All posts filed under “Geeking out

The law of unintended consequences

So a little over a year ago or so I was thinking about Twitter. Twitter is a tool that is both a type of social network (like Facebook, LinkedIn, etc.) but is also a type of communications tool. I noticed that certain people posted on Twitter constantly, and used the communications tool functionality constantly.

Trying to be a bit cheeky, I put up a post titled “Voyeur vs. Exhibitionist (on Twitter)“. Virtually no one read it, and I was a bit too simplistic in my categorisation anyway; I was trying to say that users either broadcast everything they do or just listen in on everyone else.

But through the Law of Unintended Consequences I am now on the first page of Google results when someone searches for “exhibitionists blog”!

I’m guessing that anyone that actually clicks through to this site is sorely disappointed. But if anyone has started a blog, it shows that you’ll need to be careful what you post about… you never know how Google will look at it.

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Very cool rocket photos and news from SpaceX

I’ve been following SpaceX for years, since they were building their first hardware and trying to launch it from a small island in the Pacific. I posted this fall when SpaceX became the first privately-funded company to successfully launch a liquid-fueled rocket into space. That was their Falcon 1 launch vehicle, with 1 engine. They’ve had their Falcon 9 vehicle (9 engines) in development for nearly as long, and just before New Years Eve it was fully integrated on its launch pad at Cape Canaveral! SpaceX took four tries to get Falcon 1 into orbit, and I hope that the first Falcon 9 launch works straight off.

The recent HUGE news for SpaceX is that they were awarded a $1.6 billion (yes, with a B) contract to launch 12 rockets and send 20,000kg (~22 tons) of cargo to the International Space Station. NASA may also elect for additional missions for a total of $3.1 billion total value! They will be competing for longer-term contracts with Orbital Sciences. One difference is that SpaceX will be launching Falcon 9 in the next couple of months, where Orbital doesn’t expect to launch their newly designed vehicle until at least 2010, putting SpaceX a year ahead. An interesting paragraph in this Wall Street Journal article regarding the contract says quite a bit:

SpaceX, which easily came out at the top of all the cost, management and technical rankings, is slated to start flights in late 2010, and the contracts stretch for seven more years.

Anyway, I thought people might enjoy photos of what will likely be the future of commercial spaceflight in the US for many years to come. (All taken from SpaceX’s Updates page.)

Beautiful shot of Falcon 9 at the Cape:

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Fully integrated at the Cape:

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Fitting the HUGE fairing to the rest of the rocket:

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Another shot just before the fairing was attached:

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Nine, yes NINE first-stage engines shipping from testing in Texas:

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The second stage engine:

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Get yourself on Twitter!

One of the biggest stories in the tech world in 2008 has been Twitter. I was at first quite down on Twitter, but have since changed my mind. It’s a mix of a social network (like Facebook/MySpace) and a communications tool (like email/texting).

The best way to describe it is through this short YouTube video:

Now go sign up for Twitter and then follow me.

I was against Twitter at the beginning because of Kathy Sierra’s influence. Her post (circa 2006) pointed out that if you’re trying to achieve “flow” in your work Twitter can be quite detrimental as friends’ updates will always be interrupting you.

But I’ve found that when I need to I can just turn off the Twitter application. When I don’t need to achieve that flow it’s interesting to listen in to what friends and others are discussing. If you’ve got a lot of followers, then they can serve as quite a good group to “crowdsource” questions to! (I’ve seen people asking for advice on office space, restaurants, and more.)

In the end, I highly encourage you at least try it out. If you’re on Facebook you can link any Twitter updates you send to your Facebook status, so you only have to type your “status” once and have it link everywhere. Nice…

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Estimating 37signals revenue and general profitability

One of the all-time most popular posts on my blog is my original post where I showed how I modelled the revenue and revenue growth of 37signals. It showed a business that has made quite a bit of money in the past few years; I originally estimated revenue of $3.5million in 2007 and over $5million in 2008.

Well, it’s been nearly a year since I put up that post and based off of feedback I’ve received personally and comments on the post I decided to refine this model. My new estimates are that 37signals had revenue of over $4million in 2007 and over $8million in 2008.

Breaking down 37signals revenue by product

These are my estimates of 2008 revenue, in descending order. (Please read the initial post for more detail on how I created the model.)

  • Basecamp: $4.9million
  • Highrise: $1.9million
  • Backpack: $0.6million
  • Job/Gig Boards: $500k
  • Conferences, workshops, etc: $180k
  • Campfire: $133k
  • The Deck: $60k
  • Getting Real: $45k

Analysis

Basecamp is the 37signals product champion, and a key revenue generator. Highrise seems to be quickly gaining momentum, but facing tougher competition from entrenched CRM products. My figures for Backpack are likely a bit low after their recent multi-user update; I think that sales there have significantly increased. Campfire seems to be a minor product. The ranking of Basecamp/Highrise/Backpack is likely right, as it mirrors how they are promoted in 37signals marketing materials.

The other significant revenue source for them is the Job and Gig Boards, which I estimate to be $500k/year. The rest are fairly minor in the grand scheme of things.

Estimates on 37signals costs

37signals seems to be very generous with their 12 employees. (You can be when you’re generating over $600k in revenue per employee!) I’m guessing that between salary, perks, office space (where appropriate), payroll services, equipment, etc. that they average $150k in costs per person. I’m biasing this guess towards an overestimate, so as to be conservative in estimating profits. This is by far the biggest cost at $1.8million per year.

The other biggest cost they have is in servers/storage/etc. In April, their total costs with Amazon S3 were just $2k/month. Being conservative, I’ll guess they’re at $3k/month now, or ~$30k/year.

I believe they use Rackspace for servers. I can’t find any reliable information on Rackspace prices. But I’m going to guess that 37signals pays $30k/month with Rackspace. (If anyone has better numbers or a baseline for this, please let me know and I’ll update this post!) This is a yearly cost of $360k per year.

Guesstimate of 37signals profit

If 37signals is able to make $8million per year, with costs of just over $2million per year, it is a very good business to be in. If my figures are anywhere near correct, they make $6million in profit per year.

I titled this a guesstimate because there are just too many potential sources of error in this analysis. If any readers have any guidance, please leave a comment below or e-mail me directly.

Do you want to challenge my (revenue) assumptions?

You can download the spreadsheet I used by clicking on the icon below.

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Summary

I hope this post is useful to you. Again, if you have any better information or want to challenge my revenue or costs model, please comment below or contact me directly.

While not the biggest business, 37signals does seem to be quite a profitable one.