
How to Kill a Startup Idea with Google Keyword Planner and AdWords: A Case Study - treblig
https://www.psl.com/feed-posts/psl-studio-kill-xylo
======
crikli
So...to me this article illustrates the dramatic differences in objective and
mentality between bootstrappers and VCs.

This VC looks at this idea, figures out that in order to own the market and
make $fuckton, they'd have to spend > $fuckton. Decides to bail.

As a bootstrapper of businesses, I look at this case study and go "well yeah
of course it'll take $fuckton because you're haven't focused on a narrow
enough niche". Which of course they haven't because you can only make
$shittons from niches, not $fucktons (where $fuckton is up to an order of
magnitude larger than $shitton).

It's a very different set of expectations. $idea might not be investable as a
VC, but if you can really define a specific niche, get a toehold, and
patiently build from there, $idea _might_ have merit for a bootstrapper.

(All that said I don't think this particular idea has legs based on the
reasons identified in the "Regarding competition" section and also from my own
limited experience in the music space).

~~~
anstosa
Ansel from PSL here.

Absolutely. Because we're venture-backed and are spinning out venture-backed
companies, we are limited to billion dollar ideas. It's not uncommon for us to
kill great ideas that could "only" make tens of millions of dollars.

We're hoping through blog posts like this and other means to be able to share
more of them because we want those companies to exist, we're just not set up
to create them!

~~~
awb
> we are limited to billion dollar ideas

How did matchmaking for music lessons get into the discussion as a billion
dollar idea?

Referrals for tutoring in any subject (math, reading, music, etc.) would be a
bigger market, but even then it might not be a $1B company.

~~~
rubyn00bie
Well I was right there with you, thinking it was a completely shit idea, but a
little math shows how it at least popped up on the radar (and I don't think
its quite so bad myself after some thought):

100,000 music instructors, $60 per hour, at 365 days per year is roughly:
$2.19 billion gross revenue per year-hour in the segment. Assuming, the
average hours per day are like 3.5 (I can't imagine folks doing this are
giving lessons for a full 8 hours per day, 5 days a week), that gives a total
market of like: ~$7.65bn. Assuming they could earn a 20% stake in 100% of the
market, that's like $1.53bn.

Looking at the numbers, I think there is likely more potential than they
realized[1]. I would suspect that by and large, digital advertising is
capturing almost none of the market as kinda proven by their analysis. Looking
at how low the frequency of searches were compared to the sheer number of
employed individuals tells me something is off as a whole with the analysis.

That is to say, digital advertising isn't showing the volume of or demand for
musical teaching service because it's highly likely everyone believes it's
incapable of doing so or adding value... That (driving the market online) is
the problem to be solved in the space, because it sounds _hard_, and solving
hard problems tends to be the way to make a lot of money. The other
opportunity I would look at is, sort of from the other side: how to fix (what
I assume to be likely) most music instructor's "underemployment" problems
(i.e. inconsistent, few, or not enough hours). I imagine this angle would
probably net more gross sign-ups as well since users (instructors) would be
advertising the platform for you.

With all that said, you'd have to assume there is latent under-served demand
(25-35%) in the market too to bother with anything I've said... that 25% is
essentially what would be left over for others after you've captured the
niche.

One last thought, for the VC since it looks like they're reading HN. Have you
thought about doing retroactive market analysis where unicorns now exist to
see what the market looked like then (e.g. short-term vacation rentals in
~2006)?

Might give you some strong signals for where there is potential...

[1] They are indeed a VC so it may not be in their best interest (time value
of money, opportunity costs, etc)...

Edit: Adjust some bad arithmetic.

~~~
ssivark
> _Assuming they could earn a 20% stake in 100% of the market, that 's like
> $1.53bn._

That makes no sense. Why would/should instructors+students continue to give
them 20% commission for follow-up classes beyond the first one? It seems like
just wishful thinking. The app store situation is very unusual
(monopoly/monopsony), and does not apply in this context.

~~~
hobofan
By providing some small value-add products that are not possible easy for
individual instructors to provide, but customers like to see. E.g. nicer
scheduling of lessons or a way to share sheet music with the customers?

~~~
onion2k
Very few people would give up 20% of their income for "some small value-add
products."

~~~
hobofan
With platforms like these the choice isn't really up to the supplier, but to
the consumer. The consumers come to expect those value-adds and so the
suppliers have to switch to the platform (where the revenue share is opaque to
the consumer) to get gigs.

The 20% cut also does sound rather extreme, but if you build a very good
product where you can end up charging even more than the usual price, the 20%
isn't taken away completely from the supplier, and might end up more like a
10% actual cut.

~~~
onion2k
_With platforms like these the choice isn 't really up to the supplier, but to
the consumer._

Once the platform has a significant number of suppliers, sure. If the platform
is new then attracting suppliers is the number one problem to solve, and
that's really hard if it's too expensive.

------
lowdose
So these guys have to read up on some articles about multisided marketplaces
which what they were testing. Starting a matching platform between consumers
and teachers is not a feasible plan because this is a longer term relationship
and a platform is easily cut out. A platform like uber works because nobody
has a regular cab driver. Supply and demand matching is also terrible for dog
walking platforms. Don't spend time testing all kind of startup ideas with
complicated technique when you don't know what multisided marketplaces are and
network effects.

~~~
edouard-harris
Excellent point. This would have been reason enough to kill the idea
irrespective of the CAC calculation.

Speaking from extensive marketplace experience: A pattern of long term
relationships will lead almost surely* to supply-side defection in your
marketplace, which is when the supply leverages its relationship with the
demand to set up a side deal that cuts out the platform. This can quickly take
both supply-side and demand-side churn to levels that are an existential
threat to the business. And of course, fraudulently inclined supply side firms
may turn defection itself into an optimized business process if it's lucrative
enough to do so.

High defection rates ultimately killed Poppy (babysitting marketplace) and
Tutorspree (tutoring marketplace), and they continue to plague even platforms
like Rover and Airbnb despite (or because of?) their scale.

* Despite what many folks believe, it's _is_ possible to run a successful relationship marketplace without significant supply-side defection; you just need to structure it to leverage the relationship, rather than trying to break the relationship into a set of one-off transactions. (As an existence proof, I'm running such a marketplace right now.)

~~~
novok
How does supply side defection work for airbnb except in very edge cases, such
as a long term rental. Even then it turns into something like apartments.com

~~~
htfu
Well it's pretty much driven by customers but same diff really. People who
book a night or two then realize they want to extend and ask to pay cash,
mostly. Someone who's already stayed with you just texting the next time, etc.

It works since Airbnb is mostly there to hook you up and protect from crazy
people's wanton destruction, so once you know you're dealing with safe people
and you've gotten the review, eh.

Wouldn't really be worth the penny-pinching, except people tend to forget
about the long-term booking discounts and actually end up paying more than
they would've just using airbnb.

------
tobr
This might come off as awfully naive, but this doesn’t sit right with me:

> XYLO's mobile music lesson technology is the easiest way to learn new music,
> right from the comfort of your home. Our platform can teach your child any
> instrument on any schedule, and let them replay lessons forever.

As far as I understand, this is... a complete lie? You just made some crap up
to see if you can make people click?

~~~
libertine
You have platforms that thrive on this : Kickstarter, Indiegogo.

They are filled with concepts, prototypes, what ever that's sold as end
products.

Yet they ask for money, here it's offered the possibility to get more
information.

~~~
tobr
Yes, there are many people who lie. That’s what makes it a problem, just like
with other types of pollution.

But in my experience your characterization of crowdfunding is mostly wrong.
While projects tend to describe their product as they intend for it to be in
final ready form, the whole concept of crowdfunding makes it clear enough that
backers help fund something that isn’t yet a reality, and that there is risk
involved.

------
cabaalis
This is very useful insight that I want to apply to my own planned side-
projects (like 30-something domains registered as ideas...) Too often I've
thought "that's a great idea" and then focused on the tech of implementation
rather than the viability.

At that point it's just a hobby, or skill-sharpening exercise.

Regarding the example shown, I would think that "uber for" ideas (meaning
facilitate a connection between service provider X with service need-er Y,
take a commission on the transaction) sound as though possibilities are
unlimited. However the reality may be that not everything can be disrupted in
this way.

~~~
netsharc
Reading this article and seeing these replies, I feel like a communist who
accidentally walked into a Davos hotel lobby during WEF.

What about just making a website to connect learners and providers? This
commission-taking, the Uber model, such effing rent-seeking.

I mean I also don't work for free, but things like "Uber-for-dog-walkers, but
we'll fine you much money if you arrange dog walks outside of our service.
Also we don't vet our walkers so they might kill your dog[1]."? Come back to
reality please.

1) Top result when I google "dog walker kills dog"
[https://nypost.com/2019/12/01/embattled-dog-walking-app-
wag-...](https://nypost.com/2019/12/01/embattled-dog-walking-app-wag-hit-with-
new-dead-pooch-accusation/)

~~~
throwawayjava
_> such effing rent-seeking_

That was also my take-away regarding this idea.

20% cut? For match-making on private music lessons? Fuck that. Our local music
store charges less than that for _renting an hour in a soundproof room!_ And
the discoverability/match-making "platform" is a free bulletin board next to
the restroom...

Also love how that email described the radical act of checking the local music
store's bulletin board (or going and asking a friend/coworker/etc. for a
recommendation) as "under-the-table neighborhood activity".

~~~
unlinked_dll
Plus you can get a referral for private lessons from virtually any public or
private school music teacher. For free.

~~~
logifail
> Plus you can get a referral for [snip] for free

Who actually thinks that a(ny) startup is going to be able to provide
consistently higher-quality referrals than an actual word of mouth referral
from someone you know?

------
vi-mode
A wall of text intended as smart content marketing to get some awareness for a
rather unknown investment firm or incubator--Crunchbase didn't show any raised
funds, so I don't call them VC. The long, over-polite text, the fake landing,
the ad test weren't required in the first place.

 _Why:_

The immediate answer every experienced VC would give is a simple 'no, this
isn't a VC case' without all this fuzz and waste of time.

This market is useless for VCs because it's prone to disintermediation. Once
people form a long-term business relationship, it's easy and reasonable to
kick-out the middlemen (eg Homejoy). Marketplaces without long-term
relationships don't face this problem (eg Airbnb, Uber).

Disintermediation is a hard problem nobody solved. 101 of investing.

 _Edit: Just saw another user posted the same. What is interesting, PSL didn
't answer to that user's thread which could be interpreted as approval. So,
PSL's post shows well that most investors are not per se smarter because they
invest money. They're just humans like all of us trying to get free reach for
a day with 'random' blog posts._

~~~
Traster
Counterpoint: Wag raised $300m for an almost identical idea.

~~~
Jasper_
And how's that working out for them?

------
Negitivefrags
Can someone explain to me how this is legal? False advertising laws exist and
this is literally marketing a non-existent product.

And even if it’s not illegal, I don’t understand how you can just be okay with
lying to people.

Everyone in this thread seems to just be totally okay with this and I’m super
confused about it.

~~~
dhimes
I was scrolling the comments here to see if this was being discussed. It's my
biggest takeaway from the article. We had a discussion many many years ago on
HN (maybe more than one) and the feeling among the startup devs (not all, mind
you, but the majority) was that such behavior was immoral. I think it came up
once in a conversation about Steve Blanck (sp?) IIRC.

One thing I learned a few years back, however: If you're in a game and you're
the only one playing by the rules, you're going to lose.

------
chrisfrantz
I love this, I follow a similar method. One thing that immediately stood out
is the Instagram ad creative is poor. The copy is overly technical and there’s
no call to action. The image is a basic stock photo.

Spending 5 minutes in Biteable [1] or a similar service would kick out much
better ad creative that would likely have yielded substantially better
results.

Another point of contention is around the revenue model. Sure you could pay 4x
to drive initial growth, but if you keep those customers longer than a month,
the LTV could outpace the CAC.

Finally, all those efforts work together. Spend $20K on google ads and
referrals will go up, you can test conversion funnels since you have traffic,
back links will appear that will help your organic SEO in the long term,
audiences for retargeting on Facebook will fill up, etc.

However, the conclusion of the author is one I agree with in the long term.
Tech will solve for this. Hololens and Quest are close, the next generation
will probably solve it across multiple platforms.

[1] I work for Biteable.

~~~
briandear
> that would likely have yielded substantially better results

No. It would yield higher click through, but not necessarily a higher
conversion rate. It would actually yield a lower conversion rate because a lot
of creative ads get curiosity clicks rather than people dying for the product
on offer.

Let’s just pretend though in fantasy land that double the clicks meant double
the conversion— the business would still be operating at a huge loss.

------
eschulz
This startup also faces a fatal problem when users find a great music teacher,
and then they just cut out the startup for future dealings with the teacher.
They lose both the parents and the best teachers. Similar to those startups
that pair you with a maid.

~~~
toohotatopic
... or a soul mate, aka dating platforms.

~~~
Johnny555
Pairing people romantically is so hard to do that dating platforms can count
on a long string of revenue from clients.

It's going to take many meetups before I find the woman of my dreams, but
chances are pretty good that the first maid I get paired with will meet my
needs (worst case, maybe I'll need to try one or two more), after a few
successful visits, then I can offer to pay direct and cut out the middleman.

~~~
woutr_be
Don't people usually cut out the middleman on dating apps straight away? From
my experience, after the initial connection, and before the first meet, you
usually exchange numbers, and continue through anything else but the dating
app.

In that aspect, I don't see how it's different than pairing with a maid.

~~~
jmull3n
You would only need to be paired with one maid though.

~~~
woutr_be
Correct, and if that maid is a match, you proceed. How is that different from
a dating site? In theory they only have to match you with one other person.

But my main point was; on dating sites the middle man is almost always cut out
instantly. Usually you try to immediately exchange numbers, and then proceed
from there.

~~~
Johnny555
I don't know if you're tried online dating, but in my experience, it hasn't
been "sign up for a month, find your wife and you're done".

I spent several years off and on with online dating (went on a _lot_ of first
dates, fewer several week relationships, and a few multi-month relationships)
-- dating sites tend to give a steep discount for longer term (6mo, 12mo)
subscriptions, so I was a subscriber for most of that time.

Ending up finding my wife offline though.

On the other hand, I found a housekeeper on Craigslist, called some of
references (one was a neighbor), hired her, used her for a year, then when she
moved out of the area, she referred me to someone else.

Turns out it's a lot easier to find a housekeeper than a romantic partner.

~~~
woutr_be
That's a lot of assumptions tho.

My experience with online dating has been the same, however mostly it's; match
with a person, exchange a few words, exchange numbers, move on to WhatsApp.
Yes, I do need to go back, but the middleman is almost always cut out
instantly.

That said, my experience with finding a housekeeper has been the opposite of
yours. I've had 4 different ones, and I ended up hiring none of them. This is
not necessarily due to their professional skills, but mostly due to
availability and trust. Just like finding a romantic partner. It's easier, but
definitely not like you described for me. Hence why I saw them both as the
same thing.

~~~
Johnny555
_My experience with online dating has been the same, however mostly it 's;
match with a person, exchange a few words, exchange numbers, move on to
WhatsApp. Yes, I do need to go back, but the middleman is almost always cut
out instantly._

But don't they already have your money by then? They don't care if you stop
chatting within their platform since you've already paid

~~~
woutr_be
> But don't they already have your money by then? They don't care if you stop
> chatting within their platform since you've already paid

I suppose so, if you pay for it, most of them are free. But that's besides the
point, I just had a different experience from most people here, after 4-5
different housekeepers, I gave up and ended doing the work myself. So in that
aspect, my experience has been the same as online dating.

------
throw_14JAS
My major takeaway was how cheaply they tested this idea. Waiting for someone
to sell this as a provider-as-a-service to VCs, so they can quickly get a real
world estimate of TAM.

For $1k in spend and a day's work, they had a nice data point that tested TAM
assumptions.

* Landing page is a template, figure 4-8 hours to put together the couple hundred words of content and configuring assets

* FB Spend = $509.23

* Estimate Google spend around the same (numbers not specified)

------
rmason
This is a very dangerous idea. It seems logical until you go and try it. The
potential market is too small so you pass. Only to see the market blow up into
billions of dollars that gets harvested by someone else. Do you think electric
cars were that big an idea in July 2003 when Martin Eberhard and Marc
Tarpenning started Tesla?

It also doesn't factor when you commit to an idea you become an expert. Often
that knowledge forces you to pivot and become successful. Would the founders
of Justin.tv ever have founded Twitch if they'd never started?

~~~
rchaud
They're not inventing any brand new technology. They're evaluating the
business case for being a middle man in an oversaturated industry where both
the customer and service provider want to cut out said middleman as soon as
possible.

------
bhartzer
I wouldn't use Keyword Planner for keyword research data. The keywords that
appear there are only being actively bid on. So keywords that have more search
volume and no ads won't be included.

~~~
amoorthy
This is a great point. Can you please confirm with a source (or other
commenters confirm)? Thank you.

~~~
davidwihl
You can use the Traffic Estimator Service

[https://developers.google.com/adwords/api/docs/guides/traffi...](https://developers.google.com/adwords/api/docs/guides/traffic-
estimator-service)

Disclosure: I work in Google DevRel on this API

------
jtolmar
Neat article. It's definitely a good idea to get actual numbers to estimate
total addressable market, CTR, and CPC. However I want to call attention to
this bit:

> First off, there are a ton of enabled small businesses competing in this
> space and I'm not sure there needs to be a middle man. For example, I get 4
> ads from businesses in Seattle offering lessons for guitar on Google. Thus,
> they know how to market and get customers, they are offering free first
> lessons, and have availability. So I am unsure/doubt there is any real
> consumer problem.

If your idea doesn't solve real consumer problems, kill it. It doesn't matter
if the total market, CPC, and LTV are all amazing, this is sufficient. Even if
you succeed, all you'll have done is shuffle some money around. Go make things
that actually help people.

~~~
tmpz22
I agree but would add the caveat that many market niches have a surprising
amount of depth that may warrant further discovery. For example TAKE one of
these guitar lessons and if some creepy person comes up with a windowless van
and gives an awful lesson there may be demand, just the demand is more hidden.

------
thorwasdfasdf
I think this part is really key to their analysis:

"First off, there are a ton of enabled small businesses competing in this
space and I'm not sure there needs to be a middle man. For example, I get 4
ads from businesses in Seattle offering lessons for guitar on Google. Thus,
they know how to market and get customers, they are offering free first
lessons, and have availability. So I am unsure/doubt there is any real
consumer problem."

The realization that this is not a big enough problem consumers are having.

I would guess that the musicians who want to sell their time would gladdly
sign up to this platform. But the customers looking for these services, would
most likely be very costly to reach.

~~~
bagacrap
The musicians already have a platform on which to find customers. It's Google.

------
binklee
I read one of the conclusion: "Lastly, I can't imagine that tech won't win
here with non-human based teaching. It's affordable, convenient, and scalable
to any genre, language, right from home on many platforms."

I strongly disagree with that one. The pie is big enough for different type of
teaching, including real-life classes.

If what he predicts turn out true, and we all get plugged behind screens to
learn new things... what a sad world it would be...

------
tempy_tempy
A "startup studio" and a "venture capital fund" ???

no conflict there !!

Like, great, please send us your detailed startup plan and then come pitch and
answer our questions, and then.... well, its not a good match and we pass 99%
of the time, but hey, look at this back office studio we got going here,
trying out new ideas we have never heard of before.

~~~
boffinism
I think you misunderstand how VCs work. If you come to them with a strong idea
and evidence that you have built up that it will work and a plan for how to
move forward and the right people and you try to get them to take equity they
have really no incentive to to say no to you and try to build the thing
themselves without you, when it would be so much easier just to help you build
it.

~~~
tempy_tempy
A late reply.

Your logic is true for an 8-figure VC fund. Its more nuanced for a
technically-proficient group looking at 5-6-digit (pre)seed rounds.

------
bogdanu
Doesn't promoting a single page template breaking Google Adwords ToS? A few
years ago when I did something like this Google disabled my ads.

------
arnaudsm
It's crazy how markets saturate quickly online. You really need a large
marketing budget and/or network effect to triumph nowadays, product quality is
not differentiating enough. I am scared for the future, this will inevitably
lead in harder-to-break monopolies.

I worked for an entire year on a next-gen comparison engine (picked.cc if you
want to check it out), and even with exciting user feedback and crazy
conversion rates, it probably will never scale because of those reasons.

~~~
myth_drannon
You need initial capital or connections. Right now in Canada the well
connected are flushed with free money from the government. Just say you are
doing AI or add AI to the company name (nope, elasticsearch document scoring
recommendation is not AI!) and you get millions from the government to push
your way into the market.

~~~
tixocloud
I’d love to see some of that money. I’m Canadian and you’re right, the stuff
that gets put out as AI is quite sad. They tried to pitch me as well to get my
feedback on their platform.

------
testingworks1
As a musician myself, who has also been taught by music instructors over the
years, I find this idea strange. Musicians are artists. They are also not
beholden to market trends. Music instructors tend to be picky about who they
accept when they choose their students.

Music is also a person to person thing. Those who are truly serious about
learning will choose a person to person connection.

This is an interesting case of trying to quantify a subjective subject. Music
is an art. It's hard to quantify. Musicians (mostly instructors in this case,
then a bit later the students) will most likely shy away from this form of
making a commodity of something that is inherently personal and expressive.

This model is mostly likely going to fail not because of the numbers, but
because of the subject at hand.

This is an interesting case study. And it makes sense, the numbers prove that
it's not viable. The fact that it's not viable isn't the numbers, however.

It's something to consider.

------
crsv
This makes some strong assumptions about the validity of the google and
Facebook data that underpins this theory. As the case for the prevalence of ad
fraud and questionable practices by these platforms mounts, it’s hard to
believe any data around CTR and purported conversion vs actual legit human
traffic and cash in hand conversions.

------
nikodunk
One project I've been working on is a competing (or now no longer competing
:P) platform called [https://classalog.org](https://classalog.org)
(marketplace of in-person classes). Found the same thing: buying paid ads does
not make sense for a platform – you need to do this with free traffic and
referrals.

I think the kind of math above is useful, but it doesn't replace making
something people want. Maybe to get a rough idea of the metrics, sure – but
airbnb etc wouldn't have started either if they'd done the math above.

------
kbuchanan
This may strike some as silly, but before the iPhone was invented, there were
ZERO searches for the term "iPhone". (I assume, ha!) By all means, do market
analysis, but remember that demand is not static—it can be shaped by what you
offer. I co-founded a firm 13 years ago that now employees 50 people that most
certainly would have been killed by this type of analysis.

~~~
dragonwriter
> before the iPhone was invented, there were ZERO searches for the term
> "iPhone".

Before the _Apple_ iPhone was invented, there were probably some searches for
“iPhone” because infogear had a product with that name in 1998, and Cisco (who
has purchased infogear) started using it for Linksys products not long before
the Apple iPhone launch.

~~~
rchaud
there was also the Moto ROKR, which was a Jobs-blessed product. But in any
case, keyword research isn't just about punching the exact term into a search
engine. It's about looking at all the different combinations of terms that
would identify user interest in your product.

For the iPhone that would have included search terms for "camera phone
quality", "phone with web browsing", "phone with headphone jack" etc. At the
time, the vast majority of phones came with a non-standard 2.5mm jack for a
wired headset. The concept of listening to music on your phone was alien to
all except maybe a couple of Blackberry and Nokia models.

~~~
dragonwriter
> At the time, the vast majority of phones came with a non-standard 2.5mm jack
> for a wired headset.

The 2.5mm jack used on pre-iPhone wireless phones wasn't non-standard, it was
a pre-existing, widely adopted standard for hands-free phone headsets
established initially for cordless phones (the short-range ones with landline
base stations) that was adopted by wireless phones because it was what every
wired phone headsets on the market used.

------
dana321
I think they missed the opportunity to add some value to the market, by doing
some kind of background checks to ensure the teachers are safe to let into
your kids home.

Trust is an element people always look for above all else.

~~~
briandear
It’s a value add for the first contact. But after you hire the teacher, why
would you need the middleman? For continuing background checks?

~~~
dana321
It would be a one-off fee, but you would charge more.

You could also charge a fee for doing a credit check on the other side.

------
zwendkos
FWIW, my company, TrueFire, is one of the industry leaders in music education.
We were bootstrapped, focused on a niche of the market first (intermediate to
advanced video lessons for blues, jazz, etc = older men with expendable
income), and have grown steadily since then. We were just acquired by a
private equity firm and merged with another big competitor in the space
(JamPlay) to form a new company dedicated to dominating this space. So... it
is possible to not go the VC route and be (very) successful, albeit not $Bs.

------
ChicagoDave
I’ve always been annoyed with the fail fast model. The only group that
benefits from fail fast are VCs looking for a big score. They push
entrepreneurs to invalidate instead of teaching/helping them how to build a
business. It’s all ass backwards.

But for the VC, if they see a hundred good ideas invalidated by bootstrapping
founders, they save time and money.

The founders are the suckers if they listen to this bull crap. You still need
to validate. But do it by actually trying to make the vision work, not by
giving up at the first sign of trouble.

~~~
Johnny555
_The only group that benefits from fail fast are VCs_

Doesn't the entrepreneur also benefit if it keeps him from pursuing a business
that will never work? Otherwise they may become a victim of the Sunk Cost
Fallacy -- after investing so much time and money into their business, they
don't want to give up.

The key, of course, is knowing if you really have a failing strategy, or if
you just having devoted enough time/money into making it a success. And the VC
can look at it more dispassionately than the inventor.

~~~
anstosa
Ansel from PSL here. You're exactly right. The entrepreneurs we work with want
the best shot at a winning idea. Just because we decide to kill an idea
doesn't mean we don't end up finding something else in the same area to work
on together. It also doesn't mean they can't go do that idea by themselves if
they disagree. PSL does not hang onto any rights whatsoever after killing an
idea.

It's also worth noting that only half the companies we end up spinning out
were generated by entrepreneurs. The rest (including XYLO) are generated and
validating in-house before we even seek an entrepreneur to partner with.

------
saadshamim
@treblig any advice on usually how much percent increase you see once you move
up funnel with fb advertising (optimize)? I'm guessing the cpc you got are
based on bottom funnel and highly targeted hence the high cpc. I find really
difficult to estimate costs with fb, because it takes me a fairly long time
(1-month+) to build the content and ad strategy to lower costs. But I'm
wondering at what point do you know if its a bad business idea vs bad ad
strategy?

------
emrehan
I really liked their methodology. How can I learn more of it?

~~~
Untit1ed
I wrote a blog post ([https://blog.nichetester.com/the-assholes-guide-to-
product-v...](https://blog.nichetester.com/the-assholes-guide-to-product-
validation-1e5be4eb730e)) and eventually made a web app
([https://nichetester.com](https://nichetester.com)) to step people through a
pretty similar process for new ideas.

------
rajacombinator
Seems like some of this analysis could have been done before building
anything. I also wouldn’t model it as ongoing CPC costs indefinitely. If the
product is good it should develop word of mouth and use other marketing
channels.

I would love to see a similar analysis that was greenlit because CPC looked so
profitable. (Maybe it exists, I don’t know.)

------
chiefalchemist
This reminds me of the book "Will It Fly?" His approach wasn't targeted to SV
startups, but the concepts are similar.

[https://www.amazon.com/Will-Fly-Business-Waste-Money-
ebook/d...](https://www.amazon.com/Will-Fly-Business-Waste-Money-
ebook/dp/B01BCLPPAK)

------
luord
> Lastly, I can't imagine that tech won't win here with non-human based
> teaching. It's affordable, convenient, and scalable to any genre, language,
> right from home on many platforms.

That's just sad, even if probably true I'd still hope teachers remain. I'd
rather have a human mentor when it comes to art.

~~~
rchaud
They're assuming that because justin.tv exists and is popular, and that
e-learning is now common in a number of fields, that this will apply to music
as well.

Not so in my experience. I quickly learned that I can't follow along with my
virtual guitar tutor if I broke the strings while attempting to tune it and
have no idea how to re-string it.

------
Angostura
Just a dumb question, but in the testing phase, what was actually happening
here? Are the adverts for an effectively 'fake company'? What happens to users
who sign up, do they get an e-mail saying 'thanks for your interest, but at
this stage we are only gauging interest'?

------
mchristoff
This model seems to ignore ideas that could be big if you could find a cheaper
distribution strategy other than ads, ie social, virality, etc. It also
ignores ideas that don't have demand yet.

By this analysis you guys would have likely killed AirBnb and Dropbox.

------
crtlaltdel
I think this is a solid assessment and a great data point for founders
assessing their idea.

------
justaguyhere
Wow, didn't realize adwords and FB ads are so expensive. How do small
businesses compete? are there any alternatives for those with smaller ad
budgets?

~~~
nscalf
From my experience with adwords/fb ads, this is not normal. The reason the
cost is so high is because they're targeting ads to things like "bass" instead
of "learn bass from scratch" in Sacramento, CA. The more specific you are, the
less competition and the easier to target and win on keywords. The tough part
is that being a strong force in the Sacramento, CA Bass market for new players
from scratch is not a billion dollar idea.

~~~
GordonS
Sometimes, more specific actually means _more_ cost - in B2B, I've seen
roughly $15 and $7 CPC for heavily contested keyword phrases, and know of a
competitor that bids over $30 CPC for a particular phrase.

A slight aside, but although it's definitely market forces at work, I'm
certain Google inflates CPC prices _before_ those market forces take hold,
forcing the hand of smaller players.

------
sabujp
$60/hr is actually pretty good, even in the bay area. Currently paying
$40/0.5hr for 1:1 violin and $20/hr for group piano for my kid

------
kareemm
Fantastic. Thanks for sharing. Two questions:

1\. How much data did you gather before extrapolating to the numbers in your
post?

2\. What tooling did you use to estimate traffic?

------
untangle
There is no mention of Yelp or Craigslist as a means to find local help? And
the analyst spent a week on this? Waste of time. Nothing here.

------
johnwheeler
What tool did they use to come up with that demand generation spreadsheet? Is
that just keyword planner or is there something else?

------
doctoboggan
How was the data in the first table estimated (clicks, impressions, cost,
etc)?

~~~
sumoboy
Google ads keywords planner. So many variables with deploying a real campaign
and not optimizing end to end, so actual results can vastly vary with CPC,
CTR, and conversions. If you build great ad campaigns and landing pages, you
should be beating these estimates nearly every time.

Even with these keyword estimates you would never go full speed with ad spend
until you optimized every step in the funnel on-going, then ramp up ad spend
to scale in the following months. On top of that where are the display and
youtube campaigns? Blaming these click estimates and ad platforms is not the
reason of a failure, rather the value add, demand, and audience targeting. So
many techniques to optimizing ad campaigns, I didn't get that was done.

