5 Business Models for Codecademy

I first met the founders of Codecademy through the Columbia Venture Community. Zach introduced himself during a CVC event at General Assembly, where we exchanged thoughts on startups internships and he told me about his experience at GroupMe. Ryan had been popping up on my radar throughout college, since we shared mutual friends and he was the online lead engineer for the Columbia Daily Spectator. I have much respect for both of them, and this personal connection only made me more excited to hear about their new startup and all the press it has received.

Recently, however, I have become more wary of startups that do show high levels of user engagement without a clear path to monetization. I’ve discussed this topic with a co-worker and here are my thoughts on how Codecademy would be able to monetize their product. 

  1. Freemium: For many other Saas companies, such as DropBox and LinkedIn, the freemium model has proven to work remarkably. With Codecademy’s consumer focus, this model is probably the easiest to implement. Basic Java lessons can remain free with Codecademy charging a small fee for more advanced programming topics. Premium version of Codecademy may also include features such as live chat TA sessions or coding battles between students.
  2. Licensing: If Codecademy is able to build an engaging learning platform for programming, it has infinite potential to license this software to schools and corporations. At my firm, my co-workers and I are obliged to complete quarterly training exercises for regulatory reasons. I can imagine Codecademy serving refresher coding exercises to technology companies to help keep their workforce up-to-date.
  3. Crowdsourcing: While a lot of startups are addressing the pain points of recruiting and hiring developers, Codecademy can’t really address this market because I think they are more about educating than finding talent. However, if there is a way to add a hiring component to the existing educational platform, I see the potential for Codecademy to become the Mechanical Turk of small programming jobs. 
  4. Branded events: There are already official Meetup groups in over 170 regional areas worldwide; people are clearly already excited about the company. I can see Codecademy hosting large-scale events similar to TechCrunch Disrupt that are in-line with its mission of teaching people to program. 
  5. Advertising: While advertising has always been the business model of choice for most web companies, I think Codecademy can get creative with it. For example, instead of just displaying ads across the top, side, or bottom of the site, Codecademy can work with partner brands to offer sponsored lessons. Furthermore, it would be interesting to see how well advertisement would work inside the the lessons themselves, similar to how video games now feature branded billboards/items within the gaming environment.

What do you think? What are some other options?

    A (Technology) Home Invasion

    Best Buy has recently announced that it will be selling several home gadgets that can help homeowners cut their energy consumptions and lower their bills.

    A couple of months ago, I looked at a startup in this space; ThinkEco makes smart modlets that can both track and control energy consumption in the home or office. Their product comes bundles with a wireless USB transmitter and software that generates handy graphs. 

    In its initial marketing strategy, ThinkEco hoped to tackle the corporate customers first. It wanted to focus on the offices in NYC who were most guilty of around-the-clock energy consumption and who had the most to gain from cost savings of scale. Plus, it was an easy sell in terms of boosting PR. ThinkEco also formed partnerships with large energy companies, such as ConEdison and Tendril.

    This approach is markedly different from that of Nest and its thermostat, another product that addresses the same pain point and is also offered at a premium to its peer products. The Nest thermostat launched on 10/24 and has already sold out on their online store. Recently-ordered Nest thermostats will only ship in 2012 due to high demand. 

    It would be easy to credit this success to the impressive background of the Nest founders. Or even to the Apple-like esthetic simplicity of the Nest thermostat over the cutesy branding of the ThinkEco modlet. I like to focus instead, however, on the value proposition the two products are offering. 

    While the ThinkEco modlet is marketed to our rational side (logos*) by emphasizing the cost-savings and eco-friendly nature of the device, the Nest thermostat plays mainly to our emotional side (pathos*). ThinkEco modlet’s first press release is focused on the amount of consumption reduction and the corporate stamp of approval for the product. Jun Shimada, President & CEO of ThinkEco, is quoted on the energy efficiency and cost savings aspect of the modlet. The founder of Nest, Tony Fadell, forgoes the formal press release and instead makes the announcement with a personal blog post. He writes about introducing the Nest thermostat to his friends and how it fits into the day-to-day routine of a typical household. Where ThinkEco has failed to make a connection with the average consumer, Nest has approached the product from a homeowner’s point of view. The difference boils down to this: while ThinkEco makes an interesting argument, Nest has gone a step further to make a compelling one. 

    Both the Nest thermostat and the ThinkEco modlet are available through Best Buy’s Home Energy portal. As an environmentally-conscious person, I’m a huge fan of both products and I’m excited to see their mainstream adoption. It’s about time technology invaded our households to make them more efficient, and with a company named Nest, I can only hope they have a couple more household gadgets in their pipeline. 

    *Apologies for the use of Ancient Greek in this post. You can thank the Columbia Core for that. 

    Apps vs. HTML5

    “Apps are bullshit,” said Jason Baptiste, CEO of Onswipe. They are costly to build. Consumers usually demand several version of it for different mobile OS. They are also a hassle for the user to download and update.

    There’s recently been talk of how HTML5 has the potential to unseat apps in the mobile market. Mozilla’s WebAPI want to replace native apps with HTML5. Walmart, Amazon, and the Financial Times have all built web apps as their main mobile services. HTML5 holds the key to increased revenue and freedom. By cutting out the middle man (in many cases, Apple), developers are able to retain 100% of the revenues and also don’t have to subject themselves to approval.

    However, HTML5 still lags behind in a couple of key areas. For one, there is no native integration with camera, address book, or Bluetooth. Until mobile data speeds standardize to Verizon’s 4G LTE levels, it’s hard to imagine how mobile browsing can become accessible to users on the go. The native app also has a strong home-court advantage – it can run in the background to pre-load content and further engage users with push notifications.

    Despite its strong support for HTML5 from the get-go, even Google is on fence on this one:

    Aren’t they supposed to be the main torchbearers of the HTML5 movement? Yes. But they’ve also been hedging their bet this entire time. That’s exactly why development of both Android and Chrome OS has continued totally separate from one another.

    Chrome OS, an operating system built entirely around HTML5 is still very much in beta mode. Android, an operating system built entirely around native apps is exploding with growth. Which would you back right now?

    I’ve recently discovered Raven.io, a mac browser that allows me to access the website I use the most as web apps. Raven attempts to make the browsing experience more app-like with its “Smart Bar”, while still accessing the same webpages that a regular browser would. While promising, the “Smart Bar” is currently nothing more than a more streamlined navigation tool, much like the navigation buttons in a mobile app.

    Raven is essentially making two broad statements about the future of web browsing. The first is that web users really only use their browsers to access a handful of sites, at most. I think that the average user will probably spend at least 80% of her time on a few specific websites, such as Twitter and Facebook. The second is a statement on user experience. It’s interesting to see a desktop app trying to be more like mobile. With today’s tweens using mobile as their primary platform, it wouldn’t be surprising to see more of these mobile-like services permeate traditional desktop environments.  

    Apps vs. HTML5

    Fire, meet ass (part two)

    I recently connected with a classmate of mine from Columbia, who I didn’t really have the chance to know when I was still a student. In fact, the only time I remember meeting him was when he came to one of my dorm parties, as a friend of a friend, and excused himself to leave early because he came on a bike and needed to get back to his apartment in the heart of Harlem. (I should’ve known he was a BAMF from that alone.)

    For all us non-tech people out there still dreaming the dream. David Xia is a name you might want to jot down. (In fact, you might remember him from such anti-feminist scandals as the leaked Citibank HR memo.) Having majored in theoretical math at Columbia, David told me how he ended up in a somewhat unfulfilling job post-graduation: a small company with an unfortunate big corporation feel.

    After a mere 7 months on the job, David decided that it was time for a change. He quit, found himself a co-founder, and decided to start a tech company that provides smarter travel recommendation. At the time,  neither he nor his co-founder knew how to code.

    And thus began his 6-month odyssey into the world of hacking and building. As I chatted with him about his experience, he kept using the same word to describe the process: “hard.” He talked about his weekly pilgrimage to a friend of a friend’s home to learn coding, one bit at a time. He described how he had scrimped and saved to live on $1400 a month in New York, an amount that most people pay for rent alone. He also talked about being in the trenches, traveling to Vancouver for a travel bloggers’ conference to promote his product only to get caught in the 2011 hockey riots. It’s really hard to get people to use your product, he explained.

    Though it’s not what we imagine when we think “tech entrepreneur”, what David experienced makes sense. There is a significant reporting bias in today’s tech startup world – you often only hear about the homeruns and never about the guy who bootstrapped for 6 months with his cofounder and finally decided that he needed to get a paying job. David did have to get a job after a while, but he didn’t have to settle for going back to his old one. He now works as a junior developer at SkillShare. (They’re hiring!) And yes, he still rides his bike everywhere.

    When he talks about the risks he took in quitting his 9-to-5, David humbly brushes them off. At this stage of our lives, he says, we have nothing to lose. In a lot of ways, he’s right. David refers to the past 6 months one of the most intense learning experiences he’s ever had – he spent 80 hours a week (banking hours, hollah) learning to code and many more hours learning how to succeed as an entrepreneur.

    He is, perhaps, the best representation I know of someone lighting a fire under his ass. I forced my co-founder to learn all the front end stuff, he says with a grin. He’s been thanking me ever since. If you’re lucky enough, he might light one under yours, too. 

    Fighting Apple with Fire

    When a consumer picks up a tablet, it’s the experience that matters – What can this device do? How smoothly does it run? Can I take it outdoors with me without worrying about a power source or sun glare?

    For this reason, Amazon has been very smart in how it chose to position the Kindle Fire: as a content delivery platform instead of a piece of hardware. It’s the first tablet released without emphasis on the processor speed, amount of ram, or Bluetooth capabilities. While specs are often a hot topic of debate between nerds and geeks, the mainstream consumer won’t know the difference between a Snapdragon or a Hummingbird processor. The focus at the Fire’s release was instead on what a user could do with the device and the accessibility to content. With their massive eBook library, the newly released video streaming services with Amazon prime, and a growing Apps market, Amazon has created a seamless integration of content and delivery platform. It’s no small feat for a company that began selling paperbacks online in 1995.

    With the Kindle Fire, Amazon has entered the tablet market in the same way Apple revolutionized the MP3 players space with its first iPod. The Kindle Fire also has the same potential to move tablets further past the early adopters stage, just as how the iPod served as a catalyst that mainstreamed the MP3 device. Despite being so late-to-market, Amazon makes up for lost time by paring the product down to its core features and giving users a unified experience across all its products. (Amazon’s Press Conference style was also eerily similar to Apple’s. Thanks to Jobs’ flair, no tech company can go back to less-than-climactic product releases ever again.)

    With the tablet market exploding (303.8% y-o-y growth in 2Q11) and Apple’s stronghold of a market share (currently at 68.3%), this space is ripe for some disruption. The Fire will help Android gain marketshare, but it’ll be hard to unseat the iPad as the premium device in this category. The Fire is also aimed at a different consumer segment – the more casual tablet user without a large wallet. With the 7-inch screen size, the Fire has a potential advantage of the iPad in terms of ultra portability. And at $199, the price is oh-so-right. I’m definitely rooting for the Amazon Fire. It’ll be nice to see someone best Apple at its own game, for once.

    New York Tech Meetup: July 2011 edition

    Tonight was my first New York Tech Meetup – a virtual institution in the NYC tech scene since its humble beginning in 2004 (!! Did internet even exist back then?). There is a cap of about 775 tickets that can be sold and the NYTM’s growing popularity has even created a secondary market for these high-demand spots. 

    The meetup, as I understand, serves to mainly feature demos from technology startups or smaller-scale hacks. It also encourages audience members to connect with each other during the event and at the after-party. (Though I don’t think it’s much of an after-party without an open bar.)

    First to demo was one of Silicon Alley’s newest darlings, Sonar. It was actually the first time I watched their demo (despite visiting their office during the Walkabout) and I was impressed by the app’s simplicity and powerful functionality. Audiences liked it, too. Someone asked Brett whether he was concerned that foursquare or Facebook could just easily duplicate his product. It seems to me that these social media giants are definitely paying attention – perhaps Sonar could be a good acquisition? 

    Watchlr was the first demo of the night to get a spontaneous reaction from the crowds. Instapaper for videos (as someone obnoxiously put it), Watchlr allows you to save videos for later viewing as well as resume a video across platforms at the exact same spot you stopped watching earlier…! This is definitely a product that I could see myself using, as I am often in the situation of receiving video links from friends at the most inopportune time to watch them. The interface is pretty slick, and if they integrated video sharing and “less savoury” websites, they may just get some traction. 

    CityPockets is another one of those Groupon spin-offs, but with a slight twist. They called themselves the Mint.com hybrid for your daily group deals, with a secondary marketplace for these deal vouchers. While the idea is quite solid, it was disappointing how many holes there were in their product. For one, the presenter couldn’t give a straight answer on whether companies like Groupon actually allowed resale in their policy. When confronted with the possibility of fraud (someone selling a voucher multiple times to different customers), their only reply was that their marketplace operated on a “honour system”. 

    Last, but not least, I (and the rest of the auditorium) was seriously wowed by the big guns at BioDigitalHuman. This product featured a 3-D rendition of the human body, with incredible detail and functionality. Oh, and probably a shit-ton of code. Seriously awesome. 

    Other demos included:

    • LocalBonus – a website that allowed your registered credit card to act as a loyalty card for local businesses. Personally, I am already drowning in all kinds of loyalty programs and couldn’t see myself signing for another unless the execution was markedly better and provided me with better rewards. 
    • Viva La Playlist – a website a la turntable.fm, allowing users to listen to the same stream together. Instead of specific DJs, listeners get to vote on the next song in the stream. By using embedded Youtube videos to source their audio, it may cleverly avoiding a lot of legal red-tape. 
    • SnapGoods and/or Knod.es – this presentation was a two-fer, and as a result, I had no idea what was going on. (In all seriousness, Knod.es looked like a seriously useful product, but I was just not feeling the presentation.)
    • Taap.it – mobile, local marketplace a la Craigslist. Users can snap a photo of their item for sale and list it from their phone.
    • Skillslate – a pivoted startup that now helps people find skilled people to do specific tasks. Demo was killer – the presenter showed us how he put out a search for b-boys to come perform at NYTM and then brought said b-boys on stage to actually perform. 

    While the audience was probably only a quarter technologist, there was definitely an anti-business vibe. People were there to see cool products and were apparently also schooled in the new ideology that a business model isn’t necessary to build a successful company. I can totally buy into that spirit of things, but at a certain point, I find it very discouraging that business savvy and knowledge can be met with this kind of hostility. When one woman asked “What are your financial models like?”, she was booed by the entire audience. For a full 15 seconds. 

    It was all in good fun, I’m sure, but it does also point to a kind of unrealistic expectation that as long as you follow this line of thinking (user growth without revenue streams), you’ll eventually make it as big as Facebook, or Twitter, or Tumblr. The thing that often gets lost is that there are hard-working people dedicating hundreds of hours per week to these startups and their product. If the idea can never be eventually monetized, how can it be sustained? 

    Whartonite Seeks Code Monkey: Wait, you mean a social startup called Facebook already exists?

    whartoniteseekscodemonkey:

    I hope this e-mail finds you well. I’m pulling together a startup, and I’m looking for some support on the technical side. The idea behind the startup is to strengthen and broaden peoples’ networks by targeting the real world social space. I’m an undergraduate at Wharton, and my technical…

    This parody (I hope!) tumblr perfectly showcases what developers think of MBA grads. Unfortunate, but oh-so-true. (Note to self: learn to code before going to B-school.)

    Whartonite Seeks Code Monkey: Wait, you mean a social startup called Facebook already exists?