I am Joannes Vermorel, founder at Lokad. I am also an engineer from the Corps des Mines who initially graduated from the ENS.

I have been passionate about computer science, software matters and data mining for almost two decades. (RSS - ATOM)


Entries in startups (19)


3 Low-Competition Niches In Retail Software (guest post)

My first guest post (ever) 3 Low-Competition Niches In Retail Software has been published by Andy Brice on his blog Successful Software. Special thanks to Andy and his wife for the tremendous polish, they have brought to my initial draft.


LinkedIn DirectAds, early thoughts

I just started my first LinkedIn DirectAds campaign a few days ago. I had significant previous experience with Google Adwords, and I was interested to see how DirectAds could perform compared to Adwords.

From an outsider perspective, LinkedIn looks the perfect marketplace for a niche B2B software technology such as Lokad which specializes in demand forecasting. Indeed:

  • I know exactly the profile of the people I am trying to reach: vertical, job description, company size, location, etc.
  • My willingness to pay for each super-targeted lead is rather high.

DirectAds are extremely similar in their format with AdWords. The only minor difference is the presence of small 50x50 icon along your add (the illustration of this post is a screenshot of one of my DirectAds).

The core difference with Adwords is that instead of betting on keywords, DirectAds are selected based the profile of the audience you want to reach. The criteria available for audience filtering are:

  • Company Size
  • Job Function
  • Industry
  • Seniority
  • Gender
  • Age
  • Geography

Yet, it must be noted at that, at present time, only 4 (out of the 7 available) can be selected at the same time within a campaign. This restriction is rather odd and annoying. In my case, company size, job function, industry and seniority are good enough, but geography would have been a bonus too - especially for localized ads.

Then, the job function offers only 18 categories which is a very rough granularity. Again, I would have preferred to be able to directly specify keywords listed in job description entered by the LinkedIn members.

Finally, my initial selection is giving me about 14k members as my target audience. After 48h of display, I have 2k impressions for a single $2 click ($2/click is the minimal bid).

Very low traffic is probably the downside of LinkedIn DirectAds. With such a limited audience, even assuming a good conversion rate, but it will take months to recover the 2h spent initializing the campaign.


Stack Exchange 2.0: epic fail?

It's a sad thing to see a pair of brilliant entrepreneurs going for a probable epic fail with best intentions in mind.

IMHO, the recently announced Stack Exchange 2.0  has a high probability of failure, and worse (as far I am concerned) it might marginally hurt my business due to the lack of ongoing commitment for the forum I did setup for my own company a few months ago.

Let consider the situation:

  • Stack Exchange is an excellent Q&A engine, something that the market had been waiting for a long time, as illustrated by the success of Stack Overflow.
  • Stack Exchange 1.0 had a very reasonable business model, announced with an entry price of about $120 / month.

Now, Stack Exchange 2.0 for a business plan that urgently reminds me of the 37signals announcement of their $100 billion valuation:

When it comes to valuation, making money is a real obstacle. Our profitability has been a real drag on our valuation.We’ll give away everything for free and let the market speculate about how much money we could make if we wanted to make money. That way, the sky’s the limit!

So let start by discussing the arguments proposed by the SE team to go for a free service:

  1. SE had not enough enough beta volunteers. They were expecting "thousands of sites would start to sprout up on every possible topic" (sic)
  2. People were prone to create "ghost-town sites that nobody visited" (sic).  "Allowing anyone with a credit card to make a site" (sic) wasn't a good idea.
  3. People were prone to "multiple sites on the same topic" (sic).

Expecting an overnight success

Well, as far point 1 is concerned, that was just plain unrealistic expectations. Yes, I am 100% sure that SE 1.0 (Stack Exchange 1.0) could have ultimately had thousands of happily paying customers, but it turns out there is no overnight success. Stack Overflow was a quick success because it benefited from two famous bloggers with huge 100% focused audience.

Yet, SE 1.0 is a B2B product, and needs to be marketed and sold accordingly; and it turns out that the SO (Stack Overflow) is definitively not the right audience to market SE. All the SO folks happen to be software developers: little wonder that you get half a dozen SE spawn focusing on startups (but we will get back to this point).

Hence, SE 1.0 had not even been marketed yet, not to the relevant audience anyway.

Then, the beta branding is sufficient to scare away about 99% of all B2B prospects; software tools are sort of a one-of-a-kind exception here. Thus, to even get a chance for SE to succeed, it would need to branded as v1.0 then start charging for it.

Companies don't trust "gratis" stuff, and rightly so. B2B is the contrary of B2C: you have to start charging for it to succeed (open source entered the business the day people started to charge for it).

What about the ghost sites?

Building a community is a very significant investment. It takes a lot of time, typically years, and thousands of hours of work. SE 1.0 was beta. How could it be expected any reasonable organization to push such a commitment on an unproven solution? For most businesses, a solution becomes proven when someone gets charged for it, and this person claims that is was money profitably spent.

Then, the SE team implicitly assumed that low traffic means implicit failure: those guys with credit cards they don't know what they are doing.

The market gets it wrong, and we are going to do it better.

I am very skeptical when anyone (even bright people) pretend to know more than the market. If somebody is selling Luxury Yatch, then a single answered question might be worth millions of USD if it makes the difference to close the deal.

If people (like me) are ready to be pay $100 / month for low traffic websites, then there might be another explanation than those people don't know how to spent their money.

Pushing the point further, how do ghost sites hurt the SE business in anyway? Companies pay for the websites, nobody looks at those websites, nobody gets hurt by those websites. Take the money and stop whining.

Websites on similar subjects are created

Considering that SE was primarily addressed at a near monolithic audience (software developers), it's little wonder to see that many people had the same idea at the same time.

This is old behavior inherited from Economy 1.0: it's called competition.

And so what? Software editors sell their products to companies who happen to compete against each other. This is a healthy situation. At some point the market may decide to elect a "outstanding" winner, but most of the time, market does not, and competition keeps going.

Again, pretending to know more than the market is a wild assumption.

As final point of the analysis of SE 1.0: the outlook was bright, it needed an official v1.0 release, some meaningful marketing outside the software crowd, and SE 1.0 was very likely to become a profitable business. Dropping the SE 1.0 at this point almost look like a bad case of Fear of Success.

Outlook on Stack Exchange 2.0

The SE 2.0 business model claims that service will be offering for free. Yet, there is nothing as free in business. Most likely SE 2.0 will be paid through the advertising tax which happen to be extremely expensive.

In particular, this business model will be way to expensive for most organization to commit any significant resources.

Basically, SE 2.0 is positioning itself in the attention sharing economy trying to re-introduce the old byzantine usenet rules. The intrinsic problem is that creating a community is very different from actually creating business value.

For example, Wikipedia is a worldwide community success, but it's actual business value is zilch: you might donate to Wikipedia, but you can't invest in Wikipedia and expect any financial reward.

Then, SE 1.0 had low profile unknown competitors; SE 2.0 is getting up ahead a direct confrontation with big guys: Google, Facebook, LinkedIn which will - no doubt - deliver their own variants (if SE 2.0 prove to get some traction) to be marketed much more effectively using their social communities.

As a final note, I am hoping, if the SE team sticks to its plans, that the market will quickly fill the room left empty by the now defunct SE 1.0. Contenders are already in place.


Right level of interruption and productivity

Lokad was at LeWeb'09  along with other BizSpark One startups. It had been a great time for us. Our showcase client, Pierre-Noël Luiggi, CEO and founder of Oscaro, was there at our booth and did a tremendous job at explaining why inventory and back-office matters if you intend to build a great eCommerce business.

Among various discussions that I had with Pierre-Noël during those two days of hectic trade-show, we have been discussing a lot about productivity in presence of interruptions (LeWeb'09 was focused on real-time web, hence real-time interruptions).

At Lokad, we are using loads of communication tools, and this seemed to Pierre-Noël a rather puzzling aspect of my company, as he was expecting mathematicians / developers to need an awful lot of concentration, and thus stay as far as possible from all those Web 2.0 distracting thingies.

Well, it turned out that Pierre-Noël insights were 100% correct: working on complicated projects such as Lokad requires an insane amount of concentration to get things right. Yet, this is precisly because if this requirement that we are using so many tools in the first place: we are leveraging those tools to help us, as a team, to keep interruption level as low as possible.

Basically, we have a range of interruption levels that goes as follow (ordered by decreasing intrusiveness):

  1. Face to face meetings
  2. Phone calls
  3. Skype
  4. SMS
  5. Email
  6. Google Wave
  7. Blogs (private, public)
  8. Task Trackers
  9. Wiki

Face to face meetings come on top as the most interrupting communication means. Although, we don't have a policy that forbids knocking on somebody else door, we try to keep all direct interactions addressed either early morning, at lunch time or late evening.

Then, we also try to avoid all company meetings. As a matter of fact, we have virtually no regular company meeting of any kind. It's not that we have any religious thinking about it, it's just that after close examination, it appears there are very few situations that actually call for a meeting with more than 2 people.

Synchronous media such as phone call or Skype chat comes in 2nd as most intrusive media. The policy is to keep those media for events that really needs immediate attention. For example, an alert related to our forecasting infrastrure typically falls in this category. Yet, if the matter is not pressing to the minute, synchronous media should not be used in favor of less interrupting means.

SMS and emails come as the most disruptive non-synchronous media although it's already way much less intrusive than synchronous communications. Our policy is to treat emails as hot potatoes that need immediate attention. Although you don't need to process the item right now but email should be addressed within hours not days. Obviously, if the message does not need to (or cannot) be addressed within hours, then our policy is not to send an email in the first place.

Google Wave is a latest entrant in our communication practices at Lokad. It might ultimately supplant email altogether, but for now we keep it separated from our regular email practices. The most appealing as aspect of GW is that email is terribly ill-designed to deal with ongoing discussions. Any discussion that involves more than 5 emails is a usability nightmare, no matter of much efforts smart email clients (GMail, Outlook 2010) are doing to recover conversation threads out of the underlying mess. Google Wave has a much more natural model to deal with long ongoing discussions.

The policy at Lokad is now to move away from email any complex topic, as there is no chance that the issue could be addressed within hours. Dealing with +100 replies conversations with Google Wave is just a breeze while it was a nightmare with emails.

Note: I can't wait for Microsoft Outlook to support wave as a client, that would be an incredible combo.

Still, Google Wave does require attention from your audience, as sending a Wave is like forcing people into reading what you've just wrote. In this respect, Google Wave is not different from email.

Hence, comes the lazy asynchronous media, the less intrusive kind of media. Blogs, trackers and wiki falls into this category. I am calling those media as lazy because because you do not force any attention for your audience. It's up to the audience to decide whether it has enough time and interest to read your content.

At Lokad, everyone has a personal private blog that we call a worklog. Everyone is expected to post  once a week (and no more), giving a status update on what you've been doing during the week, and what you expect to do next week. In our limited experience, this practice is to give consistency accross all individual actions without the massive overhead typically involved with weekly team meetings (which never existed at Lokad anyway).

The true strength of those lazy media is that opportunity that you give not people not to read you. Your audience knows better than you do what it really needs to know and learn and when the need will occur. Hence, rather than pushing content toward people, it lets them pull info whenever it feels appropriate.


No excuse for not disclosing your roadmap

Software is a fast-paced industry. New technologies soon become obsolete ones, and you need keep your mindset in Fire and Motion mode to move forward. Yet, when something really big emerges, say cloud computing, you end up in a crossroad and you need to make a choice about the future of your business.

This future depends on the 3rd party technology you decide to rely on. This is true for software companies buying software components, but it's also true for brick and mortar companies moving to the next generation ERP.

Trying to push my own little company forward, we can't afford reinventing the wheel. Thus, we are relying on loads of 3rd party tools and technologies; most likey any software company I guess - with the notable exceptions of Microsoft and Google that are nearly self-sustained.

There is nothing wrong in itself depending on other business. Specialization has been a driving force behind business growth for the last two centuries. Yet, in order to take good decisions, I need to be informed about future plans for key technologies that we are adopting.

Plainly put: I need business & technology roadmaps.

A roadmap helps to understand:

  • where the company is heading.
  • if it fits your own business vision.
  • if it matches your upcoming requirements.

Looking around me at companies who disclose their roadmaps, I realized that roadmaps are strong drivers to establish trust and commitment. It shows to your customers and partners that you are committed to move forward with them; not just to leverage status quo.

Yet, it's still sad to see that many companies adopt the Absolute Radio Silence strategy of Apple. It might work in the case of Apple, because they have become expert at leveraging the media buzz around their own plans; but it looks to me a total nonsense for B2B markets where relationships last for years if not decades.

The average lifetime of an installed ERP is 8 years.

Hiding behind the argument we don't want to over-promise  to keep your customers and partners in the dark looks to me a lame excuse. The roadmap represents a best effort attempt at summarizing directions, not an exact schedule. Obviously, it comes with a level of uncertainty. In B2B markets, your customers are smart enough to understand that.

Thus, I have decided to publish a public Lokad roadmap for 2010.

Obviously, one can argue that this roadmap is going to benefit to our competitors. Frankly, I don't think so. If disclosing a 3 pages document is sufficient to put your business in trouble then it means that your intellectual property is really weak in the first place.

The roadmap tells what you are going to do, not the fine grained details to make it work. As usual, ideas are dime a dozen, many investors would even offer them for free, execution is everything.