Time is money: How Clash of Clans earns $500,000 a day with in-app purchases

Confession time: While I like to rationalize my blog’s recent silence with changing jobs and moving to a new city, the truth is, the single biggest drain on my free time lately has been Supercell’s Clash of Clans.  While this apparently puts me in good company, I decided it’s about time I shared what I’ve learned about how this “free” game apparently manages to spin well over $500,000 a day for its creator Supercell.  (Update: Forbes reports Supercell now earns over $2.4m a day, the majority of that from Clash of Clans.)

Overview

The core of Clash of Clans is a bog-standard resource management game: mine “gold” and “elixir”, use gold and elixir to buy improvements to your town so you can build stronger armies, raid other players in order to loot their gold and elixir, rinse and repeat.  If you’ve ever played Starcraft, Age of Empires or pretty much any other real-time strategy game, you’ll know the drill, and the buildings and units come off as almost painfully derivative.  There’s a Barracks for new troops and Archer Towers for defense, you’ve got Zerg-like cheap and disposable Barbarians, weak but ranged Archers, slow Giant tanks for soaking up damage, etc.  But formulas are formulas because they work, and it’s fun to set up your little village, win your first battles and watch your (thoroughly meaningless) levels and experience points rack up.  The touch-screen interface is a pleasure to use and the smoothly zoomable 3D graphics are beautifully animated with cute little touches; for example, when you tap to select an army camp, every unit salutes their leader in a different way.

Show Me the Gems

“So that’s all well and good”, I hear you say, “but where’s the money coming from?”

In the standard Zynga playbook for making money off with freemium games, you would let players buy gold, elixir or the items they want directly.  But Clash of Clans adds a twist: you can’t buy anything directly, but you can buy a third resource called “gems”.   Unlike gold and elixir, gems are not necessary for building anything functional, they’re simply a type of “power-up” that serve as a shortcut.  Need more gold to finish a building? Buy it with gems.  Need more elixir to add a dragon to your army?  Buy it with gems.  Don’t want to wait a week for a building to finish?  Complete it instantly with gems.  In other words, gems mean instant satisfaction.  What’s more, their cost is neatly obfuscated: purchased gems come in big, oddly numbered stashes (500, 1200, 2500, 6500, 14000), and once you have the pile sitting in your account, it’s easier to whittle it away 834 gems at time, whereas you’d probably think twice if asked to punch in your credit card details and confirm that you really want to pay $6.98 (just a sliver under the U.S. federal minimum wage) to upgrade your Wizard Tower.

Yet this formula’s beauty is that none of this is immediately apparent.  You start the game with 500 gems, which is plenty for the initial stages, and there are many easily earned “achievements” that reward you with more, so that you don’t initially appreciate their value.  The initial buildings are fast to build, with some building instantly and others taking a minute here or five minutes there.  And you’re shielded from enemy attacks for three days, so you can take your time building up your base and raiding the AI’s goblin bases for easy loot.

As you advance through the levels, though, the time and expense of everything ramps up exponentially.  A level 2 Town Hall takes 5 minutes to build and costs 1,000 gold; a level 8 Town Hall takes 8 days and costs 2,000,000 gold.  And you soon encounter the next twist: on the later levels, patience is no longer enough.  A maxed-out set of Gold Mines can produce 360,000 gold a day, meaning you could theoretically accumulate the sum neeeded for that Town Hall upgrade in 6 days.  However, you’re being continually raided by other players, and since other players can see your wealth before they choose to attack, a fat bank account means you’re a fat target.  What’s more, since successful raids award percentages of your wealth, a single “three-star” attack worth 25% can see 500,000 gold disappear in a flash.

coc-gold-vs-loginsThere’s more.  In your typical RTS, collected resources immediately go into your central storage.  In Clash of Clans, though, they stay in the collectors, vulnerable to attack both by location and design (up to 50% can be stolen, vs. 20% for central storage), until you log in to manually transfer them to relative safety with a tap.  This, too, makes it difficult to accumulate large amounts and encourages you to login at least several times a day.  The chart shows why: if you start with 1,000,000 gold in storage, earn 360,000 daily, and get attacked once daily, losing 50% from your collectors and 20% from central storage, the player who doesn’t bother logging in for two weeks will see their pile drop 75% to under 250,000, while the player who logs in religiously four times a day will increase their wealth by over 50% to 1,550,000 — but even their earnings flatline well before two million.

What this means is that, once your bankroll is over 1.5 million or so, the only free way to keep the balance growing is grinding, a tedious non-stop cycle of raiding and army rebuilding, with nervous logins every five minutes to keep raiders at bay (you cannot be attacked while online).  In their grandmotherly kindness, though, Supercell provides you a whole wealth of alternatives.  Can you spot the pattern?

  • You can use gems to buy “shields” that stop you from getting raided: 250 gems ($2.50).  Lest that seem too cheap, you’re preventing from using more than one week of shield per month.
  • You can use gems to fill up your gold or elixir storages instantly: 834 gems ($8.34)
  • You can use gems to upgrade your gold mines to the next level, where they will work faster: 966 gems ($9.66)
  • You can use gems to buy additional “workers”, so you can upgrade your production faster and earn gold/elixir faster: 1000 gems ($9.98)
  • You can use gems to double your production of gold or elixir for a 6-hour period.  Repeated across six mines for three days: 1368 gems ($13.68)
  • You can use gems to rebuild your armies instantly, so you can keep raiding and racking up loot without anybody having a chance to steal their money back via the handy “Revenge” button. Assuming 50k elixir to rebuild and 50k profit per raid: 2760 gems ($27.60)

And once you’ve finally earned those 2 million and clicked the “Build” button, it takes another 8 days to build the thing — unless, that is, you fork out another 1123 gems ($11.23) for instant completion.  It’s little wonder most players start “to gem” (it’s a verb in Clash of Clans parlance) by the time they reach Town Hall level 7 or so, the stage when most costs are measured in millions and building virtually anything unassisted takes days.  Jorge Yao, the game’s undisputed champion, figures he has spent north of $2500 in real money on buying gems, and according to back-of-the-envelope calculations, the cost of fully fitting out your virtual village is on the order of $5000 when you include walls.  It’s little wonder the top clans leaderboard is full of players like “>< Royal ><” from Kuwaiti clan “Q8 FORCE” and clan UAE’s “khalifa” (presumably from Bahrain’s ruling House of Khalifa).

Your Pain is Supercell’s Gain

Unsurprisingly, the entire game has been warped in subtle ways to encourage buying and using gems.

For example, in your average real-time strategy game, you have fine-grained control deploying and directing your troops, and units that survive can be used in the next battle.  Not so in Clash of Clans: once deployed, units fight according to their hardcoded strategy (most commonly the harebrained “bash closest building”, regardless of what it is or who is firing at them), and every unit deployed disappears at the end of the battle, even if they are victorious.  This means it’s essential to rebuild huge armies and to attack with massive force every time.   And since building those dragons can take several hours, during which time you’re wide open to attack, there’s another massive inducement to solve the problem with a few gems.

Probably the most blatant case of tilting the table is the recent introduction of “Dark Elixir”, a third in-game resource geared squarely at high-level players.  Collected at the glacially slow pace of 20 units per hour, even in an raidless pacifist world it would take 21 days of waiting to accrue the 10,000 units needed purchase its main selling point, the Barbarian King, and the table is stacked further yet by subjecting collectors to 75% raid losses.  Who wouldn’t pay $6 to skip the tedium and uncertainty?

In comparison, the “clans” of the name seem almost like an afterthought.  Their primary function is to be a gifting circle, where players donate units to others in their clan, and receive units in return.  And that’s it: clan players cannot share gold or elixir, much less gems.  But they do provide another handy lever of extra social pressure to ensure you log in regularly, since clan troops defend your base, die when attacked and can only be received on explicit request, and since most clans enforce minimum per week donations and kick out “freeloaders” who have not paid their dues.

But It Could Be Worse…

Some credit where credit is due: unlike Zynga’s notoriously annoying games, Clash of Clans does not require Facebook signup, cram the game full of ads, spam you and your friends, or pimp your personal information to random third parties.  And while you’ll be reminded that “Hey, you could use gems for this” whenever you try to do something you can’t afford, if you stay within your means and have the patience of an ascetic saint, you’ll never even get asked for money.

Conclusion

At the end of the day, my feelings towards Clash of Clans are distinctly mixed.  Being a penny-pincher whose in-game purchases have been limited to a single $4.99 gem pack, even that largely as a token of appreciation to the game’s makers, I can’t really complain about the hours of entertainment I’ve gotten in exchange.  Yet I still can’t help but cringe as I run into all the ways the game is intentionally crippled to get you to pay up, and the way its Pavlovian triggers to come back for more operate on fear.   Would Minecraft have been any fun if it required you to log in every six hours or you’d lose parts of your inventory?   And how much more awesome would Clash of Clans be if the effort of squeezing every last cent out had been put into improving the game itself instead?

Down, down, down: Books, e-books and apps all trending to zero

“We expect DVD Subscribers to decline every quarter.. forever.”
— Reed Hastings, CEO, Netflix

Does your business model rely on selling paid content?  Welcome to Mr. Hastings’s world.

Books

Many publishers continue to operate under the assumption that printed book sales are declining gradually or perhaps even plateauing.  Unfortunately the data tells a different story: the decline appears to be accelerating.  Here’s Nielsen Bookscan for the travel market:

Printed guidebook sales, millions/year

That’s from the “Guidebook Category Report, Rolling, Period 13” for 2006 to 2012.  The trendline is a simple polynomial (n=2) best fit, and if it’s accurate, the market will halve by 2015.  And while that sounds drastic, it’s by no means unprecedented, as the sales of CDs did pretty much the same thing in 2006-2009.

Of course, the market’s not quite homogenous: Lonely Planet’s been beating the trend, mostly by continuing to invest in print and absorbing customers from the rapidly-disappearing Frommers. But that just makes LP an even-bigger fish in an ever-shrinking pond.

So can the white knights of digital paid content, e-books and mobile apps, save the publishing industry?

E-Books

Finding good data for e-books is a pain, so I ended up rolling my own: I grabbed Amazon’s Kindle Store Top 100 bestsellers lists since 2007, using snapshots from the Internet Archive that record the actual prices at the time, and computed average prices and the proportion of under-$5 titles, the vast majority of which are self-published.  (Source code in Ruby here.)

Average price of e-books in Kindle Store Top 100

Despite that December 2012 spike, the trend is clear, and while the decline looks gentle, my personal suspicion is that the trend line is too optimistic and that there’s a collapse looming.  For one thing, the data above is only for best sellers, meaning new books by well-known authors who command a distinct price premium; the average price of an average e-book is both lower and falling faster.  Yet even in the Top 100, the share of “cheap” books, the vast majority of which are self-published, is growing exponentially:

Books Under $5 in the Kindle Store Top 100

While I didn’t use their data directly, I owe tips of the hat to Piotr Kowalczyk, who wrote a very detailed report on the growth of self-published books on Kindle, and Digital Book World, which has been keeping tabs for the past half year (albeit looking only at the top 25).  DBW also has a credible explanation for the spike, which boils down to publishers yanking up prices in the period before they had to start allowing discounting, and further reinforces that shrinking prices are the new normal.

Apps

The collapse of prices in the mobile app world has been even more drastic, to the point that outside an  elite circle of bestsellers and the odd very specific niche, making money by selling the app itself is a pipe dream.  (All data courtesy of 148Apps.biz and the Internet Archive.)

Average price of paid applications in the Apple Store

By the end of the year, the average app will cost under 99 cents, and even that’s pulled up by every $999 BarMax and wannabe in the store.  The median price is already zero:

Share of free applications in Apple Store

In other words, over half of all apps are already free.  On current trends (and look how beautifully that line fits the data!), that will be over 80% within two years.  This is for the “premium” Apple Store widely opined to have less stingy customers; the equivalent figures for Android will be even more brutal.

What to do then?  The only answer is to figure out a way to make money that doesn’t involve readers paying for content.  Here are some ideas:

Farewell Lonely Planet Melbourne, hello Google Sydney

On the Metro, Helsinki, FinlandAt 18, I spent the summer delivering mail at minimum wage minus 15% (it was “training”, you see), and promptly blew my meager savings on a frenzied one-month Interrail trip through Europe.  When my parents read through the angsty, near-incoherent notes I’d scribbled into a diary while waiting for trains in Holesovice or Ljubljana, complaining about expensive yogurt and Hungarian orthography, they ruffled my hair the same way I now praise our two-year-old for going potty and said “This is amazing!  You should go work for Lonely Planet!”

“Ha”, the cynical teen thought.  “Fat chance of that ever happening.”

Sri Veeramakaliamman Temple, Little India, SingaporeYet 15 years later in Singapore, as I sat warming my hands over the dying embers of Wikitravel Press and glumly contemplated a return to the grim meathook world of telco billing systems, I received an e-mail from Lonely Planet.  A few days later, I took Gus to Komala Vilas for roti pratas, and he outlined the vision for what would become the Shared Publishing Platform and why they could really use a travel wiki kind of geek for it. A few weeks later, I was in the Melbourne suburb of Footscray, staring at the world’s largest accumulation of travel knowledge in the Void and pinching myself: “Holy crap. This is for real, I’m standing inside the HQ of Lonely effing Planet, and these people want me to come work here.”

Industrial Science Laboratory, U. of Tokyo, JapanNow I sit here in equal disbelief, voluntarily saying farewell to the best company and best team I’ve ever had the privilege of working for, and that’s not just the kind of hyperbole expected for these public farewells.  The past three years of replacing a jet’s engines in mid-flight have been an intense learning experience, and the work is nowhere near done, but unlike the company’s three previous attempts, it’s now over the hump.  All authors are now writing directly into the content management system, where editors and curators weave their magic, with printed books, e-books, apps and the website being pumped out the other end, and Lonely Planet can now start fully focusing on its shiny digital future.

Sydney Opera House
And me?  I’m joining Google’s Geo team in Sydney, where I’ll be working with the world’s most popular travel application, Google Maps.

I plan to continue to write this blog, although there will be less idle speculation about what the Big G is up to next and less of a focus on the print publishing business I now depart. That said, my next post ought to give some food for thought to those in the industry, so don’t unsubscribe just yet!

Dorky is OK: Google Glass does not have to be the next iPhone to win

TL;DR: Google is trying to position its Google Glass headset as a consumer device with the cool factor of an iPhone.  But its initial users are likely to be businesses, and they will need to be convinced about the value it will deliver, not its appearance.

Hardware revolution

Lenin Museum, Tampere, FinlandWe fling about the word “revolutionary” with wild abandon these days.  The primary hardware innovation of the Apple iPhone, for example, was really just an evolutionary step. Replacing a keypad with a touchscreen meant that, instead of holding your phone in one hand and watching its screen as you tap the keys with the other, you could now hold your phone in one hand and watch its screen as you tap the screen with the other.  As we know, this seemingly subtle change proved to radically enhance the usability of the phone and set the benchmark for today’s smartphones — but they’re still smartphones.

Google Glass, on the other hand, is genuinely revolutionary piece of kit.  As the first real consumer-grade attempt at an augmented reality computer, it completely dispenses with the screen, the keypad and even the entire “holdable” device itself.  This means throwing out every user interface paradigm developed since the 1970s, when computers started to look like today’s computers, and building something entirely new to replace them.  Gulp?

Yet Google appears to be petrified of something different: that the device will be perceived of as “dorky”.  As you can see from the picture to the right, I can personally attest that this fear is not entirely misguided: real-life wearable computers (and their wearers) do tend to fall more on the side of “geeky” than “cyberpunky”.  Google’s marketing to date has thus consisted nearly entirely of increasingly odd antics to make it “cool”: stunt cyclists performing antics on the roof of a convention centre, skydivers leaping out of airplanes and an entire fashion show with slinky models strutting their stuff.

But let’s step back in time.  Imagined being offered the chance to clip a unwieldy, heavy plastic box to the waistband of your bell-bottomed pants, bolt two bright-orange foam sponges over your ears with a shiny metal hairband, and string these bits together with wire.   Would you pay good money for this fashion disaster?

If it’s the 1970s, hell yeah: the Sony Walkman was a runaway hit.  Never mind the clunky appearance, the mere fact that it for the first time let you listen to music anywhere was worth the sartorial price of admission.  And without that ability, the minor miracles in miniaturising and ruggedizing of the unwieldy tape decks of yore necessary to produce the Walkman would have gone to waste.

Software evolution

But Google isn’t talking, at all, about what you can or, more importantly, could do with the Glass: their famous promotional video shows the capabilities of various existing Google apps doing precisely what they do now, only on a heads-up display.  Sure, the user interface has changed radically, but the capabilities have not.

So will those existing apps on Glass be slick enough to make it a must-buy?  Despite Google’s all-star developer team, their track record for customer-facing products is distinctly spotty and the sheer challenge of designing an entirely new way to interact would perplex even Apple.  The little we know of the hardware also indicates that some technologies considered key to heads-up interaction, notable eye tracking, are not going to be a part of the package.  It’s thus exceedingly unlikely that the first iteration of Glass’s UI will nail it, and Google’s reluctance to reveal anything about the interface’s actual appearance and behavior strongly hints that they have their doubts as well.

Odds are, then, that Google Glass will be a dorky-looking product that offers an inferior interface for the kind of things you can do easily with a modern mobile phone, which has, after all, evolved for 20-plus years in the marketplace.  This is not a recipe for success in the consumer marketplace.

The solution?  Sell the Glass on what it can do that nothing else can.

Five things you can do with Glass that you can’t with a mobile phone

Gift shop, Barentsburg, Svalbard

1) Simultaneous interpretation.  Hook up two Glasses so they can translate each user’s speech and beam it over to the other, where it is displayed as subtitles.  Presto: you can now hold a natural conversation and track all the nonverbal communication that would be lost if you had to glance at your smartphone all the time.

(Not coincidentally, I wrote my master’s thesis on this back in 2001.  My prototype was a miserable failure because computer miniaturization, speech recognition and my hardware hacking skills weren’t up to snuff, but I think Glass provides an excellent platform for producing something usable.)

2) Tactical awareness.  A mobile phone app that shows the location of alerts and/or other security guards would be rather useless: what are you going to do, pull out your phone and start browsing your app directory when the robbers strike?   The same application for an always-on Glass, on the other hand, is a natural fit.

(This, too, is by no means a new idea. MicroOptical’s heads-up display, the direct predecessor of the optics behind Google Glass, was the result of a DARPA grant for the US Army’s Land Warrior project.  The pathetic fate of that project, which ran from 1994 before being cancelled in 2007 and kicked off again in 2008 without ever accomplishing anything of note, also hints at why Google is, probably wisely, steering far clear of the bureaucratic morass of military procurement.)

3) Virtual signage.  Imagine an enormous warehouse filled with a variety of ever-changing goods, along the lines of an Amazon or UPS logistics center.  Right now, to find a given package in there, you’d have to “look it up” on a PC or smartphone, get a result like “Aisle C, Section 17, Shelf 5” and match that to signage scattered all over the place.  What if your Glass could just direct you there with visual and voice prompts, and show you the item number as well so you don’t have to print out and carry slips of paper?  The difference sounds almost trivial, but suddenly you’ve freed up a hand and reduced the risk of getting run over by a forklift as you squint at your printout.

(Back in 2004, commercial wearable computing pioneers Xybernaut sold pretty much exactly this idea to UK grocery chain Tesco, but their machines were clunky battery hogs so it didn’t pan out too well.  Xybernaut’s subsequent implosion after its founders were indicted for securities fraud and money laundering didn’t help.)

4) Surgery.  Surgical operating theatres are filled with machines that regulate and monitor and display a thousand things on a hundred little screens, with tens of bleeps and bloops for various alerts and events.  What if the surgeon could see all that information during a complex procedure, without ever having to take their eyes off their actual work?

(Once again, some products that do this already exist, but Glass has the potential to take this from an expensive, obscure niche to an everyday medical tool — once the FDA gets around to certifying it sometime around 2078, that is.)

5) Games set in reality.  Mashing up reality and gaming is hard: countless companies have taken a crack at it over the past decade, and all foundered on the basic problem of having to use a tiny little mobile display as the only window into the game world.  As Layar’s lack of success indicates, running around holding a phone in front of your face isn’t much fun, and relying on location alone to convey that there’s an invisible virtual treasure chest or tentacle monster in a physical alleyway stretches the imagination too much.  But with an augmented reality display, this will suddenly change, and Valve is already making a big punt on it, although Michael Abrash rightly cautions against setting your expectations too high.

What next?

Antenna station, Barentsburg, SvalbardNotice one thing about the first four ideas?  They’re all business applications, whose customers will willingly tolerate a clunky, somewhat beta interface as long as they can still get real dollars-and-cents value out of it.  This is how both PCs and mobile phones got started, and once the nuts and bolts are worked out, the more mature versions can be rolled out to general consumers.

And once Glass (or something like it) reaches critical mass, we’ll suddenly have streets full of people with network-enabled, always-on video cameras, and a rather scary world of possibilities opens up.  Add object recognition, and you can find litter, vandalism, free street parking spots.  Add data mining, and you can spot the suddenly crowded new cafe or restaurant, or catch the latest fashion trend as it happens.  Add face recognition, and you can find missing persons, criminals and crime suspects.

To Google’s credit, they are partnering with other developers almost from day one, and there will undoubtedly be even better ideas than these largely unoriginal off-the-cuff thoughts.  We can only hope that the idea is spotted and executed well enough to turn it into Glass’s killer app…  but if Google keeps on being awfully coy about Glass’s capabilities, limiting access to dinky two-day hackathons and envisioning Google+ as the main use case, that day may still be some way away.

Free travel guide Wikivoyage comes out of beta and is already kicking ass

Tomorrow, January 15th, marks the official launch date of Wikivoyage, the new free travel guide from the Wikimedia Foundation.  Born from a split with Wikitravel, here are six reasons it’s already better than its ancestor.

  1. Wikivoyage has a great mobile version.  This uses the same systems as the massively popular mobile version of Wikipedia, and is thus fast, compatible with virtually every device, and close to bug-free.
  2. Wikivoyage supports scrollable, zoomable web maps, courtesy of OpenStreetMaps.  These are so new there aren’t many around yet, but here’s an example from the Italian page for Funchal; expect to see plenty more soon.
  3. Wikivoyage lets you collect articles into books, which can be turned into a PDF or EPUB for offline reading, or shipped to you as a printed book.  (And thus Wikivoyage Press came to life at the flick of a switch.  D’oh!)
  4. No more screen scraping: full data dumps of Wikivoyage are already available.  Thanks to the Creative Commons license, you can freely use this data for travel mashups and more.
  5. Thanks to its active community, Wikivoyage already gets more content updates, and has spam firmly under control thanks to the Foundation’s years of experience in combating it.
  6. Last but not least, Wikivoyage does not suck: there are no punch-the-monkey ads, in-your-face flight booking dialogs, database backends that flake out randomly when you’re trying to edit, or company-appointed admins who censor and ban at will.

So what does this mean in practice?

Short term impact

As part of the launch, every Wikipedia page that once pointed to Wikitravel will now start pointing to Wikivoyage instead.  In addition, every Wikipedia page will temporarily be festooned with a notice pointing to the site, which means a cool 6.5 billion ad impressions a day. The traffic boost from these will be massive, so you can expect to see a lot more Wikivoyage in your search results quite soon.

South Beach, Perhentian Besar, MalaysiaThis is not to say it’s all peaches and cream, as the site remains a work in progress.  For example, while merging Wikivoyage’s image backend with Wikimedia’s Commons allowed access to a wealth of new pictures and illustrations, it also means that several thousand pages now have broken image links.  These are being fixed one by one, and the backlog has already been cut in half since mid-December, but plenty of work remains.

Long-time readers may also recall that there was a complicated tangle of lawsuits between Wikitravel’s owner Internet Brands (IB), some of its erstwhile users, and the Wikimedia Foundation.  The first lawsuit, by Internet Brands against two Wikitravel users, was dismissed on November 28, 2012, and although they could technically try again in state court, IB appears to have given up (unsurprising, as they had no case).  The second and arguably more meaningful lawsuit between the Wikimedia Foundation and Internet Brands is still rumbling on though, with both sides stomping around the sumo stadium, slapping thighs and grunting menacingly, but no court date set.  Keep an eye on the Wikimedia blog for updates; nonetheless, the Foundation has stated that this will have no impact on Wikivoyage itself.

Long term impact

While I have no doubt that Wikivoyage will surpass and supplant Wikitravel, its impact on the wider travel industry remains an open question.  For Wikivoyage to become as globally ubiquitous as Wikipedia, at least some of these hard problems will have to be cracked:

  • Oysters in Adelaide, AustraliaClearer separation between objective and subjective travel information.  Wikis are great for “the train takes 15 minutes and costs $2.50”, but not so much for “the pizzas are great and the music rocks”.  Allowing multiple comments, reviews or ratings of some kind for listings is needed.
  • Building a database backend.  Wikivoyage articles are long, flat pages of text, with a little markup for points of interest and geographical hierarchy.  Turning them into anything other than pages of text, or even getting the various language versions to share information, would require reworking the site to use a database of some kind, not a trivial exercise, although it would definitely be an intriguing application for the budding Wikidata.
  • Lack of vision and desire.  To a first approximation, the Wikimedia Foundation allocates its meager resources based on site popularity, which is why Wikipedia gets almost all of the love and the Foundation will have precisely zero Wikivoyage people on staff.  This means that not only is the Foundation unlikely to be able to make the large investments needed to bring the site to the next level, but there won’t even be anybody who could direct those investments if the money and will suddenly came up.
  • Lack of funding.  That money is unlikely to come up, though, since Wikimedia is funded entirely by donations and the vast majority of them go to pay for Wikipedia.  While adding eg. hotel bookings to Wikivoyage would be a near-guaranteed money spinner and, if done right, a genuine enhancement to the site, it would be an uphill battle to get the occasionally rabidly anti-capitalist wider Wikimedia community to accept this taint of Mammon.

I should probably underline that I’m not trying to rag on the Foundation with those latter two points, they’re operating quite sensibly with the constraints they have as a non-profit organization.

This also explains why, as a travel industry insider myself, I don’t think Wikivoyage poses an existential threat to TripAdvisor, Google or, for that matter, Lonely Planet: it’s simply not playing the same game.  Quite the contrary, it promises to be a great resource of information for everybody.  In the same way that Google pulls in data for Wikipedia for its search results and Lonely Planet’s website uses images sourced from Wikimedia Commons, other travel guides will be able to complement their own content with additional data from Wikivoyage.

 

Wikitravel Press: Seven lessons from a startup that failed

Before I joined Lonely Planet, I ran a little startup called Wikitravel Press, which packaged up Wikitravel articles and sold them as print-on-demand books.  Despite revolutionary tech, a great team and hard work, it didn’t pan out the way we’d hoped, and this is the story of the lessons I learned the hard way.

TL;DR: Lesson 1 | 2 | 3 | 4 | 5 | 6 | 7

Conception

Back in 2005, I was a vagabond telecoms consultant, flitting around the world setting up messaging systems for mobile network operators.  I loved the travel, to the extent of willingly giving up my apartment and living out of a rollaboard suitcase for a year and half, but endlessly hashing through the requirements-deploy-test-rinse-repeat cycle was starting to get old and I found myself spending more and more time on Wikitravel.

And at some point, I had an epiphany.  One of Wikitravel’s goals since its earliest days was to produce printable guides.  The volume and quality of content was starting to reach the point where the best destination guides were book-sized.  What if I could extract the content, automatically lay it out into PDF, and publish it as an actual book through a print-on-demand service like Lulu?  Compared to existing guidebooks, the advantages seemed vast:

  • The content would be as fresh as the website, unlike the 2-3 year research-to-print cycle of a typical guidebook.
  • The content would be continually updated for free by volunteers, instead of expensively and occasionally by paid authors.
  • Printing on demand would eliminate warehouses, inventory management, returns and many other banes of a publisher’s existence.
  • Printing on demand would allow creating customized, niche guides that would not be economical for a traditional publisher that needs print runs of at least several thousand copies.

But the seed of hubris had already been planted:

Lesson #1: Do not base your startup on more than two innovations. >>

Pulling off the company would have required 1) turning a free-for-all wiki into publishable content, 2) completely automating the transformation of that digital content into printed books, and 3) building a new way to distribute these fresh but very perishable books.  If any of these legs failed, the stool would topple over.

(The credit for that quote, by the way, belongs to someone else; I remember seeing it back in 2007, shortly after launch, and thinking, “Crap”.  But I’m unable to track it down, anybody know who said it first?)

Gestation

I hacked together enough of a prototype with LaTeX and a forked version of Deplate to convince myself that the primary technological challenge, turning Wiki pages into a book-like PDF, was solvable, and then got in touch with Wikitravel founders Evan and Michele to see if they were interested.  They were, very much so, but there was a major catch: they were right in the middle of selling the website to Internet Brands (IB), and I had to cool my heels until that was all sorted out.

Now Evan and Michele, being smart cookies, had already made a point of retaining print rights to the Wikitravel brand.  However, Internet Brands still had a say on who could use those rights and how, so we had to fly over from Singapore and Montreal to Los Angeles to meet IB, pitch the idea, draft agreements, get lawyers to look it all over etc, all an unnecessary cost and distraction compared to if had it been just the three of us.  The deal we came to was fair enough, and essentially boiled down to IB giving us free ad space on the site and reasonably free reign in print in exchange for a cut of any future profits.  But here, too, lay another seed of destruction.

Lesson #2: Do not rely on a third party that does not share your goals and interests. >>

For Wikitravel Press, the support of Internet Brands was critical: without it, there was no brand, and without the brand there was no company.  (The very name of the company relied on an Internet Brands trademark!)  But for Internet Brands, Wikitravel the site was just one brand in a stable of dozens, and a dinky little appendix to that site producing no revenue was at the absolute bottom of the priority list.  We were now stuck: they had negotiated the initial agreement because legally they had to, but once the ink on that was dry, we would have absolutely zero leverage with them until and unless we started raking in serious profits.

Birth

Nevertheless, we signed the agreement and the next year passed in a blur.  I quit my job and  started doing the million and one things needed to get this off the ground.  We set up Wikitravel Press, Inc in Montreal, Evan and Michele’s hometown.  (I would have preferred Singapore, a considerably more business-friendly locale, but for Internet Brands even Canada was rather exotic.)  Since the initial costs were low, we opted not to pursue venture capital, financing it ourselves.

On the technical side, I had to turn the engine from a crude prototype into something solid enough for production use, wrap it with a user interface that editors around the world could use, and integrate its output into Lulu.  Mark Jaroski whipped up an inspired piece of hackery that pulled street data from OpenStreetMap, mashed it together with Wikitravel listings and spat out printable guidebook maps.  We sourced a design for the books (hat tip to TheAgence), found one of the three people on the planet who understood the dark arts of LaTeX templating well enough to automate the layout (the brilliant Alistair Smith of Sunrise Setting), built pricing and royalty models, experimented with book formats, and more.

And, of course, we had to find some people to actually write the books.  Our ultimate goal was always to allow people to print anything they wanted whenever they wanted, but Wikitravel’s content quality was too uneven for that, and neither was our technology up to the challenge.  So we compromised: we selected popular, well-covered destinations, put editors in charge of maintaining them, published  manually-reviewed monthly updates to each title and paid the editors a royalty on sales for their troubles. Professional travel writers unsurprisingly steered well clear, but there were enough enthusiastic amateurs on Wikitravel that recruiting for the first few titles was not a problem.

On February 1, 2008, we launched Wikitravel Chicago (by Peter Fitzgerald and Marc “Gorilla Jones” Heiden) and Wikitravel Singapore (by myself) with a flurry of publicity, with coverage in Boing Boing, Gadling, and a good many more travel and tech sites.  Sales spiked nicely in the first few days, but very soon tapered off into pathetic volumes that were far less than even our most pessimistic estimates.  What had gone wrong?

Lesson #3: Validate your sales projections before you launch. >>

It seems inconceivable to me today, sufficiently so that I’m rather embarrassed to type this, but we hadn’t actually tested, at all, our conversion path with real, live customers.  We had simply blithely assumed that X% of visitors to Wikitravel pages with ads would click on to the Wikitravel Press site, and that Y% of those would go on to buy the book.  Guess what?  People browsing Wikitravel were, by and large, not interested in buying it as books; and of those that did make it to the Press and clicked on the “buy” links, another large percentage were turned off by having to create new accounts on Lulu, type in credit card details and addresses, and then pay hefty shipping fees, especially if outside the US. Doing a quiet public beta before launch would have alerted us to this at least half a year earlier.

Infancy

So there we were, with a gut-shot business plan bleeding all over the floor, and we had to do something fast to increase our distribution.  I dabbled a bit with Google AdWords and other forms of online advertising, but the brutal maths of the publishing industry made buying readers impossible: with sensible keywords costing at least $0.50 a click and an average profit margin of just $5-7 per book, we would have needed a conversion rate of nearly 10% just to break even, clearly an impossibility.

Distributing to conventional bookstores was also out of the question,  We did not have the money, warehouse space, sales network and more to start doing large print runs, hawking them to book stores, dealing with returns, etc, and even if we had, this would have obliterated our primary competitive advantage of speed.

The one avenue open to us was distributing to online bookstores, and the thousand-pound gorilla both then as now is Amazon.  Lulu had an embryonic Amazon distribution option, but not only would it have sliced our already meager profit margins in half, using it would have required new ISBNs for every edition.  And since every online book shop on the planet uses ISBNs to uniquely identify books, all reviews, sales ranking etc tied to Wikitravel Singapore, February 2008 would be lost the instant it was pulled off the virtual shelf and replaced by Wikitravel Singapore, March 2008, so this was simply not an option.  (Not to mention that, in low volumes, each ISBN costs $27.50 a pop.)  We looked briefly into selling Wikitravel as a magazine, with an ISSN instead, but the bureaucracy for getting those was even more fearsome and, again, for every bookseller on the planet, a magazine is a completely different beast to a book and would not show up in searches for the other. Was our revolution in the making about to be scuppered by a standard drafted in 1970?

Lesson #4: There are often practical workarounds for theoretical impossibilities. >>

But we found a way.  Amazon had recently launched its own consumer-facing print on demand site CreateSpace, which is tightly integrated to the Amazon bookstore, including key features like free shipping, same-day printing and, crucially for us, its own pool of pre-allocated ISBNs that could be retained through updates of the book.   In theory, you’re supposed to change the ISBN for every “substantial change of text“, but CreateSpace did not enforce this and we were more than happy to leap through the loophole.

So we shifted the entire operation to Amazon, which entitled, among other things, resizing the book’s layout, templates, covers etc to accommodate Amazon’s different page size.  And whereas Lulu had a fairly hands-off approach and a rudimentary API that could be automated to a fair extent, Amazon offered only two choices.  You could go with CreateSpace, designed for technically clueless wannabe writers and thus only drivable through an infuriatingly slow web interface, coupled with a manual validation process where every single page of every single edition was scrutinized by some half-starved third-world peon and, more often than not, summarily rejected for infractions like the cover saying “Singapore – Wikitravel” when the book title was “Wikitravel Singapore”.  Alas, the only other option was BookSurge, designed for “real” publishers bulk uploading PDFs of old books that already had previously assigned ISBNs, and hence entirely unamenable to our reuse-ISBN-for-next-edition dodge.

But we gritted our teeth and soldiered on with CreateSpace, and Wikitravel Press books went live on Amazon in November 2008.  Sales perked up immediately, and it was time to start expanding.

Stumbling forward

With the new foundation laid, there were two basic ways to expand: we could distribute to a larger audience, or we could produce more titles.

Once up on Amazon USA, the obvious next place to distribute was Amazon’s other markets: Canada, UK, Germany, Japan, etc.  However, publishing remains intricately tied up in geography, and endless rounds of discussion with Amazon Europe produced no results — at the time, the only print-on-demand service on offer in Europe was BookSurge, and that didn’t play nice with our titles.  (This has since changed.)  And while CreateSpace offers an “Expanded Distribution” program that, in theory, allows sales through Barnes & Noble and online retailers, library sales programs etc, there’s no real way to promote your books on those sites.  In practice, enabling it meant only that random online bookstores you’ve never heard of picked them up, algorithmically assigning insane prices in the vain hope that some lunatic would buy them.  (Case in point: this listing for our Paris guide,  which not only hawks a no-longer-existent product, but wants $216 for it.)

So we were stuck in our little Amazon bubble, and the only way forward was to produce more titles, which meant finding more editors to create and maintain them.  Alas, our process required a trifecta of uncommon traits: a mastery of Wiki markup, a willingness to work unpaid for a long period to initially prep the book for publication, and the tolerance to deal with unpredictable royalties once the book did hit the virtual shelves.  There were no realistic technical solutions to the first, with MediaWiki WYSIWYG remaining a pipe dream despite years of effort by the Foundation, and we were unable to pay advances because we could not accurately forecast book sales.  In the end, only nine titles made it all the way through, with quite a few left lying on the cutting table in varying states of completion.

Lesson #5:  Scaling technology is hard, but scaling people may be impossible. >>

Unable to scale people, we turned to scaling technology instead: instead of manual editing, why not automate the whole process instead?  The feeble jaws of our engine were not up to the task of digesting the whole of Wikitravel, but at Wikimania 2008 in Cairo I had been introduced to German brainiacs PediaPress, whose fearsome mwlib parser beat the pants off ours and could eat the entirety of Wikipedia for lunch.  They produced an awesome demo of a Wikitravel book, and next year I flew down to the Frankfurt Book Fair, where we shared a stand, drank beer and dreamed big.

But that dream stayed a dream, because there were two ways to make this happen, and both were blocked by limitations outside out control.

  1. We could have generated guides completely automatically and sold them via conventional channels like Amazon.  However, since CreateSpace could not be automated, there would have been an absolutely ludicrous amount of manual grunt work involved in creating and maintaining the guides; and since Wikitravel content was of uneven quality, selling books compiled with no human oversight at all would have risked a major backlash.
  2. Alternatively, we could have taken the approach that PediaPress does on Wikipedia and allowed users to build their own custom guides, but this would have required installing a custom extension onto Wikitravel.    Alas, the site was and remains fully under the control of Internet Brands, who were exceedingly reluctant to do even basic maintenance, much less install experimental extensions to help someone else’s bottom line.

Paralysis

So there we were, stuck in limbo: technically cashflow-positive thanks to our ultra-lean cost structure, but nowhere near profitable enough to pay me a living wage, much less pay dividends.

Lesson #6: A business that is not growing and not paying your rent is not a business. >>

It was surprisingly tempting to just leave it be and pretend that all was good, and in retrospect I wonder how many times I answered the usual “so how’s the business doing?” question with “Fine, it’ll make a profit this year!”.  But even through this haze of self-delusion it was starting to sink in that there was essentially no realistic prospect of growth in our current line of business, and that printed books were a dead end.

This left precisely one option: pivot away from printed books into a digital form.  Back when we started out, both e-books and apps were impractical boondoggles, with a limited range available on clunky devices if you were a member of the technological priest-elite capable of operating a Palm V or Sony Librie.  But in late 2007 both Apple’s iPhone and Amazon’s Kindle came out, bringing e-books and apps to the masses and setting off a gold rush of selling digital content.   Why not join them?

Because we could not.  Wikitravel Press’s contract with Internet Brands was only for printed products, not digital products.  We’d asked for digital rights originally, but had to give way, and our new attempts to add them to the contract were tersely rebuffed.  Since Wikitravel content is open to all, we could have tried our luck without the brand or the links from the website, but then there would have been little to differentiate us from anybody else repackaging it, and we’d probably be getting our books pulled from the Kindle Store on as just another “private label rights” publisher right about now.

Death

By 2009, the writing was on the wall and we started looking for a way out.  Evan already had a hit on his hands with identi.ca/StatusNet, and towards the end of the year I received an offer from Lonely Planet — not to acquire the company, but to bring me on board a revolutionary publishing project of their own.   I jumped at the chance, resigned my managerial positions (but hedged my bets by keeping a minority stake) and passed the poisoned chalice over to superstar editor/author Peter Fitzgerald of Chicago and Washington DC fame.  He knew full well that the company’s prospects were dim, but hadn’t had all enthusiasm and hope ground out of him quite so thoroughly yet.

Lesson #7: When it’s time to let go, let go.

In hindsight, we should have told him “no” and killed the company then and there.  The ensuing two years of slow decline were a slow but constant drain on time and money for all us, with little upside; sure, a few more editors got to see their books in print, but only see them fizzle and get pulled off the shelves shortly thereafter.  The issue was finally forced by the Internet Brands contract coming up for renewal, which we obviously elected not to do, and the company shuttered its virtual doors on December 31, 2011.

Epitaph

In retrospect, Wikitravel Press was the Minidisc of its time.  In the same way that Sony’s Minidisc was revolutionary compared to cassettes, it was a revolutionary way to do printed books, but both forms of physical media were swiftly obsoleted by the far greater revolution of digital technology: MP3 players for music, phones and tablets for books.

And the one thing that annoys me to this day is that, from day one, we knew this; we just assumed that we’d be able to get the business up and running through print books, and then expand the empire into digital once that market came into being.

On the upside, while we did not come up with the Travel Guide of the Future, neither has anybody else yet, and the trusty old printed guidebook still remains the format to beat.  Got a good idea?  Drop me a line, and maybe we can give it another shot together.