CASE STUDY QUESTIONS: (please see COMMENTS)(FOR)(WORD)(COUNT)

1. Which of the characteristics of successful entrepreneurs, do you see in Jason

Jacobs? To what degree do you think these characteristics have contributed to

RunKeeper's success?

2. To what extent do you think RunKeeper's basic business idea "adds value" to the

lives of its customers? Who is the ideal candidate to be a RunKeeper customer?

Case Study

RunKeeper: Combining a Passion for Running and Technology to

Build an Incredibly Successful Business

Introduction

In early 2008, Jason Jacobs was actively looking for a business idea to pursue. He knew

he wanted to start his own businesshe just didn't know what that business would be.

Anticipating the need for start-up funds, he lived like a bootstrap entrepreneur, even

though he had a good job. He was trying to save at least two years of living expenses to

support himself when he settled on a business to start.

Trying to settle on a business idea was frustrating for Jacobs. He looked at clean

tech, enterprise software, and several other alternatives, but nothing resonated. He got

so frustrated that he started training for a marathon as a way to clear his head. While

training for the marathon he tried several of the devices that were available at the time to

time and track practice runs, including GPS-enabled watches and the Nike+iPod device.

Although the devices worked, he found preparing for the marathon to be a fragmented

experience. Different devices offered different features, but none tied the whole

experience of training and running together. Jacobs had his business idea. He would

make a company that would combine his passions for running and technology, and build

a Web-based platform that would allow runners to integrate the hardware devices they

were running with a Web-based platform that would provide them analytics, coaching,

running-related tips, and social support. In this sense, Jacobs's business idea created a

"turnkey" operation for runners interested in tracking their progress.

Getting Started

After a brief period of indecision, Jacobs quit his job to focus on his business idea full

time. He remembers thinking, "Now you've got your idea and you're going to work on it

nights and weekends in a coffee shopare you kidding me?" He started asking around

about people who might help him get started. He was introduced to some traditional

Web site developers, who wanted $50,000 to $75,000 to build the site and functionality

he envisioned. Although Jacobs had a tidy sum of money tucked away, these suggested

fees were just too high. He met three guys who were willing to moonlight to help him get

his project off the ground at a much lower cost. He didn't bite, thinking that if he was

going to commit full-time he didn't want to hitch his wagon to people who were only in it

part-time. He then became acquainted with a two-man development shop that listened to

his idea and asked him if he'd thought about building an iPhone app. That thought had

never occurred to Jacobs, but sounded like a great idea. The iPhone app store was set

to debut on July 12, 2008, in just a few months, and the two developers had just

received a development license from Apple. They hadn't built an app yet but were eager

to try, and offered Jacobs a deal if he could pay for their first development effort. Jacobs

knew he could go back to the three moonlighters to get the Web site side of the business

built. So in Jacobs's mind, the business that was taking shape was to build an iPhone

app, with the help of the two developers, that would time and track a runner's runs, along

with a Web-based platform, built by the three moonlighters, that would take data from

the app and provide runners analytics, coaching, social support, etc., regarding their

most recent runs and their entire running programs.

Jacobs now had a six-person teamhimself, the two-man development shop,

and the three moonlighters working on his business idea. The six held weekly meetings

during the development process, and as unorthodox of a structure as it was, it worked

well. Both sides delivered on time, and the system was put together and was ready to go

for the launch of the iPhone app store.

Doubters, Good Press, and Execution Intelligence

When Jacobs talked to others about what his team was building, there were plenty of

doubters. The biggest source of skepticism focused on whether people would actually

run with their iPhone. To Jacobs this was a no brainer. The iPod was a perfect analog.

Just two versions earlier, the iPod was nearly as big as the iPhone, and people ran with

their iPods. Still, the doubters remained unconvinced. Another source of skepticism was

Jacobs's team. He was literally his company's only full-time employee, yet he was about

to debut a high-profile app in the new iPhone app store. Generally, the problem with

using contract employees rather than hiring people full-time is that a company runs the

risk of the contract employees getting distracted or not delivering on time whatever the

excuse might be. Jacobs gambled in this regard and it worked. The two-man

development shop and the moonlighters came through in an exemplary manner.

In the midst of the skepticism, one thing that worked in Jacobs's favor was perfect

timing. The opening of the iPhone app store created lots of press, and news outlets were

eager to profile apps that would soon be available for the iPhone. Jacobs worked this

angle to his favor and RunKeeper, the name he gave the app, got lots of prelaunch

press. The launch of RunKeeper also aligned nicely with the emergence of Twitter and

with the growth of interest in Facebook. RunKeeper engaged its users from the

beginning via both Twitter and Facebook, and created a "community" of users around

the RunKeeper experience. A little guerilla marketing also helped. For example, Jacobs

ran the 2008 Boston Marathon dressed as an iPhone, and periodically posted on Twitter

as he ran. The idea was to draw attention to RunKeeper and the iPhone app store in

general. The payoff was a front page story in the New York Times.

Although Jacobs promoted RunKeeper when he could, he remained laser

focused on execution, and turned down many promotional opportunities. In his mind, the

best way to build RunKeeper was through creating an exemplary user experience.

Jacobs's success in this regard can be seen in the numbers. RunKeeper has a freemium

business model, meaning that the basic download is free and users can pay $10 for the

premium service. As of mid-2010, 54 percent of the people who bought the premium

service from mid2008 until the present day are still active RunKeeper users. That's an

extremely high retention rate for a smartphone application.

A photo of the RunKeeper app in action is shown next. Along with timing a

runner's run, the app shows how fast a runner is running (in mph), the number of miles

run, the calories burned during a workout, and the pace of the run (in minutes per mile).

The bars in the middle of the screen show how the pace has varied during the run. All

this data can be automatically uploaded to the RunKeeper Web site, where a user can

keep a history of his or her runs and run a variety of analytics on past and present

workouts. An especially enjoyable feature is that the RunKeeper app allows users to

stream their runs in real time, allowing others to follow them. The results of RunKeeper

runs can also be automatically posted to a user's Twitter or Facebook account, providing

the runner extra incentive to do well because the results will be immediately available for

friends, family members, and other followers to see.

What Does the Future Hold for RunKeeper?

Currently, RunKeeper is primarily a smartphone app. The company has more than 2

million downloads on the Apple iPhone, and has launched an Android version that's

taking off. RunKeeper has been cash flow positive since day one. Jacobs now has about

a dozen employees. The company has never raised a dime of investment capital.

Instead, its users have basically provided the seed funding for the company through

downloads of the premium version of the product. RunKeeper sells a Websubscription

service for people who don't have a smartphone. The RunKeeper app is consistently

one of the top selling apps in the iTunes store.

Jacobs's long-term goals may surprise you. Technically, the name of his

company is FitnessKeeper rather than RunKeeper, which gives the company room to

expand. Although he envisions eventually building iPhone and Android apps for other

sports, such as cycling, swimming, and skiing, he doesn't see that happening anytime

soon. He believes RunKeeper has only scratched the surface of running, which Jacobs

sees as a strong and vibrant industry. The company also does very little in the area of

paid advertising or marketing, instead relying on the quality of its product to generate

buzz and stimulate additional downloads.

Even though Jacobs says that he doesn't see RunKeeper expanding beyond

running anytime soon, his ultimate goal is to build a billion-dollar company and change

the way people interact with their health. How that will be achieved remains unclear.

Jacobs readily admits that selling smartphone apps is not the route to building a billion

dollar company. The top smartphone app, Bejeweled 2, a puzzle game, has sold around

3 million downloads at $2.99 a piece. While impressive, that's just $9 million in one-time

download feeswhich is a far cry from $1 billion. Jacobs sees apps as a way of

engaging users and funneling them to his Web site. The Web site will presumably offer

additional products and services for sale over time.