Pure Digital Flips the Script

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The car key is concealed in a plastic case until the driver presses a button, causing it to shoot out like a switchblade.

Similarly, the camcorder's USB key is hidden on the side until a button is pushed and it flies out. Users plug it into the USB port of a PC or laptop to quickly transfer their video to a hard drive, and then post clips online. To begin editing or storing video, users don't need CDs to install software on their hard drives when they buy the camera. Its built-in software (compatible with Macs, too) loads instantly each time the device is plugged into any computer.

LIMITED EDITING

Pure Digital pushes new products to market quickly. In September, 2007, four months after its first release, it began selling the smaller Flip Video Ultra in 20,000 stores, including Wal-Mart (WMT), Costco (CSCO), and Best Buy (BBY). Prices are modest: $150 for the 30-minute version of the Ultra, in basic stark white or black, and $180 for the 60-minute one, also available in orange and pink. And to drive consumers to certain stores to buy a particular color, almost like collector's items, some camera colors are exclusive to their retail outlet.

Still, the Flip has flaws. And Kaplan is quick to agree: "O.K., so we don't have the highest-quality components or expensive paints." But those compromises helped Pure Digital keep its own manufacturing and consumer prices down—a helpful lesson for companies looking to save money for themselves and their clientele in a recession.

Critics point to the cameras' simple software, which doesn't offer such features as the ability to add fancy, Hollywood-style titles and scene transitions. To this, Kaplan says, hey—it's a camera and software bought together for less than $200.

"We hear the challenges, but we don't want the software to become more complex," he says. "We want to have software that helps users feel smarter."

Kaplan's position is counterintuitive, just as the Flip's success is. He says Pure Digital is looking for new niches, working on even tinier models—and possibly other devices that feature some of the Flip's user-friendly elements. The small startup that shrank the camcorder is now challenging the big players—in a way that's anything but shy.

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Jana is the Innovation Dept. editor for BusinessWeek.