Month: May 2011

A post on Fred Wilson’s excellent blog about cost of acquiring each customer versus the lifetime value of that customer. And it’s pretty simple: “LTV has to be greater than CPA or you won’t be able to scale – or, for that matter, survive.”

This seems obvious. But when you’re preparing a revenues-versus-costs estimate for a business plan, you often overlook how much you earn versus spend per customer over time. Here’s a slight variation of that from a few weeks ago:

The CEO of our firm shot down a recent plan I presented, one that involved both the mobile web and SMS working in tandem. The product was different, compelling, and the estimates said we’d be profitable in a year on the gross. But our SMS costs were 80% of the revenue we would have earned from advertising.

“Keep SMS out; figure out the mobile web part. If you’re spending 80% of your revenue on acquisition and retention, you won’t have enough to spend on content and infra and operations and product innovation – and that’s not even counting people.”

And this was true not just in the month we acquired the customer. Month on month, the SMS costs kept pace with the ad revenue per customer [1], so we’d never have enough money to spare. In other words, the CPA was lower than the LTV. But not nearly low enough [2].

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[1] It was also likely, I realised later, that over time the customer would yield less ad revenue as he/she tired of the service, but the SMS costs would be the same. So we would have to evaluate the customer’s worth and adjust SMS quality of service constantly, making things rather complicated.

[2] As an aside, these costs also grew linearly not just over the lifetime of each customer, but also with the addition of every new customer – there were no economies of scale to be had. If there were, the total lifetime value of all customers would have grown faster than the total (SMS) cost of acquisition and retention, and it would’ve been viable after a point of time.

From an article about Sina’s Weibo microblogging service (sort of a ‘Twitter and more’ for China):

The service is much the same as Twitter in that it allows users to post messages of 140 Chinese characters or less via the Web, SMS or MMS.
But 140 Chinese characters can say a lot more, according to tech expert and Beijing resident Kaiser Kuo.

As an aside, turns out that’s not all that Weibo does. There’s also groups, instant messaging with animated emoticons, video and voicemail uploads, location-based, check-ins, a desktop client and (possibly) e-commerce.

Podcasts have changed my commute since I got the iPhone. I’ve discovered NPR’s This American Life and Fresh Air, BBC’s Excess Baggage and Click, Gruber’s and Dan Benjamin’s The Talk Show and the NYT’s Times Talks and Bits. All of them free in the iTunes store.

Even though all of these were available for free download as MP3s, and I knew (most) existed, I never listened to them on my previous phones.

I recall subscribing to a bunch of NYT podcasts on my Nokia. Checking and downloading five MP3s in parallel, creating a desktop folder each week, copying it to my phone memory card and deleting last week’s folder, refreshing and waiting ten+ minutes while the music player scanned the SD card and detected the new episodes (and identified them as songs, not podcasts), and having to painstakingly navigate to where I had left off a podcast if I wanted to resume. It was a pain and I soon gave up.

The iTunes-iPhone integration makes all the difference. iTunes has nailed catalog and content, discovery, subscription and billing. It has nailed auto-download from the Internet. It has nailed silent and automatic sync with iPhone. It has nailed keeping only the most recent n episodes on-device. And iPhone remembers where I left off, per podcast.

And so then here’s what happens: during the day, the iPhone is plugged in to USB, charging. iTunes is downloading the latest episodes of my subscriptions and syncing with iPhone. Once I subscribe I don’t have to do a thing, ever. New episodes are just *there*.

But iPods have been able to do this for about a decade now. And iPhone for nearly four years. No other phone is able to manage music – and playlists and podcasts and videos and photos and contacts and bookmarks and, yes, apps – anywhere as well. You just have to say the others have been lazy.

Or I guess if phone manufacturers still consider themselves to be that – manufacturers of phones – then they’re missing a lot.

NM: @PrimeministerGR George Papandreou appreciated @ShashiTharooor ‘s TED speech. On Twitter. Tharoor @replied.

OM: Tharoor’s Kerala office briefed the Indo-Asian News Service about the exchange of tweets.

World’s best blogger? Perhaps. Almost certainly the most prolific and most influential. I have attempted to follow The Dish (formerly The Daily Dish) about a year ago; while it’s addictive, it’s very quickly exhaustive. To read all of it. And to think this man writes it.