SXSW: The Figures Behind The Top Web Apps
Sean Ammirati of mSpoke is at SXSW in Austin, TX (USA). He is reporting for Read/WriteWeb throughout the event.
On Saturday we covered an SXSW panel
called Web App
Autopsy, which examined four live web applications (RegOnline, FeedBurner, Wufoo, and Blinksale) for things like conversion rates and
revenue per customer. Today there was a similar seminar entitled "Barenaked
App: The Figures Behind the Top Web Apps", which looked at 5 web applications and
what it took to build and release those products. This time the focus was very much
around the financial costs to build and deploy these web applications (as opposed
to elements like lines of code or revenue). It also touched on what it costs
in monthly maintenance. Here is an overview of the data they shared:
- DropSend: Build $48,012 / Monthly $3,625
- Freshbooks Build $20,000 / Monthly $46,000
- Maya's Mom: Build $70,000 / Monthly $30,000
- Mobissimo: Build $60,000 / Monthly $150,000
- Wesabe: Build $200,000 / Monthly: $3,000
One other interesting thing shared was that FreshBooks cost $430k total to build and maintain, until they reached break even ($140k of those expenses went to marketing).
The entire set of slides are supposed to be online soon at www.carsonified.com/sxsw.pdf (as of writing they aren't online yet). When that PDF is published, it is well worth you downloading it - because it breaks the summary costs down by design, development, infrastructure and other categories. [Update: the slides are available now].
Photo: Ryan Carsen
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This is really good stuff thanks for publishing the info!
Interested, although I'm a bit confused...
But then you go on to say that Freshbooks cost $430K total to build and maintain (less $140K for marketing) until break even. So is that $20K to build or something quite a bit higher...I suspect the latter.
Also, I'm interested to know what do the build and run costs generally factor in? Founders time? Marketing?
Cheers
Nice writeup Sean - click my name for mine.
I have some issues (as I have written to Ryan before) with the numbers. As a former accountant, I look at things like equity as a cost, you can't just say zero. In addition, time spent by the founders are also costs.
I also question the mobissimo numbers just based on their profit numbers and backing that into a total revenue would be ultra high.
I am working on a post about this from an accountant perspective for sometime next week (I hope to write it on the plane).
Anyway - if you are still here on Tuesday, maybe we can meetup - would be cool... ping me if you are around.
Can someone break down what the build money is actually spent on? For the life of me I can't figure out how someone needs/can spend that kind of money. Is it all developer and graphic designers? A crap load of hardware? What is it?
Very interesting bit of data, would be even more useful to know how much revenue they generate so that figures about maintenance make more sense :-)
The slides are now online. If you look at them, you'll see exactly how the costs break out.
Allen, let's connect tomorrow. My cell is 412.401.0037.
@Allen Stern
I agree with you about the $0 cost looking funny for the Design & Development costs on FreshBooks. It's great that these guys were able to build it themselves, but like they say, time is money. If they spent 2-3 months building it (maybe longer?), that's 2-3 months they could have spent making a salary, earning money doing consulting work, etc.
NB: feel free to point us to a successful app you have built that cost less. Example varies widely, but I don't know many (commercial) applications that reached a level of commercial success that didn't require an initial cash and time injection
I also don't think these numbers are correct, you must account for founders time, any loans and all costs. To me 'development cost' means nothing, total cost (including those line items mentioned) is what matters. Founders should stop cheapening themselves and what their time is worth..
Mike from FreshBooks here.
Regarding the numbers: we (the panellists) were asked how much we spent to release/build. The answer for FreshBooks is $20 K. Joe and I (the founders) worked in our spare time to develop it and received no $'s. The $20 K is legal fees, some miscellaneous expenses, hosting and a couple months of our first hire Levi. That's it.
@Charles: Once we released (for $20 K) we continued to invest in the business (i.e. Levi's salary, more hosting, marketing, etc), so YES...it cost *more* to reach cash flow positive, but launching and reaching that milestone are two different things and you have to keep spending to get there - that's how businesses work.
I guess all I can say is that the numbers represent actual dollars that went out the door - no account has been made for sweat equity in the numbers...but when you talk black and white (and that is what numbers are), the federal government nor your accountant really give a care for sweat equity so they are pretty much irrelevant.
Mobissimo must have $2.25 million sales. $150k per month costs is $1.8 million, plus £450k profit.
Of course it assumes a full years operating with these figures, but whichever way you cut it - that's great going!!
fantastic article!
Great read and great slides!
Matt...re "Mobissimo must have $2.25 million sales. $150k per month costs is $1.8 million, plus £450k profit." You need to think things though a little further I think...they must have MARGINS of $2.25 million...if they have a 20% margin on their sales (and in travel their is a good bet though don't even make that) then they are probably doing over $10 million in sales.
BTW - Sean, I could not find your email address to contact you directly, but as a follow up to the panel I wrote this:
http://www.freshbooks.com/blog/2007/03/16/advice-you-may-just-have-something-there/
I'm guessing anyone building a web app on the side will be interested in it.
Interesting article, I would be interested to know if the founders just kicked in the initial dev. money or was it raised (vc's, private investors, friends and family)? Or failing that question when was VC/investors contacted to help with getting the idea off the ground?
This would be interesting to find out as many people say do it all yourself, and when you start to investigate you can see alot of startups have VC cash from the very moment they thought of the idea (not including patent type ideas).