1 (edited by JohnA 2008-06-16 09:49:31)

Topic: Chumby Business Model

When I first got my Chumby, I absolutely loved it. Until yesterday, that is, when I was shocked to see ad channels surreptitiously added without my knowledge or permission. Certainly, when I bought the Chumby, there was no mention that I would be forced to watch ads. Nowhere in the web site, and nowhere in the activation process. Now this fact may be buried somewhere in the web site, but I certainly did not see it anywhere I looked.

Since I am an MBA student, I decided to look at the Chumby business model and see if it would work.

One thing that I have learned is that new products that are radically different from anything before them, like the Chumby is, take a very long time to penetrate the market. It can be five years or more before a product like this can penetrate 3-4% of the potential market. The key to success then, is: 1. Enough capital to sustain the company during this time; 2. Segmenting the market and targeting the innovators, who are the ones that buy new products like the Chumby; 3. Creating a positioning statement that articulates the value that the Chumby provides to the target market; and 4. Promoting and placing the Chumby so that it can achieve maximum exposure to the target market. After a few years, the product can start capturing a significant percentage of the mass market as well, but initially, it must be targeted to the right customers.

So who is the target market for the Chumby? Given the price point and the type of product it is, I would say it would appeal to affluent tech junkies. They probably own an iPhone, and a powerful PC, and are tech-savvy. They find the Chumby useful, but they also like the "cool" factor. Do you think that these people will stand for the intrusion of commercials in their chumby? How cool is the chumby with commercials? This is what happens: The Chumby stutters, the screen goes blank and then you wait while the ad is downloaded. Then a mute commercial comes on (because if the sound is enabled for commercials everyone would throw the Chumby out the window). Given the fact that the chumby sits unwatched most of the time, and the fact that there is no sound, there is little value for the advertiser, and certainly a lot of value is destroyed for the customer.

The other problem with the Chumby is that it does not know what it is exactly. Is it a highly customizable alarm clock with lots of cool extra features? Or is it some kind of general-purpose networked entertainment device? To answer this question, let's see how people would use the Chumby. First of all, where do you put it? The Chumby is not a portable device, so it will pretty much stay in one place. True, you could unplug it and plug it into a different location and wait for a while until it reboots, but this is impractical. Where do you keep it then? At your office you have a computer that provides a lot more information and entertainment than the Chumby does. In your living room? Maybe, but unless you are sitting right next to it, it is impossible to read information from the small screen, and you can't play games. Plus you have the television, stereo, perhaps a laptop, and they all compete with the Chumby. I think it is clear that most people will keep the Chumby next to their bed, and use it as an alarm clock. This is then the true strength of the Chumby, a cool alarm clock with lots of cool options. You can play music to sleep to, or wake up to. You can have lots of cool clocks on your screen. You can listen to podcasts before you sleep or when you wake up. You can play some games in the evening, or on a lazy weekend morning. You can check out the weather before you start your day. I believe that this is the way the Chumby should be marketed and promoted.

Of course, the company has to make a profit. How does it do that without income from ads? Again, let's look at the target market. I think someone who will pay $180 will pay $199 or a little more for the Chumby. Additionally, the Chumby should be thought of as any other consumer electronics device. You buy the hardware and you own it. Then you buy the software. Think computers, game consoles, even dvd players. Remember, the target customers have enough discretionary income to buy widgets. There could be a subscription model, where you pay an annual fee and you are able to access widgets on the company's web site. Or, you could buy individual widgets if you would like. Or you could have a try-before-you-buy model. Or a combination of the above. Anything but intrusive, unwanted ads that nobody will watch anyway!

The success of the Chumby depends on the early adopters. As a company, you must do everything to obtain and retain these customers. It is through them that the mass market will eventually adopt the Chumby. At this point, you cannot afford to alienate them! It's just basic marketing...

One more thing. There have been battles of the "clock people" vs the "non-clock people". Given the nature of the Chumby, I think it makes sense to always hae the time on the screen. This can be easily done by having the option to always display the time on the screen. The format can be user-selected too, from the time shown on the bottom corner of the screen, to a transparent overlay. The whole point of the Chumby is customization, so let people have the option to always see the time. That way, both camps can be happy.

I really like the Chumby, as long as it is commercial-free. I hope the company finds its way, and makes the Chumby a success.

2 (edited by SilverMarc 2008-06-16 10:15:05)

Re: Chumby Business Model

Actually, the info you weren't able to find is clearly posted right in the Terms of Service:

2.5 Advertisements. You acknowledge and agree that we may display or execute Widgets on your Chumby (and/or Virtual Chumby) and display advertisements through such Widgets from time to time, if you are a Registered User. These advertisements allow us to provide you with the Services we offer through the Chumby Network. If you terminate your Registered User Account, you will no longer receive such Widgets and advertisements or the Services we offer through the Chumby Network to Registered Users.

--Marc
  June 16, 2008 @ 2:12 PM
  N40° 46.565'  W073° 58.756'

Marc Silverman
New York City
SilverMarc.com | Chumbian.com
MY POWER TEAM: Macintosh, iPhone, Chumby, Geocaching, WheresGeorge.

Re: Chumby Business Model

If you buy a chumby on the site, when you select the item you want to buy, there's a block of text which says the following:

Access to the Chumby Network is FREE. No subscriptions to pay, no plans to sign up for. It's paid for by Chumby Industries and by sponsor companies who will be sending you widgets such as music, games, movie previews, customized alarm clocks, and special offers for products and prizes, and who knows what else the future holds? Chumby Industries is 100% dedicated to keeping your widget channels new, intriguing, fun and FREE.

You could not have purchased a chumby from us without seeing that page.

The "terms of use" include this paragraph:

2.5 Advertisements. You acknowledge and agree that we may display or execute Widgets on your Chumby (and/or Virtual Chumby) and display advertisements through such Widgets from time to time, if you are a Registered User. These advertisements allow us to provide you with the Services we offer through the Chumby Network. If you terminate your Registered User Account, you will no longer receive such Widgets and advertisements or the Services we offer through the Chumby Network to Registered Users.

The FAQ has this entry:

Why are there widgets in my channels that I didn't add?
These are special Chumby Network widgets from Chumby Industries (like tips on how to use your chumby) and from partners with offers on music, games, movie previews, new products, and more. Sharing these promotional widgets with you is how the Chumby Network stays FREE.

You are *not* obligated to use our content network - as you said, unlike most consumer electronic devices, this one is yours to do with as you will, and we've provided ample information for those that wish to repurpose the device.

In any case, thanks for your input on our business model, and best of luck with your career!

Re: Chumby Business Model

Duane, thank you for pointing out that there is mention of the ads on the website. Clearly I missed it. I think that the main point of my post though, still stands.

By the way, I could not find any information about running the chumby without the Chumby Network. Could you point me in the right direction? I didn't see anything in the FAQ.

Thanks

Re: Chumby Business Model

Most of the information on how to repurpose the device is on the wiki - including creating your own Control Panel (which is basically a fancy Flash movie), as well as how to rebuild the kernel, use a variety of programming languages, how to set up a web server, etc.

Without reflashing the firmware, you can take control of the device with a USB dongle.

Many people have taken advantage of these capabilities and are "off the grid" as far as the Chumby Network is concerned.

Re: Chumby Business Model

Duane, you have got to be kidding me! Sure, i can create my own user interface and not see any ads. All I have to do is to learn flash programming, and then spend countless hours re-programming the chumby! Maybe while I'm at it, I will install a new engine in my car and build my own twin-engine jet from a kit.

If your target market is flash programmers, then this approach makes perfect sense. As for me, and most folks like me, I'd rather pay 20 bucks a year and have access to the network without the ads.

Re: Chumby Business Model

Duane, you have got to be kidding me! Sure, i can create my own user interface and not see any ads. All I have to do is to learn flash programming, and then spend countless hours re-programming the chumby

What did you expect - a psychic "do what I want" button? smile

The chumby makes it *possible* to do what you want, but you do indeed have to have the skills and willpower to do it - it's the American Way smile

And yes, some of us *do* install new engines in our cars. I've done it a couple of times - although with newer cars it's quite a bit more difficult than it used to be.

Re: Chumby Business Model

First I agree with almost everything JohnA said.  He summed me up in a nutshell as your target audience and I too would rather pay a little extra and get an ad free environment.  I can after all, as you said, repurpose the device if I don't like the "pay" model.

Having ads, even ads with no sound, for CSI come one while my kids are watching my chumby (it is always on as you love to tout) is just ludicrous.  I mean even with regular TV I can control what they see for the most part.

But the most important point I would like to make is how disappointed I was with Duane's response whom normally  gives such a good name to chumby.   Duane, I found your responses flippant.  The author clearly was making a case for the business model, not being angry about missing the info regarding the ads.  In fact it was well thought out, informative, and painted an accurate picture imho.  This is the "Product Suggestions" forum, correct?

Re: Chumby Business Model

I think you need to understand that a lot of very smart people with decades of experience building successful companies have come up with the business model that chumby is currently using.  It's not even an unusual model - it's one used by television (even TV you pay for), newspapers, and most major non-store web sites. We didn't do this arbitrarily, as people seem to want to believe.

The fact is that when *we* did the actual research on this, people told us they *didn't* want a subscription service for access to this content.  The majority of people said they'd accept a certain amount of relevant advertising to keep the system free.  We know that some people will disagree with that position - it's simply not possible to create a business model that makes everyone happy. If you search this forum, you'll find people that have taken the position that they neither want to see ads, nor pay any subscriptions - apparently, we should simply lose money in order to deliver content.

I've been involved with subscription-based services in other companies - trust me, it's a huge pain in the ass.  You have people constantly trying to bypass or hack the subscription system, people arguing that should get refunds for the days they didn't use the service, people disputing bills when they forget to unsubscribe, people arguing the value post-facto after using it for a long time, plus out-and-out fraud.  We'd like to take the service international - doing subscriptions internationally would probably not even be sustainable just from the overhead.  If I never get involved with another subscription service-based business, I'd be a happy guy.

So - some of you are proposing that we ask people to pay to *not* see something.  Is there another example of a company or system that works that way?

If someone has an analysis, with actual research to back it up, why we're wrong, then we're certainly listening.  Frankly, it would make a good project for someone pursuing an MBA - we've already had a couple of talented local MBAs take a shot at analyzing some of the company, though they were looking at the marketing and product features, not the revenue model.

Re: Chumby Business Model

JohnA wrote:

. As for me, and most folks like me, I'd rather pay 20 bucks a year and have access to the network without the ads.

This is interesting to me (from a professional POV), because IMO we're now starting to see a backlash AGAINST subscription services towards ad-funded. Since MSN Music and Sony Connect finished, people are starting to realise that the downside of subscription services are that you're locked into continuing to pay for as long as you want your content to be accessible. Most of the record and film companies here in the UK are starting to consider ad-funded models as consumes become increasingly suspicious of paying out on a  monthly basis for something that there's no guarantee will have any longevity. Making the Chumby network subscription-only would make it a lot less attractive to non-developers who will be locked into paying for as long as they want their Chumby to be anything other than an expensive beanbag.

Duane wrote:

So - some of you are proposing that we ask people to pay to *not* see something.  Is there another example of a company or system that works that way?

How about every single piece of shareware/try-before-you-buy piece of software? You download it, you take it for a run, you get annoying "adverts" (or nag screens, whatever) pop up and if you want to you can upgrade to the 'pro' version to get rid of them. Similarly, websites that offer a subscription service where once you are logged in you aren't bothered by the adverts.

So maybe we're talking about a 2-tier service, where people like me who find the adverts unobtrusive and perfectly liveable with carry on as now, and people like JohnA can pay their extra a month for a 'pro' service and not see the ads. But you need to have an established user base before that kind of thing is viable. Maybe some research is required further down the line once the adverts become a bit more established.

11 (edited by wayn3w 2008-06-17 04:49:44)

Re: Chumby Business Model

I find it very flattering to have so many people care about Chumby Industries and their own Chumbys that feel they want the company to follow a safer route and take fewer risks.  In my own opinion, I trust ChumbyCo can run their business themselves; as an example, all the recent press didn't happen by accident; that stuff takes a lot of work.

There is a danger I must warn about.  There have many times I've seen almost an elitist attitude about Chumbys -- the notion that a reviewer just "doesn't get it" or that people's conceptions of it being an alarm clock, or a music player or  a floor wax are obviously flawed.  I appreciate that people are pushing their ideas forward, to the point where it IS an alarm clock or a toy, or the center for a home automation system.  I like it that the users are involved -- and that's the part that has been generally missing from the reviews and analysis: the users are defining the device, more than the company.   But I'm afraid the elitism will turn people away rather than toward the Chumby -- the community would end up being baggage the user would be forced to adopt, rather than the family that encourages the user's potential.

I know that ChumbyCo has been watching and helping too.  Maybe not the floorwax part, but the alarm and music capabilities have been much improved since the half a year I've owned one.  They listened to my suggestions for enhancing the user interface or adding a new feature.  And they haven't forced me to buy new hardware (hint: ipod) or paid for a software update (hint: new version of almost any operating system).

I personally cannot wait until their network takes an evolutionary leap in order to support a new class of customers -- the less techno-savvy but demanding crowd that screams "Why can't I get my content (High School Musical 3 news -- Bill Frisell Tour dates -- Power Ball numbers) NOW?!  I don't wanna be a 733t hax0r to get it!"  That is when it will become really exciting, and I'm sure that will take time. 

I am willing to wait.

wayn3w

Re: Chumby Business Model

The Chumby is aspiring to be an open, community-driven device...

Ah, perhaps there's the problem.  That's not correct.  The chumby is a designed to be a pretty conventional mass-market device, not a Open Source techie/developer playground, though you're welcome to treat it that way if you like.   Our internal development is not actually driven by the community, but rather by a "product roadmap" which incorporates a great deal of community input.

13 (edited by JohnA 2008-06-17 09:12:24)

Re: Chumby Business Model

Duane, I never installed a new engine in my car, but I did change the thermostat once when I was in college! And, like you, I started my career as a software developer in the mid 80's (as a matter of fact I was the system programmer for our IBM 4341 mainframe, and had to program in 370 assembly language). However now I am a little older, and have work, school and a family to deal with, so flash programming is not in the cards for me.

But I digress. I think that the reason that we, your customers, are so passionate, is because we really like the Chumby and we want to see it succeed.

Duane wrote:

I think you need to understand that a lot of very smart people with decades of experience building successful companies have come up with the business model that chumby is currently using.  It's not even an unusual model - it's one used by television (even TV you pay for), newspapers, and most major non-store web sites. We didn't do this arbitrarily, as people seem to want to believe.

I am not questioning anyone's intelligence. The management team certainly has impressive academic and business credentials. As Steve Tomlin knows though, Harvard Business School has published a dearth of cases where extremely smart and experienced people start companies that fail to reach their maximmum potential. I am not saying that this is the case here, just that it is has happened in the past. And I would like to emphasize that I am not trying to tell you how to run your business, I am just trying to give you some feedback from an actual customer who has bought your product.

I don't think that the Chumby can be compared with a TV or a newspaper. First of all, the newspaper ads are not intrusive. You just skip over them. And with television, I think most people you are targeting have a DVR, and just fast-forward through them, or they just change the channel (which, unlike changing the Chumby channels, is instanteneous with the TV remote). The Chumby is a different animal altogether. As I mentioned before, think about your typical customer will use the Chumby. It is not a television or a computer, where you will just sit next to its wall plug (its mobility is limited by its cord) and stare at it for hours. It is mostly used for a quick reference glance (time, weather, quotes, etc.). Forgetting the fact that if I want to play a game I would rather use my computer, XBOX or PSP, when you play games and have the unit in front of you for an extended period of time, you won't see the ads anyway. So what is the value to the advertiser, of showing a mute video ad? When you wake up in the middle of the night and want to see what time it is, or when you wake up and want to see the weather, will you really stand there and watch a commercial?


The fact is that when *we* did the actual research on this, people told us they *didn't* want a subscription service for access to this content.  The majority of people said they'd accept a certain amount of relevant advertising to keep the system free.  We know that some people will disagree with that position - it's simply not possible to create a business model that makes everyone happy. If you search this forum, you'll find people that have taken the position that they neither want to see ads, nor pay any subscriptions - apparently, we should simply lose money in order to deliver content.

One thing that academic marketing research has shown is that surveys or focus groups where consumers tell you what they would be willing to pay are notoriously inaccurate.  Most people will just say that they don't want to pay anything. The situation changes when you have people in your target market actually use the product, and experience the annoyance of the commercials. Here you have actual customers sharing their experiences and telling you that they would be willing to accept some kind of pay plan, what better form of research is there?



I've been involved with subscription-based services in other companies - trust me, it's a huge pain in the ass.  You have people constantly trying to bypass or hack the subscription system, people arguing that should get refunds for the days they didn't use the service, people disputing bills when they forget to unsubscribe, people arguing the value post-facto after using it for a long time, plus out-and-out fraud.  We'd like to take the service international - doing subscriptions internationally would probably not even be sustainable just from the overhead.  If I never get involved with another subscription service-based business, I'd be a happy guy.

The marketing director of an S&P 500 company once got T-shirts for all his marketing employees that said "I am NOT the target market" wink


If someone has an analysis, with actual research to back it up, why we're wrong, then we're certainly listening.  Frankly, it would make a good project for someone pursuing an MBA - we've already had a couple of talented local MBAs take a shot at analyzing some of the company, though they were looking at the marketing and product features, not the revenue model.

I am certainly not saying that you are wrong, I am just offering an alternative point of view. I know you are a Trojan, but if you are interested, I would be happy to set up an MBA student team from UCLA Anderson to look into it and offer suggestions smile

Re: Chumby Business Model

SlvrEagle23, where in Duane's reply did you get the impression of anything being "inflammatory?" All I saw was a simple statement to correct what Duane saw as a misconception about the Chumby device.

Re: Chumby Business Model

I'm an engineer, not a customer support person, so I certainly agree that my manner is probably a bit more direct than many people are used to. I apologize to those folks - I've taken the position that it would be better to answer a question truthfully and accurately with something people don't necessarily want to hear rather than blow pretty smoke.

On the Sirius thread - yes, a user came up with a very clever solution to the issue of playing WMAs by transcoding them to MP3.  Note that this solution does not account for the patents and associated license fees that are involved with such a transcoding in the United States.  It has *never* been a technical issue, and nobody from Chumby Industries, including me, ever claimed that it was. We have *all* the code  and technology to do this - just not the legal right to do so.  I'm sorry you interpret that as giving users the "middle finger", but we didn't make the patent laws nor do we set the terms under which these companies choose to license them.

Most of the time we say "no" is due to either legal/license restrictions or security issues.  Even this whole "subscription" thing isn't a totally closed issue - you can be sure that Chumby's management is reading this whole thread very carefully.

We certainly don't promote the device to customers as a community-driven Linux box, though some bloggers and journalists have certainly taken that position when confronted with a device that's clearly more accessible to hackers than pretty much anything else on the market. Most of that stuff is here on the forum and the wiki, where I think I've personally been quite generous with hacks and deep information about the device that have no direct benefit to Chumby Industries whatsoever. Indeed, most of the "community" hacks have been mine - the port of some programming languages, Flash development and other tools, the lighttpd web server, and the use of the Chumby as an iPod server.  All of this was done with publicly available tools and documentation - and *any* reasonably competent developer could have done them if they were so inclined.

I'm not sure I understand what you mean about having "to redesign the entire thing from the ground up" in order to make it do something interesting - usually all it takes is a couple of scripts, and maybe some Flash if you want a pretty UI, and of course, time.

Re: Chumby Business Model

Duane - I love the straight forward way you communicate - I wish that many other businesses had the courage (and good sense) to speak plainly. Dont change.

Re: Chumby Business Model

I'm not the technical part of this conversation, those of you who have read what I have ever written know that. I just write about what I like or don't like and I have no idea how things happen or work. I don't want one more thing to pay for monthly. I don't do a good enough job keeping track of things like that as it is. The ad's and 101's don't bother me in the slightest, because I can delete them as quickly as I can a widget that I downloaded that I find I don't like after all. It takes one second to delete them, so you don't even HAVE to watch them, and that's the part of this thread I guess I haven't really understood. Some have mentioned that we have to watch them. We don't. Well, I guess we do if our widgets are automatically running, but that doesn't effect me, so that might be why I don't understand the issue but I understand if it is an issue for you.

NOTE TO ADVERTISERS: "Not that we would EVER delete them, we watch every one, and would never think to delete them...yea, that's the ticket...we would never delete them."

But if we wanted to...we could.

Re: Chumby Business Model

For what it's worth, from a very new Chumby owner...

I do not (yet) find the ads or 101 widgets intrusive.  Do I wish they were not there?  Sure...but not so much that I would want to pay to make them go away.  If it truly became intrusive, then I might change my mind on this.  So far I am very happy with my new toy and its versatility.

I have read this entire thread with great interest, and at no time did I find Duane's responses flippant.  The only response that might have been taken that way "What did you expect - a psychic "do what I want" button? smile " was also followed by a smiley, which seems much more light-hearted than flippant.

In the few days that I have been reading this forum and the wiki, my impression is that the Chumbians (and Duane in particular) care about the community of users much more than some of the authors on this thread give them credit for.

Re: Chumby Business Model

I'll just go ahead and accept your frank evaluation of my social incompetence and simplistic binary world view, and I see no reason to continue to inflict myself on you, since it's obviously frustrating for both of us.  Being trapped in my black and white engineering mindset, I'm completely helpless to do anything else.

Perhaps somebody else should answer your posts from now on.  I don't actually set any of the policies you're talking about.

Best of luck!

Re: Chumby Business Model

What, a software engineer complaining about a binary world view? If it wasn't for those zeros and ones, there wouldn't be any computers! wink

I am not sure how this thread degenerated the way it did. My original post had nothing to do with open source or violating Microsoft's patents, and I don't think Duane has been giving anyone any fingers, middle or otherwise.  As a matter of fact, the Chumby is remarkably open in its architecture and programming environment, and the company has been unusually forthcoming and helpful in that regard. Is it possible to stick to one topic per thread?

Again, all I was trying to do is to present a customer's point of view regarding an alternative marketing and revenue model.

Peace and joy

John

Re: Chumby Business Model

Duane's right on the mark.   You're just not hearing what you want to hear and insist on demanding otherwise.  Best of luck with that.

Re: Chumby Business Model

Duane wrote:

I'll just go ahead and accept your frank evaluation of my social incompetence and simplistic binary world view, and I see no reason to continue to inflict myself on you, since it's obviously frustrating for both of us.  Being trapped in my black and white engineering mindset, I'm completely helpless to do anything else.

As someone who's opinion probably doesn't count anyway, here's my $.00125 pesos worth....

Having engineering blindness (or more PC, engineer's blinders) is not the same as being socially incompetent.

Duane, you are the LAST person on earth I would consider socially incompetent.

That said, there are quite a few views expressed here that I do agree with.  Ads don't bug me.  Being forced to watch an ad that either doesn't pertain to me or I've seen a million times already, does bug me.  Having options doesn't bug me, losing the ability to choose does bug me.  Being told I'm free to do what I want doesn't bug me, but not being given the key to do it does.

Vice President of Duane's Chumby Buddies Inc, Pro-Clock faction                       Clocks are life; we all expire sometime.
http://forum.chumby.com/viewtopic.php?id=2565

Re: Chumby Business Model

Some people dont get the idea that some things DO not have a simple answer, and only hear what they want to hear and ignore what they dont.... Even if there is good reason for doing so... Duanes dead on right..

Re: Chumby Business Model

joltdude wrote:

Some people dont get the idea that some things DO not have a simple answer, and only hear what they want to hear and ignore what they dont.... Even if there is good reason for doing so... Duanes dead on right..

But if no one ever expresses that something isn't what they'd like, nobody would ever even TRY to fix it.  What good is that?

Vice President of Duane's Chumby Buddies Inc, Pro-Clock faction                       Clocks are life; we all expire sometime.
http://forum.chumby.com/viewtopic.php?id=2565

Re: Chumby Business Model

People can express their opinions without attacking people.. I know a lot of suggestions are in consideration....
But why would you buy an ad supported device and then go. Oh i "demand" it without ads... Frankly thats just a direct insult to the time and effort and people working to develop the device.. Its ok to suggested a subscription "option" but believe it or not, some people bought it based on the price and not having to worry about subscriptions... Having antivirus software expire is a pain in the backside... do people really want to have to deal with deactivation/reactivation and such? I had reservations and had to save up to purchase a Chumby. not that it matters much. and i held out for some time.. for having the service included (even with the "offensive" ads.. which i find tasteful and not in your face, unlike broadcast tv.. (Esp digital tv in the us where the ad volume level is cranked higher than the shows in progress)...clinched the sale because I wanted an alarm clock, and a music streaming device.. and the LCD philips picture frame alarm clock didnt quite cut it.