nimbletoad blog

I 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.

I watched a documentary tonight about Dorian Paskowitz and his family. One quote by him particularly rang true.

“In early times man fought to save himself from hunger. Today we fight to be hungry”

As designers and creators of today’s consumer marketplace we have to ask ourselves, “What do people really want.” I cannot help but remember what Alex Bogusky once said to me, “why don’t you go low res? I’m sick of hi res.”

Yesterday, Apple premiered the IPad. Today, the press is declaring it a flop.

Is it being panned because people want to prove that they are still hungry?

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.