A couple of people asked me afterwards whether anything I tried had worked. Yes! I wouldn’t have survived long as a microISV otherwise. But I didn’t really want to dwell on what had worked for me because it might not be relevant for different products with different price points in different markets. Also that isn’t the sort of information I want to give to my competitors.

Things were running a bit late due to problems with the projector, so I didn’t have time for the audience participation at the end. Projector problems are really not what you need when you are just about to do a talk to a room full of people! Many thanks to Alwin and Sytske of Collectorz for doing the video and to Dave and Aaron of Software Promotions for helping to sort out the unruly projector.

Did I miss any?

Software developers seem to be herd animals. They like to stay very close to each other. As a result, the marketplace ends up riddled with hundreds of ToDo lists while other segments are deserted, despite high financial stakes. During my routine browsing of software business forums, I have noticed that the most common answer to Why the heck are you producing yet another ToDo list? is the desperately annoying Because I can’t find a better idea.

This is desperately annoying because the world is full (saturated even) with problems so painful that people or companies would be very willing to pay to relieve the pain, even if only a little. A tiny fraction of these problems are addressed by the software industry (such as the need for ToDo lists), but most are just lacking any decent solution.

Hence, I detail below 3 low-competition software niches in retail. Indeed, after half a decade of running sales forecasting software company Lokad, I believe, despite the potential survivor bias, that I have acquired insights on a few B2B markets close to my own. Firstly I will address a few inevitable questions:

Q: If you have uncovered such profitable niches, why don’t you take over them yourself?
A: Mostly because running a growing business already takes about 100% of my management bandwidth.

Q: If these niches have little competition, entry barriers must be high?
A: Herding problems aside, I believe not.

Q: Now these niches have been disclosed, they will be swarmed over by competitors, right?
A: Odds are extremely low on that one. The herd instinct is just too strong.

Q. Do I have to pay you if I use one of your ideas?
A. No, I am releasing this into the public domain. I expect no payment if you get rich (unless you want to!) and accept no liability if you fail miserably. Execution is everything.  And don’t trust a random stranger on the Internet – do your own market research.

Before digging into the specifics of those niches, here are a couple of signs that I have noticed to be indicators of desperate lack of competition:

• No one bothers about doing even basic SEO.
• No prices on display.
• No one offers self-signup – you have to go through a sales rep.
• Little in the way of online documentation or screenshots are available.

However, lack of competition does not mean lack of competitors. It’s just not the sort of competition that keeps you up at night. Through private one-to-one discussions with clients of those solutions, here is the typical feedback I get:

• Licenses are hideously expensive.
• Setup takes months.
• Upgrade takes months (and is hideously expensive).
• Every single feature feels half-baked.

By way of anecdotal evidence – during a manufacturer integration with our forecasting technology a few months ago at Lokad, we discovered that the client had been charged $2,000 by its primary software provider in order to activate Remote Desktop on the Windows Server where the software was installed. Apparently, this was well within the norm of their usual fees for the inventory management system in place.

Granted, just being cheaper is usually not a good place to be in the market. Yet, when a competitor’s software is designed in such a way that it takes a small army of consultants to get it up and running, they can’t just lower their license fees to match yours – assuming that your design is not half-baked too. The competition would have to redesign their solution from scratch, and give up on their consultingware revenues. So you are in a great position to drive competition crazy.

With a market managing over two-thirds of the US gross domestic product, one would expected retail be saturated by fantastic software products. It turns out this is not the case. Not by a long shot – except eCommerce (e.g. online shopping carts) which attracts a zillion developers for no good reason.

Some salient aspects of the retail software market:

1. Most retailers are already equipped in basic stuff such as point-of-sale, inventory management and order management systems. So you don’t have to deliver that yourself. On the contrary, you should rely on the assumption that such software is already in place.
2. As far the Lokad experience goes with its online sales forecasting service, retailers are not unwilling to disclose their data to a 3rd party over the Internet. It takes trust and trust takes time. Interestingly enough, at Lokad we do sign NDAs, but rather infrequently. We are not unwilling, but most retailers (even top 100 worldwide ones) simply don’t even bother.
3. Retailers have a LOT of data, and yet unlike banks, they have little talented manpower to deal with it. Many retail businesses are highly profitable though and could afford to pay for this kind of manpower, but as far I can tell, it’s just not part of the usual Western retail culture. Talents go to management, not to the trenches.

Niche 1: EOQ (Economic Order Quantity) calculator

Retailers know they need to keep their stocks as low as possible, while preserving their service levels (aka rate of non stock-outs), see this safety stock tutorial for more details. If the marginal ordering cost for replenishment was zero, then retailers would produce myriads of incremental replenishment orders, precisely matching their own sales. This is not the case. One century ago, F. W. Harris introduced the economic order quantity (EOQ) which represents the optimal quantity to be ordered at once by the retailer, when friction factors such as the shipping cost are taken into account. Obviously, the Wilson Formula (see Wikipedia for details) is an extremely early attempt at addressing the question. It’s not too hard to see that many factors are not accounted for, such as non-flat shipping costs, volume discounts, obsolescence risks …etc.

Picking the right quantity to order is obviously a fundamental question for each retailer performing an inventory replenishment operation. Yet, AFAIK, there is no satisfying solution available on the market. ERP systems just graciously let the retailer manually enter the EOQ along with other product settings. Naturally, this process is extremely tedious, firstly because of the sheer number of products, secondly because whenever a supply parameter is changing, the retailer has to go through all the relevant products all over again.

The EOQ calculator would typically come as multi-tenant web app. Main features being:

• Product and supplier data import from any remotely reachable SQL database[1].
• Web UI for entering / editing EOQ settings.
• EOQ calculation engine.
• Optional EOQ export back to the ERP.

Pricing guestimate: Charge by the number of products rather than by the number of users. I would suggest to start around $50/month for small shops and go up to $10k/month for large retail networks.

Gut feeling: EOQ seemingly involves a lot of expert knowledge (my take: acquiring this knowledge is a matter of months, not years). So there is an opportunity to position yourself as an expert here, which is a good place to be as it facilitates inbound marketing and PR with specialized press. Also, EOQ can be narrowed down to sub-verticals in retail (e.g. textiles) in case competition grows stronger.

Niche 2: Supplier scorecard manager

For a retailer, there are about 3 qualities that define a good supplier: lowest prices, shortest shipment delays, best availability levels (aka no items out-of-stock delaying the shipments). Better, sometime exclusive, suppliers give a strong competitive edge to a retailer. Setting aside payment terms and complicated discounts, comparing supplier prices is simple, yet, this is only the tip of the iceberg. If the cheapest supplier doesn’t deliver half of the time, “savings” will turn into very expensive lost sales. As far I can observe, beyond pricing, assessing quality of the suppliers is hard, and most retailers suffer an ongoing struggle with this issue.

An idea that frequently comes to the mind of retailers is to establish contracts with suppliers that involve financial penalties if delays or availability levels are not enforced. In practice, the idea is often impractical. Firstly, you need to be Walmart-strong to inflict any punitive damage on your suppliers without simply losing them. Secondly, shipping delays and availabilities needs to be accurately monitored, which is typically not the case.

A much better alternative, yet infrequently implemented outside the large retail networks, consists of establishing a supplier scorecard based on the precise measuring of both lead times (i.e. the duration between the initial order and the final delivery) and of the item availability. The scorecard is a synthetic, typically 1-page, document refreshed every week or every month that provides the overall performance of each supplier. The scorecard includes a synthetic score like A (10% best performing suppliers), B and C (10% worst performing suppliers). Scorecards are shared with the suppliers themselves.

Instead of punishing bad suppliers, the scorecard helps them in realizing there is a problem in the first place. Then, if the situation doesn’t improve after a couple of months, it helps the retailer itself to realize the need for switching to another supplier…

The scorecard manager web app would feature:

• Import of both purchase orders and delivery receipts (this might be 2 distinct systems). [2]
• Consolidation of per-supplier lead time and availability statistics.
• One-page scorecard reports with 3rd party access offered to the suppliers.

Pricing guestimate: Charge based on the number of suppliers and the numbers of orders to be processed. Again, the number of users having access to the system might not be a reliable indicator. Starting at $50/month for small shops up to $10k/month for large retail networks.

Gut feeling: By positioning your company as intermediate between retailers and their suppliers, you benefit from a built-in viral marketing effect, which is rather unusual in B2B. On the other hand, there isn’t that much expert knowledge (real or assumed) in the software itself.

Niche 3: Dead simple sales analytics

Retail is a fast-paced business, and a retailer needs to keep a really close eye on its sales figures in order to stay clear of bankruptcy. Globally, the software market is swarming with hundreds of sales analytics tools, most of them being distant competitors of Business Objects acquired by SAP years ago. However, the business model of most retailers is extremely simple and straightforward, making all those Business Intelligence tools vast overkill for small and medium retail networks.

Concepts that matter in retail are: sales per product, product categories and points of sale. That’s about it. Hence, all it should take to have a powerful sales visualization tool setup for a retailer should be access to the 2 or 3 SQL tables of the ERP defining products and transactions; and the rest being hard-coded defaults.

Google Analytics would be an inspiring model. Indeed, Google does not offer to webmasters any flexibility whatsoever in the way the web traffic is reported; but in exchange, setting-up Google Analytics requires no more than merely cutting-and-pasting a block of JavaScript into your web page footer.

Naturally it would be a web app, with the main features being:

• Product and sales data import from any remotely reachable SQL database.[2]
• Aggregate sales per day/week/month.
• Aggregate per product/product category/point-of-sales.
• A Web UI ala Google Analytics, with a single time-series graph per page.

Pricing guestimate: Regular per-usage fee, a la Salesforce.com. Starting at $5/user/month basic features to $100/user/month for more fancy stuff.

Gut feeling: probably the weakest of the 3 niches, precisely because it has too much potential and is therefore doomed to attract significant attention later on. Also, achieving a wow effect on first contact with the product will probably be critical to turn prospects into clients.

Market entry points

Worldwide, there are plenty of competitors already for these niches. Yet, again, this does not mean much. Firstly because retail is so huge, secondly because it’s a heavily fragmented market anyway. First, there are big guys like SAP, JDA or RedPrairie, typically way too expensive for anything but large retail networks. Second, there are hundreds of mid-market ERPs, typically with a strong national (or even regional) focus. However, those ERPs don’t delve into fine-grained specifics of retail, as they are too busy already dealing with a myriad of feature requests for their +20 modules (accounting, billing, HR, payments, shipping … etc). Hence, there is a lot of space for razor-sharp web apps that focus on one, and only one, aspect of the retail business. Basically single-minded, uncompromising obsession with one thing, leaving aside all other stuff to either ERPs or other web apps.

In order to enter the market, the good news is that mid-size retailers are pretty much everywhere. So you can just use a tiny bit of networking to get in touch with a couple of neighbouring businesses, even if you don’t have that much of a network in the first place. Then, being razor-sharp in a market where very little online content is available, offers you a cheap opportunity at doing some basic SEO based on the very specific questions your software is addressing.

Q: I am interested, I have questions, can I ask you those questions?
A: Naturally, my rate is 200€/h (no just kidding). Yes, email me.

[1] Don’t even bother about providing a super-complicated setup wizard. Just offer a $2k to $5k setup package that includes the ad-hoc handful of SQL lines to match the existing data of the retailer. We are already using this approach at Lokad with Salescast. Alternatively, we also offer an intermediate SQL schema, if the retailer is willing to deal with the data formatting on its own.

[2] Again, I suggest an approach similar to the one of Salescast by Lokad: don’t even try to robotize data import, just design the software in such a way that adding a custom adapter is cheap.

Joannes Vermorel is the founder of Lokad, company motto “You send data, we return forecasts”. Lokad won the first Windows Azure award from Microsoft in 2010, out of 3000 companies applying worldwide. He has a personal blog that mostly deals with cloud computing matters.

It isn’t surprising that microISVs fixate on features. MicroISVs tend to come from a programming background and learn marketing  on the job (I have yet to meet a microISV who started off in marketing and taught themself programming). Features and coding are what we like to do best and it feels like ‘real work’. But all too often the warm embrace of an IDE is just an excuse to stay in our comfort zone. Of course, features are important. No features = no product. But, if you have got low traffic to your website and/or you are doing a lousy job of communicating with people that arrive at your site, then adding more features really isn’t going to help much. If you are in a hole, stop digging. Successful marketing is about being different from your competitors. You can even make a virtue of your lack of features. If you are competing against more feature-rich competitors, then emphasize the simplicity and ease-of-use of your product instead. It certainly seems to work for 37Signals.

Marketing can seem like a very alien discipline for someone from a programming background. But you can learn it like any other skill. There is loads of great information out there, for example Eric Sink’s marketing for geeks. Also, some elements of online marketing are actually quite technical with plenty of opportunites for number crunching. Analytics, A/B testing and Adwords will give you more data than you know what to do with. This can give programmers a considerable advantage over people from a more traditional marketing background, many of whom don’t seem to be able to handle anything more complicated than a 2×2 matrix. You don’t have to be a marketing genius, you just need to be better than your competitors (in the same way that you don’t need to be able to run faster than a lion to survive a lion attack, you just need to be able to run faster than the next guy). Given that your competitors are likely to be other programmers (who are probably also not doing enough marketing) or people from a marketing background (who don’t really understand software and are probably more interested in long lunches) that may not be as hard as you think.

After launching our new test management software TestRail early last year, we recently contacted Andy to help us increase the visibility of our product. Based on customer feedback and reviews, we knew that many software development teams prefer TestRail over legacy solutions that are difficult to use. But we also knew that most teams weren’t aware of our new product, so we wanted to improve this situation.

The first thing Andy did was to try and test the application as a normal user would use it. While he walked through the application and briefly tested its major features, he recorded a video of this experience and narrated the video with comments and suggestions. Seeing how a first-time user uses your application can be very useful and it definitely showed us a few things that we could improve.

Learning more about the application was also important for the next step: Andy interviewed us to learn more about our goals, marketing methods and many other things. He then prepared a detailed and thorough report with many suggestions, comments and recommendations. Implementing all those suggestions will take time but we are already seeing first positive results of the short-term improvements that we’ve implemented. If you want to bring your product (or product marketing) to the next level, Andy’s consulting service is highly recommended.

Dennis Gurock, www.gurock.com

Although only launched last year, TestRail is already a polished product with an impressive customer list. If you have a suite of test cases you need to manage, I suggest you take a look.

After launching our new test management software TestRail early last
year, we recently contacted Andy to help us increase the visibility of
our product. Based on customer feedback and reviews, we knew that many
software development teams prefer TestRail over legacy solutions that
are difficult to use. But we also knew that most teams weren’t aware of
our new product, so we wanted to improve this situation.

The first thing Andy did was to try and test the application as a normal
user would use it. While he walked through the application and briefly
tested its major features, he recorded a video of this experience and
narrated the video with comments and suggestions. Seeing how a
first-time user uses your application can be very useful and it
definitely showed us a few things that we could improve.

Learning more about the application was also important for the next
step: Andy interviewed us to learn more about our goals, marketing
methods and many other things. He then prepared a detailed and thorough
report with many suggestions, comments and recommendations. Implementing
all those suggestions will take time but we are already seeing first
positive results of the short-term improvements that we’ve implemented.

If you want to bring your product (or product marketing) to the next
level, Andy’s consulting service is highly recommended.

The good news

LinkedIn ads can be laser targeted. You can specify who you want to see your ad based on their job function, company, gender, age group, country and (best of all) the LinkedIn groups they belong to. I targeted 10,102 LinkedIn members who live in wealthy English speaking countries, belong to various LinkedIn groups related to event planning and have appropriate job titles. The campaign was quite painless to set up. It probably took me less than 10 minutes in total and I started getting impressions within an hour or so.

The bad news

The minimum allowed CPC (cost per click) was $2. Ouch. I know from extensive experience with Google Adwords that there is no way I can get a return on that.

The minimum allow CPM (cost per thousand impressions) was $3. If the CTR (click through rate) is around 1% (about what you might expect from Google search ads) this is $0.30 per click. Possibly profitable. If the CTR is around 0.1% (about what you might expect from Facebook ads) this is $3 per click. No better than the CPC bidding. Given that LinkedIn is more similar to Facebook than Google search, I expected the latter. I decided to spend a few dollars to find out. The results are below (click to enlarge):

So, with an average 0.17% CTR, I ended up spending $1.76 per click. Given my average transaction value and a realistic conversion rate I know that I can’t make any return on this. Also the CTR is likely to drop the more often people see the ad. So I stopped the experiment after less than 24 hours, before I wasted any more time or money. As far as I can tell (based on my own cookie tracking - LinkedIn ads don’t have their own conversion tracking) I didn’t make any sales. But that is hardly surprising given the small number of clicks.

Summary

Obviously $19.38 is a tiny amount to spend, but I think it told me what I needed to know about LinkedIn ads. Unless they reduce their CPC or CPM bid prices by an order of magnitude there is no way I can make a return. Of course, if you are selling a product where the average lifetime value of a customer is hundreds or thousands of dollars, the numbers might work out quite differently for you.

Related posts:

Advertising your software on Facebook (=Fail)

Even if you have done something radically new, interesting and different in one of these markets, how are you ever going to get noticed amongst thousands of more established competitors? Wouldn’t it be better to find a market that is currently under-served by software? It may be less fashionable than writing software for other techies, but it will probably contribute more to the sum of human happiness and be a lot more profitable.

There must be thousands of niches where there is a real need for software, but limited competition. You just need to open your eyes to the bigger world around you. It may mean having to learn about an unfamiliar domain. But it is generally much easier for a software developer to learn some domain knowledge about, say, butterfly collecting, than it is for the average butterfly collector to learn to create a software product. Next time you are talking to a non-techie about their job or hobbies, just ask them “Do you use software for that?” and “Is it any good?”. The ideal answers you are looking for are “Yes” (if there are existing software packages, there is probably a market) and “No” (maybe you can do better).

Software developers are usually so busy writing software for other techies, that they often forget there is a bigger world out there. Terrell Miller has a successful herd management software product for cattle ranchers. He generously agreed to share his experiences on what it has been like building a software business in a non-techie niche market.

Can you tell us a bit about CattleMax?

CattleMax is herd management software designed specifically for beef (meat) cattle, and helps ranchers keep track of their cattle records including births, purchases, sales, breeding history, measurements, lineage, and more. Having the records in one location enables producers to stay organized and helps them make better decisions – which in turn helps them be more efficient and profitable in their operation.

What was your background before CattleMax?

My wife Penny and I met at Texas A&M University while we were both in Undergraduate programs. My degree in Information Systems in the College of Business and family member’s involvement in cattle, along with Penny’s degree in Agricultural Leadership and years of showing cattle, proved to be a great compliment for us to start a business where we could work together.

How long have you been working on CattleMax?

I started working on the first version of CattleMax, which started out as a custom application for a local ranch, in July 1999 right after I graduated and have worked for Cattlesoft ever since. Penny worked at the local university on a full and then part time basis for 18 months before joining the business on a full-time basis.

What technologies and languages do you use to develop CattleMax?

CattleMax is developed in Microsoft Access 2007. Access has been a key ingredient to our desktop software’s success. A lot of developers don’t give Access the credit it deserves as a powerful and rapid development tool. We have done extensive customizations to our interface to differentiate from the Access default templates and many customers don’t realize we are even using Access.

If you were starting CattleMax from scratch today would you go for a web based solution? Or would you stick with a desktop solution?

Why did you choose this market? How confident were you that it was a commercially viable market?

You could say the market chose us. Initially, we wanted to create a side project that involved both of our interests. Being students at Texas A&M helped open doors to talk with professors and experts about our product and ideas. Through these talks, we were introduced to a nearby ranch who needed an easy-to-use cattle record keeping system. They became our first customer and continue to use our software today.

How long did it take you you to get CattleMax to v1.0?

It took about 9 months to get CattleMax marketable and stable. Our first public release date was at a local trade show where we received great response. Being a student, we didn’t really have any income to replace – it was the ideal time for us to have started Cattlesoft and the software. We had little to lose and the rest of our life to recover from any business or financial mistakes made.

How technically proficient are your customers? Can you reach them with online marketing?

Our average customer is in the 45 – 65 age range. Over the years, cattle ranchers have become much more knowledgeable with technology. Our marketing is primarily online (PPC, SEO, direct website advertising) along with some print advertising.

The CattleMax user interface looks very slick and intuitive. Do you do any usability testing? Did you find the switch to a ribbon bar difficult for you or your customers?

In the beginning, I would go to a customer’s ranch and watch them use the software. By listening and watching how they interacted with the software, I was able to identify areas of confusion and see ways that we could make processes and areas easier to work with.

The ribbon was mandatory when we switched to Access 2007. While I was initially apprehensive about the change, I now see that the ribbon has made CattleMax easier to use, since it allows priority of certain menu items/common areas by giving them larger icons and visibility.

I see you have a Facebook widget on your home page. Have you found Facebook to be a useful marketing tool?

We use Facebook to post upcoming events, interesting articles and ask our customers for their feedback, plus it’s another way for customers to ask us questions. While advertising on Facebook allows for laser targeting based on interests, our in-house email list is larger than the number of ranchers on Facebook according to their PPC platform. Therefore most of our communications efforts are through our email newsletter and Cattle Management blog.

How did you choose the price of the product?

In the beginning, we chose prices that were comparable to other cattle software programs. We have two editions of our software, one for the commercial/beef producer and another for the purebred/seedstock producer. Each of these editions is available in a Small Herd (50 cow limit) and Standard (no record limit). We chose two editions so that it would be easy for a rancher to confidently choose the edition right for their herd. The two herd size options are so we can offer a solution to small herd producers while providing additional value for larger herds that may require additional support. See Camels and Rubber Duckies.

You have a generous 60-day money back guarantee. Do you have to give many refunds?

We may have one customer, at most, per year return the software because of dissatisfaction. We may have 5 returns a year from people who bought without downloading our trial and wanted a refund – a few of those reasons are receiving it as a gift and not wanting it, software not working on their computer (Windows 95 anyone?), or lacking a key feature. I highly recommend a satisfaction guarantee as it does help customers buy with confidence, knowing that you will stand by your product. No software company wants a dissatisfied customer who feels you “took their money.”

Do you charge for upgrades? Is this a significant source of income?

Our upgrades have been on about a 2-3 year schedule, and current customers can purchase them at half the price of the full version. While upgrade purchases are a double-digit percent of our business, we focus more on new sales. One of the challenges of making a good product is it takes an even better product for customers to understand the value in upgrading.

Do you outsource much work?

We work frequently with independent contractors and freelancers. While we’ve had 6 or more full and part-time employees over the years, I find employee management and “keeping people busy” to be too distracting from working on the big picture. Having people working from their own locations gives us more flexibility, plus we are not limited to just our physical location/city for finding experienced workers.

Do you have any products besides CattleMax?

We adapted CattleMax into LonghornMax, a software for Texas Longhorn cattle that enables breeders to record horn measurements in addition. LonghornMax primarily arose from our connections with the Texas Longhorn Breeders Association where we were previously their official software program. We also raise Texas Longhorn cattle on our ranch near College Station, which is about 90 miles west of Houston. Another spinoff is EquineMax, a software program for horse owners to keep track of their horse records.

Stepping beyond software in 2010, we launched CattleTags.com which is a website for purchasing cattle ear tags. In 2011 we launched LivestockSupplies.com which includes additional equipment and supplies for the ranch. Selling livestock supplies has proven to be a nice complement to our software as it helps us offer additional services and value to customers by offering them convenience and variety of selections, without them even needing to leave the ranch!

Would you recommend others to start a business straight out of college? Or should they work for other people first to gain experience?

Terrell and “Dude”, an 80 inch (200cm) tip-to-tip 2,000 pound (900kg) Texas Longhorn steer.

No ad is permitted to contain or link, whether directly or indirectly, to a site that contains software downloads, freeware, or shareware.

It says in their guidelines that downloadable software that does naughty things such as “sneaks onto a user’s system and performs activities hidden to the user” is not allowed, which is fair enough (see section 14 of their ad guidelines for the details).

Woohoo! As part of my ongoing project to try every legitimate form of promotion known to man, I can try advertising my seating planner software to, for example:

I ran 5 different ads over a couple of weeks. For example:

Trying to fit an attention grabbing and informative ad into the very limited strapline and image size was challenging. But I didn’t spend too long agonizing over the ‘creative’ (image and text), as this was just a feasibility study. The biggest problem was the minimum bid prices. Facebook was recommending I bid at least £0.40 per click. Given that the majority of my customers buy a single licence for £19.95 and typical conversion rates for clicks are around 1%, I would be likely to lose money if I bid £0.20 or more (especially when you consider ecommerce fees and support). I bid £0.10, but got no impressions at all. I bid £0.20 as an experiment and got a reasonable number of impressions. As soon as I dropped the bid to £0.15 the impressions slowed to a trickle.

Here are the stats from my experiments, as reported by Facebook:

Any of you who are used to Google Adwords might be surprised how low the CTR is. But apparently this is quite a reasonable CTR for Facebook. This isn’t too surprising when you consider that people are on Facebook to socialise, rather than to search for stuff.

Of course, the most important metric is the profit. So how many licences did I sell? According to my own cookie tracking: zero. Zilch, nada, nothing, not one. Cookie tracking isn’t 100% reliable, but it seems that a 1% conversion rate might be highly optimistic for a facebook ad. Advertising a £19.95 product on Facebook to people who might be planning to get married obviously wasn’t going to be profitable given my price point, the minimum bid prices and low conversion rate. So I created a new ad to try to target a more focussed demographic, who might convert better and perhaps buy one of the more expensive versions of my product. Ad number 6 was disallowed one minute after it had been approved.

Eh? This ad was very similar to the previous 5 approved ads and for the same product. Their email said:

The content advertised by this ad is restricted per section 5 of Facebook’s Advertising Guidelines. Restricted content includes, but is not limited to: 1. Downloadable products that may affect the user’s computer or browser performance in unexpected or undesirable ways; 2. Get rich quick and other money making opportunities that offer compensation for little or no investment, including “work from home” opportunities positioned as alternatives to part-time or full-time employment or promises of monetary gain with no strings attached. 3. “Free” offers that require users to complete several hidden steps or make additional purchases in order to receive the promised product. We reserve the right to determine what advertising we accept, and will not allow the creation of any further Facebook Ads of this type. Ads for this product, service or site should not be resubmitted.

I didn’t feel my ad/product violated any of those criteria. It was clear in the ad that only the trial was free (not the product) and it doesn’t do anything nasty or sneaky. I emailed them for clarification. Here is the response:

Hi Andy,

Thanks for your email. Please note that we don’t accept ads for downloadable products through our self-service advertising channel. We reserve the right to determine what advertising we accept, and will not allow the creation of any further Facebook Ads for this product.

In order to maintain legitimacy of the products and services promoted on Facebook, ads for downloadable or installable products are only permitted through a direct sales partnership with Facebook. At this time, we’re only able to provide this service to a small set of qualified advertisers.

We’re committed to providing high-quality support for all of our advertisers, and we’ll keep you and your business in mind for the future growth of our ads product. In the meantime, please continue to email us here with any questions you may have and we’ll be happy to answer them for you.

If you have any further questions about why your ad was disapproved for Restricted Content, please refer to our Help Center about downloads at:

http://www.facebook.com/help/?faq=18665

Thanks,

Gloria

Online Sales Operations

Facebook

So apparently, they still don’t accept advertising for downloadable software, unless you are an approved partner, because it ‘may affect the user’s computer’ (even if it doesn’t ). This wasn’t at all clear in their guidelines and they let me run 5 ads before they enforced it (these ads are still running BTW). Thanks Facebook, I like you less with every passing day (and I didn’t like you much to start with). At least I got enough data to show that I was unlikely to ever get a return on advertising a £20/$30 product. I also console myself with the fact that PerfectTablePlan is doing better financially than Facebook (after 7 years and with 500 million users Facebook are finally cash flow positive, but nowhere near recouping the estimated one billion dollars in venture capital) and my product will hopefully still be selling profitably after Facebook has  been buried by the ‘next great thing’ that comes along so regularly in the world of social media.