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12 Rules For Building Your First Profitable Startup

I’ve been obsessed with Internet Startups for almost a decade now, and I still find myself consuming as much content as possible about the best way to startup a company that is setup for success. As luck would have it, I am actually running a profitable startup now, so I figured I would assemble a set of rules I wish someone had given me when I was trying to start my first few companies.

Now, I know for every rule in this list, you can name exceptions. I get that. And I don’t care.

This list is for someone looking to start their first Internet Startup who is interested in bootstrapping a reliably profitable company that can then open the door to the next big project.

That’s my plan; I am running a profitable company, and I plan to use it and the experiences and capital I am getting from it to slingshot myself into the next, probably riskier project. The rules below are compiled together because if you can design a product that follows all of them, you have a much better chance of investing your time and energy into something that stands to be profitable and successful.

I firmly believe first time startup founders shouldn’t be trying to build the next Reddit or Facebook. Yes, I know they’re both profitable (now). However, they’re both exceptions to the rule of both the markets they’re in. They’re great ideas to pursue after you have money in the bank and are not risking everything on your idea. Until you reach that point, I think you should focus on ideas that, while smaller, can much more easily be made profitable.

This is just my opinion and I know many out there will think I’m an idiot. That’s cool. I dig that. But hopefully those who don’t think I’m an idiot and are looking to get started in the world of internet startups will find this set of rules useful.

I have two main goals for this post:

  1. To provide a set of rules for first time startup founders to follow to help increase their chances of building a successful, profitable company
  2. To use as many tacky stock photos as possible
Let’s get started…

The Psychological Difference Between Freemium & Free Trial Plans

I’ve been in hiding for the last few months, mainly to work on my startup, serpIQ. We just passed the one year milestone, which is an awesome and surreal feeling simultaneously. And in that year, to say that I have learned a lot about startups and business would easily win “Understatement of the Year” at the StartUppies (That’s what I assume an award show for startups would be called).

One major misstep I think that we made was back in February of this year. Amongst other things, we switched from a usage limited free trial plan to essentially a freemium plan. Previously, you could sign up and analyze 5 keywords for free, then you’d have to upgrade to continue. Now, you can sign up and analyze 5 keywords the first day, then 2 per day after that. When we made this switch, the mentality was that this would allow for people to have a longer time period to test out serpIQ before pulling the trigger and upgrading.

However, after doing a lot of research (and looking at our numbers) it appears that there was a more subtle thing going on that was negatively impacting our bottom line. Continue reading

Once Again, Google Proves They Don’t Care About Publishers

Google announced today that they will now be automatically using the SSL version of their search engine for any user who is logged into their Google account.

Their official reasoning behind it is that it adds a new layer of security for those who rely on Google daily (read: everyone) as it is now much more difficult to sniff search queries on public wifi, via spyware, and any other attack vector.

Sure, that sounds pretty cool, thanks for doing that.

Wait a minute…

This is all fine and dandy, until you get to this part:

When you search from https://www.google.com, websites you visit from our organic search listings will still know that you came from Google, but won’t receive information about each individual query.

Every single site owner and SEO on the planet should have had their ears (eyes?) perk up when they read that part.

It gets even better when you hit this gem:

 If you choose to click on an ad appearing on our search results page, your browser will continue to send the relevant query over the network to enable advertisers to measure the effectiveness of their campaigns and to improve the ads and offers they present to you.

What does this all mean? It means Google has just blocked referrer keyword data from organic results from ALL analytics platforms whenever a user is logged in to their Google account. However, if a user reaches you via an Adwords PPC ad, they’ll still pass along that referrer data to your preferred analytics platform.

Want to see how useful the data they give is? It’s already showing up in my analytics:

google ssl blanked referrer

MAN THAT IS SO HELPFUL, THANKS GOOGLE

To say this is an abuse of power is quite an understatement. Google very well knows the search queries that sent users to you, seeing as how they are the ones who sent them in the first place. But in order to avoid anti-trust issues, rather than only allowing that data to show up in Google Analytics, they’re going to block it from all platforms instead. So in the effort of being fair, they’re screwing over everyone.

This just goes to show that Google is NOT on the publisher’s side. While publishers are the entire reason Google is in business (They’re the world’s largest scraper, their index is entirely full of other publisher’s content), Google has decided that unless you’re paying them to run your ads, you don’t deserve to know how people got to your site through their engine.

Well, this should at least stop those nasty SEOs…

In reality, it will make analytics a slight bit less useful, but there will still be all the data coming from users who aren’t logged in to Google, which I would imagine makes up quite a few users in actuality. However, it’s still extremely inconvenient for those of us who look at our referrer data to determine which pages on our site we need to beef up with new internal links, content, images, or videos in order to increase their rankings even higher.

But you know who else it screws with? SEOs who are smart enough to use their analytics data to power their Adwords campaigns. For some stupid reason, most people treat SEO and PPC as mutually exclusive ideas that will cause the world to ignite if you were to combine them together. However, a smart website owner, ecommerce store owner, or affiliate marketer will build a site that performs well in the SERPs as well as on the Adwords PPC network, and they’ll use the data from PPC to optimize their sites and the data from their organic traffic to optimize their PPC campaigns. With this latest rollout of SSL, a schism will be formed between your organic traffic analytics and your PPC campaigns.

The Bottom Line: Google’s customers are ADVERTISERS, not website owners and publishers.

Project Clients Vs. Product Customers – How To Maintain Sanity By Building Products

I’ve read about quite a few startup founders who started working as consultants or at web agencies where they cut their teeth and learned about development, project bidding, and project management. The problem is that: 1) Client work is a soul sucking endeavor that will leave most people hating their work after a few years and 2) it’s a black hole of quick money that will sometimes lock you in and prevent you from taking the bold steps to actually build a product and break free from the catch-22 that is having clients.

Below are my thoughts on the difference between Project Clients and Product Customers and why having a product is infinitely better in the long run.

Project Clients

project-clientsWhen you work at an agency or as a freelancer or consultant, you have project clients. Project clients are people who come to you with their problem and it’s your job to fix it, or build it, or make it better. The reason they’re coming to you is because they don’t have the personnel or tools internally to complete the task, or don’t have the time or bandwidth internally to tackle the project themselves. Continue reading

Competitors Are Awesome You Dummy

The bane of any startup founder’s existence is the emergence of competitors, or the discovery of competitors after dreaming up an amazing idea. It can certainly be discouraging to find out there are other people out there as brilliant and creative as you are, but there are many advantages to having competitors that most people never discuss. Here are a few of my favorite things about having competitors:

1) Competitors validate your model and niche/market.

The big buzzword nowadays is “disruptive ideas”…projects and startups that flip a market on its head and make everyone see things in a totally different way. It’s extremely difficult to predict whether a disruptive idea will actually stick and take hold, and even harder to test such a belief. So this often leads to people believing in and launching projects and ideas into markets that literally don’t exist.

The Lean Startup movement is all about testing your niche or market thoroughly before actually committing time and money and effort into actually building things out. This is smart. The simplest, easiest way to test a market? Look for competitors. Look for companies that have done something similar to what you’ve had in mind, see how they’re doing it, how people like it, how much they charge. Dissect them. Then make them your bitch. Continue reading

Private Remote Git Repositories Using Ubuntu On Linode

In working on my latest project, I’ve made a bunch of development changes. I’ve switched over to Ruby on Rails (which has been great so far), started using Git in my workflow, and have automated my app deployment with Capistrano. There have been some learning curves, especially with the lack of coherent documentation for most of the stuff, so it has been frustrating at times. I made sure to take detailed notes though as I worked through the process of learning all of this stuff, and I’m planning on posting a few guides here on how to do some of the stuff that I now use daily. So hopefully that’s something that will help anyone interested in adding some new stuff to their current workflows.

Bring In The Git

I’m not going to go into too many details as to why Git is great or the technical explanation of how the hell it works because quite frankly I don’t really know. I do know enough about it to know that it’s better to use than not use and if you’re serious about coding, you should use it. Main reasons why?

  1. Versioning is a good thing. Versioning + remote backups = great thing
  2. You should never modify your production code base. Always branch out from it, code on the branch, test, merge back, deploy. Don’t break working code.

So basically, Git allows you to break shit without risking your entire project (and sanity).

On To The Guide

Anyone expecting a long, thorough guide, will be disappointed. But that’s a good thing in this case, because setting up your own remote repos on your own Linode VPS is stupid easy. There isn’t that much documentation out there for some reason on this topic (I guess all the cool kids are on Github), so that’s why I’m writing this now. So here we go…

1) Install git on your server. SSH into your Linode, and (assuming you’re on Ubuntu) run “apt-get install git-core”

2) On your local machine, install Git. Depends on your OS, there are guides everywhere for this.

3) Back on the server, navigate to and create a folder where you’ll house the remote repo. This should be a non-public folder. I chose /srv/git (my apps are stored in /srv/www/[app-folder]). Assuming you’re using /srv/git, the workflow would be:

[cc]mkdir /srv/git

cd /srv/git

mkdir [project-name]

cd [project-name] [/cc]

4) In your new project folder, run the command [cci]git init –bare[/cci]. This will create an empty repository for your project.

5) Back on your local machine, you need to add the remote repo as a remote target to your Git setup. To do that, run:

[cc]git remote add origin ssh://[username]@[domain/ip/hostname]/srv/git/[project-name] [/cc]

What that did was add the remote target of [cci]origin[/cci]. I have no idea why everyone calls their remote repos origin…if someone has an answer, I’ll mail you a cookie.

6) Now, work locally on your project. When you’re ready to commit and push to your server, the workflow looks like:

[cc]git add .

git commit -m “my commit”

git push origin [branch-name][/cc]

So if you were working on your master branch, you would use [cci]git push origin master[/cci]. That command would calculate all your repo deltas and push only your changes to your server. WIN.

Moving Forward

Once you’ve nailed that workflow, there’s some awesome advanced stuff you can do. Namely, deploying a Rails app with Capistrano and Git. It’s sexy when it works, but confusing as hell to figure out. I’ll post a few more guides that will hopefully help you get started with that stuff as well.

Wickedfire is down…let productivity commence

Bummer to see the site down, seems like a database corruption issue. Curious to see how things turn out in the next few days. If you have SEO questions, feel free to ask them at SEO Loudmouths…I’m going to get all caught up on the lingering open questions by tomorrow.

If things stay down for a while on WF, I’m not sure what will happen in terms of something to replace it. Too early to tell now.

PS: I’m working on something so fucking epic for SEO research you’re all going to love it. I’m hoping to launch it within two weeks and will officially kick it off (with a special Layered Thoughts discount) as soon as its ready to go. Stay tuned!

Awesome Viral Marketing Idea – Pay With A Tweet

I found Pay With A Tweet online about a week ago and thought it was really cool. The basic premise is you have something to give away (guide, report, free app, etc) that you would normally require name and email address to download (classic list building method). Rather than require that though, the download link is hidden behind a Twitter Tweet or Facebook Like button, so in order to get to the download, a user must tweet a link to the landing page on their account and then they’ll gain access to the download page. Then, anyone who follows that Twitter user or is friends on Facebook who is also interested in gaining access to the download must click the link in the tweet/link, which has the Tweet button on it as well, and they must then tweet to all of their followers.

Depending on the niche, something like this could work REALLY WELL. Any tech savvy niches, like SEO, social media, affiliate, etc (really, any niche where people have Twitter or Facebook accounts) can create a big rush of traffic because of the exponential growth potential. Sounds really hyped up, but it seems like a sound principal.

Since I’ve just started using Twitter again and am working on growing my follower count to increase my reach on it, I think I’ll try a few tests of this system soon to see how effective it is. An ideal setup for me would be: Tweet the link, go to download page, subscribe to blog, receive download link. Seems like a really solid way to increase my feed subscriber base as well as increase the brand of the blog.

I’ll post some updates soon of ideas I want to test this system out with.

As A Consumer, I Do Not Want Social Search

Social Search is a novelty. On paper, it sounds good: search results are influenced by the likes and interests of those in your social circle. But for the vast majority of searches, I don’t really give a damn what my friends think or where they have been before. Yet Google has stated that they’ve launched a more integrated social search experience. Here’s the example they’ve posted:

“This means you’ll start seeing more from people like co-workers and friends, with annotations below the results they’ve shared or created. So if you’re thinking about climbing Mt. Kilimanjaro and your colleague Matt has written a blog post about his own experience, then we’ll bump up that post with a note and a picture”

Useful? No. Abstract Example? Yes. Nice try guys.

I search Google when I need information about a topic that none of my friends have. A perfect example of a situation like this would be if I wanted to buy a nice new HD Video Camera. There’s maybe 3 or 4 people out of my 500 or so Facebook friends who are even close to being qualified to answer the question “what is the best HD video camera I can buy for $X?” The people I want to hear from are professional videographers and product reviewers. Possibly I’d go to Amazon and read reviews simply because every product has a review there. But I won’t defer to my friends for this one.

A question I’d post to Facebook rather than Google is something like “What’s the best Mexican food place in Pacific Beach?” That’s something I want to hear from my friends. Google’s results are not in any way supported by actual quality of service, the local results are easily gamed, and they are simply not that useful compared to a few vouched for suggestions by my friends in the area.

Social Search, to me, is simply a buzzword mashup without any useful substance. It’s almost like they’re showing off what they can do with their technology. It’s no secret that Google absolutely sucks at anything that has to deal with Social-Anything, and the Social Search enhancements are a shining example of their perpetual failure in that field.

The bottom line is, Google is for search queries outside of the realm of your friend’s expertise. Google themselves state that 20 to 25% of searches have never been searched before. That’s a huge amount of searches that you nor anyone else has ever queried before. I’m calling it right now, Social Search will not become what all the buzzword fans think it will become.

Why Google Doesn’t Want You To Mess With Paid Links

For years, Google has been very vocal about why you should never buy backlinks for your sites. There have been a good amount of horror stories about people who buy backlinks and then find their site completely removed from the index for up to 6 months or more. Obviously, this could literally put your company out of business if it happens to you.

And yet, anywhere you go, you’ll see all kinds of ads for sites like Text Links Ads, Links XL, and others, who broker links. They all have huge pools of publishers who they are able to sell links on their own sites through the link broker networks. This seems like a sitting duck situation, where Google could possibly sniff out the entire network and systematically crush an entire portion of the internet. But this doesn’t really seem to be happening, and that’s because these networks are doing a good job of hiding the fact they’re selling links. They leave little if any footprint, so unless Google actually came into their network to sniff out who is participating, things are pretty safe.

But it still begs the question, why does Google not want me to buy links? The answer is connected to the core of Google’s ranking technology, and is a pretty basic one once you see it.

Stuffing the Ballot Box

The super simplified way of describing how Google uses backlinks to determine how a site should rank is that each backlink is a “vote” for the target site. These votes aren’t all equal; a link on a no-name site is not even close to being worth as much as a link on a big authority site. But regardless, a link is an endorsement according to Google.

By purchasing backlinks, you’re all of a sudden “stuffing the ballot box” and artificially increasing your backlink numbers. Without a way of discerning which backlinks were naturally procured as opposed to purchased, Google has trouble knowing how legitimate a site is or if the owner of the site just has deep pockets.

Because of how large and powerful Google is, they are able to set their own internal rules that everyone starts to follow because if they don’t and get caught for something Google doesn’t like, the penalty could potentially devastate their traffic and cash-flow. So Google is in this unique “internet police” position where they can somewhat control people’s behavior online simply by discouraging certain practices.

The Funny Part Is That Paid Links Work. Really Well.

The thing is, if there is no footprint to identify your paid links with, Google has no damn clue that you paid for them. Because of this, if you have the cash, you can snatch some very powerful links that would be challenging to naturally get at least early on in a site’s life and can dramatically increase your site’s ranking.

Despite Google’s authority, they simply can’t be all knowing. Whether you have a handful of independent, powerful sites that you interlink to help each one out, or you buy links, it’s a way to fast track your site to high rankings in competitive niches.

Rand at SEOMOZ wrote a great post about his experiments with paid links, and the results pretty clearly show what I’m saying here. If you have the budget for the links, it’s definitely something to (carefully) use.

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