Boris Yankov

Anyone even remotely interested in Web 2.0 apps will be delighted to learn that FreshBooks just reached 80,000 customers. You can read an interview with their CEO here.

But aren’t you asking yourself, do this number anything without no details are provided?

Users 2.0

One thing that has lost its meaning with Web 2.0, is the concept of a ‘user’. Is a user someone who is paying for your application? Or is he someone who typed in a user name and a password, for a chance to take a look at your service? The exact definition varies a lot, from person to person.

As a simple example: I have registered twice for a free account at FreshBooks. Am I considered two users or what? In the old days, no one cared to count the downloads of their programs as an actual user. Things certainly change.

Customers 2.0

To be fair, FreshBooks looks like a decent application, with good potential. I am sure they have real customers, paying real money. And money are so Web 1.0. Who needs money if they have visitors? I guess the real problem I have with this, is the number of 80,000 users cited.

But lets talk about me for a sec, before continuing, should we? I have a free program called MSConfig Cleanup. It is of the old-style type, out-of-fashion desktop application. It gets about 300 downloads per day. This should be about downloads 110,000 per year. Now I am confused. These people, downloading my app, are not paying anything. Are they customers of mine? Or should I have a Web 2.0 application to be able to claim them as customers?

Profits 2.0

Lets get back to FreshBooks. How much exactly are they earning each month?

To be honest, I don’t know. No one except them doesn’t know. But let’s try to calculate their revenues.

First try. The guys are not hyping anything. They actually have 80,000 paying users. Their prices are $14, $27 and $39 respectively, to an average of $26.7. Eighty thousand people paying this much means over 2 million dollars each month. Not bad at all, huh? Should we be waiting for an IPO soon?

Second try. The guys are reporting their total users, including the free accounts registered. We assume a typical rate of 1 paying customers per 100 visitors that registered for an account. We get 800 people that registered for FreshBooks and paid for using it. In the 2 years running this business, the FreshBook guys retained 30% of them (hey, we are trying to be realistic this time). And should we calculate in, the fact that the cheaper accounts usually (always?!?) get more registrations? So how much profits per month would are we speaking of? $5000.

Reality 2.0

There is so much hype around Web 2.0 that even successful businesses with reasonable, back-to-earth applications can’t resist the temptation to lie with their numbers.

Keep in mind that FreshBooks is not a social network site, and it is not even written on Ruby! It even does have profits! May be it is not a Web 2.0 application after all. Let get back to reality, should we?