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Zero customer acquisition costs essential for investing in companies with traffic and no revenue model

By December 1, 2006 12 Comments

AlarmClock:Euro posted on the mediatech event yesterday saying that VCs (and indeed Yahoo!) were happy investing in companies with audience but no revenue model.  I wanted to leave a comment, but they have disabled that feature so I’m putting it here.

This is more or less a direct quote from Ben Holmes of Index, but if there is no revenue model then the only way you can invest is if customer acquisition costs are zero, or very close to.  That way you only need to be able to make a small amount per user to make the business model work, and it is pretty safe to bet you can get that from somewhere.

MySpace is a good case study of turning traffic into cash.  if anyone has seen a good write up I’d love to know.