Category Archives: Internet Business

Let your users decide your web site layout through A/B testing

I’ve been doing a lot of A/B testing on the landing page of a side project website I have called VIN-History.com.  The goal of the site is to capture organic searches for VIN numbers (the unique, 17-character serial number that every production automobile in the world has).  People put VIN numbers in Google to try to find more information about that car.  I try to give it to them (to the extent my database has any) and then help them find out the market value of the car, its maintenence schedule and how to buy a full vehicle history report from Experian’s AutoCheck.com.

How to test (plus some actual code):
There are a lot of ways to do this, but I’ve found that what makes the most sense is to give each unique session either version A or B for that session only.  If they close the browser and come back at a later date, they have a 50/50 chance of getting A or B.  If they hit the page you’re testing 10 times in the same session, they’ll always see either A or B, whichever they were assigned when they arrived.  This keeps things consistent and doesn’t distract or confuse the user.

Steps To Implement:

  1. In the main page that will call either verison A or B of the content, assign this visitor either “A” or “B” for the rest of the session.  First see if there is already a session cookie set.  If so, get the value.  If not, set one.
    A/B Cookie PHP Code
  2. $ab is the variable that holds whether the user is going to see version A or B.  Now, wherever you want to include the code you’re testing, you do a simple line that includes the appropriate file.  It helps if you can name the include file with an “A” or “B” in it to keep things simple.
    A/B Include Code
  3. Be sure you include Google Analytics tracking codes on the different actions you want to measure.  On my landing page, a user can do 1 of 3 things:  Get an AutoCheck report, find out the market value of the car, view the service schedule for the car.  All 3 are links or form POSTs that take the user away from the site.  Each action is worth something different to me and I’d like to measure which page layout yields better results for each action and overall less dropoff from the page (bounce rate).
    GA Code
    - The text ‘/ds-psr-a’ is completely arbitrary.  It doesn’t even have to be a valid URL.  It is just a unique string that will show up in the Google Analytics  report later as an action that was taken by a user.   For this particular action, I used /ds-psr-a and /ds-psr-b to track the same action on two different versions of the page.

The First Test

The goal is to test goal conversion on the VIN number landing page.  I’ll use this VIN as an example:  1N6AA07B55N529895
Here are the two versions of the landing page I decided to test first.  A is the original, B has some significant changes.  Both have the same 3 actions a user can choose from.

Landing Page version A

b

The Results:

After testing both versions for about 2 weeks, the results from Google Analytics were pretty conclusive:

  • Goal 1: AutoCheck Report:
    Goal 1: AutoCheck
    Version A sends almost 75% more traffic to AutoCheck than Version B does.  Interestingly, sales through AutoCheck remained constant.  This means that the leads being sent by Version B were more qualified and were converting much more efficiently.  Net-net: Version A wastes traffic by sending too many users to Experian when that may not be what they’re really looking for.  Pure gold!
  • Goal 2: Market Value Lookup:
    Goal 2: Value
    Versions A and B basically tied this race for the trial period.  This is not surprising, considering that on both versions of the page, the Value Goal is pretty much the “second” thing on the menu.  No action to be taken here.

  • Goal 3: Servicing Link:
    Goal 3
    Version B clearly converted on this goal better than Version A – 253% better.  A lot of these clicks were probably ones that would have been wasted on Goal 1.

Round 1 Conclusion: So, it’s clear that Version B wins here by converting on 2 of the 3 goals more efficiently.   Next step will be to come up with a new version B that can test a few more theories about converting even better.  That will be in the next post … stay tuned.

Beijing Startonomics: Chinese VC Panel

Moderator:  David Wolf,   CEO    Wolf Group Asia

 Panel:

 

Q: How has the global financial crisis affected the VC climate in China?
A: Exactly the same as the US.  Not going to bother paraphrasing.

Q: What makes a Chinese Entrepreneur better / different?
A: US: decks are well structured, CEOs are polished and sharp.  CHINA: much younger, more grass-roots entrepreneurs.  
     US: ready, aim, fire   CHINA:  ready, fire – go see what you killed    US: still in the bunker figuring out what to shoot

Q: Advice to / opinions of expat entrepreneurs? 
A: Tend to only invest in experienced Chinese entrepreneurs. 
     Understanding of Chinese culture (to know your users) is a requirement 
     More attractive:  Chinese who leave, learn in US, come back
     IP + good approach to business model coming to China from another country  

Q: Post-Series-A, what does the cap structure look like between Founders / VC /  employees?
A: Chinese founders will typically own more than in US.  This is because of Chinese culture.  Talent/engineering cost is very low.  Angel round will get a company to 20-30 employees.  Also, companies need less cash so founders end up keeping more.  (lower cap-ex)

Q: What are the exit strategies here in China and what are the corresponding legal hurdles?
A: Shooting for overseas IPO or M&A.  Company will be owned by a holding company based off-shore.
     China working on a NASDAQ competitor starting Q1 2010 (Jimbot (sp?))
     Trading volume in China is already 4x Hong Kong’s
     PE ratios higher in China as well.  All of this should help more local IPOs
     Chinese consumers understand the concept of investing, also helpful     

Q: How are Chinese entrepreneurs connecting with VCs (is there an angel/incubator equivalent in China?)
A: Events & conferences, lots of demos in China.  Not many incubators yet.
     There are some angel groups in Shanghai – not making a lot of progress yet.  60 angels ~ 4 deals.  Each angel is committed to invest $5k/year = lots of startups. 

Notes:

  • 1-5mm fetching about 10-40% of a company normally here. (Softbank – backed by Cisco)
  • Funds are preserving so they can do follow-on investments for their portfolio companies
  • 15 person company buring 12k/mo in China – 2nd largest language learning company in the world
  • in RMB investments there is no concept of preferred / common stock
  • Must have an RMB fund on-shore to invest in China
  • There are constraints on equity ownership by foreign investors.  Forces investors to localize
  • There are still unclear tax issues after liquidity events in China
  • It’s about investing in people, just like in the US
  • Retaining people is key – much harded to do in China – competing with the big, stable companies.  An investment in a charismatic, likeable leader carries a lot of weight
  • “You’re ATM card is less secure than your online gaming account in China” – the gaming acct has a lot more value built in
  • Service-based innovation in the US tends to be based on core technology innovation in China.  Example:  Kindle developed in China, commercialized in US.
  • Orange:  in China to find business model innovations to bring back to Europe.  
  • Behavioral targeting on the Internet:  US you get in trouble (Beacon?) – in China it’s coming out of Government / University labs.
    - Chinese gov’t is motivated in tracking people and their habits whereas US gov’t is not.  
     

Three Things You can do to become Lucky

#1. Unrelenting optimism.  If you always think positive, you will influence the outcome.

#2. Be well-prepared and agile to better catch the opportunity

#3. Persistence.  The more times you try, the more likely you’ll hit.

= Lucky

-John Wu
Chairman FangJia & former CTO Alibaba

Tokyo Startonomics: Eric Ries on Lean Startups

Eric’s blog:  startuplessonslearned.blogspot.com

Twitter: @ericries (tag with #leanstartup)

Presentation Notes:

  • Most startups fail catastrophically
  • How many startups have lived up to their employees, founders and investors?
  • Most startups that succeed turn out to be something totally different from the initial vision of the company
  • Difference between a successful startup and a failure is the number of iterations the company could afford before death / success
  • Eric’s new company – IMVU – bring avatars and digital goods to the USA

IMVU:

  • shipped in 6 months – a horribly buggy beta product
  • charged from day 1
  • Visionary Customers can be just as or more valuable to the business as the founders
    - must be in constant dialog with those visionary customers
    - those visionary customers live with the same pain that the founders did when they came up with the business idea
  • Iterate constantly.  IMVU pushes to production 50x per day
  • No PR, no launch
    - this way you only focus on what your customers think
  • 2007 revenues of $10mm, still growing nicely

Lean Startups Go Faster

  • Full-scale refactoring of how software is developed.
  • Commodity technology stack – easy, cheap: EC2, grid, cloud, etc etc
  • Customer Development (find out what customers want before you build it)
  • Agile (lean) product development (fast iterations)
    - Principles drawn from Lean Manufacturing and Toyota Production System
    - Where problem is known but solution is not
    - Meetings are waste, revising code is progress
  • Product development at a lean startup:
    - problem and solution both unknown
  • get rid of departments.  2 teams:  problem team, solution team
  • Problem team constantly asks what the problem is and is there a business here if we can solve it?
  • Solution team constantly asks what the problem is and if the product is sufficiently solving it (constantly iterate)
  • The biggest source of waste in any startup is building something nobody wants.

 

Disclaimer (AJ):  My notes don’t do Eric’s presentation or concepts justice.  Please watch Eric’s recorded presentations and look at his actual slides.

Tokyo Startonomics: US Startup Investment Market

This perspective is from the smaller seed / angel investor perspective.

Panel: Dave McClure, Joyce Kim, Ryan Pipkin, David Troy

 

  • Downturn has been worse for VCs than for startups (harder for VCs to raise money relative to the valuation hit for startups)
    VC as an asset class has performed terribly and many of their LPs are “overweight” in the class.  All bad for VCs
  • Lots of VCs will be disappearing over the next few years.  The good ones will survive (CRV, August, etc)
  • New environment:
    - more focus on getting revenue, get to break even cash flow
    - get to sustainability on the Series A so you don’t have to raise money later (usually won’t be the case)
    - Seed Funds (SoftTehc, Maples Investments), and Incubators / Angels (YCombinator, TechStars) are gaining traction in this environment
    - much cheaper to prove concept these days – < $50k 
  • Troy – making 100-250k investment in 1-3mm pre-money companies in BWI area only
  • Pipkin – makes software that helps angels manage / syndicate their deals.  
  • Angel Capital Association: 160 member organization of angel investor groups
  • Due diligence process is much more arduous now
  • Startup valuations down 33-50% on average in the Valley
  • VCs taking 50% longer to close investments, on average
  • Legal:
    - not a lot more convertible notes going around (except for McClure)
    - they’ve started capping these notes (cap the Series A valuation) in the last year and a half
    - terms are very pro-investor.  Less term sheets, less room for negotiating
    - easier to take a board seat on A round or get a liquidation preference
  • Series B’s are impossible to do right now.  Best you can do is likely 50% down round or worse.  Many are dying now – too speculative.
  • Trend for Micro-Seed ($0-$100k to get a prototype built and start proving a market):
    - panel is bullish on micro-seed model
    - Pipkin:  there may too many micro-seed incubators out there, Paul Graham has a secret sauce 
  •  Troy:  You have just as good a chance at good returns in a small startup than you do in the public markets
  • Panel agrees outlook for Angels are looking much better than VCs right now, at least from an ROI perspective
  • Kim:  Seed round expectations have completely changed.  Try-and-see not as viable now – must be building a real business.  Less R&D investments.
  • Is there still room for no-revenue, pure-growth companies in the VC model?
    - Kim – not really, unless it is a proven entrepreneur
    - McClure – seed yes, VC less so
    - Concensus: we must be at break-even by next round.  We’re basically bankers now.  
  • Net-net:  Fail fast and move onto the next one.  Don’t waist too much money proving/disproving what you think will work.

Startonomics / Startup Metrics:  (Dave’s AARRR)

  • Acquisition:  what channels do customers come from?
  • Activation: do they have a good 1st experience?
  • Retention: will they come back?
  • Referral: do they tell other people (net promoter score)
  • Revenue: will they pay / how to make money?

       – crucial for startup to track these things to take some of the risk out of the business for their investors.
       – We’re seeing the professionalization of the low end of the investment market

Q: How do angels feel about a quick exit at a smaller valuation (as opposed to the larger, follow-on deals ending in larger exits)
A: There is more of an oppty for angels and seed funds for deals like these since the VCs aren’t interested in them.  It really depends on the fund size … all about ROI.  Someone managing a 10mm fund would be happy with a smaller exit. 

The slides:

Tokyo Startonomics – USA's turn

Panel:  Dave McClure (Founders Fund) , Dan Gould (Fox Interactive Media), Bradley Horowitz, VP at Google 

  • Social gaming platforms slowly becoming more popular in the US
  • McClure: Features really don’t matter that much  (on platforms)
  • monetization/distribution is more important
  • Looking for the intersection of users and money
  • Throwing traffic at an uncompelling feature won’t help it.  It will go away as soon as you turn the traffic off.  This is how Yahoo! has been attempting to grow the popularity of some of their features.
  • Top 3 Social Platforms in the US:  FB, MySpace, Twitter … also, the Web as a platform
  • Gould: “It’s a mistake for FB to spend too much time copying twitter” … FB a lot more personal, that’s its strength.  
  • Would make more sense for MySpace to have more asymmetric features (like Twitter) because of the “broadcast” nature of MySpace
  • How much $ would you allocate to the FB ecosystem as opposed to the Twitter ecosystem (companies built on on those platforms):
  • Horowitz:  I”d give it to GM (hehe) … correction, Google Wave
  • Gould: All on FB because it has a lot more mainstream stay than Twitter (even in the long run)   [I agree]
  • None of the top payment gateways in US (eBay, Apple, AMZN) are social networks.  Why not?
    … because they have “shit people want to buy” (as to say they don’t need social networks).
    Google basically has all those pieces in place (socail + payment).
    Horowitz: Who you know and who your friends are may or may not be important from a purchasing standpoint 
    Gould: “You can buy music on MySpace … but the US should learn from Japan on social payments”

Mobile Wars in the US (iPhone, Pre, Android, RIM)

  • iPhone is the leader because of a superior phone, superior platform … Steve Jobs bullying AT&T as opposed to the other way around (traditionally)
  • Why has Android not dominated the market:  too early in Android’s life.  Android is still very much a work in progress.
    GOOG trying to get competitors to use better browsers, raise the bar for technology (cites Gears and Chrome as filling the holes in browsing experiences)
  • “What’s good for the Internet tends to be good for Google”

 

  • McClure: Why aren’t there social networks around Moms/Kids/Families?  
  • Huge oppty to figure out how to organize those groups that want to connect to each other (play dates, etc) to help figure out where the “family spend” goes (strollers, schools, etc etc)

Passion:

  • Gould: When you have communities of people that are passionate about a particular topic, you end up with highly active forums (the dark matter on the Internet)
  • These sites aren’t collecting hundreds of millions of users but are making good money and are able to sustain
  • Ning is making inroads here by allowing social networks be created around niche verticals
  • Panel seems to agree that the silo’d social networks will continue to co-exist with the macro-network (MySpace, FB)
  • Gould: sometimes barriers can be good — bad UI and slow pageload keeps only the true enthusiasts on board – keeps content high quality
  • Gould: we need more hardware in the US that can help link the online and offline worlds.  The stored value cards in JP are very effective.

The slides from Dave: 

Tokyo Startonomics – Investor Panel

Panel of 4 investors that operate in Tokyo and China talking about investing here.  (didn’t get their names down, sorry)

  • Current investment climate is “very difficult” – illiquid capital markets.  Starting to feel some new momentum, though
  • Behind the scenes there is a lot of core investment going on for the future
  • valuations are a lot lower (just like California)
  • Most large VCs in Japan are currently structured in a corporate (bank like) way
  • Currently smaller, limited partner model VC firms are being formed to compete with the larger banks
  • Targeting mobile social networking in China, mobile MMORPG in China, mobile social applications in Japan
  • ValueCommerce – #1 affiliate marketing company in Japan
  • 700k websites that drive traffic to the bigger portals
  • 38k mobile sites
  • 2k advertisers
  • 40k transactions per day
  • 10b YEN gross revenue ($100m USD)
  • Public on Tokyo stock exchange since July 2006
  • 17 contracts with Yahoo! Japan – great partnership
  • Eminence – iPhone app development company
  • Make sure your PE ratio > 60 before going public in Japan
  • Process of the IPO can dramatically change the initial value, regardless of earnings and performance
  • Mixi is following the strategy of Facebook
  • In Japan, VCs like to own about 10% on average of a portfolio company (as opposed to 20-40 in US)
  • There is a lot less competition between investors here (except for the exceptional businesses).  This keeps valuations lower (less cash chasing entrepreneurs than in California)

Where they find opportunities to invest in:

  • Mobile gaming
  • Animation / premium content
  • Still lots more progress to be made in search (video search, etc)
  • applications and services that are non-language dependant … like graphical things
  • Not a lot of angel investing going on here yet (YCombinator model) but they see it working here

Notes from Q&A Session:

  • Japanese investors understand that they need to re-tool themselves before they can effectively invest in China.
  • Smart.fm – new japanese company that is launching in the US.  http://www.smart.fm
  • Japanese secondary market coming into play now that public markets are basically closed.
  • Secondary market in Japan fairly diverse, like in the US (PE firms, hedge funds, etc)

Tokyo Startonomics – Kris Tate (BlueBridge)

Kris Tate – American entrepreneur living in Tokyo

- Started Zooomr 4 yrs ago
- 1.5 yrs ago started BlueBridge – located in Harajuku part of Tokyo
- 3 months ago:  launched AM6
  - first mail service that allows you to get exactly what you want, delivered when you want it, to your phone
  - up to 40k users daily active users already
  - launched this in Japan for 3 reasons:

  1. best mobile infrastructure in the world
  2. foreign entrepreneurs are rare (better press coverage for them)
  3. Japan is an economy looking for an answer on how to get into the service economy (they’ve been heavily mfg) 

Q: Why are foreign (US) companies failing to enter the Japanese market?
A: It’s about the relationships and introduction here in Japan than about the service.  BlueBridge can help with that.

Q: What are some of the downsides / difficulties in the Japanese market?
A: Image – foreigners don’t understand the culture.  

Q: AM6 – how are you monetizing?
A: Premium content and ads

Tokyo Startonomics: Japanese startup lightning round

J-Magic

- mobile service provider, started in China.
- not yet in US.  30 employees.
- many patents in image recognition technology
- his previous company was sold to Google and now powers facial recognition technology of Picasa (wow!)
- Product:  Kao-cheki - kind of a game.  Take your own picture, it scans its database of celebs, etc, etc and comes back with who you look like.
  - 10mm unique users in Japan and China (combined)
  - Take a picture, the system morphs your picture to make you look like a Zombie.  2mm people ues that every month (wow)
  -  monetizing via ecommerce 
- Product: Portrait Maker
  - creates digital avatar from a real still photo
  - used for SNS, games, mail, etc
  - done in real time using facial recognition technologies 

 

AdLocal

- mobile advertising platform
- display/deliver mobile ads to customers (using lat/long)
- advertisers can setup a target range (geographically) – up to 1 mile radius
  - demographics to target:  carrier, publisher category, time of day (hours),
- Locallally targeted ads deliver 4x the CTR
- 4th generation product now launching in the US market
  - allows broadcast of 1 creative to multiple locations
  - allows businesses to target specific businesses / buildings / campuses with certain content/offers
  - platform provides a heatmap that shows where advertisers are earning their impressions (what is converting best, real-time) – very cool
  

 Japanese Mascots - communicate different emotions / trust levels to Japanese society.  Helps build brands and products.

- Mona 
- Amoeba from ameba.jp
- Bear from so-net.ne.jp
- Nico-nico-douga (video sharing website)
- Yume Lion from Toky MX (television)
- Gnome from lolipop
- Fukui, Chiba, Tokyo, Yamanashi (from the local police)

- Mascots lowers the level of intimidation – makes difficult things seem more simple/friendly

Scigineer (science and engineering) 

- not “search”, but “discover”
- community mining (“deqwas”)
- providing the service to ecommerce and mobile sites
- showing us some porn slides right now, not sure why.  Spoof movies.
- meant to pick up “very long tale” items – even “plays on words” – (hence the porn titles, I guess)
- algorithm is based on complex network theory 
- they power CNet Japan’s recommendation engine (content)
- starting an adnetwork on top of the recommendation engine

 

Cerevo

- photo share fraud eliminator 
- when your friends don’t send you the pictures that they promised they’d send you! 
-  soltuion: 2 products
  - DSC : the world’s easiest way to sync photos to the web
  -  it’s actually a camera.   camera automatically emails you (the owner of the camera) the photos.  Or you can send them to flickr.

More from Tokyo Startonomics: mobile ad networks, games and auctions.

Gaming Trends (in Japan and Globally):

- video game market is becoming mature
- it’s a hollywood like business model now.
- costs $30mm to make a game which puts break-even at 3mm units.  Go big or go home.
- other mediums (mobile / pc) more like the broadcasting business (as opposed to hollywood)
  -  easier to fine-tune, lower cost, much more revising the experience, etc.  (long tail gaming)
- casual gaming demographic is changing a lot – tilting older and more female

Presenter: Moba-ge-town (DeNA Co) 

- Founded in Tokyo, March 1999
- Mobile portal, ad network (mobile), e-commerce
- New business:
 - AirLink (travel agency business)
- > 500mm pageviews / day (largest in JP)
- Virtual SNS with high quality free games
- over 70% penetration among teens
- stickiness & addictiveness (70% new user return rate)
- USD$200m annual revenue – 70% profit margins 
 - Ad revenue (place ads and pay sponsor fee)
 -  ”Success-based ad revenues” – basically a CPA model / affiliate program
 - Sales of avatars (virtual goods)  - 2D and 3D avatars
 - Display ads are 40% / the rest is 60%.  Virtual goods a small piece right now.
 - main user base in their 20s 
 - “Tie Up Ads” – national brand advertising.  Coca-cola, etc.
  - end user goes to the retail store, buys the can of coke.
  -  user takes pic of can with phone, uploads it (2D barcode)
  - DeNA sends uesr’s info to coke so coke can market to them
  - Coke gives the user coupons, targeted messages, etc
- Mobile payment system key to all of these businesses

 

- Mobile auction service: Mobaoku
 - very popular for buying/selling items via mobile phone
- Talk about boot strapping – Moba-ge-town was started by 3 staffers (1 engineer) in 3 months