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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

#31

Post by edouard-harris »

lowdose wrote: post #3

So these guys have to read up on some articles about multisided marketplaces which what they were testing. Starting a matching platform between consumers and teachers is not a feasible plan because this is a longer term relationship and a platform is easily cut out. A platform like uber works because nobody has a regular cab driver. Supply and demand matching is also terrible for dog walking platforms. Don't spend ti…

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 and demand-side churn to levels that are an existential threat to the business. And of course, fraudulently inclined supply side firms may turn defection itself into an optimized business process if it's lucrative enough to do so.

High defection rates ultimately killed Poppy (babysitting marketplace) and Tutorspree (tutoring marketplace), and they continue to plague even platforms like Rover and Airbnb despite (or because of?) their scale.

* Despite what many folks believe, it's is possible to run a successful relationship marketplace without significant supply-side defection; you just need to structure it to leverage the relationship, rather than trying to break the relationship into a set of one-off transactions. (As an existence proof, I'm running such a marketplace right now.)

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

#32

Post by AznHisoka »

kbuchanan wrote: post #25

This may strike some as silly, but before the iPhone was invented, there were ZERO searches for the term "iPhone". (I assume, ha!) By all means, do market analysis, but remember that demand is not static—it can be shaped by what you offer. I co-founded a firm 13 years ago that now employees 50 people that most certainly would have been killed by this type of analysis.

of course there would be no searches for a new product name. However there are tons of people searching for “new phone” or “best phones”.

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

#33

Post by toohotatopic »

eschulz wrote: post #26

This startup also faces a fatal problem when users find a great music teacher, and then they just cut out the startup for future dealings with the teacher. They lose both the parents and the best teachers. Similar to those startups that pair you with a maid.

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

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

#34

Post by edouard-harris »

smallgovt wrote: post #29
lowdose wrote: post #3

So these guys have to read up on some articles about multisided marketplaces which what they were testing. Starting a matching platform between consumers and teachers is not a feasible plan because this is a longer term relationship and a platform is easily cut out. A platform like uber works because nobody has a regular cab driver. Supply and demand matching is also terrible for dog walking platforms. Don't spend ti…

Can you clarify what you mean by "supply and demand matching is terrible" for dog walking platforms? It seems like if the primary qualifier on marketplace success is the ease at which two parties can cut out the platform, dog walking would not pass.

Perhaps surprisingly, dog walking platforms like Rover do experience alarming levels of defection (when participants do a side deal and cut out the platform). The dynamic seems to be that you generally take your dog out for a walk at a similar time every day, and this regularity (and comfort with a specific dog walker that you've grown to trust) leads to more frequent defections.

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

#35

Post by triceratops »

dragonwriter wrote: post #27
kbuchanan wrote: post #25

This may strike some as silly, but before the iPhone was invented, there were ZERO searches for the term "iPhone". (I assume, ha!) By all means, do market analysis, but remember that demand is not static—it can be shaped by what you offer. I co-founded a firm 13 years ago that now employees 50 people that most certainly would have been killed by this type of analysis.

> before the iPhone was invented, there were ZERO searches for the term "iPhone". Before the Apple iPhone was invented, there were probably some searches for “iPhone” because infogear had a product with that name in 1998, and Cisco (who has purchased infogear) started using it for Linksys products not long before the Apple iPhone launch.

Rumors of an Apple iPhone have been around since at least 2002 (5 years before its release).[1]

Apple trademarked the name in Singapore and the UK that year.

Here's an NYT article from the same year using the name "iPhone"[2]

1. https://www.fiercewireless.com/wireless/timeline-apple-iphon...

2. https://www.nytimes.com/2002/08/19/business/apple-s-chief-in...

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

#36

Post by [deleted] »

toohotatopic wrote: post #33
eschulz wrote: post #26

This startup also faces a fatal problem when users find a great music teacher, and then they just cut out the startup for future dealings with the teacher. They lose both the parents and the best teachers. Similar to those startups that pair you with a maid.

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

[deleted]

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

#37

Post by teej »

edouard-harris wrote: post #31
lowdose wrote: post #3

So these guys have to read up on some articles about multisided marketplaces which what they were testing. Starting a matching platform between consumers and teachers is not a feasible plan because this is a longer term relationship and a platform is easily cut out. A platform like uber works because nobody has a regular cab driver. Supply and demand matching is also terrible for dog walking platforms. Don't spend ti…

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…

I’ve seen some writing on what makes marketplaces resilient to “supply side defection” as you call it, but I’d love to hear your take. Specifically I’d love to hear more about structuring to leverage the relationship, or anything else you think is important.

What specific structural things are important?

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

#38

Post by crikli »

anstosa wrote: post #23
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…

Ansel from PSL here. Absolutely. Because we're venture-backed and are spinning out venture-backed companies, we are limited to billion dollar ideas. It's not uncommon for us to kill great ideas that could "only" make tens of millions of dollars. We're hoping through blog posts like this and other means to be able to share more of them because we want those companies to exist, we're just not set up to create them!

Hey Ansel, thanks for responding and for validating my train of thought...I don't have that much exposure to the VC world so the things I suspect far outweigh the things I know. :)

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

#39

Post by thorwasdfasdf »

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…

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.

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

#40

Post by nikodunk »

One project I've been working on is a competing (or now no longer competing :P) platform called https://classalog.org (marketplace of in-person classes). Found the same thing: buying paid ads does not make sense for a platform – you need to do this with free traffic and referrals.

I think the kind of math above is useful, but it doesn't replace making something people want. Maybe to get a rough idea of the metrics, sure – but airbnb etc wouldn't have started either if they'd done the math above.

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