On: Slashdot and SourceForge sold to Dice Holdings

[dmethvin]

Many profitable businesses tail off very slowly over years, throwing off excellent revenue in the process. Last year, for example, AOL made $175 million off 3 million customers who still subscribe to its dial-up business.[1] Those businesses can become even more profitable in the near term if your strategy is to cut marketing/operating costs to the bone and "ride them down". It sounds very mercenary, but that can be the right approach when there is no growth potential.

[1] http://www.splatf.com/2012/07/aol-3million-chart/

[cydonian_monk → dmethvin]

My dad is one of those 3 million dial-up subscribers - but not by choice. He doesn't use dial-up, hasn't had a PC with a modem in it for several years, but every time he calls AOL to cancel they give him six months to a year of free service.

[cstejerean → cydonian_monk]

Without a modem, why even take AOL up on the free six months to a year of service? It just means you'll have to call again in 6 months, and so on.

[dredmorbius → cstejerean]

Subscriber numbers themselves can be useful, even if only to count as possible future revenue or marketing.

[cydonian_monk → cstejerean]

Presumeably because calling every six months or so is easier than telling people your new email address.... I honestly don't understand it myself.

[maxerickson → cydonian_monk]

The email service is free.

[mike_ivanov → dmethvin]

Why everyone is so obsessed by "growth"? Who in their right mind would ride a horse down because it can't be grown into an elephant?

[dmethvin → mike_ivanov]

You're at Hacker News, just about every startup is obsessed by growth because that's all they have on their side.

To your analogy, it's more like selling a horse to the petting zoo for kiddie rides because it no longer has enough stamina for long hard rides in the mountains. It's a good deal for the seller, the buyer, and the horse.

[vidarh → mike_ivanov]

Eventually the horse will die of old age. And if it hasn't procreated by then, you're left without horses.

Not all businesses will have a way of replacing a user base that is dropping off that isn't lower ROI than putting the money elsewhere.

If that's the case, then you extract the revenue that's left, but you don't reinvest much of that revenue - you might keep the horse while it's still doing useful work, but you're not building a new stable or hiring new stable boy in expectation of growth.

[mhurron → mike_ivanov]

You sort of answered your own question. Those obsessed with growth see not growing as failing. There is no other success then growth. Under that mindset having a stable, profitable business is 'riding it down.'

[bmelton → mike_ivanov]

If you aren't growing, you're dying. This is especially true in business where there is generally attrition to contend for.

Acquiring a business is generally only done when the expectation of future revenues is greater than the purchase price, but if the business is dying, the key is to maximize the revenue out of it so as to prolong the inevitable, and squeeze as much money out of it as they can.

[athesyn → mike_ivanov]

And the existence of growth is the main reason for a steady loss of quality.