To give a little background on how I understand the state of the School of Informatics, IU Bloomington, and the State of Indiana, there is a significant brain drain. The State of Indiana can’t keep the talent it produces from their state universities that found first-of-their-kind schools. Hello from California by way of Illinois.

Funding Ideas

A competition that funds business plans is ultimately funding ideas. The timeline of the competition is purely academic and verges on the pace of corporate. Submit in November, select by February, and present in April.

It’s open to seniors and graduate students meaning if you didn’t already secure a job offer by mid-November, which you should in such a hot tech market, feel free to throw an idea out there that appeals to Indiana based investors (hint: faster assembly line). If you still don’t have a real job offer or couldn’t build a prototype to get funding, you could still make a presentation by February. After six weeks of deliberating over PowerPoint slides, you, you and your partner, or you and your team will win at least $100,000.

“As an Indiana University graduate and local software entrepreneur, I am thrilled to have been involved in the formation of BEST. I am optimistic that pairing talented student entrepreneurs with seed capital and business mentorship will lead to entrepreneurial success”

- ExactTarget CEO and BEST investor, Scott Dorsey

You’ve proven you’re a talented student entrepreneur after a few rounds of presentations spread over six months. Now, CEOs from all over Indiana will drop what they are doing to mentor you to bring your idea to life. Your seed capital should give you at least a year (maybe two if you’re lean) to build it.

Build It

Now imagine it’s the beginning of your second semester of your junior year, and you’re scheduling classes for next Fall. (That’s how it felt for me.) An upperclassman didn’t tip you off that your internship from the summer before junior year could be used as your capstone (thanks Tyler) so you’re blocking out half of your schedule for one course where YOU BUILD SOMETHING.

For the next 6–8 months between homework, Little 500, and a summer internship, you can formulate and iterate over half a dozen serious ideas before showing up for your first capstone session where you form a team to build something. You and your team then have two semesters of student loans (plus endless credit card offers) to build a business. Student loans (and credit card interest) are way cheaper than venture capital funding, especially if you’re a “talented student entrepreneur.”

Better Yet

In all seriousness if you think you’ve got a good to great chance at this BEST competition, drop out and come to Silicon Valley. There’s a valuation bubble. Port your PowerPoint slides to HTML/CSS/JS and talk loudly at University Ave. coffee shops, and odds are you’ll have $100k before everyone else has finished submitting their business plans on Nov. 15.

Shamelessly, the company I build products for needs more help. If you just need someone to talk with about building ideas, I’m open to that, too.

Weaknesses

What concerns me most about this business plan competition is the lack of involvement by two key players in the Indiana technology scene as I see it. Gazelle TechVentures and Scott Jones used to play a substantial role in driving technology innovation and hi-tech job growth in Indiana with the support of Mitch Daniels. Jones and President McRobbie have a long history. I was present for their first press release over four years ago. If this was a sound plan for job growth and technology innovation, Scott Jones would be involved.

SproutBox has been investing in solid, vetted business plans for years in Bloomington. Why aren’t they involved? They even host a technology conference that boasts the benefits of starting a technology company in Indiana!

It frustrates and saddens me that this is what is announced the day before the SOIC Career Fair. I’m still proud to tell people I have a degree in Informatics from Indiana University even though it matters less every day. Throwing money at problems like this rarely works, especially in technology.

Students, don’t plan it– build it.

Nine months ago I ended an amicable lease with three roommates and a landlord in the Wrigleyville neighborhood of Chicago. About seven months ago, I received a security deposit check that was late and less than the original amount. I went to court, settled, and turned a loss of $400 into $5000.

I will not go into the details of our case because if I have learned one thing over the past six months, it’s that I never want anything to do with any sort of legal proceeding ever again. The legal system is slow, full of unknown technicalities, and endless paperwork. Surprisingly, the Cook County Clerk of the Circuit Court does keep online records where you might be able to find my name if you don’t believe me about the arduous process. I did want to share my experience, advice, and tips for anyone else who might have felt slighted by a landlord.

Learn Everything

The upside of government websites being poorly designed and severely outdated is that they look exactly like internal corporate websites. I read everything I could about security deposits in Chicago starting with the Residential Landlord Tenant Ordinance. Next, I scoured blogs and legal sites for information and clues on whether my case had any legs. The more I read and learned, the more passionate and convinced I became about the matter.

Bluff Accordingly

You will probably find a lot of people online suggesting to bluff your landlord to think you’ll take them to court. Even the most well written email and properly spoken voicemail won’t make them bat an eye. File the proper papers in court or have a lawyer send an appropriately threatening letter. Even in a tenant friendly city like Chicago, you are pretty ineffective and powerless alone.

Lawyer Up

I showed up to the courtroom after filing all of my forms and paying all of my dues ($284 total to get heard in Cook County by the way). I imagined the court appearance would be similar to Judge Judy so I prepared all of my paperwork and a little spiel to present it all to the judge respectfully in turn. Before I could give my name, my landlord’s lawyer handed the judge some legal documents, quickly recited l3g4l sp33k, and we were all ready to pick a date to meet again in 30 days.

I had no idea what happened either. My amateur filing of paperwork was grounds for dismissal, or at least that’s what the defendant was asking the judge to do. I now had 30 days to get even more serious so I got a lawyer by calling the Illinois Tenants Union.

Selling Your Case

I should clarify “got a lawyer.” I called the number on the website after work which allowed me to leave a voicemail with some basic details of my case in hopes that someone would return my call. A day later a real life lawyer called me back. I was to come to their office with all of my evidence in order for them to invest their time in my case.

Luckily, I was already on the brink of quitting my job so taking a two hour lunch to convince a lawyer to let me pay him $300/hr after doing all of the leg work for his case was not a problem. Throughout my entire ordeal with my lawyer, I was treated with very little respect as a client. Do not hire a lawyer you found on TV or a quick Google search.

I would suggest looking for law offices in the most expensive parts of town like the Gold Coast or Loop. Call them, briefly explain your case, ask for a 30min meeting, and my guess is that they’ll either take it or point you in the right direction if you’ve already done your homework. Hustling should come easy if you know you’re right and only  need legal representation so as not to be derailed by the legal process.

One thing I did take to heart from my lawyer is that the system is built for lawyers by lawyers. Tort cases like mine go in front of judges who are more likely to be landlords than tenants so no matter how tenant-friendly the city is on paper, bias still exists.

Baa Bah

That was the sound of settling. The RTLO states that certain wrongdoing by a landlord constitutes that two times the original security deposit plus interest, costs, and attorney fees be awarded. For our $2750 security deposit, I understood that to mean that I could walk away with a maximum of $5,500 plus interest, which is negligible these days, costs, which was the original $284 that got me in front of a judge, and attorney’s fees which constantly accumulate.

Wrong. Your maximum award is 2x, but you are still owed your original security deposit. In our case, we were originally shorted $400. Our potential maximum award was $6,184 plus attorney fees, but we signed a complicated and greedy contract with our representative that essentially stated, “We’re looking to settle and take a large chunk of anything beyond your original deposit being reclaimed.”

Exiting

We ended up settling for $5,000 for a lot of calculated reasons. If this were Phil Hellmuth’s legal-deal-of-the-week, I’d go into the thinking behind the move. If this were treated like a venture investment, we all walked away doing really well.

After many months and plenty of riled conversations, lots of people asked me if it was worth it. The hourly wage wasn’t, but if you approach it like Tim Ferris did an MBA, totally. It was a great experience, profitable or not.

I’m not out to capitalize on every landlord’s minor miscues. It was more of an exercise in knowing your rights and defending them. I’ve still never met or seen the landlord alluded to in this entry so obviously it was strictly business for him.

It’s all in the game, yo.

Magpie allows you to advertise on Twitter through other user’s accounts. As an advertiser, you write your advertisement in 140 characters or less including whatever links or hashtags you please. Then, you set how much you want to spend which determines the number of users your tweet is exposed to. Twitterers who sign up to allow advertisement tweets in their stream get paid based on how many followers they have when a tweet goes out.

I signed up when they originally launched around two years ago. In that time I earned a little over $38. In order to get a payout, I had to earn $50. So instead of spamming the followers I now value and did not as much when I started tweeting, I used the $38 to send out my own spam in hopes of selling a few more iPhone apps. According to Magpie’s metrics we reached over 39,000 people for less than $39 between July 28th and August 5th.

Our Google Adwords campaign stemmed from a $75 coupon in Wired. It’s a more traditional approach to advertising online so we had a little more control on the audience. We chose to target mobile and had over 100,000 impressions. Our click through rate was pretty low. Even though we targeted mobile, we couldn’t target “webpages on iPhone” which probably would have performed better than anything on Android (since we don’t have an Android version of our app).

For our minimal effort, we had 66 downloads of the free version of Geolorean and one paid download. That netted us around a dollar plus or minus whatever iAd earned us (close to nothing). Not every iPhone app developer gets to quit their day job for fame and fortune. Twitter advertising wasn’t effective. The accounts that auto-tweeted our spam weren’t of quality in my eyes. Adwords weren’t effective either probably by our own fault. Targeting mobile devices was a start but that didn’t mean it was an audience that was looking to buy a location based services iPhone app.

It was a good lesson. It didn’t cost us anything. Next time I think we’ll approach publishers directly or use isocket so we get to direct our ads in a more meaningful way.

There was a reception Thursday night with plenty of wine courtesy of Gary V. I got to meet people from all angles of the technology world. There were guys from London, ex-consultants turned entrepreneurs, solo freelancers building iPhone apps, and established veterans from the valley. The next morning when we showed up for breakfast it felt like you already knew half the room.

Chris Sacca was the first speaker. I knew who he was and a few things he is involved with, but I hadn’t seen any videos of him speaking before. After his talk and participation in the afternoon roundtable Q&A, I wrote down two words — affirmed reputation. I had heard what nice guy he is, how smart he is, and how involved he is philanthropically. Now that I’ve seen him in person, I can confirm he is the real deal, and he does wear those cowboy shirts everywhere.

I hadn’t heard of Ben Kaufman before, but half way through his talk Andy and I both were browsing quirky.com. It was nice to have someone who dealt in physical goods as opposed to a dot com. He had a great answer to a question in Q&A about sustainability. Unlike traditional consumer goods producers who put out products just to put out products, Quirky only makes products people have a need for which is based on if the users think it would be useful.

Dave Morin was someone I really wanted to see since he has all but disappeared for the last few months while building Path. He delivered the best talk of the day. Most of it comprised of topics covered in my new media classes in Informatics and Telecommunications.

The average Facebook user has 55,000 friends of friends.

It’s crazy to think you have that kind of audience. His main points were simplicity, quality, and design. I loved every bit.

As I was still absorbing Dave’s talk, Travis Kalanick came on and described himself as The Wolf from Pulp Fiction. I was immediately intrigued.

Travis likes to include in his talks that he was once sued for $250 billion. I thought it was cooler that he was actually at the dinner they portrayed in The Social Network where Justin Timberlake talks about a million dollars not being cool. Travis also sat at our table for lunch and told us more about Ubercab, which I can’t wait for here in Chicago.

That’s the best part of tech meet-ups and conferences. You get exposed to these emerging technology sites and services. The other standout new service from the conference was definitely FastSociety as it managed to distract the afternoon panel.

Kevin Rose was the speaker I was probably most familiar with since I still watch Diggnation every week. Andrew Mager actually got Kevin’s entire talk up on ZDNet just a few minutes after it ended. My favorite point from Kevin’s talk was Skills vs Talent when hiring. Talent is more important than skill set. I found it refreshing since I’m constantly worrying about not having a specialty, but that’s for another post.

Dave McClure was another impressive presenter who I had heard a lot about but never seen before. He cursed a lot which got a lot of laughs, myself included. Dave was usually the catalyst of the Q&A becoming boisterous and on the verge of losing control. When he had a serious point to get across, he would speak in a lower tone and you could see just how smart he is.

Alexia Tsotsis is a blogger for TechCrunch and was the only female speaker. She, too, was pretty funny talking about how to not pitch like a douchebag when trying to get covered by AOLCrunch. I constantly have half thought out, unintentionally funny emails fill up my corporate inbox. I’m sure the amateur attempts she sees daily make it a little easier to work for Arrington. All of her advice will be very useful the next time I try to get a hold of a blogger.

Gary Vaynerchuk wrapped up the speaking for the afternoon with fresh material that I’m sure will be covered in his next book. He’s another speaker who I probably follow too closely online. I’ve seen all of his talks online so I was extra excited that this talk was so original. The best part was when he called out someone who had gone around and passed out flyers saying something along the lines of “follow this twitter account to win an iPad.” He was brutally honest (and quite on point) about that method of advertising being tired. A show of hands revealed only 7 people out of the room of 200 or so bothered to follow for a chance to win.

Later in the Q&A, the panel brought up the guy who had handed out the flyers. He had a chance to tell his story and made a real human connection. Instead of being the spammy marketer, he was a genuine entrepreneur trying to make it like everyone else. I’ll remember that chance of redemption more than anything.

Tahoe Tech Talk was fantastic! I’m already looking forward to it next year.

First, there was Tech Cocktail Bloomington hosted at the IU Memorial Stadium Hall of Champions. I’ve been to a few Tech Cocktails here in Chicago and always have a blast. I was bummed to not get in town in time to catch this one at the newly completed Hall of Champions.

Friday was filled with a great lineup of speakers and discussion panels. Ben Huh, CEO of Pet Holdings, Inc., started off the morning talking about generating revenue from user generated content. I admittedly wasn’t looking forward to his talk since I was never that into the whole internet cats thing. That ended up being the point of his talk. It’s not about what everyone likes, because there is very little of that, but rather the many niches of humor that you and your group of friends find funny. Own enough of these sites that cater to these niches, and the money piles up.

Neil Patel was the next speaker, and he had peeked my interest after hearing him on The Pipeline. He wasn’t afraid to tell everyone he was 25, and on top of that act like it. I think it rubbed some of the older, more modest midwesterners in the crowd the wrong way but not me. I was hoping for more of an updated talk on “Metrics and Methods for Internet Marketing” but it was pretty entry level SEO advice. He did offer up some cool tools like Yahoo’s Site Explorer that I hadn’t heard of before.

Then came the first discussion panel titled “More Than Corn.” The panel of Midwest executives did not deliver. I thought they would be up there boasting about how great it is to be part of tech companies in the Midwest and the opportunities that lie ahead. Instead, they never offered any valid arguments beyond the cost of living being lower and being a great place to raise a family. Working for less and settling down is something very few of my friends under 30 are interested in. By the end of it, I was reaffirmed with my decision to leave Indiana. Indiana’s brain drain won’t stop until there’s something to stick around for besides growing old.

Frank Gruber, co-founder of Tech Cocktail, rebounded nicely with some general entrepreneurial advice he had picked up along the way and witnessed through hosting Tech Cocktail. He had the best slides of the day, IMO.

After a tasty lunch at Esan Thai with some of the Sproutbox team, Christian Lander, author of Stuff White People Like, took the stage and delivered his very funny and entertaining story of starting a blog and becoming a New York Times Best Seller. He was hilarious and everyone loved him.

The second panel of the day titled “Go West — Former midwesterners that have moved to silicon valley share their stories.” They did a great job of selling the Valley by explaining the limitations of staying in the Midwest, but not without offering a fair warning of the difficulties that come with moving west. My favorite bit was from John Ramey, founder of isocket, when he eluded to an article from Hacker News a while back about how other cities try to reproduce the Silicon Valley but are unable to because of its history.

Chris Wanstrath, co-founder of GitHub, delivered an informative talk about the bootstrapping of GitHub. He didn’t use slides which I liked. It was a pretty traditional entrepreneur story– we had a problem, solved it, and figured out how to make other people pay for our solution. I like git the more I use it and would like to contribute more open-source code to GitHub.

Please excuse me for being an Apple fanboy, but the Windows Phone 7 demonstration was a joke. I’d already seen it at a previous Tech Cocktail in Chicago so I knew what to expect from the hardware and software (disappointment). The slip-ups and trip-ups of the presenter was humorous, but you can sum up Windows Phone 7 as “everything iPhone and Android have done right without their mistakes.” I’ll be really surprised to see it take off.

Sloane Berrent has a very impressive resume and was one of the few non-technical speakers. She was probably the most polished public speaker of the day. You can see her slides that cover some great tools for organizing people for causes and getting results.

Micah Baldwin was surprisingly my favorite speaker of the day. His talk on “How Not to Lose in a Failure Filled World” was an interesting look into the human psyche. I tend to like Jason Fried’s approach that you should never want to fail, but Micah presented a formidable argument. He is a great story teller and brutally honest.

After a brief CEO Q&A wrap-up, it was time for the headliners Michael Ian Black and Michael Showalter. They were pretty entertaining telling their story of using the internet to fuel fame. I had a pretty good understanding of the dilemma from new media informatics classes, telecommunication classes, and my time with Gamezombie.tv. It was interesting to hear how much effort MTV puts into scouring the internet to find new talent.

Some final takeaways: Chicago was never (or hardly) mentioned. The best storytellers give the best talks. Shout out to Matthew Dimmett for the fantastic design work all around. Congrats to the volunteers who put on such a great event! I will definitely be back next year. Seeing a theatre of roaming Twitter avatars is creepy and calming at the same time. Getting to catch up with the people behind the avatars, and even meet some of them for the first time was great.

I thought I was going to be able to cover Dev Derby in this post, but didn’t know I had taken so much away from Friday’s speakers. I’ll cover that madness in the next post.

Update: I also thought it was strange that ChaCha, Scott Jones, and Gazelle TechVentures (all Indiana based) were not mentioned at any point on Friday.

I’m always interested in people’s stories (how they grew up, where they came from, what makes them who they are today) and Tony’s story was no exception. The narrative describing his childhood was funny and easy to read. I appreciated how he admitted to finding creative ways around actually doing any hard work. He didn’t seem to get in as much trouble for it as I did in middle school and high school. One thing was made clear in the beginning of the book — Tony was a serial entrepreneur. If there was a buck to be made, he was going to figure out how.

I truly empathized with how Tony (and his friends) felt about their first job out of college. They went from Harvard to Oracle in the Silicon Valley. Great jobs, great pay, no worries, enjoying life. That is– life outside of 9–5. This line was golden to me:

“This wasn’t about the money, it was about not being bored.”

Tony and his friend quit their jobs at Oracle to design websites for local businesses. At this point, Tony’s story of breezing through college, getting a good job, not liking it, quitting to design websites, and then going on to start LinkExchange was almost verbatim of what I have been considering doing for the past month or two. Glad to know that there is a possibility of building something and selling it for $250 million to a big company like Microsoft. It wasn’t an overnight success. I found the journey of LinkExchange just as exciting as Zappos’ story.

Fun fact: Tony Hsieh did not found Zappos. He was an original investor. Another fun fact: it was originally named “Shoesite” but that seemed too generic so Nick Swinmurn, the founder, settled on Zapos, which was short for the spanish word zapatos meaning shoes. Tony told him to add another ‘p’ so it wasn’t accidentally pronounced ZAY-pos. That was super interesting to me after wrestling with names for a few side projects recently.

Something that struck me as odd about the book was that Nick just disappears from the story. Apparently he left the company in 2006. Throughout the book “Tony, Alfred, and Fred” are mentioned time and again but Nick isn’t ever really part of the picture. I don’t know if that’s bad. It was just kind of odd since he was the founder.

Another quirk about the book was its transition from the story of Zappos to explaining their culture. One page they’re moving to Las Vegas and the very next page they’re explaining the Culture book. It was an abrupt switching of gears. The journey of Zappos’ growth was enjoyable, laid-back reading, but the insights on developing core values to shape a corporate culture is what you’ll want to re-read and go back to for reference.

Since I’ve been working for a big company for the past six months, I could relate to a lot of the corporate cliches Zappos tries to avoid or improve upon. Creating their core values was a very interesting process. I especially liked what he had to say about integrity:

“Integrity was a value that had been suggested by some employees, but I made a conscious choice to leave it out. I felt that integrity would come from us actually committing to and living up to our core values in everything we did, not just referring to them when it was convenient.”

Ironically, Accenture lists Integrity as one of their core values. We memorized Accenture’s core values during our initial training, but I have to admit that it’s easier to relate to Zappos’ Core Values. Both companies stress living their core values. Would you think it’s easier to live out “Client Value Creation” or “Build Open And Honest Relationships With Communication”?

Towards the end of the book there are excerpts from employees and even customers. One was from a recruiting manager on the core value “Be Adventurous, Creative, and Open-Minded” and how her freedom to be creative at her job made it more fulfilling. This was another golden passage for me:

“The problem when someone feels burned out, bored, unchallenged, or stifled by their work is not the job itself but rather the environment and playground rules given to them to do the job at hand.”

I’ve been there. Just today actually. I’ve heard it from coworkers, too. So many points in this book hit home for me, which is probably why I couldn’t put it down. I read this article on Inc.com about Zappos’ marriage with Amazon before finishing the book. The book’s version is much more upbeat. The great lesson he offers is very Jason Friend/37Signals-esque and something I’ve definitely heard before but can’t help but repeat.

“You don’t need to put a lot of effort into reaching out to the press if your company naturally creates interesting stories as a by-product of delivering a great product or experience.”

The last chapter of the book barely scratched the surface of positive psychology. Tony definitely whet my appetite to read more books on the subject. I can easily identify pleasures and passions in my life, but as for a higher purpose, I feel I’m still searching for mine or haven’t realized what it is yet.

I’m really glad I read this book. I highly recommend it. Let me know if you’d like to borrow one of my copies.

The two points I took away from the opening keynote by Laura Hollis were that entrepreneurs were not satisfied with the status quo and that they needed to be rewarded for being the most creative and innovative.

Next, there were two panels to pick from (somewhat blindly). We chose Panel A consisting of Jonathan Naber, Michael Bell from Fronterion, Phil Tadros from Doejo, and Zach Kaplan from Inventables. I think the panel had the potential to share a lot more knowledge than they were able to because of the poor questions. For example, after the panel got done with introductions saying they were part of companies no larger than 30 people this girl rambled off a prepared question along the lines of, “How do you scale your company to be 50 or 100 employees while sticking to your company values?” No one works for or has built a company of 50 people so how are any of them going to answer that? Other questions were very specific to only one member of the panel which defeated the purpose of the panel.

After the panel, we went to our first breakout session and chose “Bootstrap Marketing” with Michael Bell and Phil Tadros. Tadros was by far my favorite speaker of the day. I had my laptop with me so I was able to quickly stalk him and the Doejo operation. You could tell he had a lot of real world experience and knew how to get things done. A lot of his marketing advice revolved around word of mouth, referrals, and parties. By the end of the breakout session I had come to the conclusion that marketing isn’t important until you have a solid product or service. When you have that, avenues for exposure open very quickly.

One of the most entertaining parts of the day was Tadros taking questions and immediately presenting solutions and striking up business deals with other entrepreneurs. “Oh you have a music site? We have X and Y musicians as clients who could help promote. Let me get your info after this.” It was great because instead of “this is how I would accomplish your goal”, he approached it as “let me help you accomplish your goal”.

The second breakout session we attended was “Finding Good Problems and Solutions” which was more presentational and less Q&A. Ken Taylor from Yahoo started off presenting about where and how to find good problems to solve. It was geared towards those who “just know” they need to start a business but have no clue where to start, but this was fitting since a majority of the workshop attendees looked like college undergrads. Michael Callahan followed with how he approaches finding solutions. It was funny because he presented like his approach was totally his own and then Taylor’s first question after he was done, “so like the scrum?”

Carl Nordgren, a visiting associate professor at Duke and co-founder of Minogi, gave his closing remarks in true college profession fashion.

This will only take 15 minutes, but when I tell my students at Duke that they know it’ll be 35 minutes.

It was a rather long closing, but he presented some valid points and gave an insightful historical look into the Millennial Generation. I jotted down that “creative capacity increases when you declare you are creative”. I love that line. I enjoyed Carl’s remarks and wanted to take his class in order to hear more.

What I Took Away

I need to go produce something and stop observing all of this entrepreneurial stuff from the sidelines. There were a few nuggets and insights that made it worthwhile, but I had heard most of it before (more than once and practically memorized in some cases). I have no track record and my portfolio is getting stale. I’m going to spend the next 3–6 months putting out a lot of projects that have spent way too long on the back burner. This is the first of many.

At first glance, BidFire is a very cleanly designed site that’s well put together and simple to get around. Kudos to their web designers. There is a short video that explains how the site works. Surprisingly, it has very little in common with eBay for being an auction site.

Instead of being able to bid as much as you want like on eBay, on BidFire you pay each time you bid. It costs $1 and you have to buy bids in packs of 10, 25, 50, 75, or 100 before you can use them.

On eBay when the auction is over, it’s over. On BidFire, the countdown to the auction’s end is reset every time someone bids within the last minute of the auction. This means that an auction could go on as long as bidders have bids they’re willing to use.

Auctions increase at a fixed amount, usually a nickel, on BidFire. This is what keeps their auctions so appealingly cheap. It’s also where they make their money.

I was observing an auction for 25 bids that was valued at $25. With a little over 2 minutes left in the auction the price was $0.10. All of a sudden, the action picked up just like you would expect an eBay auction to. Instead of someone with the fastest internet connection putting in the last bid with two seconds left in the auction, a group of six or so bidders went calmly back and forth sometimes bidding with 50 seconds left and other times with 2 seconds left. Either way, the clock reset to one minute and the price went up a nickel. Here’s where the auction turned into a game of sorts.

The point of the game, as I see it, is to bid as few times as possible to win the auction. The final price is not important because it never comes close to half the retail price of the actual item. Every time the clock nears zero, you have to predict whether or not someone else is going to bid to reset it for everyone else. If no one does, the auction is over. If someone does, a nickel is added to the auction price and the clock is reset to one minute. If two people bid, both are charged with using a bid, the price goes up twice, and the clock is reset just once.

This auction for the 25 additional bids ended with a final bid of $2.15. As long as the winning bidder didn’t bid more than 22 times, he came out ahead and beat the system (22 x $1 + $2.15 < $25). For everyone else who bid, they played into BidFire’s revenue model. It took 43 bids to get the price up to $2.15 so BidFire made $20 on the auction! (43 x $1 + $2.15 = $45.15)

Another auction that just ended was for a Playstation 3 Slim 120GB that retails on Amazon for $299.99. What did it go for? $15.40! Someone got a real steal right? Sure, but BidFire didn’t lose any money. If you divide $15.40 by $0.05 you get 308. BidFire could take the $308 they just made, go right to Amazon and spend $299.99, ship the Playstation for free to the winner, and still have enough left for a delicious meal at Taco Bell.

You might be thinking that $20 here and $8 here isn’t much especially when BidFire doesn’t even have 10 auctions a day, but what if they did? What if they had the right backing where they could have 100 or 100,000 auctions every day? If they did, would economists rule the site and play the odds to their favor? Is it technically gambling since you’re betting your dollar that you’ll be the top bidder each time? How else do you explain not winning an “auction” when it cost you to bid?

It should also be noted that they don’t always profit. If you look at their FAQ, they’ve listed some sample auctions like one for a $50 Walmart Gift Card that was won for $0.05 (technically $1.05 since the bid cost a dollar).

Kudos to BidFire’s clever profit model. Is this actually an old model I’ve never come across (e.g. pyramid scheme)? Please leave a comment if you’re better at math than me and can give me some pointers to gaming the system (legally).

Pandora had a huge win in an Internet radio royalty ruling but this also meant that they would have  “to begin limiting listening to 40 hours per month on the free version of Pandora”. If you go over the free 40 hours in a month it’s just $0.99 for unlimited listening for that month. I think that’s a great deal, especially since I sit at a desk most of the day and can’t stand listening to my coworker’s idiotic side comments.

My new favorite web service of the summer has been Dropbox which allows you to store files online and sync them across multiple computers. They sent me this email last night about changes they’re making:

The Dropbox team has been hard at work these past few months and we’d like to tell you about some upcoming changes and enhancements to the Dropbox service.

We’re Changing Undo History
Did you know that Dropbox automatically:

• Safeguards any files you delete in case you need to undelete them
• Saves old file versions in case you need to go back to them later

It’s like having “undo” for all your files and folders.

Today, Dropbox keeps these deleted files and old file versions (“undo history”) forever. For many people this creates clutter, and it also wastes space.

Because of this, beginning August 1st, our new policy will be to keep 30 days of undo history.
…

I actually had no idea about that feature since I’m new to the service, but once again you can see they are scaling back the free service and pushing the premium subscriptions (freemium model).

The last email I received about “new policies” was from Vimeo who starting August 1st will only keep your original video source file for one week after upload unless you become a Vimeo Plus member. I wasn’t as bummed about this one since I have only uploaded one video there to date. I may do more if I ever start editing stuff I film with my Flip HD.

I’m not mad at any of these companies for cutting back free services. I understand it costs money to offer them to people for no charge. SMS messages are expensive and so is streaming music and paying royalties. Hard disk space has become cheaper and cheaper but it still costs money. I don’t think any of these companies are trying to force people into becoming paying customers, they just can’t simple take on the costs and subsequent losses like Facebook and YouTube do.

Mashable’s had a great article today that was very Mark Cuban-esqe talking about how “free will not last forever”. It was less about how companies can’t survive giving everything away for free, but more about how the end users are willing to pay for services if it’s better and easier than the free alternative.

If users are persuaded to sign up for a premium account for Tatango, Pandora, Dropbox, or Vimeo, they’ll expect more whether it be more features or a more polished experience. And if those users are willing to spend the money, they’re probably going to shop around for some alternatives where their money could go further. If they lose the functions they love the most about these services and don’t have the money, then they’ll find the next best free alternative or maybe get inspired to start their own service.

I’m lucky enough to have more disposable income to subscribe to more premium services and buy more apps and software, and I think a lot of people are with me at least in their willingness if they don’t have the extra cash. (I mean who wouldn’t pay for TweetDeck?) All of this breeds competition which is great for me– the end user. I want the best of the best for as cheap as possible and while that might not be free as often as it used to be, I should still be the one getting more out of it.

Dear Scott Weber and the rest of Volatus Advisors, LLC,

GET A NEW WEBSITE! Yours is embarrassing in every sense of web site evaluation.

Thanks,

Web Designers Everywhere

P.S. Here’s something to get you started:

<script type="text/javascript">
<!--
var currentTime = new Date()
var year = currentTime.getFullYear()
document.write(year)
//-->
</script>

Before I get on to regurgitating what you talked about last week, I wanted to recap how these blog posts are evaluated. We receive one point for being within 50 words of our 750 word requirement. We receive another point if what we talk about in our post is related to the assigned questions. We receive out last point for posting before midnight the following Sunday. I’m going to come right out and admit to Travis, who grades these, that I’m not even attempting to get close to the word count this week. Just not feeling it, sorry.

Here are the points I wrote down:

• compelling concept
• well thought out business plan
• emulate most successful company
• gotta be realistic
• outgrowing management
• be nimble, define processes
• think about what you want
• corporate culture
• acquiring funding
• change in business

As you can see they’re pretty self explanatory. What would save everyone some time is if your talk was captured and uploaded to Canteloupe.tv or some other website so anyone who is interested in hearing your formula for success can watch your talk instead of relying on my crappy recap. For example, Gary Vaynerchuk has a whole section to his website for his keynote speeches. It’s awesome.

Here is Max Beatty’s formula for getting people care about what you have to say:

1. Get a new website
2. Post your talks there
3. Follow your own advice

Thanks and have a great day!