Tuesday, June 23, 2009

"Sponsored Definition" - Ads come to Twitter

This morning on my Twitter, there was definitely an ad labeled "Sponsored definition" for the iPhone ExecTweets by Microsoft (and federated media).

When I clicked on it, it opened up my iTunes (somewhat annoying). I can only assume this has to be an ad? Is this the end of the free advertisements for Twitter apps?

Tuesday, June 16, 2009

Using Adsense to test your business model

There has been a lot written how entrepreneurs can use Google Adwords to verify whether customer demand exists for their products. Even before you have a product built, you can write a text ad and pay to have it displayed next to search results. If people click on your ad at a solid clip, you have a good sense whether customers are interested in what you are offering.

Another interesting tool is to use Adsense to test your business model. You can use Adsense to answer a simple but important questions - is there money to be made in what I am doing? All too often, entrepreneurs start a social network, blog, or site where there is literally no way to make money. This is a little diagnostic to help avoiding that. Here goes:

Put Adsense on your site. Observe the eCPM. If the CPM is high (say greater than 5 CPM) this is a good sign. If you have low CPM (say less than .5 CPM) this is a bad sign.

The eCPM of your site tells you two important things. First, are you in an industry where there is money to be made. You might not understand yet how to make that money, but someone out there is willing pay for traffic and therefore they know how to make money.

Second, the eCPM tells you whether your vistors have "purchase intent" for something. If they are coming to your site to read an article, message their friends, or write a post, they probably don't have purchase intent for anything and will exhibit a low eCPM. If they are looking for real estate, browsing car prices, or looking at electronics reviews, they will tend to have an higher eCPM.

If you are getting a very low eCPM, I'd encourage you to think very critically about the industry you are getting into and your prospects for making money. Your site could become massively popular, but your business could still be a failure. Your business model will feel like you are squeezing blood from a stone.

In short, you can use Adsense to determine industry profitability and whether you are attracting visitors that might want open their wallets. This does not mean you should use Adsense as your primary business model. Making decent money from 3rd party advertising (even at a high CPMs) requires a level of traffic that most sites will never achieve. However, if you are achieving a strong eCPM, there is a good chance eventually you'll figure out how to make money.

Wednesday, June 10, 2009

Does Craigslist make $96 million in profit?

The AIM Group is estimating that Craigslist is doing about $100 million in annual revenue. Given that you can physically count the number of paid listings on their site, I take this to be a solid estimate of their revenue.

The more remarkable fact is that Craigslist achieves this revenue with only 30 employees. They've built a product so compelling that they don't need any sales and marketing to achieve this revenue. Customers just show up and hand them money. If you assume a fully loaded average wage of $130,000 per employee, that comes out to a cost base of only $4 million.

So is Craigslist making $96 million dollars in profit? This leaves a heck of a lot of money to pay dividends to it's owners (and the government).

When I first started Personforce, I met with a former senior exec at Monster. The advice he gave me was try to be more like Craigslist and less like Monster. His point was that running a sales force is expensive and pushing a product that no one is excited about is not fun. Instead, build something that is so unique and compelling, it sells itself. Who wouldn't want to run a company with 95% net margins?

Friday, June 05, 2009

Ha, I was right about Stack Overflow jobs!

A few weeks ago I wrote a post saying that Stack Overflow would be come a recruiting and jobs site.

Today, I logged into my Google analytics for the first time a couple of weeks and saw a massive spike in traffic to that post. One of the co-founders of Stack Overflow linked to it on twitter, saying "the silicon MBA is on to us!"

Turns out I was right. They added a job board to the site and hinted about more recruiting functions to come. Looks like a solid move for the company and an innovative way to find technical talent.

Thursday, June 04, 2009

Thanks for selling my information, Yahoo

About a year and a half ago, a friend and I decided to start a tshirt business on a whim. Our plan was to sell hyper-targeted tshirts to folks using Facebook's self-service ad platform. Our target market was management consultants, a market which we sized to be about $500 in annual revenue (if we achieved 100% marketshare) and we would have negative gross margins. Seemed like an inspired idea!

That very morning, we bought the domain and set up a store using Yahoo Stores to power our ecommerce site. Within 3 hours of thinking up the idea, we had our business up and running; 8020 tshirts was born!

By the afternoon we lost interest in the idea; 8020 tshirts was dead! After letting the site sit around for a while, we cancelled the account with Yahoo Stores (after paying them about $150 bucks in fees). So this business only lasted about 3 hours and the only one who ever knew about it was Yahoo.

But why the heck do I get junk mail almost every week addressed to 8020 tshirts? Credit card applications, small busines banking promotions, all sorts of crap. It's rather annoying actually (and a constant reminder of our sad business failure!).

I can only assume that Yahoo sold our information to a mailing list company. That seems like a pretty low move. I could never see Google doing something as greedy and short-sighted as that.

What gives Yahoo?