Comments on: Zero customer acquisition costs essential for investing in companies with traffic and no revenue model http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/ Nic Brisbourne's view from London on venture capital and exploiting change in technology and media Fri, 12 Mar 2010 19:55:07 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: azeem http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/comment-page-1/#comment-608 azeem Thu, 21 Dec 2006 20:07:54 +0000 http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/#comment-608 Per our conversations in Paris, I completely agree with this. Once you have an audience, that is somehow engaged, you can find a monetisation model, whether it it Pixel lotteries, advertising or something else. The critical thing is that your customer acquisition has to be dirt cheap if your customer lifetime value is unknown (but positive). Otherwise you run into the web 1.0 problem of paying hundreds of dollars to acquire customers and then have a business model than only generate a few bucks per customer. Nothing wrong with either of those attributes, just don't put them together. Per our conversations in Paris, I completely agree with this.

Once you have an audience, that is somehow engaged, you can find a monetisation model, whether it it Pixel lotteries, advertising or something else.

The critical thing is that your customer acquisition has to be dirt cheap if your customer lifetime value is unknown (but positive).

Otherwise you run into the web 1.0 problem of paying hundreds of dollars to acquire customers and then have a business model than only generate a few bucks per customer. Nothing wrong with either of those attributes, just don’t put them together.

]]> By: JCurve Chronicles :: Chris McAleenan’s view on technology, start-ups, venture capital, and life » So Hot on 12.02.06 http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/comment-page-1/#comment-545 JCurve Chronicles :: Chris McAleenan’s view on technology, start-ups, venture capital, and life » So Hot on 12.02.06 Sat, 02 Dec 2006 20:31:21 +0000 http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/#comment-545 [...] No revenue model doesn’t have to be a dealbreaker, according to Nic Brisbourne… [...] [...] No revenue model doesn’t have to be a dealbreaker, according to Nic Brisbourne… [...]

]]> By: nic http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/comment-page-1/#comment-544 nic Sat, 02 Dec 2006 16:46:42 +0000 http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/#comment-544 Thanks Val. Re the spam, I run Wordpress and need to sort something out for my spam problem as well. If you find anything let me know.. Thanks for the pointer to startup review, also to weaverluke. 5280Angel - I agree that not many companies will succeed in generating traffic with minimal cost, and that it is very hard to predict in advance which are the ones that will. Most VCs (including us, so far at least) are only investing in companies that have already cracked this problem. We pay up a bit for that privilege though. At the angel level this is more difficult. Thanks Val. Re the spam, I run Wordpress and need to sort something out for my spam problem as well. If you find anything let me know..

Thanks for the pointer to startup review, also to weaverluke.

5280Angel – I agree that not many companies will succeed in generating traffic with minimal cost, and that it is very hard to predict in advance which are the ones that will. Most VCs (including us, so far at least) are only investing in companies that have already cracked this problem. We pay up a bit for that privilege though. At the angel level this is more difficult.

]]> By: weaverluke http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/comment-page-1/#comment-540 weaverluke Sat, 02 Dec 2006 07:59:56 +0000 http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/#comment-540 Try <a href="http://www.startup-review.com/blog/myspace-case-study-not-a-purely-viral-start.php" rel="nofollow">this write-up</a> from the excellent Startup Review, Nic: Try this write-up from the excellent Startup Review, Nic:

]]> By: Web 2.0 Ireland http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/comment-page-1/#comment-537 Web 2.0 Ireland Fri, 01 Dec 2006 19:16:15 +0000 http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/#comment-537 <strong>Investors are looking for audiences, not revenues from Guardian Unlimited: Organ Grinder...</strong> Commentary from event in the UK yesterday. Investors are looking for audiences, not revenues from Guardian Unlimited: Organ Grinder Quote: “Yahoo is focused on identifying start-up companies that can create products with a large number of user... Investors are looking for audiences, not revenues from Guardian Unlimited: Organ Grinder…

Commentary from event in the UK yesterday.
Investors are looking for audiences, not revenues from Guardian Unlimited: Organ Grinder
Quote:
“Yahoo is focused on identifying start-up companies that can create products with a large number of user…

]]> By: 5280Angel http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/comment-page-1/#comment-536 5280Angel Fri, 01 Dec 2006 18:23:40 +0000 http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/#comment-536 I have looked at several companies where the business plan has no clear revenue model but huge expected traffic. I have been uncomfortable to say the least in considering a company that just hopes someday to generate ad revenue because of their user base or get lucky with a huge acquisition. Either way it doesn't feel like investing...more like russian roulette. Most companies are going to have to spend real money to generate significant traffic so the odds of picking the anomalies with small customer acquisition costs seem pretty slim. I'm not that smart or lucky. I have looked at several companies where the business plan has no clear revenue model but huge expected traffic. I have been uncomfortable to say the least in considering a company that just hopes someday to generate ad revenue because of their user base or get lucky with a huge acquisition. Either way it doesn’t feel like investing…more like russian roulette.

Most companies are going to have to spend real money to generate significant traffic so the odds of picking the anomalies with small customer acquisition costs seem pretty slim. I’m not that smart or lucky.

]]> By: Valerie http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/comment-page-1/#comment-535 Valerie Fri, 01 Dec 2006 17:55:59 +0000 http://www.theequitykicker.com/2006/12/01/zero-customer-acquisition-costs-essential-for-investing-in-companies-with-traffic-and-no-revenue-model/#comment-535 Hi Nic, It's Valerie here from the a:c euro. We really were sorry to turn off the comments - but the spam was unmanageable - still looking for a solution, by the way. But thanks for posting your comment here. The additional insight into what investors are thinking when they invest in web companies that don't have an immediate revenue model sheds light on the subject. You said you were looking for a good case study about turning traffic into cash. There is a good blog, that I have been meaning to link to, Startup Review (sponsored by Sierra Ventures) that does just that. It provides a lot of insight into various social media type companies, including Facebook, HotOrNot, istockphotos, Digg and some others. URL is http://www.startup-review.com/ Hi Nic,
It’s Valerie here from the a:c euro. We really were sorry to turn off the comments – but the spam was unmanageable – still looking for a solution, by the way.

But thanks for posting your comment here. The additional insight into what investors are thinking when they invest in web companies that don’t have an immediate revenue model sheds light on the subject.

You said you were looking for a good case study about turning traffic into cash. There is a good blog, that I have been meaning to link to, Startup Review (sponsored by Sierra Ventures) that does just that. It provides a lot of insight into various social media type companies, including Facebook, HotOrNot, istockphotos, Digg and some others. URL is http://www.startup-review.com/

]]>