dw_news | Weekly Update: 6 April

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weekly announcements

Weekly Update: 6 April

Hello, Dreamwidth! I'd like to start this update by wishing my wife

sarah a belated happy birthday (putting her on the spot in front of tens of thousands of people) -- her birthday was Saturday, and she had a very good one.

Anyway, we've got a full update this week, so on we go!

Behind the cut:

* Development
* Technical Debt
* Biz Update
* Seed Accounts
* Styles Class
* Invite Codes
* Antispam
* Our Support for LiveJournal
* Our Farewell to Inksome
* Sad News

Development

Since last we spoke, we've had one code tour:

March 17, 2011 - March 31, 2011, done by

poulpette

This code tour includes (hopeful) fixes for the problems people were having with their comment import from LiveJournal timing out, an update and overhaul of the Presentation section in the Customize Journal page, and some major, massive, epic work to modernize our JavaScript sitewide. Which brings me to:

Technical Debt

I've seen a few people lamenting the lack of new user-facing features lately, or wondering why it's taking us so long to release features we said we were going to release. This absolutely isn't a sign that DW development is slowing down, or that we're working less hard or accomplishing fewer awesome things. The reason it seems like we haven't had any major feature releases lately is because we've been working hard on things that, if we do them right, you won't ever see -- backend improvements that are critical for us to do before we can do all the new feature work.

Basically, we are working on paying down our technical debt. For those of you who don't know, technical debt is a metaphor used in the software development world for the maintenance and improvements you delay for a future time in order to get code or software shipped now. Because we forked from LiveJournal, we inherited a decade's worth of delayed maintenance that we need to make good on in order to continue forward. We could keep delaying it, but we've reached the point where it's more work to continue working around the problems than it is to fix it.

We've spent the last six months aggressively working on modernizing the code and improving the backend, which is putting us in a much better position to go forward. The project's not completely done yet, but we're getting there! Most of the fixes and improvements are things you guys won't ever see, because there aren't any user-facing changes. But once we're finished, we'll be in a much better position to do feature development much more rapidly.

That's the short explanation -- if you'd like a longer one, I wrote an entry that gets into a lot more detail. You can read that here: Technical debt and the making of payments on it.

Biz Update

So, tax time is upon us, and that means that we've finalized the 2010 books and the results are in. We're cautiously pleased with how things wound up: in 2010, we very nearly broke even for the year, in terms of "money earned vs money spent", and we would have broken even or had a slight profit if it weren't for the three months of being unable to accept payments.

(For those of you who are just tuning in: in January of 2010, PayPal decided that they would no longer do business with us unless we agreed to censor the content our users posted to remove material that did not violate our Terms of Service, but bothered them. We declined, and in the end, we had nearly three months of downtime in which we couldn't accept online payments until we could implement our alternate solution.)

I've posted the 2010 Year End Update in

dw_biz, in which I go into some more detail about our expenses, our results, and some of the various factors that meant we didn't actually see all the money we took in this year. If you're interested in the "behind the scenes" aspect of where your payments go and how we handle the business end of things, head on over.

Seed Accounts

We've had multiple people ask us about seed accounts (permanent accounts) lately, and whether or not we ever plan to offer them again. When we started Dreamwidth, the plan was to sell them once -- at the site launch -- and never again unless something major happened; this was to prevent seed account sales from cannibalizing future revenue.

Well, something major happened -- the three months where we were unable to accept payments did eat a lot into our operating fund, and various other factors since then have been nibbling at the reserve. (See the

dw_biz post I linked in the previous section for more information there!) In order to replenish that reserve, and make sure that we have the resources to continue to expand through the rest of 2011 instead of just stagnating, we will be putting a limited number of seed accounts on sale next month.

I know that no matter what I say, people are going to worry, but rest assured: we are not in financial trouble. Right now, we are on track to break even or make a modest profit in 2011. (Which is good -- our plan for when we started DW was that we wouldn't actually start seeing a significant profit until 2013 or so!) Rather, this move is to make sure that we have a reasonable reserve in the event of (God forbid) future disaster -- it was that reserve that let us stay on the air last year when we had our payments crisis, and the reserve never quite recovered from that depletion. Having that reserve back in place will let us sleep a lot more soundly at night.

Plans haven't been 100% finalized yet -- stay tuned for more announcements -- but right now, the tentative plan is to place 400 Seed Accounts on sale in four batches over a 24-hour period on April 30 - May 1, our two-year anniversary to launching our open beta. We'll be doing it in batches to make sure that our users in every time zone -- whether geographical or personal -- have at least one opportunity for a sale time that isn't in the middle of their night. Accounts will remain on sale for as long as it takes for the 100 accounts in each batch to sell out, whether it happens immediately or over time, and each new batch will be added to the previous. (So, if there are still 50 accounts left for sale from the first batch when the time for the second batch comes due, the 100 from the second batch will be added to the 50 left from the first batch.)

As with last time, seed accounts will cost $200 (the equivalent of four years of premium paid service). You'll be able to buy them for yourself or for a friend. (We chose that number because it's what we felt was the right balance between replenishing the reserve and not hurting future sales too badly.)

We'll give you more updates on when accounts will go on sale as we get closer to the end of the month.

(Edit: And someone in the comments made me realize I hadn't mentioned: a Seed Account is functionally equivalent to a Premium Paid account, and receives the same benefits. It just won't ever expire. Also, if you have existing paid time when you buy a Seed Account, you can contact us to either transfer the paid time to another account, or have it converted back to Dreamwidth Points.)

Styles Class

Have you been wanting to learn how to customize your style more than the wizard will let you do, but haven't quite gotten around to figuring out how? Or do you have the image of the perfect style in your head and haven't been able to make it a reality?

foxfirefey is starting up a course on the DW style system and how to work it in

style_system. You can view the proposed syllabus to see if it's something you might benefit from. It's a low-pressure, no-commitment-necessary way to learn how to play around with making things pretty.

Invite Codes

As many people no doubt noticed, we released another batch of invite codes earlier this week. This time we distributed 1 invite code each to all personal accounts that had been active in the last 30 days. You don't need to save the email you got -- you can always view all your invite codes at the Invite Someone page, linked on all site-skinned pages.

Invite codes don't expire; you can save them for personal use or invite a friend. Or, if all of your friends have already joined you on Dreamwidth, you can share them in

dw_codesharing.

Antispam

We've seen a small uptick in the amount of spam being posted to the service, and the "no invite codes" week does seem to have had a small "logged-in spammer" result. (I'm guessing it took time for the result to become apparent, since much spam software will create an account and then let it lie dormant for a bit before posting.)

Our antispam team has been smacking down the spammers as fast as they rise, but this is a good time for yet another reminder! If you receive spam -- whether in comments or in posts to your community -- be sure to pick the "mark as spam" option while you're deleting it. That will put the comment or post into the antispam system, where our antispam team will leap upon it so fast that it's often dealt with within minutes. (No, really. They have an irc bot to alert them to new spam and everything. It's kind of frightening sometimes.)

Our Support for LiveJournal

I'd also like to take a few minutes to publicly offer support to LiveJournal, where the team has been doing an incredible job in responding to and mitigating a Distributed Denial of Service (DDoS) attack. If you haven't been able to reach LJ in the past few days, this is why; the current theory in the press is that the DDoS is a political statement being made against Russian-language bloggers using LJ as their platform. We wish the LJ team luck, perserverence, and a bottle of really good top-shelf liquor in trying to combat the problem.

We've seen increases in the number of people using the content importer to back up their content from LJ over the past few days, and with LiveJournal inaccessible during periods of heavy DDoS traffic, this can cause a problem with imports timing out or not otherwise succeeding. We'd like to ask you to consider holding off on starting a new import for a few days, until the problem can clear up a bit. Our importer is smart enough to retry an import a few times if the process times out before giving up completely, but minimizing the traffic that LJ needs to cope with can only help them out.

Our Farewell to Inksome

This week also will see the closing of Inksome, another site based on the LiveJournal code. Kit and Shell, the owners and operators of Inksome, have been awesome to us throughout, and they've been great to share ideas with over the years. We'll miss you guys, and we wish you luck.

Sad News

It's with regret that I announce the loss of

padme_kenobi, a member of the Dreamwidth community. She suffered from Epidermolysis Bullosa, an incredibly rare genetic disorder. Her friends remember her as an incredibly positive force in the world; we are made lesser by her passing.

*

That's it from us for now! As always, if you're having problems with Dreamwidth, Support can help you; for notices of site problems and downtime, check the Twitter status page; if you've got an idea to make the site better, you can make a suggestion.

We'll see you in two weeks for our next update.

Flat | Top-Level Comments Only

I have a random set of thoughts.

It seems from the outside (without seeing your actual financials) that your capital structure is heavily reliant on equity, with little or no debt. Have you explored the option of a 4-year loan of $80k? This would provide the same amount of operating capital as 400 seed accounts, with a fixed payback period instead of a permanent loss of all future income of those accounts, $20k/year. If you consider this as a perpetuity you are obligated to pay, its present value must be calculated based on an expected interest rate. If we adopt a conservative 5% return as the rate, the aggregate present value of your seed account sales is ($20k/(0.05)), or $400k. The less interest one could expect to earn on the investment (or, the lower the rate at which you could get a loan), the higher this value is. How does this compare to the total cost over 4 years of the loan alternative?

What about leverage? I understand the reserve isn't available to you, but it still is an asset you own. Could it be used as collateral for a loan?

In a perhaps more intricate manner, could you float a sort of convertible bond issue? Say, $80k in $200 par bonds, in a number of series, that at maturity in 4 years are at your option payable in cash or convertible to seed accounts, with bondholders entitled to premium paid account services in lieu of interest payments? Or even annual payments of $50, which is equivalent to allowing the bondholder to choose whether to take payment in cash or services?

Perm account holders also create social capital. I have friends who are still mainly or solely on LJ, by their own admission, purely because they have perm accounts. Never mind that they've had said accounts long enough that they've more than "cashed out" on the actual cost of the perm account, their accounts are permanent and hence so are they.

I think the concensus is that these people who are permanent because their accounts are permanent aren't a net asset. To take the line of reasoning to its logical extreme, if everyone bought a permanent account, then once everyone had an account, there would be 0 income on an ongoing basis. Also, once someone has a permanent account, there is no longer a business case for caring about their concerns, because they are no longer a source of funding. They are an expense, from a financial standpoint. Thus, the concerns that drive income are the concerns of people who aren't members, because they are the only remaining source for future income.

One of the most loved features of DW has always been its practical, healthy, and *sustainable* business model. Basing your income source on always needing new users isn't any of these, because to attract people you haven't attracted before, you have to become something you weren't before. This gives you a steady stream of short-term happy new members, and a long-term buildup of dissatisfied people who feel betrayed. The current DW model works well, because there is some scale point where the service is profitable at a given size, and can remain profitable indefinitely at that size by keeping the paying users it has at that time happy.

The idea of "social capital" is an interesting one, and a hard thing to quantify in business terms. As I've shown above, there is certainly a point of diminishing returns and even of negative value for additional social capital of this type, because once you've converted everyone into social capital, you have no more conventional income from your core offering. However, it would be interesting to examine the numbers and find out what contributions from permanent accounts at various services do have measurable monetary value, and in what amounts.

Ultimately, I think the important realization that's being overlooked on a lot of levels is that seed accounts are functionally a sale of equity. While they don't merit a claim on assets at liquidation as is usually understood in the definition of equity, they do constitute an ongoing claim on assets for as long as the business is a going concern. A certain portion of the resources of the company must be devoted to satisfying their requirements, and receives no compensation in return. In the world of economics, this is exactly the same as saying seed account holders receive annual income in the amount of the current yearly subscription price of the service.

Wow, I'm long-winded! tl;dr: "social capital" won't pay the bills, but it would be nice to have even an approximation to a value function for it.

I think perhaps this is a bit reductionist? I'm nitpitcking especially on this bit:

Also, once someone has a permanent account, there is no longer a business case for caring about their concerns, because they are no longer a source of funding. They are an expense, from a financial standpoint.

Except that if you think outside a model where each customer only interacts with the seller, and appreciate DW as a far more complex system, as well as part of a larger whole, the online community generally: people with seed accounts, for whom DW is 'home', who are posting regularly and interacting on and off the site, are a base on which DW can grow. People with DW loyalty who are creating content and building community bring in new account holders, gift paid account time to help people get started, and keep the site rolling and active. All this is necessary, necessary stuff; users of this kind are an asset.

Failing to care about those with seed accounts wouldn't have zero consequences; on the contrary, creating large amounts of converted (in the wrong direction) would be a significant liability to the site, both in terms of them withdrawing their content and contributions, and in terms of potential for them spreading their dissatisfaction elsewhere.

I'm pretty sure DW staff are already on board with all of this!

Thank you for saying this better than I could.

I'm actually pretty sure

denise is on board with how I said it myself, because, in her words:

Permanent accounts are bad for users, too, because it strips users of their ability to influence site operations with the most important thing possible: voting with your pocketbook. A site that already has your money doesn't have to work to keep you happy, because they don't have to worry about keeping your business.

(context)
I could be wrong, but I think that's pretty clearly what I said.

Thank you for saying this so well!

I'm not stuff, but I get the impression that a loan could potentially create a scenario where the loaner has leverage on Dreamwidth by virtue of the fact that they're in control of how much money Dreamwidth has, which is something that staff are trying to avoid.

Then again, I don't know much about how loans work so maybe I'm wrong?

You are most certainly stuff.

*giggles*

I meant that to say "I'm not staff", of course.

But thank you! You're stuff too!

Loans work in a wide variety of ways, to suit whatever is agreeable to both the borrower and the lender. Angel Investor loans often have a lot of stipulations attached, including handing over some operational control and possibly even accepting a business manager appointed by the investor; sometimes this is indistinguishable from selling out. Conventional bank loans, on the other hand, are practically indifferent to your success or failure. Their most negative potential consequences are seizure of collateral (if the loan is secured) and negative credit reports.

The *advantages* of the loan are that they have a finite term, and that inflation is on your side as a borrower. If the price of everything doubles in two years (extreme, I know, but still illustrative), the cost associated with carrying the seed accounts likewise doubles. However, your loan payment remains the same in nominal currency. Thus, when you double your own prices, you fall slightly behind on the seed accounts, because twice nothing is still nothing and their burden must be spread among the paying accounts. To break even, you'd have to slightly *more* than double your prices. But with the loan you could come out ahead of where you were, because you considered the loan payment as part of your costs, and that *didn't* double.

We were not able to secure a bank loan in this economy; without collateral they were unwilling to offer us the amount we needed. Trust me, we tried everything we can think of.

Flat | Top-Level Comments Only

Weekly Update: 6 April

Development

Technical Debt

Biz Update

Seed Accounts

Styles Class

Invite Codes

Antispam

Our Support for LiveJournal

Our Farewell to Inksome

Sad News

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