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How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

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Re: How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

#101

Post by bcrosby95 »

DevX101 wrote: post #28
crikli wrote: post #21

So...to me this article illustrates the dramatic differences in objective and mentality between bootstrappers and VCs. This VC looks at this idea, figures out that in order to own the market and make $fuckton, they'd have to spend > $fuckton. Decides to bail. As a bootstrapper of businesses, I look at this case study and go "well yeah of course it'll take $fuckton because you're haven't focused on a narrow enough nic…

You're also ignoring the probability of success. This project is only worth $shitton ($30 million) if the project were perfectly executed and other market participants didn't dynamically react to this new entrant. This isn't the likely outcome. The expected value of this project is probably only $5-10 million once you factor probability of success into account and thus not worth the time and effort at trying in the f…

That said, if you want to specialize in $shitton projects you should be picking ones that don't need to be perfectly executed. There's a literal shitton of $shitton projects out there that you can half ass and still make a $shitton from. In my experience the best method at finding these $shitton projects is throwing shit on a wall and seeing what sticks.

Re: How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

#102

Post by orasis »

crikli wrote: post #21

So...to me this article illustrates the dramatic differences in objective and mentality between bootstrappers and VCs. This VC looks at this idea, figures out that in order to own the market and make $fuckton, they'd have to spend > $fuckton. Decides to bail. As a bootstrapper of businesses, I look at this case study and go "well yeah of course it'll take $fuckton because you're haven't focused on a narrow enough nic…

I’m a bootstrapper and I also use a similar metholodology to this article.

I only go niche if the larger addressable market is big enough. It might be okay if the initial niche offering only makes $5k its first year, but I should see some path to expand to $500k+ per year or the opportunity cost is too high.

Re: How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

#103

Post by wolco »

stri8ed wrote: post #58
edouard-harris wrote: post #31

Earlier quoted context omitted.

Excellent point. This would have been reason enough to kill the idea irrespective of the CAC calculation. Speaking from extensive marketplace experience: A pattern of long term relationships will lead almost surely* to supply-side defection in your marketplace, which is when the supply leverages its relationship with the demand to set up a side deal that cuts out the platform. This can quickly take both supply-side a…

How would you rank UpWork in this respect?

Upwork offers payment platform/record keeping and will dole out harsh punishments if caught leaving.

That's the value they provide and the stick. It works because trusting third world developers is hard. It fails for more local developers.

Re: How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

#104

Post by wolco »

knlam wrote: post #95
toohotatopic wrote: post #33

Earlier quoted context omitted.

... or a soul mate, aka dating platforms.

at face value, this seems plausible. However, the dating dynamic is unique among other marketplace ideas. Case in point, tinder is profitable (whenever people find their soulmate through it, tinder loses customers)

or goes back after the heartbreak.

Re: How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

#105

Post by ssivark »

rubyn00bie wrote: post #79
awb wrote: post #48

Earlier quoted context omitted.

> we are limited to billion dollar ideas How did matchmaking for music lessons get into the discussion as a billion dollar idea? Referrals for tutoring in any subject (math, reading, music, etc.) would be a bigger market, but even then it might not be a $1B company.

Well I was right there with you, thinking it was a completely shit idea, but a little math shows how it at least popped up on the radar (and I don't think its quite so bad myself after some thought): 100,000 music instructors, $60 per hour, at 365 days per year is roughly: $2.19 billion gross revenue per year-hour in the segment. Assuming, the average hours per day are like 3.5 (I can't imagine folks doing this are g…

> Assuming they could earn a 20% stake in 100% of the market, that's like $1.53bn.

That makes no sense. Why would/should instructors+students continue to give them 20% commission for follow-up classes beyond the first one? It seems like just wishful thinking. The app store situation is very unusual (monopoly/monopsony), and does not apply in this context.

Re: How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

#106

Post by bagacrap »

thorwasdfasdf wrote: post #43

I think this part is really key to their analysis: "First off, there are a ton of enabled small businesses competing in this space and I'm not sure there needs to be a middle man. For example, I get 4 ads from businesses in Seattle offering lessons for guitar on Google. Thus, they know how to market and get customers, they are offering free first lessons, and have availability. So I am unsure/doubt there is any real…

The musicians already have a platform on which to find customers. It's Google.

Re: How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

#107

Post by xenadu02 »

thelittleone wrote: post #77
crikli wrote: post #21

So...to me this article illustrates the dramatic differences in objective and mentality between bootstrappers and VCs. This VC looks at this idea, figures out that in order to own the market and make $fuckton, they'd have to spend > $fuckton. Decides to bail. As a bootstrapper of businesses, I look at this case study and go "well yeah of course it'll take $fuckton because you're haven't focused on a narrow enough nic…

Had a similar experience running a consulting practice for a global software company. Our practice revenue was growing with profitably around 20% EBIT. Software sales where not growing as fast. As a result consulting was an increasing % of regional contribution income but at a lower margin. So my practice was lowering regional EBIT margin. We got told to slow down. I put an amazing guy in charge and resigned. Million…

There's a large opportunity cost to that strategy. If you allow consulting to make up 80% of revenue by default the business will inevitably turn into a consulting business, not a software business.

Consulting can be a great way to bootstrap but you need to know when the tail is at risk of wagging the dog.

Re: How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

#108

Post by tacon »

shiftpgdn wrote: post #97
thorwasdfasdf wrote: post #39

Earlier quoted context omitted.

You won't even make 1 penny, if you can't break even on your user acquisition costs. That's what usually breaks a business not the fact that it's not profitable enough, but that's it not profitable at all.

But music lessons are an ongoing (hopefully) expense. If your pockets are deep enough you can run out all the other players and capture the market.

The lessons are an ongoing expense, but the principals will rather quickly eliminate the middle man marketplace after meeting and being happy with the connection.

Re: How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

#109

Post by throw_14JAS »

My major takeaway was how cheaply they tested this idea. Waiting for someone to sell this as a provider-as-a-service to VCs, so they can quickly get a real world estimate of TAM.

For $1k in spend and a day's work, they had a nice data point that tested TAM assumptions.

* Landing page is a template, figure 4-8 hours to put together the couple hundred words of content and configuring assets

* FB Spend = $509.23

* Estimate Google spend around the same (numbers not specified)

Re: How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study

#110

Post by samcheng »

thorwasdfasdf wrote: post #39
DevX101 wrote: post #28

Earlier quoted context omitted.

You're also ignoring the probability of success. This project is only worth $shitton ($30 million) if the project were perfectly executed and other market participants didn't dynamically react to this new entrant. This isn't the likely outcome. The expected value of this project is probably only $5-10 million once you factor probability of success into account and thus not worth the time and effort at trying in the f…

You won't even make 1 penny, if you can't break even on your user acquisition costs. That's what usually breaks a business not the fact that it's not profitable enough, but that's it not profitable at all.

As your niche gets smaller, you will be able to focus your marketing a bit better. This should result in lower user acquisition costs.
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