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Just a few highlights from Jason Fried's talk at the Future of Web Apps conference in Miami last week. Because of business travel, I'm just getting a break to write about it now.
Fried is CEO of 37 Signals, the company best known for producing team and personal productivity applications like Basecamp and Backpack, as well as for its Signal to Noise blog, and for having given birth to the web development framework Ruby on Rails. This is a small but creative company that has been getting a lot of attention in the last few years. Talking about the theme of the conference, he suggested the future of the web is going to be more about innovation in business models than innovation in technology.
One of the things Fried suggested Web companies pay more attention to are byproducts of their work, something he suggested more mature industries are much more aware of than the typical web company is. For a parallel, he talked about the lumber companies that in the process of cutting wood would produce a certain amount of waste. At first, they just threw it away. But then they realized this material also had value – that they could sell sawdust and woodchips and mulch.
"Whenever you make something, you make something else as well," Fried said. The trick is spotting the opportunities those byproducts create.
Rails was a byproduct that turned out to have value beyond its original use, which was to help the company's own programming team organize its code and be more productive, rather than spending so much time on repetitive programming tasks. The first book 37 Signals published, which helped boost its reputation and brought in a little money beside, was a byproduct of the blogging the company founders were already doing about their products and the philosophy behind them. The book, Getting Real, in turn gave rise to a series of conferences on the same topic.
"That stuff has generated over $1 million in revenue for us, even though we were just doing it on the side," Fried said.
Meanwhile, although Rails has emerged as a popular open source technology and many of the company's other applications are offered in a free version, upgradable to subscription pricing, Fried said he thinks the advantages of business models based around free are overhyped. In the current economy, a lot of free services are cutting back on their offerings or simply going out of business, and that is bound to reduce the trust people place in free services. That may make them more willing to pay for web services they know they can trust.
"I'd like to see people start charging more, and I think that's a really important thing for our industry," Fried said. He also expressed irritation with the "fail early and often" ethos that says you learn more from failure to success. "I'd like to see someone go up to a farmer and say, 'fail often – I hope your crops die every year.' No, succeed early and often. People say you're better off learning from your failures, but I think it's better to learn from your successes. When you fail, all you learn is what not to do next time. What is this, the process of elimination – you've got to do a million things wrong before you do one thing right?"
One of the ways he is applying these ideas is by doing more systematic A/B testing of designs (presenting segments of users with alternate versions) to see which words and phrases or buttons convert better, meaning that they turn the viewers of a promotion into buyers. "Now I think we can turn those results into a report and make it a PDF that we can sell for $20," Fried said, and his experience tells him it will sell.
"One of the things we've noticed or discovered is that the bulk of our paying customers started out as paying customers," rather than free trial subscribers, Fried said. "So, yes, free converts. But paying converts even better."
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