The way it was: channel sales before app stores

There aren’t a lot of us around who existed selling mobile software before iOS and Android. I believe there is a misconception over the way things were back then though and how we built out sales channels. My history in mobile dates back to 1997. Compaq was still its own company (and producing its own mobile hardware devices), Dell was the king of device sales, and Apple was barely an after thought¹.

We built a multi-pronged channel approach to generate revenue. Channel is the place of marketing’s 4 P’s (product, place, promotion, price). I even had a dedicated sales woman who was a queen at managing channel. It was a big deal back then! Now… well, not much choice. You can sell through Apple’s App Store, Google’s Play store, Amazon’s Appstore, Mac App Store, Windows App Store and maybe your own site depending on the platform. Most other channels are gone, although enterprise sales probably still have value-added resellers and other channels.

  • When I started out we had a partnership with a retail publisher. Macmillan Digital Publishing bundled us with a few other titles and sold through CompUSA, Best Buy, Office Depot, Staples and the like. We received a $1.00 per title, and the bundle, which included about five titles, sold for about $50. All were shareware titles and we did five of these over 3 years. The last one was a suite of titles we developed. It was a good deal for us. It was a channel we couldn’t attack directly at our early age and lack of funding, basically putting us in front of a group of customers who otherwise wouldn’t have known about us. We bundled a lesser product — a Lite version in the parlance — and then upsold our higher end version for $20 more. It didn’t drive a lot of up-sell traffic as we didn’t “own” the customer relationship and really couldn’t promote the higher-end versions effectively.
  • Once this bundle started selling, we started selling from our own web site as well. We sold two versions: the Lite version for $20 and the Pro version for $40. We drove people to the Pro version with ads in a magazine included in the box with each PalmPilot sold. I remember writing my first check — $20,000 — for an ad. My hand shook. Eventually our prices changed. The Lite version became free, a Personal version was $10, and then we had other versions from anywhere from $30-160. Our average selling price was $37 net.
  • We sold through online resellers, most prominently Handango and PalmGear (and a few others I can’t remember on the Windows Mobile side). These guys started our as good partners and a 20-25% cut of the revenues (they received), but they slowly started to raise their prices and, at the end, were demanding 60-70% of the sales revenue. When Steve Jobs stood on stage and said he was only charging 30% and what a great deal that would be, he was referring to these guys. Very little mobile software was ever sold through retail channels. Handango and PalmGear were the go-to places.
  • We, on the other hand, did sell through retail. Not just the aforementioned bundles but also through some very select channels. The Franklin-Covey retail stores were a perfect match. We also sold through (physical CDs, not electronic downloads in those days), Dell’s and Palm’s stores. Each took about a 30% cut. We had the opportunity to go to other retail, especially Costco which did a lot of sales back then, but we turned them down. It wasn’t the cut of the revenues we worried about, which was 30-50%, but instead was the terms. These stores could return the inventory at any time for a full refund and they ordered in the tens of thousands. This meant we couldn’t spend the money until we were certain it all sold, and we weren’t confident enough in our niche, vertical products to expect it to do well in a horizontal market like these.
  • Of the retail we did pursue, Franklin-Covey was the biggest of these sellers, although Palm, Amazon and Dell sold a lot of software for us as well. We sent and they sold thousands of titles through Franklin Covey retail stores. Palm, Amazon and Dell were a little different. They would place smaller orders and we would deliver them, mostly just in time or even drop-ship direct to customers. This mitigated the inventory risks.
  • While it wasn’t a sales channel, our biggest market opportunity came in 1999 when we started bundling with PalmPilots. We were on a CD that came in the box with other titles. The Palm deal led to other deals and at one point were bundled with about 85% of handheld computers sold. We gave away the Lite version and charged for the higher-end products. We even gave customers a little something for free (some extra calculations) if they came to the site and registered.  We built a 400,000 person mailing list and figure we distributed close to 20 million calculators in that time period. This became our primary marketing effort pretty quickly and, it turned out, drove about 75% of our sales. (I only know that because when the deals dried up our sales plummeted by that much.) I don’t think we ever truly utilized that marketing list. That was probably our biggest opportunity wasted. We did occasional mailers but didn’t really understand the impact that attention could have driven for us. It was extremely expensive back then to email them, honestly, and our minds were elsewhere…
  • … like the education market. When we focused on vertical markets and education in the early 2000s we signed up a number of value-added resellers and others that helped generate some income, but most of the education sales were speculative. We needed standardized test approval to be adopted and, well, that didn’t happen in the end. This is a story I’ve told before. We did do some smaller sales to a school or classroom. It was nice to send a single disk and paper saying how many computers it could go on, and get multi-thousand dollar checks in return. With standardized test adoption we would have seen districts and states adopt. That would have been big money, dwarfing all other revenue we had at that time easily.

Channel was a big part of our marketing strategy and, frankly, besides bundling, channel was our biggest strength and catapulted Infinity Softworks into being one of the best revenue businesses in the handheld era². Unfortunately it didn’t last long — our peak revenues were from 1999 to 2004 — and we never did figure out a way to break out into massive growth. The world was very different back then.

¹ In 1997, when graduating college, I thought I’d either develop Mac software or Palm software. The PalmPilot had just come out a few months before and it seemed like it had more promise. Oh well.

² That’s not saying a lot, although much better revenue then today for an indie developer with a small team.