A semi long read on the economics of content. Consolidation will be a likely reality but that won’t necessarily solve the monetization problem.
over a period of several months, Groupon launched a coordinated and focused price-cutting attack in the U.S. After maintaining take rates of 43 percent and 44 percent respectively on North American local and travel deals in the first two quarters of 2012, those cuts of revenue dropped to 38 percent in the third quarter, and then 32 percent in the fourth, according to a recent Morgan Stanley research report, as Groupon looked to increase the amount of deals in its fledgling deals marketplace, and to steal business from LivingSocial.
Related but slight different than the Penny Gap post by Josh Kopelman.
Good postmortem of what happened at ShoeDazzle when they brought in an ecommerce vet who had no experience with subscription commerce. He failed to understand that the business was inherently different enough where he ran it into a ground:
When Bill Strauss took the reins of ShoeDazzle, he deemed its 10 million members insufficient and set about trying to bring in millions more by jettisoning membership and opening the site to anyone. What he didn’t understand was that those initial existing members loved the brand — they were not only acting as brand ambassadors to spread awareness of the site, but were also likely to continue buying over time. Compared to cultivated members, customers are less loyal, more fickle, and harder to please.
Further, the typical retail metric of cost of customer acquisition is less relevant than customer lifetime value. It may cost more to acquire a quality customer, but she will produce a greater return with higher value/more frequent purchases, longer retention, and brand advocacy. A subscription business model requires a longer-term view on metrics.
In the first 3 years, these public SaaS companies spend between 80 to 120% of their revenue in sales and marketing (using venture dollars or other forms of capital to finance the business). By year 5, that ratio has fallen to about 50% where it remains for the life of the business.
Despite the divergent revenue ramps, the marketing and sales spend patterns for these companies resemble each other strongly and serve as good benchmarks for high-growth SaaS startups.
TLDR: Spend 80-120% of return in sales and marketing in first 3 years. By year 5, it should go down to 50% and stay there.
And also very important:
At the same time, CBS rejected demands that it give up the opportunity to sell separately its content to digital outlets like Amazon and Netflix, insuring another bountiful revenue stream, likely to be worth hundreds of millions a year.
The latest (week old) article that explores the difference between paid and ad-supported content:
“Rather than go through the hassle of publishing, marketing, excerpting and selling the story as an e-book, we figured we would just share it with all of our readers all at once,” Mr. Blodget said in an e-mail.
This approach is the opposite of that taken by another online publication, NSFWCorp, which was formed by Paul Carr, a blogger and author. NSFWCorp bills itself as The Economist as written by The Daily Show, and generates what Mr. Carr calls “real long-form journalism — but with jokes.”
In adtech, most conversations are really just about a handful of issues that we’ve been dealing with over the last decade and more. Ad tech cos have a lot of headcount. Always have and probably will into the the near future. I’ll make sure to make a really big deal when I post news on the day this changes.
Technology instead of humans — That’s the model ad tech companies have touted over the years, especially to their investors.
But it’s not that simple in practice. As nice as self-service platforms and automation sound, the fact is vendors still require hefty service layers if they want to sell into agencies. Advertisers fully expect their vendors to take care of any heavy lifting when it comes to executing and optimizing campaigns, especially around display.
Yang’s statement is closest to what Yahoo has aspired be — “the most essential starting point” for Internet users — and struggled to become as it was lapped by Google, Facebook and others who developed very profitable services that prevailed over Yahoo’s.
This is a Yang quote but it still speaks to the core appeal of what Yahoo was (and wants to return to) when everyone went to their my.yahoo page to get the digital content.
As I’ve stated before, as marketers get more demanding for multi-screen metrics, Yahoo needs to increase their PVs of logged in users. On paper, they’ve reversed this the growth trends for those metrics through this acquisition.
Below is a full list of Yahoo’s acquisitions since 2005. How many can be described as success stories?