First update (12/27/2017)
Not fundable, because you need a ton of money to acquire users, and no one will fund that!
That's the first sentence that comes out of a typical VC or an angel investor mouth when you pitch them a consumer facing product (B2C). And, it annoys me to my core! Why is that the first thing they think about? Because of all the minor problem-solvers. All the apps and startups that just solve minor first world problems, just improve the lives of people incrementally, just deliver a little something people may or may not crave. Of course, when you are in the business of incremental improvement, cost of user acquisition is high. You have to convince people to give you their time and then some money to fix a very minor and perfectly avoidable pain in their little comfortable first world lives. Why would they do that, unless you find them at the best moment, at the most convenient location, and when they are in the mood for some levity or comfort. That is going to be expensive. But not every startup that is B2C falls into that category. Some of us are solving real pains. Some of us are trying to help people make less costly mistakes. Some of us will save people from their emotionally charged financial disaster, and bring order and logic to their investments. We do not belong in the crowd of "high cost of acquisition" apps. We do not belong in that club! I will prove it!
My side mission to prove VCs and Angels wrong! Here and now, I declare a side mission. A side mission to prove to those VCs and Angels that we are not in the same category as every other B2C product. We are not even in the same universe. Don't treat us that way. We are solving a real problem here! In its simplest form, cost of acquiring customers (CAC) = (Sales + Marketings Costs) / Number of New Customers. So you really have two levers to play with. Reduce your cost of sales and marketing per 1 new customers. Or increase number of new customers per 1 dollar spent on a new customer. So I will split the research into two parts: 1) How to reduce cost of sales and marketing. Or 2) How to increase number of new customers per dollar. I will update this post several times in the weeks and months to come. All I know at this point is that we are not the same. My hunch tells me that if you solve a real problem (as opposed to improving people's lives marginally) there must be a better way, a low cost way to acquire users. I do not know how, but I will find out. I'm just fed up of these presumptions, and I will prove them wrong. Stay tuned!
Second update - Become a Trust Broker (2/11/2017)
My second update on the topic of customer/user acquisition cost is a peek into a startup who has been able to acquire users in millions - NerdWallet. It came to my attention by Ryan, one of the Founder Institute's program directors. NerdWallet has truly mastered the path of content market in the personal finance category. My guess is that their cost of marketing with a focus on SEO is not too low, but they have been able to able to convince visitors to click through and land on their website, and ultimately convert. I want to understand they did it, and what was their secret sauce or unique insights. Let's begin!
NerdWallet - A personal finance website that "demystifies" big financial problems, and get paid a lead generation fee from financial institutions. On their Wikipedia page (ohoom, pun intended!) it says "founded in 2009, the company by 2016 had a valuation of $550 million and projected revenue of about $100 million". They attract about 3 million visitors per months to their website. For a website that its primary value is in its free content, this is one impressive profile. It is even more impressive when you think, there are 1000s of other companies, bloggers, websites, Podcasts, TV shows, radio shows, prints, books, and personal advisors that compete with them. So, what is their secret sauce? What is the unique insight they know and use to be who they are.
Their unique insight (Not so unique for us though! This is one of the pillars of our customers insights at Invest Groove) is the fact that when it comes to financial advice, customers do not trust the insiders. NerdWallet banks on the the idea that "most consumers want to know that they can trust somebody who is not beholden to one of financial institution - Dan Yoo, NerdWallet COO". NerdWallet produces that independent content, and through SEO engines put it in front of the customers. The second unique insight is finding those who are willing to pay for those customers handsomely. The old saying "follow the money" is exactly what they did. NerdWallet creates valuable, free content for the customers and then sell them to the same people who the customers were escaping from at the first place. Basically, NerdWallet plays the role of "trust broker". Trust is broken between financial institutions and customers, and they bridge the two sides together by keeping their independence.
What does this mean for us? Can we be the Trust Broker in the stock investing process for the regular people? The first thing that came to my mind is how a startup called TipRanks is doing just that. They test the financial analysts recommendations for accuracy, and sell the accuracy ranking to the customers. In other words, they assumed the reason the trust is broken between financial analysts and stock investors is in lack of reliability of the recommendations, and they are fixing the trust. They are charging a subscription fee for validating and being a proxy for the trust. The question I need to answer is, how can I position Invest Groove as a Trust Broker, and who are the parties that are interacting with each other? One thing for sure that we want to maintain the independence of being the platform that is built by regular investors for regular investors. Thinking about it, it is really about being the trust broker between regular people. We are the trust broker between peers.
Third update - Podcasting and new, yet proven media channel (2/24/2017)
My third update on this topic is based on my believe that there is still a possibility to acquire users with low cost through channels that the target customers are hanging out. The idea came to me one night when as usual I was googling, going back and forth between my laptop screen, conversation with my hobby, and whatever was on Netflix - chosen by hobby as the entertainment of the night. And I came across a Quora question and answers by Sangeet Paul Choudary. He is a well recognized author of a book called Platform Scale. In his book and on Quora he talks about and I'm quoting "Be the first to get onto a new user acquisition platform: There is a window when a new channel launches when users are still gullible enough to be harvested. Yelp did it with SEO, Zynga did it with Facebook. The same tactics don't work when both the users and the channel get more sophisticated later on." At that moment it striked me that is exactly what we should do. In our case, I don't believe our target customers need to identify themselves as stock market investors, but rather explorers. I then started thinking and exploring what are the new channels that we should be on. Everybody have been on Facebook, Twitter, Google SEO, Radio, and TV. What are and where are our channels? The channels where our target customers are hanging, exploring, and waiting to be discovered. These are two examples of companies who have found or are in the exploration phase of figuring out a new channel.
Podcasts - My fascination with podcasting is coming from my never ending quest to become a better storyteller. Podcasting is a fantastic channel to tell stories that surprises, delights, and emotionally engages the audience in a way that no other media does. Intuutitively, you would think because podcasting is limited to sounds and tunes, other media, TV for instance, have a much higher chance to engage their audience. But for me personally Podcast has an exact opposite effect. While TV is distracting, podcast is engaging. When I watch TV my mind wonders. It happens as well when I'm listening to a podcast except that it is a different mind wondering experience. With Podcast my mind wonders around the story the podcast is telling. I can also listen to Podcast almost everywhere with minimal interruption to other activities. When I'm driving, showering, brushing, cooking, sleeping, eating, you name it. And I think that's the unique power of podcasting. The only question remains is whether podcasting is as new as I think it is and the audience are as explorer as I want them to be?
What does this mean for us? All we need to do is give podcasting a chance. Produce a content that fits the channel, and measure how this new and emerging channel will be our path to acquire users with low cost. I did a bit of research and found that about 91M people in the U.S. have listened to a podcast, close to 60M have listened to one podcast in the last month (let's call them active listeners). If the 90M population of podcast listeners is a good representative of the U.S. adults population, then 25% of them should have money in the stock market and half of them should be self-directed investors. That gives me 11M podcast listeners who also invest in the stock market on their own. Can I have all of them listen to our podcasts, and then acquire them to use our platform at Invest Groove almost at no advertising cost? My plan is to give podcasting a chance. As it stand today, I've reached out to freelance podcast producers, I begged Ginlet media to let me pitch a podcast idea, and I pitched a good friend of mine to be my cohorts. None of these has yet come to fruitation. But, I'm determined to record and publish at least 4 podcasts. I owe it to my little inner storyteller to run wild.
One last note note before I wrap up this update. Are there other even newer channels with more explorers out there that I'm ignoring? As I wrote these sentences, I can't help but wonder whether something like Amazon Alexa or Google Home are the channels that are even better than podcasts and I just need to look into them deeper? I guess, this update might have a second part to it that I did not expect. Stay tuned for my next update.
Fourth update - The power of simplicity and storytelling (2/XX/2017)
Finimize - abc
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