Phil’s Law – Moore’s Law Meets Murphy’s Law

This is from a really interesting post from Todd Sattersten interviewing Phil Libin from Evernote.

Evernote is a fab little note-taking, image and life capturing app/website/iphone app.

The post has some incredibly useful real numbers from Evernote on freemium conversions / active users / costs. They’re discussing a mistake in the calculations for Todd’s ebook Fixed to Flexible, but the conversation has some golden nuggets:

Active users are people that have used Evernote in the past 30 days. That’s important because someone who doesn’t use the system in a given month, doesn’t cost us anything that month. So that 9 cents per month figure is for active users, but you did the math as if it was 9 cents per month for all users. Only about 30% – 40% of our users are active in a given month, so the mistake makes our margin looks a lot worse than it really is.

I ran the numbers from January 2010. At the end of the month, we had 2,335,676 total users and 41,598 premium users. Total variable expenses (hardware + software + hosting + network + operations staff + support staff) were $68,641. Total revenue from active premium users was approximately $145,000. I say “approximately” because this is recognized revenue, which trails cash, but is more relevant for gross margin calculations. The gross margin comes out to about 53%.

But my favourite thing in it is the great line from Phil:

… you have to multiply Moore’s Law by Murphy’s Law; “The number of things that will go wrong will double every year.”

Well worth a read: