Photo by Toasty Ken

I'm a cheerful pessimist about human nature, I generally expect the worst but don't let it get me down. This report from the US Senate is beyond the pale though, it really makes me mad. It details how companies like Affinion, Webloyalty and Vertrue pay immense amounts of money (CPM rates of up to $2650!) to well-known firms like priceline.com and 1-800-flowers to get links inserted into their checkout process. These links look like discount offers, but clicking on them passes your credit card information to the scammers, and lets them set up a recurring monthly payment on your account without asking for permission, hoping you won't notice, at least for a while.

How much money is there to be made here? The report estimates just those three firms have earned over $1.4 billion so far! And how much of a scam is it? Vertrue estimates 98% of their call volume is cancellation requests, and Webloyalty admit that 90% of their members have no idea they're enrolled.

As an entrepreneur I know how much over-regulation can hurt startups and economic growth, but scams like these drive people down that path. As an industry we need to have enough sense to avoid crazily short-sighted schemes like these if we want to have a long-term future. All three companies are owned by big-name private equity firms, and big-name websites are hosting their ads. Everyone involved should be ashamed of themselves, and nobody else should touch them with a barge pole. Sadly, $1.4 billion is very persuasive…

Photo by Intermayer

This is one of those posts I hesitate about writing, because it's tempting to hoard an advantage like this, but sharing always seems to benefit me more in the long run. I'm able to get new users for my (in-testing, very unfinished) Facebook app for as little as $2 each using Facebook Ads. Here's my most successful ad so far:

It's short and simple, and around 0.07% of people who see it clicking. Naively I started off expecting click rates of around 1%, but since then I've talked to people with more experience in the ad world, and outside of search ads mine is actually pretty respectable. It's also cheap – I set my cost-per-click bid to 50 cents, but actually ended up paying 37 cents each.

This is only the start of my funnel, the landing page is the install dialog for my Facebook app. The only thing I have control over there is the app description and logo, and currently only 30% of the visitors click accept to install it. That means my cost per installation is around $1 per user.

After they've made it through that screen, they're finally on a page I control. Here I ask them to give me their email address, accept extended permissions and authorize me to access their Twitter account. I lose between 50% and 70% of users there, bumping my final cost per true user to between $2 and $3 each.

So what are the secrets to achieving similar results?

Land in Facebook. I have a massive advantage in that I've moved my service over to run as a Facebook app. It's low friction for users when they're staying within the same site, I doubt you could achieve the same CPC for external pages. I'm now a hostage to Facebook's whims of course, but for me the gain in user trust far outweighs the risks.

Start small. I'm still paying only $15 a day spread over several campaigns, that gives me enough data to tell what's working and refine my ads and landing pages before I ramp up to collect larger numbers of users. It's also a great way of flushing out bugs and scaling issues while annoying a relatively small number of users.

Test, test, test! I'm terrible at writing ad copy, really, really bad, and my first versions had awful click-through rates around 0.01%. I was able to use Facebook's statistics panel to tell which ads were the least-worst, and spot the patterns. In my case the shorter ones worked much better, as did the ones that focused on a single feature, which is how I ended up with the one above. I'm also constantly trying new versions of the landing page and sign-up flow to measure how I can improve the rest of the funnel.

Foreigners are cheap. There must be a lot less competition for UK and commonwealth Facebook views, because I'm able to get CPCs of 37 cents if I specify the English-speaking non-US in my targeting, versus around 60 cents each in the US. If you're in the testing phase, I would expect you could get representative data for almost half the price if you use non-Americans as guinea pigs.

I still think there's a lot of room for improvement in my funnel, so I'm hopeful I can keep driving the cost down, even if the ad market overall becomes more expensive with competition. I'm also not doing much with the targeting possibilities beyond picking countries, I think localized ads could get a strong response, and I need to run a census of my users to understand what demographics the service appeals to most and target them.

Photo by Garretc

Andy Kessler's talk yesterday got me thinking hard about why I found his argument so unconvincing. He focused on how innovation will destroy jobs, the way container ships put all the stevedores out of work. I think he's missing a completely different outcome of innovation, and one that excites me a lot more.

Stevedores were performing a process that achieved the results we were after, they weren't dropping half the boxes into the ocean as they unloaded, so containerization just made the process more efficient.

Where Andy went off the rails is when he applied that model to worlds like education. We are really, really bad at teaching our kids, enormous numbers of them don't even make it through high school. It's as if we're losing half the cargo every time we unload a ship. Innovation in education gives us the chance to achieve better results with the existing resources, giving our teachers tools so they leave fewer kids behind. It's about effectiveness not efficiency, because we're falling so far short of our goals right now.

Would we expect a school district that increased its students' overall GPA to then fire some teachers to save money and return to the old GPA, since we lived with that before? Of course not, we'd celebrate the achievement and try to replicate it elsewhere.

What really excites me about technology innovation is that we can help people do important things that weren't possible before. MIT's opencourseware is an awesome example, the lectures and materials work as an accelerator and multiplier to traditional learning methods, helping students all over the world get better results. There's no wave of professors being fired, if anything it's taking pressure off them to do mundane and routine introductory lectures and focus on the value-added personal teaching instead.

I love increasing productivity because it lets people do tricky jobs much better, which I find a lot more satisfying than automating people out of a job. I'm much happier preventing screw-ups than eating people!

Andy Kessler just gave the opening keynote speech at Defrag '09, and I really hated it. The title was Be Solyent, Eat People, and since I'm fascinated by the topic of productivity and job replacement I was looking forward to a thoughtful analysis of a complex topic. Instead it felt like a rant by an undergraduate who'd just read Atlas Shrugged for the first time. He laid out a taxonomy of 'unproductive' jobs, which he generally classified as servers as opposed to creators, and then split those servers into 'sloppers', 'sponges', 'slimers' and 'thieves'.

What gobsmacked me was his seeming contention that basically anyone who wasn't a programmer was a parasite. He mentioned a lot of jobs that should be largely automated, from the uncontentious idea of stevedores being replaced by container ships, to the eyebrow-raising example of librarians and finally to the gob-smacking idea that teachers are on the way out!

He seemed to be taking an uncontroversial idea, that there are buggy-whip making jobs that will be replaced by new processes, and taking it to ridiculous and offensive extremes.He used doctors as an example of a 'sponge' profession where artificial barriers to entry kept the incumbents charging high fees and gouging their customers. I'm extremely sympathetic to Adam Smith's quote 'People of the same trade seldom meet together, even for merriment and
diversion, but the conversation ends in a conspiracy against the
public, or in some contrivance to raise prices', but we tried unregulated doctors for most of the nineteenth century here in the US, and it didn't work so well.

All of Andy's ideas are controversial extrapolations of accepted ideas, but he gave no evidence that any of his assertions actually hold. All it did was annoy me without offering any enlightenment, I'd love to engage with his ideas but there was nothing to hang a debate on, just pure opinion.

This is a tricky post to write, because some of my best friends are hippies, I've been accused of being a hippy myself and I live in Boulder, but after reading this article about a first-time entrepreneur's messy breakup with a business partner I couldn't resist.

When it comes to business, pay no attention to what a potential partner says. Judge them on what they do. This is especially important if they're charismatic and overtly spiritual because what they say will be both flattering and very appealing, you'll be tempted to bend over backwards for them. I'm speaking from painful personal experience; my two worst business outcomes were situations where I really liked a partner and stopped thinking critically about what they were offering.

I followed a charismatic hippy manager into his new startup for no equity and worked like a dog for a year. He replaced my friends (he'd needed all our resumes to get the initial contract) with cheap college interns, compressed the schedule and played a lot of other nasty tricks until I finally snapped when a colleague was reprimanded for being late on a Sunday. I'd spent many evenings with the guy and his wife and kids before 'our' startup launched, I really liked him, and he'd painted a beautiful vision of a family-friendly workplace with a great culture. My mistake was that I'd failed to push for any tangible evidence he was serious about his promises. Trust but verify.

The sad thing is, I don't think he was faking the beliefs that he kept talking about, but he was able to use them to convince himself that they justified whatever the most convenient thing for himself was. During the nightmare he often invoked providing for his family as a reason to cut salaries and hoard the benefits of success, which sounds great until you saw it meant a second home for him while employees struggled to afford healthcare for their kids.

Since then I've been much more comfortable with 'coin-operated machines', as a former partner described himself. I find someone who's up-front and honest about their motivations is a lot easier to deal with than anyone who claims they're acting in your best interests.

On Hacker News, a commenter pointed out that Steve Jobs is a hippy, which is true, but I don't think it's possible to find someone who's more blunt and straightforward in his reactions than Steve! All I want is honesty and trust, and I find that's a lot easier to achieve with someone who's unafraid to admit selfish behavior than anyone who's worried about preserving a virtuous self-image.

This is one of the hardest posts I've had to write, I'm admitted a strong prejudice based on a small sample size, and I got a lot of flak when I posted my original comment on HN. In the spirit of openness I'm trying to be honest about what my biases are and how I got to them, even if they aren't particularly flattering. I look forward to the comments!

Photo by Gen Kanai

I use Tokyo Tyrant/Cabinet as the key-value database for Mailana, and after some initial hiccups I've been very happy with its performance. Last night though it stopped working in the middle of preparing several hundred nightly emails, and I wanted to document the problem and the fix to help anyone else who hits this.

After a bit of investigation, I noticed that the Tyrant server kept dieing with "File size limit exceeded". My casket.tch hash database file had grown to 2GB, and running on a 32 bit EC2 server Tokyo couldn't cope with anything larger. There's a standard called Large File Support on Linux that allows you to access >2GB files, but it requires a few things to work:

– A modern version of Linux. I'm on 2.6, so it has support for LFS built in.

– A modern file system that supports large files. I'm on XFS, so that was also ok.

– You need to recompile your program to use the 64 bit versions of file operations. Happily Tokyo was using the correct off_t type for file offsets, rather than int, so I was able to add the -D_FILE_OFFSET_BITS=64 compile flag to the configure script in both Cabinet and Tyrant, rebuilt them both and they then ran with 64 bit file offsets on a 32 bit system.

There was one other quirk I discovered. By default Tokyo only uses a 32 bit index for the hash database, so you also need to pass in the l option at runtime to cope with the larger files, eg:

/usr/local/bin/ttserver -host /sqlvol/tokyo.sock -port 0 -le /sqlvol/casket.tch#opts=l

After doing those changes, I was able to restart my server and run the daily email updates again. The meta-data for my database seemed to have been corrupted by the issue, but all my data integrity checks passed, so I patched around the problem. Specifically in tchdb.c:tchdbopenimpl() the file size returned from fstat() didn't match the one stored in the meta-data header, so I skipped the check:

sbuf.st_size < hdb->fsiz

I don't usually post spam, but for anyone out there who gets an email like this and googles it, no, I don't think it's that dream investor you've been waiting for. The fact they can't even figure out my first name is a strong sign, and I'm not the only one getting these.

Photo by Ronn Ashore

I spent several years suffering with grotty customer service at Citibank, and then I was hit by a check fraud that spiraled into a kafka-esque nightmare. A house-mate snuck into my room, stole a check, forged my signature (poorly) and then cashed it for $1000. Einstein that he was, he'd had to write his driver's license and social security number on the back, which showed up when I got the photocopy back. Not wanting to tip him off, me and the other housemates contacted the police, who were very helpful and interested. Now all we needed was the location where the check was cashed, which didn't show up on the statement.

After 3 months of both me and the police constantly calling and visiting Citibank, they refused to provide us with any details. I was constantly fobbed off with bogus excuses, since the case was allegedly in the hands of their fraud department who must live on an island somewhere in the south Atlantic with no means of communicating with the outside world, since I was never able to get a phone number or address to contact them. I finally received a refund after blowing my top at the local branch, and then promptly closed my account, threw the house-mate's possessions out on the front lawn and sent a copy of the forged check to his parents.

I was reminded of that when I saw this article on someone being hit with a $888,888.88 bank charge, with no explanation or help from the bank staff. It sounds like exactly the same sort of organizational failure that stymied my efforts to get help. From what I can see, the big banks have spent the last decade trying to build automated systems and procedures so they can get rid of expensive staff. That mostly works for routine operations, but as soon as something unusual happens you need somebody with judgement and authority to make decisions.

So what's the answer? I moved my account to a credit union eight years ago and I've been incredibly happy with them ever since:

– The customer service has been fantastic. They have trained, motivated bank staff able and willing to sort out problems for me, both in the branch and on the phone.

– I pay zero ATM fees, even when I'm traveling, since I can use any other credit union's machine for free.

– They don't gouge me with any other fees either. The big banks make nearly 40% of their revenue from 'non-interest income', and the bigger they are, the more they rely on them. Even worse, the 20% of households who pay the majority of overdraft fees (ie the poorest) pay 80% of those, averaging around $1300 each annually.

– I also get a warm glow inside because my deposits are funding straight-forward loans to local people and businesses, not financial speculation or empire building by bank CEOs. I'd rather be helping George Bailey than Gordon Gekko.

My personal account is with Keypoint Credit Union, and my business one with Lockheed, and they've both been stellar. If you're sold on the idea, there's almost certainly one that you can join, either because of where you live or the industry you work in. If you're current with a large bank, you won't regret switching.

Photo by Roadside Pictures

To really learn about what your users want you need to see how they respond to the different alternatives. Running A/B tests is a great way to do this, but even though the concept is simple, I always felt like it would require some complex coding and database setup to implement. I was wrong: inspired by Eric Ries's tips from a recent workshop I've been getting a lot of valuable feedback using just a 32-line PHP module and plain old logging to a file.

To use it yourself, all you need to do is think up a name for your test, and surround your alternatives with an if (should_ab('yourtestname', $userid)). That's it. I've deliberately made it so there's zero configuration, you can just pick an arbitrary test name, to encourage myself to test early and often. It's best if you have a proper user id to supply to the test function, but if you omit it, the client IP address will be used instead.

Now when your users load up a page they should see one version or another based on who they are, but how do you gather the information about which one worked? I'm logging all my user events to a file on the server using my custom_log() function, so whenever a user views a page I want to store what options they viewed it with. To do that, the only other function in the module returns an array containing what A/B choices were made for the current page. With that appending as a JSON string to each log entry, I can run analytics on the user's subsequent behavior, to tell which version of a front page led to the most conversions for example. The only tricky part of this approach is that you need to make sure you're logging the event at the end of the page, after all the choices have been made.

If you want to dive deeper, there's lots of strong frameworks out there for split-testing (I particularly like kissmetrics' approach), but even using something as brain-dead as my 32 line module will be a massive leap forward if you're a non-split-tester like I was.

[Update – Doh! I got the random generator wrong, it only returned true about 30% of the time using the md5 test. I've switched it over to crc32 below and in the file]

Download abtesting.php

<?php
// A module to let you do simple A/B split testing.
// By Pete Warden ( http://petewarden.typepad.com ) – freely reusable with no restrictions

// An array to keep track of the choices that have been made, so we can log them
$g_ab_choices = array();

function get_ab_choices()
{
    global $g_ab_choices;
    return $g_ab_choices;
}
?>

Photo by Old Shoe Woman

I needed a function in PHP that worked like error_log(), but appended to a set of custom files rather than to the standard error_log. I wanted to have an easier way to organize the different types of information, so that important messages weren't buried in an avalanche of less-crucial warnings, but this sort of thing is also great fodder for analytics if you write user events to their own file.

The result is custom_log(). It takes two arguments, a category name that determines which file to write to, and the message you want to log. The message gets written to that file, prefixed with the time and client IP. You can download the code as customlog.zip or it's included below:

<?php

?>