So what exactly is a lifestyle business? A lifestyle business is a business that generates sufficient revenue that allows the owners the flexibility to comfortably adjust their work/life ratio. It sounds like surefire income but like any other business, the risk for failure is just as high. The phase of Jambool in building and monetizing Facebook apps is best described as a lifestyle business that allowed Vikas & I the luxury of having a lot of fun, earning an income and yet having the flexibility to take time off whenever we wanted just because we could. The following is the evolution of how Jambool’s 2nd business plan evolved into a lifestyle business and a top Facebook app developer.
Building on a repeatable platform
November 2007 was the turning point in Jambool history when we realized we were actually onto something big. When we built Hug Me, we wisely decided to build a generic gifting app engine so that we could launch other gifting apps based on other themes. By doing so it allowed us to launch new apps in the future simply by adding configuration and custom images.
Much of the rest of the month of November and December 2007 was a blur; we spent the month scaling out our systems to handle the surge in traffic, including switching dedicated server providers, adding memcache, tuning and partitioning our MySQL database. This was a far cry from a few months before when we were on the brink of shutting down. When we had time to think creatively, we scrambled to think of other clever specialized gifting themes so we could generate new clones of Hug Me.
We launched Send Good Karma and Smiles towards the end of December 2007 and watched usage sky rocket through cross-promotion between the 3 apps. Much like the name suggests, Send Good Karma allowed users to send virtual karma, such as Hope, Happiness, Peace, etc. Smiles allowed you to send funky types of smiles. Other than the icons, names and adjectives, the 3 apps were completely identical. It turns out a fair number of users who send virtual hugs would most likely send virtual karmas as well.
We repeated the formula, and launched additional gifting apps over the next few weeks, based on the Hug Me engine, that specialized in sending specialized emotions such as Wishes, Cheers, Massages, Spanks and the ever classic Fart You. If any conclusions can be drawn by the number of users who liked sending virtual emotions, then one can safely say that more Facebook users liked sending virtual expressions of flatulence than virtual cheers.
Early Monetization of Reach Apps
Now that we had a bunch of pretty viral apps, we decided to focus on monetizing them. We placed Google ads on our applications and found that it produced very little revenue. Next, we switched to using Facebook specific ad companies, such as SocialMedia and RockYou ads and saw revenue increased tremendously. The difference being that these latter types of ads cross promoted other Facebook apps, and kept the user in context on Facebook, whereas Google ads produced links that took the user away from Facebook.
Soon it became evident that our ad revenue increased because of the direct correlation between the number of Daily Active Users (DAU), and thus page views and revenue. The industry called these reach apps because they are extremely viral, reach a lot of users, but generate few page views before users bounce off distracted by something else interesting. By simply placing advertising within these apps, there was a high likelihood the users will click on an ad.
We generated about $3,000 in advertising revenue in November 2007 and $8,000 the following month from these apps and ad revenue steadily climbed over the next few months. Later on, we found other sources of monetizing these apps including a sponsorship by Time, Inc, to help build their fan base on their Health.com Facebook page by a partnership with Send Good Karma. Technically, we were profitable that first month as we generated enough to pay for the servers, and it certainly helped when we weren’t paying ourselves a salary. But that was about to change and not a moment too soon.
Our first paycheck
Vikas last took a salary when he left Amazon.com in early 2006, and by late 2007 his once patient wife had given him an ultimatum to get a real paying job within a few months. When it became clear that we would be generating enough income to support the operations we decided to pay ourselves a salary of a whopping $2000 a month. Our first paycheck arrived in our bank accounts on January 31, 2008, just days before Vikas hit his 2 year anniversary of having no income and when the ultimatum expired. If we had waited another month to experiment on the Facebook platform we may not have continued down this route.
Beginnings of Virtual Currency monetization
In early 2008, a new kind of monetization technique started to gain popularity on Facebook. This was the concept of Offer Walls in which Cost Per Action (CPA) based advertising allowed end users to be rewarded with virtual currency in exchange for performing an action, such as subscribing to Netflix, filling up a survey. The advertiser would pay for each completed action, and the revenue would be shared with the ad network and the game developer.We introduced virtual currency on our gifting apps and it did provide an additional channel of income through the use of Offer Walls. We were selling virtual emotions for virtual currency. The portion of revenue earned through virtual currency was still lower than straightforward CPA ads. Unsatisfied with the performance of how virtual currency worked in those apps, we decided to think of new apps that would have virtual currency built in from the start. My next blog article will describe the birth of these engaging apps.
The global reach of Jambool Apps
By January 2008 we had all but abandoned the Social Collaboration site (Business Plan #1). Jambool the Facebook app (Business Plan #2) company was up and running and we had about a dozen Facebook apps all clones of Hug Me. These reach apps propelled Jambool into the Top 15 app developers later that quarter by number of users. Over the lifetime of Hug Me, Send Good Karma and Smiles, they attracted a total of 14 million unique users, most of it during the first 6 months of launch. Facebook acquired 100 million users by August 2008 and one could comfortably say that one in 10 Facebook users that year had used a Jambool app by then. My hypothesis was confirmed by a pseudo-work/holiday trip I took to Brisbane, Australia in February 2008, when I met some friends of my friend Noel, half of his friends had used one of our apps. The moment of recognition was still overshadowed by having to explain what I really did for a living. Uhh. yeah I write apps for Facebook that allows you to send virtual hugs to your friends.
The reach of Jambool apps expanded far beyond Facebook users when we took a portion of the revenue earned from Send Good Karma and Hug Me to make micro-loans on Kiva. Over the life of these apps, Jambool made almost 500 loans totaling almost $13,000 to small businesses around the world. Everytime someone spent virtual currency on our apps, we contributed into a pool of funds for Kiva. This was our way of indirectly translating virtual karma into real world goodness.
Time for an exit?
The early success we had with these apps attracted a variety of attention. Aside from partnerships from other apps for cross-promoting apps, there was more serious inbound interest to acquire our apps and also the talent. We could’ve taken an early exit, made back some of our lost income and moved onto something else. We decided against selling out, as we were having a lot of fun being in control and even getting some attention from the press.
Within a year’s time from the launch of our very first Facebook app, we did eventually decide to abandon the Facebook app business and pivot onto something else. At the peak of our success, it seemed unthinkable to wake up one day and decide to abandon the easy income, the flexible lifestyle and being one of the recognized names in your field. But that is exactly what we did, and more on that in a future blog post.Early ConclusionsUp to this phase in our Business Plan #2, there much of the success was quite accidental and the business had not grown long enough to draw major conclusions, but nevertheless there are early takeaways about a lifestyle business:
- Build a platform - if we didn’t build a generic gifting engine we wouldn’t have been able to theme Hug Me and branch out to other apps. Send Good Karma ended up being more successful and recognized than Hug Me.
- It’s still hard work – While most of the time it was fun, there were still many late nights spent scaling the technology and sweating about the loss of users and income.
- Have fun – We were having a lot of fun thinking up new apps and riding the Facebook app fever. This was probably more important than seeing your revenue grow.
If you’ve built a tech lifestyle business, how it evolve? I’d love to hear your stories.