MBA Value

A recent blog entry at LifeHacker asked whether it would be better to read a bunch of books instead of getting an MBA. This would allow you to avoid paying the $100k it normally takes to get a real MBA. The question posed was whether this technique would allow you to get the high paying jobs or not. I read a lot of comments on this post, and thought I would share some of them with my take.

There seems to be a general consensus that the MBA degree alone is not worth much. However the networking you can do with others can prove to be priceless from the MBA program. Also there are factors such as debates, discussions, and sharing with others that is lacking from a book reading substitute.

On the other hand, many believe that the real benefit from an MBA is the skills you gain. These can be gained from reading books. They can also be gained by taking courses online at a significantly reduced price. Some go as far as saying that hands-on experience itself is the best teacher.

There was a list of books linked from the LifeHacker post that constituted a replacement for the MBA degree. The link itself was not good. However somebody else shared the list of books. Here are some of the ones that I have read or are familiar with. I recommend anybody read these, whether or not you are going to get an MBA.

• How to Win Friends and Influence People by Dale Carnegie
• Influence: The Psychology of Persuasion by Robert B. Cialdini
• Getting Real by 37signals
• The 4-Hour Workweek by Timothy Ferriss
• The Design of Everyday Things by Donald Norman
• The 80/20 Principle by Richard Koch
• The Millionaire Next Door by Thomas Stanley & William Danko
• Founders at Work by Jessica Livingston

AdSense Hope

Nine months ago I started up a couple of blogs. The idea was to put advertising on them and make some cash. So I signed up for Google AdSense. It took a while to get some good posts on these blogs. Then I configured them to display AdSense on them. After a few months I was only early a couple dollars a month. I tried to drive more traffic to my web site to get more clicks and earn more money. However I only got a couple more bucks a month.So I cooked up one I thought was a great idea. I started clicking on my own ads. Then my click through ratios went sky high. I started to panic. Google would be able to tell something was not right if users (me) went straight through to just the ads. So I wrote some programs to help through the Google analysts off my track. I wrote some software to simulate users that came to my web pages but did not click the ads. Then my click through ratios were not as high.

Unfortunately the dark day came. I tried to log into AdSense to see the latest count of my cash. The login screen said my account had been disabled. It directed me to check my e-mail for further information. So I read my e-mail and found that they discovered the click fraud. I figured I could replace AdSense with some other ads. Yahoo never responded to me. The other services such as AdBrite or Adster did not pan out. Either the ads were problematic or did not pay well or the service was a scam and they skipped my payments.

Here I am with a bunch of blogs with no advertising. I decided to drop all the ads that were not working. I figured that maybe I could get another chance with AdSense. I filled out Google’s online appeal form. And I did not try to hide the fact that I clicked on my own ads. Essentially I was begging Google to take a chance on me. I hope they will be agreeable to that. If they do accept me, I will be extra careful to not try to cheat the system. It is not worth it. And I am positive there will not be a 3rd chance. I will keep you posted on what Google says.

Spammers

I got an e-mail from the Electronic Data-Gathering, Analysis, and Retrieval (EDGAR) system. It had 2 links which stated they would allow me to download a white paper on EDGAR capabilities. So I clicked on both the links. That took me to a web page that had a form I needed to fill out. I proceeded to enter my contact information. All I got was a message stating that I would get an e-mail with information on how to retrieve the white paper.

Normally I disregard e-mails that ask me to click a link. However this last e-mail was from EDGAR. So I figured it was safe to click. It may have indeed been safe. But I was tricked. It seems they just wanted to collect some information about me. As a user I don’t like to be tricked. If you are giving me a link to get to a form, don’t tell me the link will give me a white paper.

Yeah maybe EDGAR needs to compete with the other spammy folk out there. But this should not be so. I assume EDGAR is part of the Securities and Exchange Commission. In other words, this is a government site. And they should not be spamming. Well at least the e-mail I got had an unsubscribe link. I definitely clicked on that because I don’t want no spam nonsense from EDGAR.

So far I have not received the e-mail with the white paper promised by EDGAR. I certainly hope I don’t get any more email (spam) from them. You only get only chance to make a first impression on me. Bad form EDGAR. You lost my respect. I am made enough about the spam that I should write a letter or something. No. I have just written this blog post to rant. I am still using the power of the pen.

Customer Acquisition

Today I read about an interesting new service by Pixily. They will take your paper documents, scan them into digital format, post the results to a searchable web page, then return your original documents to you. The neat twist is that they handle document exchange and pricing like Netflix. They charge a monthly fee for a certain level of digitizing per month. And they give you prepaid envelopes in which you can enclose the documents you need scanned. This idea is generating some interest among other tech types as well.

Initially I had reservations about the Netflix idea. I was used to visiting the local Blockbuster to scan and pick up videos. However I was won over with a free trial from Netflix. Once I found how easy it was to create a queue of movies, and exchange the DVDs by mail, I was hooked. The value is pretty strong as well. I pay a whole lot less for many DVDs from Netflix than I would from Blockbuster using the old in-store rentals.

This is all interesting experiences. But the relevant part of both of these businesses is how much the companies spend to acquire customers. They underwrote my initial subscription by providing it to me free of charge. As a result they got a customer for life (or until the next company steals me away with a better offer). Previously I had heard that Netflix spent almost $50 per new customer to acquire them. Now I think they have brought the acquisition costs closer to $30 per new customer. This is still a significant initial drain on cash.

I recall the first time I started my business (around 15 years ago) I paid somewhere around $60 per new customer. This was a huge drain on my resources. Yes these customers then turned around and purchased some of my product. But only a few became repeat customers. This differs from the Netflix and Pixily models where they sell you a subscription which keeps bringing in revenue month after month. Maybe it is this model that, when worked correctly, can set your company up for a long time. I wonder how I can translate such a model for selling application software for PCs. Any suggestions?

Startup Ideas

I am an avid read of Y Combinator News. Recently Paul Graham added a link to his post on a multitude of ideas that his company would like to fund. Only two of them were great interest to me:

7. Application that your company needs
13. Better online learning system

Regarding the first item, I really need an application that projects profit from trading stocks. There are numerous times that I have purchased a number of shares from many different companies. And given the current prices for these securities, I want a number of statistics such as dollar amount of profit per company, percent profit, etc. Yes my brokerages provide these things. However I do not want to log into my brokerage accounts from any old computer. I would rather run my app, enter the data, and see the results.

I can also vouch for the second item. My prior company did not like sending people out to paid training. I guess it cost the company too much money as we were a huge company. So they contracted out the training to another company which provided everything via a web site. Let me tell you. The web site was pretty weak. Yes I understand it is not easy to develop great training materials. But come on. There were lots of problems with this system:

• It was not simple to log in


• I had trouble printing out documentation


• Screens worked poorly at my resolution


• The testing was a joke


• Navigation was not easy


• I could not take online notes


• Images were not that good

Although I could go on, I think you get the point. The training system my company used was weak. If some little start up could generate a better one, I think there is a market for it. I am doing my part as well. I have already prototyped some solutions to the first problem. And when I get a polished version, I will release the app free of charge on my Black of Hat blog.

Effective Ads

This weekend I was browsing through my latest copy of Information Week magazine. A full page advertisement from Diskeeper Corporation caught my eye. Normally I scan the magazine for technical information and skip all ads. However this ad made me appreciate the marketing work done by this company. I made a note to remember the fine points of the ad in case I am in a position to take out a full page ad myself one day.

Like all ads in the magazine, the top of the page had the obligatory “Advertisement” banner so as not to confuse the articles with ads. But it was all up hill from there. It had a catchy headline of “Speed up Your Systems in Real Time”. They listed 8 bullet points of benefits. There was a bar graph ranking top benefits as chosen by users of the product. There was a “Try it FREE for 45 days” message in large font. The URL for the company was prominently displayed. Although there was some small print, it was very small, at the bottom, and in a light color so as not to distract the reader.

Maybe I was more interested in the marketing technique than the product. However I did not even know what they were selling. I mean I knew it was some product to run on your PC to make it faster. But I had no clue what it was that they did to achieve this. Maybe they did this on purpose. Either way their ad got me to their web site where I found out their flagship product was a disk defragmenter. I am pretty stingy with my money when purchasing software products. So I did not follow through and purchase this software. That is the real test. But I did look through their entire web site and read up on the company.

I recall back when I placed my first “big” advertisement in a magazine. It was just a black and white text ad that took up a quarter of the page. The ad cost me around 600 bucks. I don’t think I made anywhere close to that on the revenues that the ad generated. In retrospect I should have done an analysis of other ads that work well. Maybe then I would have had a better response and return on investment. This post goes out to the people ad Diskeeper (http://www.diskeeper.com/defrag.asp). Thumbs up to your marketing team. You have my respect.

College Software

For some time I have had some ideas on a software application used to simulate attendance at college. It would be something like the Sims for a college student. But it would concentrate more on the academics and class taking. This has remained an idea for a very long time. But I had some free time. So I started working on a prototype. The high level idea is not too complicated. However as you get into the details, things get complicated.

Given enough time, I am sure I could knock out a nice implementation of my ideas. The real trick would be how to market and profit from this software. On grand idea would be to license the thing to colleges. If even a small amount decided to license the software, it could prove to be highly profitable. The hard part would be to make the contacts at the colleges and broker the deal. A slick demo might help in this regard. But I am a one man software shop. I imagine a university might not take me seriously. Perhaps I should start with my own alma mater.

I could try to market the software directly to the public. Then this turns into a normal software sales and marketing task. It would be prohibitive to try to get this thing displayed in stores by myself. I could go through a publisher, but that would eat into my profits. Then again I could market the thing on the Net. Something like Google Adsense might be of help. However this would require initial capital and provide no guarantee of success.

The last idea I had would be to produce a web version of the application. I could then release it for free and run it from my web server. It could be monetized by putting ads on the site. However this suffers from the same problem as some of the other techniques. The word has to be put out that there is a web application available. I suppose the crucial problem to solve is the marketing of the software. This is the difference between working as a developer for a shop, and working in a Micro ISV for yourself. The benefit of the Micro ISV route is the potential to make the large bank.

Software Pricing

I have a subscription to the magazine Technical Analysis of Stocks. This month I took at look at the stock trading software that was being reviewed. Specifically I was interested in how much these software packages sold for. There were two software applications being reviewed. Visual Trader listed for $2995. And Multicharts listed for $1497. I got to thinking that those were nice price points for software applications. And I wondered whether I could develop any software that could sell for such a high price.

Since this software was being marketed to the active stock trader, I figure it required deep domain knowledge to develop these products. Also people get upset when their trades do not go well. So I figure the companies that make these products need to spend a good deal of money trying to defend themselves against lawsuits from users whose trades went bad. The software was being reviewed by the magazine. But I bet the companies also need to spend quite a bit on marketing to get the word out about these products.

In the end, these applications are just some software. Yes they may be very polished products. But I expect they are the same as any software. They solve a problem for their users. It is just that the users of the software can and will afford a good price to have the problem solved. I have heard that a good way to get started in the software world is to write code that solves problems you are encountering yourself. So I have gone down this path. However so far I have been distributing my programs for free. I am using this as an exercise to figure out how to publish and release software. Even though you would think that this is easy, there is a lot to this.

The high cost of stock trading software is alluring. But I wonder how large the market is for such software. This is probably not software that an occasional stock trader would buy. It is most likely geared toward the professional trader who trades stocks for a living. Perhaps if I was in this industry, I would have an idea of how many individuals this represents. Let’s do a little math. Assume that you can move 10 copies of Visual Trader a month. That amounts to 120 copies a year. At $2995 a copy, the annual revenue for these sales would be $359,400. And that is no small potatoes if you ask me.