
Seth's Godin: How to make a million dollars - staunch
http://sethgodin.typepad.com/seths_blog/2007/06/how-to-make-a-m.html
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elq
While I agree with Godin's general premise, the obvious (at least to me)
implication of this to hackers is to make "enterprise" software. This is
rather unfortunate. The sales cycle for such systems tends to be very drawn
out, and large companies decide to purchase from vendors in a manner that
seems rather arbitrary using criteria that is often non-obvious e.g. the long
term survivability of the vendor is frequently at least as important as the
quality of the product they provide.

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especkman
Why is that the obvious implication, especially whith the two home-run
examples he gives?

Starbucks and Microsoft are built on smaller transactions than one would
expect from enterprise software. Starbucks does it $3 at a time. Microsoft
established itself selling desktop software for for a few hundred a pop, and
for quite a while, it was selling a couple of copies at a time until they
gained enough momentum to sell their desktop software to whole departments and
later even whole enterprises.

Interesting to consider that the average annual revenue Starbucks gets from a
regular customer, is probably similar, or even a bit more than the annual
revenue Microsoft gets per-seat from its best enterprise customers. A reminder
that one should balance the difficulty of acquiring a customer against the
lifetime value of that customer.

Getting $1 from a million people might be a tough business, but getting
$20/year from 50,000 people one dollar at a time is conceivable.

Flickr might be a good example (though a little on the big side). When they
were acquired by Yahoo, just a little over a year from their debut, they
already had ~400,000 registered users. Within a few more months, they had a
million, and a few months after that a million more. I'd postulate that nearly
all of that post-acquisition growth (and much more) came from existing
momentum rather than their association with Yahoo.

I don't know if the same ratios held back then, but when I looked a few months
back, about 15% of flickr accounts were flickr pro accounts bringing in $24.95
in annual revenue. Thats 300,000 x $24.95, or $7M in annual revenue, just from
pro accounts.

Margins were low, or negative, because they were going for growth, but they
had various knobs they could twiddle. First off, a little after the Yahoo
acquisition they cut the pro subscription price (by half, I believe). In
addition, they controlled the amount of storage and upload bandwidth available
to both free and pro account holders. Taken together these variables gave them
latitude in picking margins. Even a relatively paltry 13% margin would have
generated $1M in profit.

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joshwa
Start with $100 million, and start an airline.

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run4yourlives
Ad-based startups take note.

