at higher margins without the threat of being undercut by the chains.

Today, technology is taking its toll. Companies like Vinfolio are using both capital and intellectual networks to close the doors on competition. The result are closed social circles where clients inventory their wines, sell their wines [not all companies offer this service] and buy their wines; all within a closed loop.

In response to the latest threat to the corner wine shop, the founders of Nimbletoad plan to make a free version of vinecat available to independent retailers. Soon, the corner bottle shop will be able to offer a complete cellar management solution to their customers.

If you operate an independent wine shop, send an email to info@nimbletoad.com. We would like to hear your thoughts and put you on the list for this competitive equalizer.

How do you know you are independent?

• Your board of directors are not Silicon Valley washouts (I mean luminaries)
• Your idea of venture capital is gas money to Tahoe
• You’re not related to the mayor
• Your advisory board consists of your spouse

Earlier this month Google announced the preview release of the Google App Engine. Is this the dawn of a new enlightened era or the foreshadowing of the Apocalypse? Think Terminator and Battlestar Gallactica. Google’s servers will now not only catalog and store our data, make use of our anonymous profiles, but run our software applications as well.

Google App Engine lets you run your web applications on Google’s infrastructure. App Engine applications are easy to build, easy to maintain, and easy to scale as your traffic and data storage needs grow. With App Engine, there are no servers to maintain: You just upload your application, and it’s ready to serve your users.

On one hand I find myself stoked at the the possibilities. The Google App Engine promises to solve many of the problems and barriers to entry previously encountered with web apps. It has always been difficult to deploy web apps. Adam Howell over at Vitamin sums up deployment frustrations at the start of his Google App engine review. Writes, “And if, by the grace of the server gods, I do finally get something that runs and deploys my code — well now I get to monitor it, keep it updated and running 24/7. Yay!.”

With Google Application Engine one only has to upload an app and Google does the rest. Plus the Google App Engine runs on Python and comes pre-loaded with the django framework. Now anyone with a little bit of drive and ingenuity can release their very own web app. POWER TO THE PEOPLE.

On the other hand something can be said for the distribution of control. Let us all hope the good hearted people at Google always remain smarter than their creations.

Free has a price. Make no mistake about it. The old saying, “You can’t get something for nothing” rings true especially in today’s Internet.

Google and Yahoo do not provide free search and email out of the goodness of their hearts. Myspace and Facebook do not exist simply because the founders were lonely. There is a seemingly endless list of sites offering you free access to their services. Mint will let you track your money for free. Sites like Cellar Tracker and Vin Cellar will let you track your wines. Yahoo’s Flickr will even let you store your photos without a charge. The question is “Why?”

Well, the March issue of Wired magazine declared Free as the Future of Business. At first glance it makes sense. Think back to the classic example of Gillette giving away the razor so it could sell the blades, or of Hewlett Packard virtually giving away printers so it could sell ink jet cartridges. Giving away something to ensure a future revenue stream seems logical. But, what about the long term? What if customers wake up one day and realize they have sold their souls for a shiny trinket?

Everyone must ask themselves “Is the free razor [or email, or storage site] worth it ?”

Is the privacy I’m giving up to sites such as Google and Myspace worth the utility I get? I used to think so. However, now I’m not so sure. I think I’ve discounted what my anonymous data is worth. On March 31, 2008 Google declared revenue of 5.19 billion for the previous quarter. It would appear Google’s product, namely our “anonymous” data is pretty valuable.

But, what about sites like Mint and Vin Cellar that do not sell advertising?

Instead of a direct answer, let’s take a look at 37 Signals. 37 Signals is not only the creator of Ruby on Rails, but of many web apps.

37 Signals does it right. They make no bones about it. They offer free functional versions of their web apps such a Basecamp and Campfire to lure you into the paid plans with greater functionality. 37 signals is in the business of creating and selling Web Apps. Their intentions are clear. Other sites’ intentions are a little more cloudy.

Two questions that everyone needs to ask before signing up for a “Free” web service:

1. What are the ulterior motives behind offering this free service?
2. Is the price of “Free” worth it?