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E-scooter company goes bust after spending big on Facebook ads

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Re: E-scooter company goes bust after spending big on Facebook ads

#41

Post by danimal88 »

greenyoda wrote: post #6
xenospn wrote: post #2

I just can't understand how someone can be so irresponsible. They knew exactly what their ad spend was and how many pre-orders they had in the pipeline. Since they only had several hundred pre-orders, they could have easily set that money aside for refunds, but they didn't.

If they took customers' money knowing that they could neither deliver the product nor refund the money, wouldn't that be fraud?

Hard to say. One way is that they say got 100K in sales on 10K in ads. Then they said, hm, lets take 50K from sales and put it into more ads so we can get 500K in sales and the remaining 40K went to tooling/production. When that 50K ad buy didn't really pan out, now they have 40K towards fulfilment which probably doesn't meet their suppliers MOQ if it even covered the NRE (non recurring engineering) and tooling. Its more or less the same problem that all companies encounter when they do preorders/crowdfunding/etc.

There is a solution of course - you need to raise enough money (or commit, in the case of Tile founder who should have had enough personal capital to make this work) to never be in a financial position that you couldn't simply return all your customers money in the event that the product or business didn't make sense. As long as you can gaurentee that you hold onto enough money for the returns, you are operating responsibly. If you take 100% of the money you get from sales and commit it, you cant take back ad spend or tooling/engineering spend. Is it fraudulent - I'm not sure. Is it irresponsible - most definitely.

Re: E-scooter company goes bust after spending big on Facebook ads

#42

Post by johnfactorial »

flyGuyOnTheSly wrote: post #28
bransonf wrote: post #13

If you give $700 to a company that promises to deliver a scooter, and they spend that money on advertising, that’s fraud. They have no plausible argument that they didn’t know they couldn’t deliver or refund customers after they started spending pre-order funds. I hope customers get successful chargebacks and there’s a class action lawsuit. This wasn’t a crowdfunding campaign. Consumers were lied to, and the law shou…

You're not wrong, you're an idealist, which typically are very closely intertwined when it comes to reality. If you gave $700 to a company who promised to deliver you a scooter a few years down the line if all of the dominoes fell exactly as planned... I would argue that you got what you paid for even if it amounts to nothing tangible in the long run. Which is to say, you paid for a pricey digital lottery ticket with…

> If you gave $700 to a company who promised to deliver you a scooter a few years down the line if all of the dominoes fell exactly as planned... I would argue that you got what you paid for even if it amounts to nothing tangible in the long run.

Is that what happened with this company? That's the model of kickstarters and the like, but this story sounds like it was a real company offering a product for sale. If a company can form, offer a product, sell 350 units, pay employees & expenses, then fold without delivering product or refund, nor facing any legal repercussions, what's to stop the same employees and founders from following that method ad infinitum? Form company #2, offer a different vapor, take in money from sales of the never-to-be product, spend it on salaries, declare that the product won't be delivered nor refunds given, and move on to company #3. If that's what this company has done, and the court systems are never burdened with tackling such an issue, it is a viable if entirely unethical model for the people involved.

Re: E-scooter company goes bust after spending big on Facebook ads

#44

Post by StuffedParrot »

flyGuyOnTheSly wrote: post #28
bransonf wrote: post #13

If you give $700 to a company that promises to deliver a scooter, and they spend that money on advertising, that’s fraud. They have no plausible argument that they didn’t know they couldn’t deliver or refund customers after they started spending pre-order funds. I hope customers get successful chargebacks and there’s a class action lawsuit. This wasn’t a crowdfunding campaign. Consumers were lied to, and the law shou…

You're not wrong, you're an idealist, which typically are very closely intertwined when it comes to reality. If you gave $700 to a company who promised to deliver you a scooter a few years down the line if all of the dominoes fell exactly as planned... I would argue that you got what you paid for even if it amounts to nothing tangible in the long run. Which is to say, you paid for a pricey digital lottery ticket with…

There’s large differences between bad luck, failed plans, mismanagement, and fraud. It’s optimistic to assume the best of the person who raised funds.

Re: E-scooter company goes bust after spending big on Facebook ads

#45

Post by jcoffland »

rpmcmurdo wrote: post #30

Just wait until the scooter companies and operators get nailed with an injury class action lawsuit. A good friend was seriously injured on a rental scooter, going 2-3 mph, catapulted onto her face, ended up with brain damage and multiple facial fractures requiring reconstructive surgery. A high school physics student could work out that tiny wheels combined with a high center of gravity is a bad combination.

Broken ankles are another common low speed injury for new riders.

Re: E-scooter company goes bust after spending big on Facebook ads

#46

Post by paulpauper »

Facebook ads are way too expensive and tend to not convert that well. There are stories of fake likes and fake clicks. If your growth strategy involves buying click ads, find another strategy or business idea. Groupon is another company that overpaid on Facebook ads to build its email list. Disney and other multinationals are the only companies that should buying such ad.

Re: E-scooter company goes bust after spending big on Facebook ads

#47

Post by jberm123 »

johnfactorial wrote: post #42
flyGuyOnTheSly wrote: post #28

Earlier quoted context omitted.

You're not wrong, you're an idealist, which typically are very closely intertwined when it comes to reality. If you gave $700 to a company who promised to deliver you a scooter a few years down the line if all of the dominoes fell exactly as planned... I would argue that you got what you paid for even if it amounts to nothing tangible in the long run. Which is to say, you paid for a pricey digital lottery ticket with…

> If you gave $700 to a company who promised to deliver you a scooter a few years down the line if all of the dominoes fell exactly as planned... I would argue that you got what you paid for even if it amounts to nothing tangible in the long run. Is that what happened with this company? That's the model of kickstarters and the like, but this story sounds like it was a real company offering a product for sale. If a co…

>what's to stop the same employees and founders from following that method ad infinitum?

Informed consumers

Re: E-scooter company goes bust after spending big on Facebook ads

#48

Post by mtgx »

vkou wrote: post #11
playing_colours wrote: post #7

Hyped industry, sort of hyped name, wasting money on FB ads. It seems like they were “hacking” their way to quick success instead of focusing on delivering a proper product - exactly like Paul Graham described in his recent essay http://www.paulgraham.com/lesson.html

> It seems like they were “hacking” their way to quick success instead of focusing on delivering a proper product Generally - not specifically - speaking, in a world where your competitors can throw away millions of VC dollars into hacking their way to quick success and market share, this is a valid strategy. It may, in fact be the optimal strategy. Of course, if you don't have said millions of VC dollars to throw in…

It might be better using other advertising channels if your competitors are pissing away VC money drastically raising bids and making it virtually impossible for any "proper" business to do well in digital advertising utilizing the same channels.

You can notice this even within sub-segments of Google Ads and Facebook Ads where there is a propensity for advertisers to just throw millions at the channel without expecting to be profitable right away (or ever).

But the good news is that if some channels are over-saturated with "free money", then chances are there are other channels are that undersaturated.

Re: E-scooter company goes bust after spending big on Facebook ads

#49

Post by Someone1234 »

toomuchtodo wrote: post #22
Someone1234 wrote: post #17

Earlier quoted context omitted.

A class action lawsuit against who? You cannot sue a company that no longer exists. It is unlikely consumers would be able to defeat limited liability, particularly with the argument that "the company should have allocated resources differently."

You sue the corporate officers, and it's up to them to find someone to defend them in court.

You can quite literally sue anyone for anything. But lawsuits aren't free, and the law isn't on the claimants side here, so they'd lose.

So, sure, sue away it is just even more money lost and likely still no scooter or refund to show for it.

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