
Ten million users is the new one million users - yonasb
http://cdixon.org/2012/08/03/ten-million-is-the-new-one-million/
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therealarmen
If you have an iPhone app with 1 million daily active users, VCs will be
knocking down your doors to write that Series A check. A spammy Facebook app
with 1 million "users" is a totally different beast on the other hand. It
really depends on your definition of a user, which the author conveniently
leaves out of his analysis.

~~~
dave1619
There's a lot of iPhone/Android apps with 1+ million daily active users. But I
bet most of them aren't VC-fundable.

I think 1 million daily active users isn't as impressive as it was 5 years
ago. iOS/Android/Facebook platforms have radically changed distribution.

All that to say, with 1 million daily active users... it depends on the app as
to whether VCs would be interested or not.

~~~
_pius
I dare you to name a team that built an iPhone app with 1 million DAUs that
couldn't successfully find an investor if they wanted one.

~~~
dave1619
OK, how about this developer,
[https://play.google.com/store/apps/developer?id=Best+Cool+%2...](https://play.google.com/store/apps/developer?id=Best+Cool+%26+Fun+Games)
. Their Ant Smasher games has over 20 million downloads. All their games
combined likely have 1+ million DAU's.

Note, the post I commented on assumed that with 1 million DAU's that VC's
would be "knocking down your doors" to fund a Series A.

With the example developer above, they could probably get some kind of funding
(ie., seed funding from somewhere) but I highly doubt reputable VC's would be
knocking down their doors to fund a Series A.

~~~
theotherone
There's no way they have 1MM DAU. People play that once and then leave.

~~~
dave1619
Likely. But we don't know which iOS/Android apps have 1MM DAUs, and so this
makes this debate kind of pointless... unless developers share their stats.

There are lots of apps with 20+ million downloads (total), and if they're good
apps they might be pushing 1MM DAUs (of course, tough to tell unless developer
reveals that). All I'm saying is that some of them are hits and VC's are
clamoring over, but some might be good lifestyle (or less scalable) businesses
and VC's aren't "knocking over doors" to fund a Series A with them.

I'm just calling out the assumption that 1MM DAU = guaranteed Series A
funding.

Come to think of it, I should retract what I said about most of them not being
VC-fundable. I just don't know cause the stats aren't out there.

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nhashem
If investor attitudes are changing as the OP seems to indicate, I actually
think this is a great thing. For all the doom and gloom about "Tech Bubble
2.0," the public markets are not valuing tech companies on "potential." You
need real profits.

If that trickles down to private investors and makes them more gun-shy about
investing in startups who don't have an obvious path to a product that
involves someone using their credit card at any point, all the better. It's a
much better outcome than losing all valuation rationality for a few years
until the bubble pops and catastrophically damages the industry.

Also, if you do have 1 million daily users, even if you can't get the investor
valuation you used to be able to get, you will still have a TON of options for
a business model.

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InclinedPlane
This seems to be an indication that maybe we're getting past the bogus math of
the first dot-com era. In that time a lot of companies were built on the
following "business plan": enter a market worth X (where X is large) dollars,
posit that even a tiny percentage (say 1% or 0.1%) of X is still a very large
number, enough to support a company with many employees, wait for the
investments to pour in. The problem with this line of reasoning is that being
able to capture _any_ part of a market is difficult, regardless of its size.
Earning a million dollars is a difficult proposition whether the market size
is currently non-existent or even if it's a trillion dollar global industry.

And that logic transfigured itself in the "web 2.0" and "social" era to
something like the following: grow business to X (where X is large) users,
posit that even a tiny per-user monetization (say $1 or cents) still results
in large revenues, wait for investments. The fundamental mistake is the same.
Indeed, consider that a homeless man on a busy street has the same exposure to
"potential customers" as a billboard on that street does, but neither are
guaranteed to generate even a single dollar in revenue.

It turns out that what's important is pretty much what's always been important
in business. Does your company do something valuable? Are people willing to
pay for it? How effective is your company at turning potential customers into
actual customers? The better your company does those things the more likely it
is to be successful.

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jmtulloss
I'm surprised at the negativity around this article. Chris Dixon is a pretty
successful investor, and well connected in the valley. All he's saying is you
need a lot more users now if you make money off of ads and if you want to
raise a large series A.

~~~
waterlesscloud
It's also in his interest to raise the bar.

~~~
loceng
Indeed, something I thought too. If they know they can make a higher minimum
requirement, or that those exist out there, I am sure they would prefer
putting their investment money in those areas. They are potentially bigger
markets, and potentially a more successful company. At 10 million users
though, even just throwing up some basic ads you can likely make enough money
to cover your burn rate..

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lowglow
One dollar is the new ten million users.

~~~
lr
Absolutely! I would gladly pay money for my Twitter account each year (in
return for them not offering the sponsored tweets). How much is that worth to
me? I would pay $20/year for that, easily. I would probably even pay $5/month.
But you know what? No one has ever asked me!

~~~
jmduke
More so for Facebook, in my opinion. Maybe it's because I rarely use the
Twitter feed -- usually I read individual accounts -- but the noise on
Facebook is much more distracting to me.

~~~
lr
Yes, and I would pay even more for Facebook if it meant they would not track
me the way the do. For this reason I have never pushed the "like" button, and
basically only use Facebook for (occasionally sharing) photos (of my dog).

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lr
I guess if you are looking to start a company that offers a free service that
you try to monetize later, than ten million is the new one million. But if you
start a company where users pay right off the bat, then perhaps you only need
a few hundred customers. Sortfolio being the perfect example of an app that
generated hundreds of thousands dollars/year, and took way less than one
person to run.

~~~
_pius
In fairness, OP makes precisely this point:

 _For consumer startups with non-transactional models (ad-based or unknown
business models), you need something closer to 10 million users versus 1
million users to get Series A funded. For consumer startups with transactional
models, e.g. e-commerce, the number of users required is often far lower
because revenue is the more important metric._

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jdavid
The problems in this space are based on attention ( time on site/
interactions), interest (consumer segmentation/focus), and intent (willingness
to make a purchase).

The problem of most ad based apps is that they trade attention for interest
and purchase intent. The problem with facebook is that it's so good at getting
your attention that you rarely visit facebook with the interest or intent of
buying something.

The core difference of google and facebook is that when you go to facebook,
you are engaged with your friends and are in a lean back mindset, while with
google you are actively pursuing interest in something.

I think VCs should actually come up with standard KPIs around interest and
intent than saying lame things like X number of users is worth $y amount. It
would be much smarter to say things like, a user with a KPI of K is worth $Z
this year, and $Q over a lifetime.

A Dropbox, and Apple user looks much different than a Facebook user.

~~~
dsushant
That's a good perspective. Monetization would thus depend on whether attention
& intent are aligned - true in the case of Google search but not so with FB &
Twitter.

~~~
jdavid
with hash tags and with twitter search it might be. even pinterest is having
trouble with intent. At 10 million users it's also likely you have KPIs vs.
some sites at 1million might not have anything more sophisticated than unique
IPs/ logged in users.

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nivertech
Advertising budgets growing much slower than number of Internet/Mobile users,
therefore having more users don't automatically grow the revenue you can make
from advertisement, i.e. it's just divided to more users and you earn less per
user.

if your startup provides 80% better targeting, the ad account manager will not
pay you 80% more, she probably will pay the same or maybe 15-20% more in the
best case.

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thesis
I'm not sure how some people generalize like this... It totally depends on
what you're doing and who you're targeting.

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AznHisoka
10 million, 1 million, it makes no difference since everyone has a different
definition of the word 'user'.

Stop being so abstract, and cut to the chase! Most consumer startups rely on
advertising. Let's assume $1 CPM. The most useful stat to care about in that
case is 'Average Users Per Day'. So if you have 10,000 average users a day,
you're gonna make $10/day and $300/month.

Stop with this users nonsense. It helps noone, ok.. maybe venture funding,
since investors love these buzzwords.

~~~
corin_
If you're going to base it on CPM rates then you want to be caring about
"average ad impressions per day" not "average users per day".

~~~
earbitscom
That is not accurate. You can have more average ad impressions per day by
putting 15 ads on each page instead of 2, but with the same number of users,
the performance of more impressions just gets worse with more ads.

~~~
corin_
I work in advertising and haven't found that true at all. Obviously there's a
limit to how many adverts you van usefully place on a page, but clicks tend to
relate much closer to page impressions than uniques. What is important about
uniques is that each advert should ideally be frequency cap so nobody sees it
too many times to get the best results - therefore unique numbers do impact
how many impressions you can show of any one advert.

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dredmorbius
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