This is Part 2 in bi-weekly series by Oban Lambie.  Part I is here.

The Product

I wish I could tap into some super-entrepreneurial mental database to come up with exotic new products and services, but I can’t.  Sometimes, however, one falls flies right into the window (that would be a “bluebird” customer), He even told us exactly how to build the product.

I love customers like this.

This nameless customer said, “I prefer to shake hands with the people I do business with.” (What?!? How un-Web 2.0!  Where do handshakes fit into online social networking?!?)

He’d spent the previous year paying a large company to host his network of web cams. They were slow to respond to his requests, when they responded at all.  Their video players where choppy and they plastered their own logos all over the web cam players. The final straw came when our customer asked that his own logo be used instead and they refused.

Could we fulfill his requests and host his network of web cams?

Our programmers did some research, the client told me how much the big company was charging him, and we determined we could not only do it, but we could do it better and for less money.

Web cam hosting.  It doesn’t have that sexy glow like other high-tech products, and I often wish I was better at “skating to where the puck is going to be, instead of where it is now” but sometimes coming late to the game actually gives us a leg up.

After a few weeks of Joel and Jonathan (two of our rock-star programmers) writing scripts, modifying and testing the open-source Red5 flash server code – and giving our new service to a television station to beta test it and work out the bugs on a live audience  – we were in business.

See for yourself: One of the competitors web cams and a couple of our web cams.

Our advantage; bigger, smoother, clearer video and easy video player customization by the client (who can put their logos anywhere they like, themselves!) We also offer much more bandwidth for much less money.

The Money

200 hours.  That’s how long it took us to put this together.  We charge $125 an hour.  If a programming client wanted us to do this for them the final bill would have been $25,000.

Our cost for this work (salary, rent, computers, taxes, etc.) is about half of that, or $70 an hour.  Total Brownrice cost for project; $14,000.  If we add the dedicated server with 10 Terabytes of bandwidth at $300 per month (again, this is my cost, not yours!) and the costs to support the software, upgrade it, hold some hands, and send some emails over the next year, it looks like this:

Initial Programming:        $14,000

1 Year maintenance:         $2,000

12 Months Server:             $3,600

TOTAL  COST                 $19,600

We charge $29 per month to host a web cam (this is less than our competition) and we charge $3 per month per Gigabyte of bandwidth used, which is 1/2 what our competition charges. (Customers can also “buy down” the cost of bandwidth by agreeing to pay, in advance, for larger amounts.)

Bottom line: We make most of our money on the bandwidth.  And keep in mind that it essentially costs us the same amount to run a camera server whether we host one web cam or 30, so it behooves us to load this server up with accounts.

To date we’ve brought in about $6,500 from our bluebird customer and a couple of word-of-mouth referral customers.

Which puts us down about $13,000.

I clearly need these frikkin’ keyword ads to move some product.

The Keywords

We’re going to target ski resorts, amusement parks, daycare centers, and large construction firms.  Why? Because that seems to be what our competition does.

See, I was serious about not being good at skating to where to puck is going to be.

The Video

Did you know that Google can tell you what keyphrases your competition is potentially using, how much each keyphrase is likely to cost *before* you purchase them, and how many people type these keyphrases into search engines each month? In theory, if used correctly, this is most of the information you’d need to run a profitable keyword advertising campaign.

I’ve put together a quick eight minute screen-cast to show you how to easily grab this data (among other things.)  I’ve also tried to keep the tech-level fairly low so that semi-normal, non-developer types might understand it and do it themselves.  Let me know what you think:

We had some great comments on the first post, from some serious Internet Pros.  Check them out as many of the comments are insightful and potentially helpful for your online business.  And feel free to offer suggestions or comments below.

Next post:  We buy the keywords, build the pages, and show you how we track our clicks and conversions!