Web Applications – Part 2 – “Value Add”
Friday, January 29th, 2010I want to thank Alder Yarrow, Founder of Hydrant and creator of Vincellar, for his response to my previous post on Web Applications. He summed up a few points about the web application, Vincellar, much more succinctly than I could. He wrote,
“[Vincellar] would never have generated the revenues required to justify the investment made in its creation and redesign… Vincellar was merely a value add service…”
The financial decision to build a web application whether it be a stand alone service, or “merely a value add service” needs to be weighed against the potential benefits it will bring to both the company and its clients. For Vinfolio the financial decision to redesign Vincellar was to be offset by the added revenue generated by the marketplace. Vincellar did not directly cause Vinfolio’s financial troubles, but it possible that it is endemic of the financial spend that led to the company’s downfall.
Wild hypothesis. Vincellar turned Vinfolio upside down. When a new client signed up for Vincellar the primary service they received was a great place to store and keep track of their wines (for free). The value add to a new client was that they could also sell and buy wines in the marketplace. While I do not want to conjecture how much Vinfolio paid for the redesign and daily management of the Vincellar application, it is clear that a significant amount of money was spent on this service.
Vinfolio’s core clients are active wine buyers, collectors and investors. They routinely buy and sell wine. Vincellar’s redesign was intended to expand this customer base, bring in new buyers and sellers. They problem was that not only did the core clients slow their purchasing, most of the new clients saw the primary benefit of the Vincellar system as a place to keep track of their wines.
In contrast, CellarTracker’s primary purpose is a place for users to keep track of their wines and tasting notes; the ability to sell wines was recently added as a “value add.” I greatly admire Eric Levine’s work with CellarTracker. Out of his love for wine and his desire to build a cellar management program for himself, he has defined online cellar management. Eric has spent thousands of hours on this web application, hours which he may or may not every financially recoup. CellarTracker is his baby and seeing it grow and mature is Eric’s main reward. This fact in-itself ensures CellarTracker’s continued existence.
To companies – “Value Add” web services are a great way to build leads and expand a customer base. However, the “Value Add” should not become a service in itself. Otherwise there is a risk that the free value add will become the primary business to the new client base. If Vincellar is on one extreme, a mortgage calculator on a realtor’s site is another. The mortgage calculator is handy, will never overshadow the realtor’s house listing, but will not generate that many new clients. My advice, find somewhere in the middle.
Disclosure – We are currently working on a cellar management solution called Vinecat. We have been working on it for the last couple of years. Like Eric’s CellarTracker it is a labor of love. I currently use it to keep track of my wine cellar and love its simplicity. We think the general public would also like to use this system. As cellar solutions such a CellarTracker and Vincellar get more complex, we feel there is a growing need for a simpler solution. When will it be released? We don’t know. Will it make money? Maybe.
