LearnDo you need to spend money on advertising your web app?

Ryan
writes on December 5, 2006

Now that we’ve built two web apps, we’ve got a good perspective on what it takes to make them succeed. This is my conclusion: You’ve got to be prepared to spend cash to advertise your web app.

I’ve been spending one day a week on Amigo and it’s painfully obvious that the blogosphere is only going to get us so far.

  • Yes, Bare Naked App was a great guerrilla marketing activity (and a lot of fun)
  • Yes, getting on TechCrunch was handy
  • Yes, a lot of folks in the Web 2.0 community know about Amigo

However, none of that is yielding an increase in revenue. We’ve got a long way to go until we build a critical mass of people who use Amigo. This demonstrates the point of this post very well: Building a financially successful web app takes hard work, clever marketing and advertising dollars.

Signal Vs. Noise is not normal

I have a feeling that far too many people (including myself sometimes) think that the blogosphere is a free ticket to successful web apps. This just isn’t the truth. We all look at Signal Vs. Noise and think “All we need to do is launch a great blog like the guys at 37signals. It will create buzz around our app and then we’ll see the users flow in.”

Well, I just don’t think that’s the case. Signal Vs. Noise is an anomaly. It has a loyal readership (myself included) that is the perfect market for their apps. Jason and crew has done a fabulous job of creating passionate users. However, I don’t think their experience is easily repeatable.

Yes, the blogosphere is powerful

I’m not trying to say that you shouldn’t have a great blog. It is definitely an extremely important part to any web app. However, it’s vital that you set aside money in your cash flow for advertising after you launch.

I called a friend today that runs a successful web app (the revenue from one app supports the entire company) and he said they often spend $10,000+ per month on advertising.

We were lucky with DropSend

So how did DropSend become successful with so little in advertising? There are two reasons:

  1. When you need to send a file, you’re often desperate and will often pay for the ability to do so
  2. It’s viral as it tells the file recipient about DropSend

Most apps (including Amigo) don’t benefit from these two vital elements. Most of them need good ol’ fashion advertising to spread the word.

Plan for the long haul

So when you’re planning your budget for your new web app, don’t forget that you’ll most likely need to spend money on advertising. Yes, there’s always a chance that your rocket to success because of some great press, but it’s far more likely that you’ll have to wage a long term marketing and advertising battle to rise to the top.

Having this long term perspective (instead of expecting to achieve success very quickly) will separate the truly successful web apps from the rest.

35 Responses to “Do you need to spend money on advertising your web app?”

  1. Ryan,

    Did you guys try other forms or marketing before reaching the conclusion of going for more traditional routes?

    We’re going through our own launch process shortly and are targeting people outside of the web 2.0 world as well. Its going to be a challenge to get the general public to take notice because they don’t check 10 blogs every 10 minutes like the whole 2.0 crowd does.

  2. did anyone cover the ole’ way of marketing an enterprise web app; or the practices outside our techie cheese cover that are needed to reach your focus group? yes, i’m tired of putting big $ into full-size 4c ads, tele-marketing and editorial promos but even in a 2.0 world it’s a long way into the market share.

  3. Ryan Carson on December 11, 2006 at 3:04 pm said:

    Again, great post Ryan…and sweet blog…even writing a comment is fun with your big scripty fonts 🙂

    Thanks mate! Nice to have you stop by the blog.

  4. Ryan,

    Great post…I think a lot of web app developers will be wrestling with the question of “how much to spend on marketing” over the next few years and I think that is only a sign that the web app space is growing up a little…and that’s a good thing.

    Here is a post I wrote a while back that touches on the fact the you need to spend:

    http://www.michaelmcderment.com/2006/06/07/your-sexyunsexy-mix/

    So, if you want to bootstrap and grow organically (which is a wonderful way to run your own business, it just takes a little longer than the traditional VC route of FAST, FAST, FAST), then challenge is finding your balance between spending and not spending on marketing. It’s a tough balance, but definitely something you will need to put some thought into as more and more apps are released and things get crowded.

    I also touched on some of these things in a Work Happy interview here:

    http://www.workhappy.net/2006/10/interview_with_.html

    Probably worth a look for anyone starting a web app.

    Again, great post Ryan…and sweet blog…even writing a comment is fun with your big scripty fonts 🙂

  5. I think a lot of people dont give a lot of thought to their idea before they try to execute .

    I think there are 4 things you need to think about before you launch an internet biz

    1. Biz Model
    2. Revenue Model
    3. Marketing Model
    4. Pricing Model

    I would start by creating a marketing model . If you have an idea that you can’t figure out how you’d market – ABANDON

    The reason why a lot of ideas fail is not because they are not good ideas but because people have not figured out how to monetize them . If you have a good idea or invention that you can’t make money with – Its not a business it a Hobby and sooner or later it will fail because it cost you money and not maiking any .

    When thinking of a business think about what you can offer a prospective customer . What will be the customers ROI ? If you can not quantify the ROI (i.e Invest $100 and get $200 back) you may run into problems .

    Myspace Youtube Milliondollarhomepage etc are hard to duplicate .

    My best advice
    – Give thought to how you would market your product before you start developing it .
    – Choose a Established Niche . For instance if you decide to make software for opticians or Mechanics
    it will be easy to market because you know exactly who your customer is and they have trade associations, magazines, journals etc . You would not need to advertise to everbody . You can just join one of their trade associations to meet all the mechanics or opticians in one place or you can look them up on the internet .

    Example – Seamlessweb.com has a site that provides onlinefood ordering for restaurants . They did not have to spend money advertising aimlessly . They just called the restaurants and pitched their product then they went to highrise office buildings and signed up entire companies to order food thru their website . They should have something like $120 million in rev in ’06. They make a percentage of that as commision .

    Look at a case study http://www2.seamlessweb.com/public/clientCaseStudies.html#CaseStudyOne

    Seamless web is able to quantify their ROI by showing major savings .

    To contact me post a message on my blog
    See my blog I have posted over 100 internet businesses that I find interesting . I dont have any ads on the site – this is not a shameless plug .

  6. Ryan Carson on December 7, 2006 at 12:12 pm said:

    Print up cards, and send them in small bundles (Iâ€ll take fifty!) to people you know, trust, love, etc and get them to evangelise your product for you.

    Wow, thanks mate. Might take you up on that 😉

  7. Ryan Carson on December 7, 2006 at 12:11 pm said:

    Thanks Matt – great stuff!

  8. Ryan Carson on December 7, 2006 at 10:30 am said:

    How do you know your advertising budget wonâ€t just go down the drain, without adding much to the bottom line?

    You don’t, unfortunately.

  9. Here are a few things that we do which spring immediately to mind:

    1 – Tag your adverts and alter your sign up / data capture forms so that when someone completes your intended goal – be it making an enquiry or signing up, you can see exactly what keyword/ad drove them there. This can provide some really interesting information, not only on what works, but what you’re wasting your cash on. We’ve saved a fortune doing this by finding that some higher priced keywords drove plenty of traffic but resulted in zero sales.

    2 – Experiment with focused landing pages for your adverts, giving end users a single task to complete which isn’t necessarily directly sales related. Then keep tweaking that page to get the best conversion rates. There is some great information on this on http://www.marketingexperiments.com

    We’ve done this by giving away a free guide to email marketing to anyone who filled in a few details and this provide a great way of building a database of interested people who were not quite at the right place in the sales cycle yet but who could then be approached later with a far higher resulting conversion rate than usual.

    3 – If you have people interacting with you on your site in a non-direct sales route (i.e. filling in an enquiry form and not going straight in to a free trial etc.) then make sure you carry your tracking data across the lifecycle for that contact, and if you can then try to see whether conversion time varies by advert – we’ve just started doing this and it provides an interesting insight into where abouts different ads catch people in the buying cycle.

    4 – Try and measure churn very specifically for customers based on their source. If ads are producing promiscuous customers, they’re not worth a lot of money, but if they produce great customers who stick with you, you can push the price per click/impression if you need to.

    All in all, it comes down to keeping an eye on as many factors as you can and then distilling trends from that data. It can take a few months to start getting some really in depth information, particularly if you have a longer sales cycle (and when you start really tracking this you may be surprised at how long it is) but it’s definitely worth the effort.

  10. Ryan Carson on December 7, 2006 at 6:18 am said:

    The key thing weâ€ve found with our web aps is that youâ€ve got to obsessively measure response to your ads, constantly tweak the parameters and also look at the results in terms of the lifetime value of the customers.

    Any tips on this Matt?

  11. With Amigo, I would have thought a sales team/person going out and contacting potential customers would work better than advertising.. since I expect the percentage of potential customers searching for stuff about newsletter advertising is pretty low 😉 That said, I do agree with your sentiment!

    It would be incredibly interesting to see some objective data on The Deck. It doesn’t /seem/ like a great investment to me (although other people clearly beg to differ!) in terms of raw visibility, although, naturally, it might give you credibility (like TV advertising).

  12. While musing about where to put your advertising, it might behoove you to check out Adbrite. Their model is sort of interesting, where you can bid on ad slots for specific websites. This could get you advertising on small but highly focused blogs, community websites, etc, that you otherwise wouldn’t be able to advertise on.

    OSTG claims to do this as well, but so far every dollar I’ve spent on OSTG has been a dollar wasted, and I’ve never seen one of my ads appear on a site that I’ve signed up for, their customer service reps always give you some wishy washy answers why, but in the end, it’s not that good of a system unless you’re spending $50k+ per month on internet advertising.

    Google Adwords can be really hit or miss. We tried an Adwords campaign about a year and a half ago. In the end we spent about $7500 on Adwords, and sold about $5k of one-time business on it. We’ve done far better by getting our PageRank above 5, and getting high in results for relevant phrases.

    Oddly enough, our adwords links would be right next to our website listing when you would search for terms like “Nagios Consulting” yet we would never get any Adwords hits from those terms (we would get direct hits from the same searches).

  13. Ryan,

    One thing I think works really well.. get some little cards made up, for each of your web apps. So, I guess you’d make one for Amigo and maybe one for BD4D. Print up cards, and send them in small bundles (I’ll take fifty!) to people you know, trust, love, etc and get them to evangelise your product for you.

    matt

  14. James Deer on December 6, 2006 at 1:05 pm said:

    When marketing with a budget (which i will be doing once my app is finished) i think forums would be a good place to start some general buzz, as long as you don’t spam i think this would be fine until you do make enough revenue to start advertising properly. However it does depend what your app is, so for you Michele, starting with some developer forums would be good.

  15. Amigo is an app aimed more at the web 1.0 crowd. I mean, people who still send out newsletters for the purpose of earning money are web 1.0, as all of the web 2.0 people are running blogs with RSS feeds.

    So if you are going to advertise it, rather than the Deck I would go for placing banner ads on websites which tell you how to run ezines. E.g if I google ‘How to run an ezine’ and get to a website which has got a tutorial about that, there should either be direct mention of Amigo in the copy of the tutorial, or a banner at the top.

  16. Ryan,
    You said:
    “However, itâ€s vital that you set aside money in your cash flow for advertising after you launch.”
    And then:
    “Weâ€re not spending any money on advertising right now.”
    So how do you know?
    How do you know your advertising budget won’t just go down the drain, without adding much to the bottom line?
    I guess we’re all pretty much in the dark here, given the fact that no one has been able to build much experience yet in web 2.0.
    I actually plan to launch a web app within a few months. It will be a free app, creating revenue through advertising. It seems a bit counter productive to buy adds in order to find eyeballs for the adds I plan to sell. But then again, this is web 2.0. Who knows?

  17. Since launching 16bugs, I’ve been thinking about how to do some proper marketing given the small budget. The Deck, for example, might be great, but it costs a lot of money, so I guess I’ll have to give AdWords a try.

    Any tips on online marketing on a budget?

  18. A web-app is like any other app and of course needs advertisement.

    With web applications because of its intended audience/target you can spend most (if not all) of your budget in on-line advertisements where roi is much better than on off-line media.

  19. We’re also going to be spending some resources (man hours rather than cold hard cash) on doing some traditional marketing and PR activity. As the first commenter Mathew notes, when your target market isn’t an alpha-geek, innovation seeking, RSS consuming, early adopter, sometimes you have to knuckle down and push your product in front of the people who influence them, ie. journalists.

  20. I think you absolutely have to be prepared to spend a significant proportion of your revenue on ads in the early days if you want to break your app into a wider audience – relying on press etc. can only get you so far.

    The key thing we’ve found with our web aps is that you’ve got to obsessively measure response to your ads, constantly tweak the parameters and also look at the results in terms of the lifetime value of the customers.

    If youâ€re providing a service where each customer generates a regular stream of income then you can really benefit long term if you can dig deep in your pockets and be able to spend $6,000 a month on ads which only bring in $1,000 that month, but which long term you know will bring in $30,000 of business from the customers you gain. The problem for most small web aps though is that this is a non-starter cashflow wise – it took us over a year to build up to the level of being able to comfortably do this, but itâ€s well worth it.

  21. I’d be really careful here. Advertising is an easy, but relatively ineffective (not to mention expensive!) form of marketing. Have you thought about spending money on other, more innovative ways to market Amigo?

    And considering the great exposure Vitamin/BarenakedApp/workshops/etc. has provided, if your intention is to target the web design and development market and you haven’t achieved the penetration you wanted, have you considered that maybe it’s time to look at other markets?

  22. Great post and great new blog.

    Advertising is tough to get right and varies dependent on niche/market and the actual target audience.

    I run a small site which is aimed at a niche market. To date I’ve done no advertising and have relied on word of mouth and the ‘viral marketing’ which seems to be so hot at present. [refrained from plugging ;-)] Next year advertising will be an important decision for me which I need to get right, especially when the niche market I target are possibly less tech savvy.

    Would be good to see this article extended and include further information on advertising options and pros and cons. Also, didn’t your Wife right a good article on vitamin about PR http://www.thinkvitamin.com/features/biz/how-to-get-good-press 😉

    Regards,

    Darren.

  23. At last, someone has said it!

    Since launching my site I’ve done all of the free stuff like blogs, mailing lists, emailing people, getting other sites to link to me etc and I felt like I was doing something wrong as it wasn’t having the same effect as it has had on other sites.

    I’ve come to realise that that type of marketing works to an extent – especially for sites that are targeted at people in the web industry and early adopters.

    My crowd are certainly not that, so I’m going old school and doing some leg work – literally 10,000 flyers worth of leg work. I’ll be doing lots of other offline promotion too… but still on a shoestring budget.

    As much as I dreamed of a ‘build it and they will come’ website, the reality for most of us is much different.

  24. Hmm, I disagree in part. It all depends who your target audience is, and how big your niche is.

    In Amigo’s case, I agree that you’re probably going to have to spend some money on advertising, but I don’t think this is true across the board.

    If you’re aiming for a very web savvy audience, then it may well not be necessary, or at least far less important.

    Of course, in 37signals case the best advertising they did was Ruby on Rails…

  25. Ryan Carson on December 6, 2006 at 7:47 am said:

    Iâ€m thrilled with the new blog.

    Thanks 🙂

    Say your web-app is bringing in about $3K per month and your team are all still doing their “day jobs” and running and building the thing outside normal hours. Would you re-invest the entire amount, after server costs, to advertising? If not, how much would go to advertising and what would you do with the rest of the money?

    I would re-invest the entire amount into advertising, at least for the beginning (say 6 months?). Just my opinion.

  26. Ryan,

    I’m thrilled with the new blog.

    Re: This post. I’m interested in what percentage of revenue should be allocated to marketing / paid search? Once you have some revenue, of course.

    Say your web-app is bringing in about $3K per month and your team are all still doing their “day jobs” and running and building the thing outside normal hours. Would you re-invest the entire amount, after server costs, to advertising? If not, how much would go to advertising and what would you do with the rest of the money? Anyone?

  27. Ryan Carson on December 6, 2006 at 6:58 am said:

    What forms of advertising do you think are suitable for web apps?

    Well, I’d say banner advertising and Adsense are a great start. But as you said, it depends on your target market.

    What are you guys spend on Adwords monthly?

    None. We’re not spending any money on advertising right now. That will change. I reckon we’ll go for banner ads first. Maybe even the Deck, as we’re going to target the web design/development market first.

    Iâ€m sure I can speak for a lot of people when I say we appreciate it.

    Thanks Ryan!

  28. Great post!

    So, any idea where you are going to spend your ad money? I’d put Google’s adword at the top, but anything else seems more like a shot in the dark.

  29. Great post. I think you’re definitely right about 37signals and their methodologies. I’m a really big fan of them and their work (I love their series: Design Decisions), but that’s not where a business plan should start. I’m a relatively new web developer, but I’m also getting into the marketing/business side of things. Sites like yours (and vitamin) really help add great content and valuable resources for those starting out. I’m sure I can speak for a lot of people when I say we appreciate it.

  30. We are spending ~$3,000 USD per month for our web application for only Google Adwords.

    I wonder if this is a higher than the average or not.

    What are you guys spend on Adwords monthly?

    Also, what are other good paid advertising sources?

    Thx,
    Alx.

  31. So Ryan,

    What forms of advertising do you think are suitable for web apps? I know this question would probably be answered by saying “It depends”, but I would be interested in what you think are worthwhile advertising channels in general terms.

    Cheers,

    Myles

  32. Thanks for a good honest post Ryan. For Amigo the major target market are probably not highly technical people living on the web all day, and they can’t be reached as easily as the web designer crowd can.

    You often read advice to build products to solve your own problems, which works great but results in lots of web apps aimed at a relatively small market. Getting noticed outside of the techy space is much more of a traditional marketing challenge.

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