Evernote reveals their usage finances

December 7, 2009

I just found this beautiful article. In short, the figures are as follows:

May 2009: 900,000 users total; 12,000 paying users.

Nov 2009: 2,000,000 users total; 31,000 paying users.

The cost a user incurs is $0.09 per month.

A few observations:

  1. The user base growth is very solid. Going from 900K to 2000K in just 6 months is cool.
  2. Their conversion percentage is up from 1.33% to 1.50%. This is insanely important (unless the numbers were just rounded this way).
  3. They are loosing money: $4.50 * 12 * 31,000 = $1,674,000 income. $0.09 * 2,000,000 * 12 = $2,160,000 costs of serving the users. Total is ($486,000) annually.
  4. Those were just the costs of providing the service to the users. They also have user acquiring costs as well as development costs (to improve the service and to extend to other platforms). These costs are easily into $2-3M a year.

Note: I used $4.50 per month fee because it is $5.00 if you pay for a month. If you pay for a year, it’s $45/12 = $3.75 per month. Plus, payment processing is not free, especially for small transactions.

A few questions:

  1. Is Evernote a good business? Not yet. Even if they stop all development, their operating costs give them a fat red number.
  2. Will it become a good business? The trend is still not in their favor. However, even making losses, they might be eventually bought out by someone like Google, making a happy exit for the founders and VCs. It seems to be their strategy.
  3. How does MobileNoter compare to Evernote? I won’t share any hard numbers, but if we stop the development, we’ll be cash positive.

What do you do if your sales slump?

December 6, 2009

We had a sales drop recently, due to the holiday and Black Friday that followed. It is natural for software sales to suffer during the holidays, especially for Productivity software. What can be done to prevent the slump or increase the sales during non-holiday days? There are a few simple and realistic things that lead to immediate increase in sales.

  1. Start (or increase your current) AdWords campaign. This is easy to do. It will cost money, but again it’s easy to track how much you spend on ads and how much revenue it brings in. As long as the cost of acquiring and keeping a new user is lower than the money you get from a sale, it works.
  2. Offer discounts via coupons, “bargain of the day” sites, or just old plain “holiday” discount. This always works, but sometimes it can alienate your recent customers who didn’t get the discount, and it also teaches potential customers wait for next discount period instead of buying outright.
  3. Draw attention to you product or company by sending out a press-release or posting some cool controversial article. Sending out press-releases is next thing to spamming, so I don’t think this works very well anymore. Posting a  cool article is a much better thing to do. And it has to be controversial to draw people’s attention.
  4. Run a contest or lottery with a meaningful prize. For example, if you offer software for a specific industry, it could be an industry specific gadget or book. This works very well, but it will cost some money, and most of the time your site doesn’t have enough visitors, so you need to advertise your event on other sites and it will cost even more money.
  5. You can always send people emails reminding about your great product and how it is a good time to buy it. I’m not talking about blind spam here. You need to build your own mailing list by giving people something good in exchange for their email address. It can be a free version of your product or a white-paper on the topic of their interest. This means that you should plan this in advance and work your way to creating a list of people who is interested in your product. It is therefore more of a marketing strategy than a quick “trick” to increase the sales, which is my topic in this post. So I will end the list here.