I will continue to post longer thoughts here, but for  quick “appetizer” notes and things of interest I will start posting them on my Tumblr blog here.  If you want my stream of conscious check out Tumblr, if you want some well formed ideas this is the place for you.

• 37 Signals Basecamp: Simplicity
• Box.net: SharePoint sucks
• FogBuz: Great for Geeks

Without ever using Basecamp or FogBuz I developed a mental picture of these products. For Box.net all I know about their product is that they think SharePoint is a crappy product.  That tells me absolutely nothing about their product. In fact, Box.net has done a phenomenal job of telling the world that SharePoint sucks  – especially if you live in the SF Bay Area and travel on 101.

This is classic negative advertising – politicians have mastered it.  For companies this hard hitting negative advertising is a poor way of communicating. It doesn’t tell the consumer anything about the product.

If you are going to take some shots at your competitor (which is fair) it also needs communicate your value to the consumer. Here are some recent clever marketing tactics that did both.

Netflix: “No Late Fees”

They are clearly going after Blockbuster but don’t have to explicitly mention it.  If I explained the Netflix product to a friend I would say something like “they deliver movies by mail and I never have to worry about late fees like I did with Blockbuster.” They reenforce one of their core differentiators in contrast to their competitor.

Apple: “I am a Mac”

This ad campaign clearly took some shots at Windows but at the same time establishes the Mac as a fast, no-virus, easy-to-use alternative to Windows.  The clever part of this ad is that they don’t slam Windows in a mean spirited kind of way, yet they also successfully tell you you why the Mac is better.

Salesforce.com:  “No Software”

As a pay-as-you-go web-hosted service the “No Software” slogan squarely takes aim at the license fee client-server based application vendors like Oracle, Siebel (now Oracle), and SAP.  Back in 2000 delivering enterprise software via the web as a monthly service was novel – now not so much – and the “No Software” made that point clear without using words like “application hosted software.”

————————————————————————————————————————————————-

Disclosures:  I have never worked for Microsoft.  I am not an investor in any private software collaboration company.

Why OpenTable has massive barriers to entry:

• OpenTable is a two-sided marketplace which have significant barriers to entry, see eBay.  Lets say a competitor magically gets 10,000 restaurants to use their OpenTable clone — you have only one side of the market.  Restaurants need new customers making reservations to make this interesting – which OpenTable delivers by virtue of its strong position in Google search results, integration with all the major online local reviews sites like Yelp.com, and increasingly popular mobile applications.  Generating the traffic to drive to restaurants takes years to develop.
• Selling, installing, and maintaining an OpenTable system is not a simple or quick process.  Selling to small business is time consuming and expensive.  Once OpenTable is installed, it’s akin to installing SAP or Oracle Financials for an enterprise – nobody wants to rip it out.

Why OpenTable is undervalued:

• Significant barriers to entry — you would need a minimum of a $50M and 3-5 years to start chipping aways at OpenTable business.  This assumes that OpenTable management is fairly incompetent and does not react.
• Flash sales:  They have an audience and deep merchant relationships enabling them to layer a Groupon like flash sale – very lucrative.
• Mobile:  The volume of reservations will increase significantly as their mobile applications reach critical mass.
• New lines of business: Once they wrap up the restaurant market their is no reason why they can’t do spas, hair salons, and even car-services.

Companies are starting to fall by the wayside as the stacked teams of Apple, Google, and soon Microsoft take firm control of the race.
Lets look at a checklist of capabilities one needs to launch a competitive mobile OS. Half way down this list you will realize that very few companies have assembled a deep and wide enough talent pool to execute a smartphone mobile os on a global scale.

[1] Limited Network Effects: During the PC war application developers propelled Windows PC to its monopoly position – users adopted the OS with the widest range of applications and developers adopted the platform with the most users. In the mobile smartphone OS war the top 20,000 apps that matter will be replicated to the top five mobile os platforms in each market or region muting the possible network effects because the development costs are relatively low.

• Travel: Acquired ITA Software which aggregates flight routes and pricing information and enables advanced search capabilities on travel data.
• Local: Attempted to purchase Yelp.com, and after that fell through they ramped investment to build their own local data set.  Additionally,  Google has been investing for years in map with StreetView and satellite imagery.
• Metaweb (Freebase): Structured data of  people, places, and things.

When Google focuses on a category like local this is what happens to the search experience.  For a query like Delfina Pizzeria (an excellent pizza place in San Franciso) rather than linking to the best sources of information like Yelp, Zagat, SF Chronicle, etc. Google first pushes you towards Google Places. It currently includes a mix of their own content and other sources of licensed content.  What happens when they have their own pictures, reviews, and check-in data — do they really need to license all this other content from the likes of  Zagat and SF Chronicle.

I expect Google to complete the buying binge by acquiring companies with rich data sets across other highly monetizable categories:

• Shopping: Amazon and eBay to a lesser extent are capturing significant percent of query share in a very lucrative area.  If users bypass Google and go directly to Amazon for their product queries this represents a serious threat to their business.  They need to acquire a company with a huge selection of product data — rich and structured product attribute (size, color), inventory availability, pricing and promotions, and user reviews.  I can’t think of one company (beyond Amazon) that has done this well at the scale Google would need.  This may require acquiring multiple companies to create this.
• Real-Estate: Is somebody like Trulia next?

• New Magic trackpad  – this  is very cool as it brings full multi-touch to the desktop (review here)
• 27 Inch LED Display (review here)
• Upgrades to iMac line (review here)

A pretty significant product launch.  So, you would think with Apple passing on a big Steve Jobs press event at the very least they would swap the Apple.com homepage to promote the new products.  Not a chance.  They are laser focused on the iPhone.

First, lets begin with some context on the enterprise software business.  During the golden years (nineties) of enterprise software – companies like Siebel, Peoplesoft, ePhipany and many more brought software from the back-office (order processing and billing) into the hands of sales reps, customer service, marketing, and human resources (commonly referred to as the front-office).  The license based enterprise software revenue model works like this.  They sell $1M worth of software licenses and then charge companies annual maintenance fees (approximately 20% of the original license cost) for patches and incremental versions of the software.   So, a $1M license software deal actually translated into $2M over five years ($200K annual maintenance fees times five years plus the original license deal of $1M.)   Once a customer installs the software they are effectively locked in for many years.  These maintenance revenue streams are highly profitable as they not paying sales commissions and support costs are spread across thousands of customers.

With that context, it’s pretty clear what buyout firms are doing.  Acquire an enterprise software company with a significant customer base, cut new product development, move support to a low-cost labor market, and milk the maintenance revenue stream.

Yes, this is part of the natural product lifecycle – these are companies on their death-bed.   But the unfortunate part of this is that users (customer service agents, payroll admin, and hiring managers) are stuck with barely usable (try using Oracle Applications) and now largely unsupported tools.

Given the improvements in user experience (Apple) and collaboration tools (Facebook, LinkedIn, etc.) over the past five years these older software tools are a massive productivity drain for millions of users.  There needs to be a better and faster way to flush out mostly defunct enterprise systems and migrate users quickly to something usable.  There is hope, companies like Yammer cleverly bypasses traditional IT purchasers and first hooks the people that matter most — the users.

1. Multiple Parallel Deals:  This is another way of saying broad offer selection. With only a deal or two a day per city (~50 or so cities) the activation energy a competitor needs to catch up is fairly small (sales force and some search marketing spend).  If they had more liquidity on the supply side (hundreds of deals per day per city) it would be very hard to create this kind of supply with a sales force.  To do this effectively they need to build a recommendation engine that ensures that I never see a deal for a pedicure.
2. Turn Competitors into Sales Franchises: Local businesses don’t have the time or desire to transact with multiple group buying sites. Furthermore, Groupon’s competitor’s are starting to plateau, as this happens will seek new ways to generate incremental revenues.  Groupon can avoid a bloody fight with these competitors by turning them into a local sales franchise.  They bring deals to Groupon and in return get a cut of any deals sold. Of course, these local sales franchises have to use all the listings and contract management systems Groupon provides.
3. Build Local Business Reviews:   For each deal many hundreds of people experience the service.  If 10% of these wrote a detailed review they could quickly become an excellent source of business reviews.  Today’s Groupon in San Jose is running a deal for Cindy’s Yoga (see here) that 792 people purchased.  If ten percent of purchasers wrote a review (or 79 reviews) Groupon would have 36 more reviews than Yelp’s listing for Cindy’s Yoga (see here).

Adapted from my answer on Quora.  Follow me on Quora here.

Their objective centers around maximizing profit from the complementary product (Draft) rather than the core subscription product, Campfire. This is akin to Bloomberg trying to charge a hefty premium for content — Bloomberg news content is a complementary product to their lucrative subscription Bloomberg Terminal business.

The objective should be to get every Campfire user with an iPad to purchase the Draft app.  Price it low enough to make it a no-brainer decision for these users.  If every Campfire user (with an iPad) purchased the Draft iPad app Campfire would become far more valuable. Campfire users would post more content via Draft and more conversations around the content creates deeper customer lock-in.  As Campfire becomes more valuable customer are less likely to cancel their subscription.  37Signals knows better then anybody else that losing a subscription revenue generating customer is very hard to replace.

Given the amount of controversy this $10 price point is generating the last thing 37Signals needs is Campfire users thinking twice about purchasing the app — at $4 or $5 these types of users don’t think twice.

[See here for an excellent essay on product complements by Joel Spolsky)