
Why we're losing $300 per user every month - lukekennedy
http://kudu.io/blog/why-were-losing-300-per-user-every-month/
======
manishsharan
Kudos to Kudu ! This seems to be a great way to do MVP but I still have a few
questions:

Isn't the point of MVP to test the idea that people will pay money for the
provided service ? The blog post does not seem to mention if they are charging
customers a price for their service.

Also, is it possible that the current users , who are being served manually,
are viewing kudu as a "consulting" service rather than a SaaS

~~~
lukekennedy
Great points - these are things I struggled with.

How do I test without building? How do I know they want Kudu or just the Kudu
test?

The best I could do was make it VERY clear on the landing page at
[http://kudu.io](http://kudu.io) that they were purchasing what is effectively
'early access' to Kudu and what this would involve.

(Note - We've now changed the page content as we've sold out of these early-
stage seats.)

..and yes, we're charging just $30 p/m

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nhebb
I hope you succeed. AdWords has become more complex over time, and I do think
there is a market for a service that cuts through the confusion. I was priced
out by high CPC's years ago, but my friends who have stuck with it and had
success all say that it takes time to optimize your campaign - at least a few
months. If you can shorten that period, your investment should pay off in the
long term.

On a related note, I was looking at patio11's charts last week and noticed
that he seems to have dropped AdWords in the past year. For 2012, BCC had $64k
in sales and $29k in expenses ($13k of which was for advertising) yielding a
net of $35k. In 2013, his sales dropped to $46k, but with little overhead it's
almost pure profit.

~~~
babs474
It is interesting to see the complexity of strategies needed to play adwords
increase over time. Big budget advertisers use predictive models and automated
bidding to quickly react to changing conditions. I predict some years in the
future we'll have crazy high frequency trading robots battling each other like
in the stock market.

~~~
joosters
Isn't this what already happens with Ad Exchange auctions?

~~~
babs474
Yes, I think it is very much happening right now. I think that the
sophistication will grow and grow as more ad dollars are converted to the
digital world.

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robinwarren
It's good to see people getting what an MVP should be. In this case it's
proving that someone is willing to pay X amount monthly for a specific
service. I guess the next thing to prove is that the company can deliver this
for less than X monthly.

I assume they've some confidence they can create the technology or they'd have
started with that side of things. No doubt there is still risk there but there
was probably less there than on the market side of things. Good work.

~~~
lukekennedy
Thanks for the encouragement, Robin.

------
dutchbrit
This might seem silly, but on your homepage, you have a girl called Erin. Her
'website' is www.truelovecoffee.com - which is just a domain landing page.
It's obviously dummy content, but I hope you will replace that sometime with a
real customer.

------
drakaal
If you have one employee and 4 users, it is easy to lose $300 per user per
month. This isn't an issue.

If you have 1000 users and 10 employees This is a bad thing.

If you have 10k users this is a really bad thing.

Most startups in the pre-cashflow positive stage are losing pennies per user,
not dollars. Few are losing $3600 per year per user.

It is hard to comeback from those kinds of numbers. It is harder to convince a
VC that you will ever be able to turn that around.

Edit: I also don't think that telling a VC that you trained people to do what
you think you can build software to do will fly.

If I told you we were going to launch a new search engine, but until we got
the formula's worked out we were launching using human edits to the results,
you'd laugh me out of the room.

~~~
robobro
Let's say he has ten customers. Do you really think that his company is losing
$36,000 a year by finding what adwords are good for ten web resources?

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kbutler
My initial reaction was that this does not meet the "viable" keyword.

However, in MVP, "viable" is from the customer perspective, not the business
perspective. The MVP is viable for the customer to use, not necessarily viable
for the business to continue providing in its minimal state.

------
meritt
What differentiates Kudu from any other client-services SEM shop?

~~~
lukekennedy
Kudu will be a self-service SAAS for managing successful ad campaigns.

Our current manual process is for our discovery process only.

We want to create a service for those who can't justify hiring PPC managers or
third-party consultants.

~~~
maxbrown
Just in my opinion, the manual process is a concierge service, which people
may be willing to pay $30/m for if they're getting $300 of value (a real
person to work with).

When they switch over to the self-service version, they have to put more of
their own time in to using your system and lose the expertise of the concierge
person, and the value proposition may not be > $30/m anymore.

------
danexxtone
Out of curiosity, what will happen after the two months? What expectations do
your 10 customers have when the time period is over?

~~~
lukekennedy
Good question, we're building as we go through this discovery process.

At the end of the test period (which will be at least 2 months) our users will
have early access to the Kudu product.

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dredmorbius
WTF is MVP?

~~~
robobro
Most valuable project, I'm guessing. And if his most valuable project is worth
-3600/user/year I feel sorry for the company.

~~~
dredmorbius
My first thought was "mobile video platform" though I found that hard to
reconcile with the apparent focus on advertising.

Digging through links on the site suggests "minimum viable product". That term
_isn 't_ among the top definitions listed in acronym dictionaries, though
having had my memory prodded, I've seen it before on HN.

Articles which can't be arsed to define their acronyms draw flags from me.

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robobro
This is a really lousy way of advertising your project. If you're the author
of this article, karma-- bro. Picking a few words to associate with a
project/product/company/enterprise/whatever SEO buzzword you pick doesn't
magically pull $300 or more out of your bank account unless you are paying
someone else $300/user/month or more to pick out adwords -- in which case, why
the hell are you paying for it yourself?

Does it really cost $300 a month, in any case? I have a hard time imagining
that your company is losing ~$3600 on average per customer a year just for
assigning keywords to their $SEO_PHRASE. This is not an informative article.
It doesn't make anyone's life better. You're just inflating the value of your
unnecessary service and trying to make like you're doing a huge service for
everyone, when you're not.

~~~
MSM
You're really, really overthinking this. How much does it cost to assign a
word to $SEO_PHRASE? Nothing. How much money magically flies out of their bank
account whem they pick up the phone to talk to a customer? Nothing.

However, if they have someone on their payroll making $100k/yr and that
employee spends a day with a customer gathering feedback about the product and
what the customer would like to see going forward, that's going to be an
opportunity cost of ~$300. It's just an investment. They aren't making money
right now- they are spending money paying the (hopefully) right people to
determine what they can do to (hopefully) maximize their viability later in
the product's life.

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tehwalrus
The analogy here annoyed me. If I were running a farm (big 'if', etc) I would
never buy a service that involved burning a ton of fuel just to give me some
analytics. Something low carbon, like a drone, would be a much happier
proposition.

I am aware this isn't the point of the post - but the point is lost if the
example "quick hack" involves a three-order-of-magnitude increase in CO2
emissions. This shouldn't be a socially acceptable suggestion to make in this
day and age.

~~~
RokStdy
I think you're misunderstanding. The point was that they would test their
thesis quickly and with available means to validate their idea.

The actual product wouldn't involve burning a bunch of fossil fuels.

~~~
tehwalrus
I did understand that bit, but the principal still annoyed me.

