Why we're losing $300 per user every month

http://kudu.io/blog/why-were-losing-300-per-user-every-month/

by lukekennedy • 13 years ago

37 31 13 years ago

danexxtone• 13 years ago

Out of curiosity, what will happen after the two months? What expectations do your 10 customers have when the time period is over?

lukekennedy7• 13 years ago

Good question, we're building as we go through this discovery process.

At the end of the test period (which will be at least 2 months) our users will have early access to the Kudu product.

robinwarren• 13 years ago

It's good to see people getting what an MVP should be. In this case it's proving that someone is willing to pay X amount monthly for a specific service. I guess the next thing to prove is that the company can deliver this for less than X monthly.

I assume they've some confidence they can create the technology or they'd have started with that side of things. No doubt there is still risk there but there was probably less there than on the market side of things. Good work.

lukekennedy7• 13 years ago

Thanks for the encouragement, Robin.

nhebb• 13 years ago

I hope you succeed. AdWords has become more complex over time, and I do think there is a market for a service that cuts through the confusion. I was priced out by high CPC's years ago, but my friends who have stuck with it and had success all say that it takes time to optimize your campaign - at least a few months. If you can shorten that period, your investment should pay off in the long term.

On a related note, I was looking at patio11's charts last week and noticed that he seems to have dropped AdWords in the past year. For 2012, BCC had $64k in sales and $29k in expenses ($13k of which was for advertising) yielding a net of $35k. In 2013, his sales dropped to $46k, but with little overhead it's almost pure profit.

lukekennedy7• 13 years ago

Thanks, @Nhebb I really hope we can build something that will give you more choices if you hit those same hurdles with Adwords in the future.

And thanks for patio11's stats you've encouraged me to have another look at them.

babs4742• 13 years ago

It is interesting to see the complexity of strategies needed to play adwords increase over time. Big budget advertisers use predictive models and automated bidding to quickly react to changing conditions. I predict some years in the future we'll have crazy high frequency trading robots battling each other like in the stock market.

lukekennedy7• 13 years ago

Note to self - don't build an RTB platform.

joosters• 13 years ago

Isn't this what already happens with Ad Exchange auctions?

patio11• 13 years ago

I haven't dropped AdWords - we're just behind on bookkeeping for expenses. (Partly me being busy, partly due to some uncertainty as to how to alter our practices to be compliant with some Japanese requirements we'll be subject to from this tax year forward.)

manishsharan• 13 years ago

Kudos to Kudu ! This seems to be a great way to do MVP but I still have a few questions:

Isn't the point of MVP to test the idea that people will pay money for the provided service ? The blog post does not seem to mention if they are charging customers a price for their service.

Also, is it possible that the current users , who are being served manually, are viewing kudu as a "consulting" service rather than a SaaS

lukekennedy7• 13 years ago

Great points - these are things I struggled with.

How do I test without building? How do I know they want Kudu or just the Kudu test?

The best I could do was make it VERY clear on the landing page at http://kudu.io that they were purchasing what is effectively 'early access' to Kudu and what this would involve.

(Note - We've now changed the page content as we've sold out of these early-stage seats.)

..and yes, we're charging just $30 p/m

meritt• 13 years ago

What differentiates Kudu from any other client-services SEM shop?

lukekennedy7• 13 years ago

Kudu will be a self-service SAAS for managing successful ad campaigns.

Our current manual process is for our discovery process only.

We want to create a service for those who can't justify hiring PPC managers or third-party consultants.

maxbrown• 13 years ago

Just in my opinion, the manual process is a concierge service, which people may be willing to pay $30/m for if they're getting $300 of value (a real person to work with).

When they switch over to the self-service version, they have to put more of their own time in to using your system and lose the expertise of the concierge person, and the value proposition may not be > $30/m anymore.

tehwalrus2• 13 years ago

The analogy here annoyed me. If I were running a farm (big 'if', etc) I would never buy a service that involved burning a ton of fuel just to give me some analytics. Something low carbon, like a drone, would be a much happier proposition.

I am aware this isn't the point of the post - but the point is lost if the example "quick hack" involves a three-order-of-magnitude increase in CO2 emissions. This shouldn't be a socially acceptable suggestion to make in this day and age.

lukekennedy7• 13 years ago

A fair point. I wonder how far the Stanford guys got with the MVP

JasonFruit• 13 years ago

The analogy was excellent and appropriate. Your objection to it is, like its social acceptability, utterly irrelevant to both the analogy and the rest of the article.

RokStdy• 13 years ago

I think you're misunderstanding. The point was that they would test their thesis quickly and with available means to validate their idea.

The actual product wouldn't involve burning a bunch of fossil fuels.

tehwalrus2• 13 years ago

I did understand that bit, but the principal still annoyed me.

drakaal2• 13 years ago

If you have one employee and 4 users, it is easy to lose $300 per user per month. This isn't an issue.

If you have 1000 users and 10 employees This is a bad thing.

If you have 10k users this is a really bad thing.

Most startups in the pre-cashflow positive stage are losing pennies per user, not dollars. Few are losing $3600 per year per user.

It is hard to comeback from those kinds of numbers. It is harder to convince a VC that you will ever be able to turn that around.

Edit: I also don't think that telling a VC that you trained people to do what you think you can build software to do will fly.

If I told you we were going to launch a new search engine, but until we got the formula's worked out we were launching using human edits to the results, you'd laugh me out of the room.

robobro3• 13 years ago

Let's say he has ten customers. Do you really think that his company is losing $36,000 a year by finding what adwords are good for ten web resources?

kbutler• 13 years ago

My initial reaction was that this does not meet the "viable" keyword.

However, in MVP, "viable" is from the customer perspective, not the business perspective. The MVP is viable for the customer to use, not necessarily viable for the business to continue providing in its minimal state.

dredmorbius2• 13 years ago

WTF is MVP?

robobro3• 13 years ago

Most valuable project, I'm guessing. And if his most valuable project is worth -3600/user/year I feel sorry for the company.

dredmorbius2• 13 years ago

My first thought was "mobile video platform" though I found that hard to reconcile with the apparent focus on advertising.

Digging through links on the site suggests "minimum viable product". That term isn't among the top definitions listed in acronym dictionaries, though having had my memory prodded, I've seen it before on HN.

Articles which can't be arsed to define their acronyms draw flags from me.

drakaal2• 13 years ago

Minimum Viable Product.

The idea behind an MVP is that you build the bare minimum of what it takes to prove their is demand, and then you build out the rest of the features to make it awesome.

If you don't build an MVP you might never ship anything, and that makes VC's unhappy.

robobro3• 13 years ago

This is a really lousy way of advertising your project. If you're the author of this article, karma-- bro. Picking a few words to associate with a project/product/company/enterprise/whatever SEO buzzword you pick doesn't magically pull $300 or more out of your bank account unless you are paying someone else $300/user/month or more to pick out adwords -- in which case, why the hell are you paying for it yourself?

Does it really cost $300 a month, in any case? I have a hard time imagining that your company is losing ~$3600 on average per customer a year just for assigning keywords to their $SEO_PHRASE. This is not an informative article. It doesn't make anyone's life better. You're just inflating the value of your unnecessary service and trying to make like you're doing a huge service for everyone, when you're not.

MSM• 13 years ago

You're really, really overthinking this. How much does it cost to assign a word to $SEO_PHRASE? Nothing. How much money magically flies out of their bank account whem they pick up the phone to talk to a customer? Nothing.

However, if they have someone on their payroll making $100k/yr and that employee spends a day with a customer gathering feedback about the product and what the customer would like to see going forward, that's going to be an opportunity cost of ~$300. It's just an investment. They aren't making money right now- they are spending money paying the (hopefully) right people to determine what they can do to (hopefully) maximize their viability later in the product's life.

dutchbrit• 13 years ago

This might seem silly, but on your homepage, you have a girl called Erin. Her 'website' is www.truelovecoffee.com - which is just a domain landing page. It's obviously dummy content, but I hope you will replace that sometime with a real customer.

Why we're losing $300 per user every month

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