Economics of the Everpix Shutdown Decision

http://research.ivanplenty.com/2014-economics-everpix-shutdown-decision

by ivanplenty • 13 years ago

43 6 13 years ago

research.ivanplenty.com

sharemywin• 13 years ago

What if they had used there own storage and servers for the cloud?

ivanplenty2• 13 years ago

Then they may have had a chance. That seems to be the way that the other major players (Google, Microsoft, Facebook, Apple, etc) stay in business.

dougmccune• 13 years ago

I liked the analysis, but it's only for the core product and doesn't take into account any of the other potential revenue streams that can occur if you're the de-facto storage mechanism for people's photos. Photo books, xmas cards, individual prints, etc. Everpix was all about trying to innovate in the automatic curation of your photo stream, ie over the last year automatically create a stream of the highlights. If that worked well you can pretty easily imagine subscribing for a year-end photo book that gets mailed to you every year or any number of other photo-related products.

I don't know if that was the eventual goal of the founders, or if they really thought they could make the core product profitable. But maybe the core photo storage product was destined to be a loss leader to let them monetize a massive collection of photos.

swisspol• 13 years ago

Impressive write up. I agree your reasoning almost 100% but not with a few hypothesis you make and that changes the overall conclusion:

1) IMO you can't apply such "idealized" reasoning to an early stage consumer startup: the vast majority run at a loss. It's expected and as a matter of fact not a single investor had problems with our financials. For better or worse, Everpix was on the VC track, not the bootstrap track.

2) You're essentially assuming that infrastructure costs are set in stone. I addressed this point in another comment: https://news.ycombinator.com/item?id=7043555.

3) You're assuming photo collection sizes are also constant, which is not the case: early adopters will have more photos than mass consumers. For instance IIRC average subscriber had 15K photos, while we would expect the average consumer to have 5-10K. This gets compounded with infrastructure cost savings.

4) You're assuming the only revenue stream are subscriptions. We had concrete plans post Series A of printing based monetization leveraging the uniqueness of our photo platform.

So what you demonstrated is that, assuming some hypotheses, it would be really difficult to run profitably such a business on AWS. Again, I agree with you: none of the large players do it on AWS (I know for a fact and that savings would be 3X-8X), and our #1 engineering goal post Series A would been to get off AWS (since we would have had the capital and resources to do so).

I would however counter that using a different set of hypotheses, more appropriate to such a business, combined with our "track record" of driving infrastructure costs down, we would have fixed that marginal loss short-term. I am actually 99% sure of that but of course I cannot prove it :)

On a side note, some questions which IMO are more critical to address are for instance what's the total size of the market or how much does it cost to acquire customers at scale? Now these are externalities you cannot "change" contrary to infrastructure costs. So if these don't work out, then your business can absolutely not be viable. I would love to read blog posts as detailed as yours on such topics.

Thanks again for writing this insightful post!

PS 1: About infrastructure costs, I shared some extra context here: https://news.ycombinator.com/item?id=7041640

PS 2: About the team size, Android & Windows were actually outsourced to contractors. Regarding the rest, we're going to have to disagree that a quality and complex product like Everpix can be built with a smaller or less experience team in such a time frame (for instance, you're ignoring the science part and I assure you no junior iOS dev can built highly responsive and dynamic apps displaying 20,000 photos) ;)

ivanplenty2• 13 years ago

Thank you for responding thoroughly to the write-up. I think you're absolutely right that we both are clouded by preferences and philosophies when looking at this data. Your conclusions are just as valid.

The only point I would make is that I did not assume constant photo sizes, even distributions of users, or constant costs in the long term. I did assume these variables changed each month. What I tried to do was match what actually happened each period to determine if there was an operating profit.

I agree had the business expanded to other revenue streams or had been able to migrate to a different infrastructure it may have become a profitable ongoing concern. It just doesn't look like you had been able to get to either in the time you had.

But I think you will in the next venture. Again, I cannot stop thanking you and wishing all the best!

underwater• 13 years ago

"In my humble opinion..." Ha!

Your point would have been better made without the schadenfreude, self promotion and condescending tone.

Economics of the Everpix Shutdown Decision

Related Stories