[HN Gopher] How to Kill a Startup Idea with Google Keyword Plann...
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How to Kill a Startup Idea with Google Keyword Planner and AdWords:
A Case Study
Author : treblig
Score : 157 points
Date : 2020-01-21 18:44 UTC (4 hours ago)
(HTM) web link (www.psl.com)
(TXT) w3m dump (www.psl.com)
| tempy_tempy wrote:
| 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 wrote:
| 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.
| oblib wrote:
| Sounded to me like they were paid for testing the idea for both
| the startup founders and investors because that's a specific
| service they offer.
| bogdanu wrote:
| 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.
| crikli wrote:
| 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).
| novok wrote:
| Often though, many successful VC startups start from a niche
| and expand from there. For ex: uber started with luxury black
| car service only in SF (a niche) and then expanded into normal
| cars, carpools, food and the rest of the world. I think the
| real requirement is a foreseeable future that you could
| potentially expand into a bigger $billion market.
|
| Small niches that have proved themselves are often more
| attractive from an investment standpoint.
| DevX101 wrote:
| You're also ignoring the probability of success. This project
| is only worth $shitton ($30 million) if the project were
| perfectly executed and other market participants didn't
| dynamically react to this new entrant. This isn't the likely
| outcome.
|
| The expected value of this project is probably only $5-10
| million once you factor probability of success into account and
| thus not worth the time and effort at trying in the first
| place. A $5-10 million E.V. project is very much worthwhile for
| two founders who wanted to bootstrap though!
|
| One reason VCs target billion dollar ideas is that you'll
| probably fail. But in the unlikely scenario that you succeed,
| it more than makes up for the 10-20 other projects in their
| portfolio that DID fail.
| thorwasdfasdf wrote:
| You won't even make 1 penny, if you can't break even on your
| user acquisition costs. That's what usually breaks a business
| not the fact that it's not profitable enough, but that's it
| not profitable at all.
| anstosa wrote:
| 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!
| crikli wrote:
| Hey Ansel, thanks for responding and for validating my train
| of thought...I don't have that much exposure to the VC world
| so the things I suspect far outweigh the things I know. :)
| sprsimplestuff wrote:
| feel free to start sharing those "small market" ideas haha
| awb wrote:
| > 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.
| nikodunk wrote:
| One project I've been working on is a competing (or now no longer
| competing :P) platform called 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 wrote:
| 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.
| AznHisoka wrote:
| of course there would be no searches for a new product name.
| However there are tons of people searching for "new phone" or
| "best phones".
| dragonwriter wrote:
| > 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.
| triceratops wrote:
| Rumors of an Apple iPhone have been around since at least
| 2002 (5 years before its release).[1]
|
| Apple trademarked the name in Singapore and the UK that year.
|
| Here's an NYT article from the same year using the name
| "iPhone"[2]
|
| 1. https://www.fiercewireless.com/wireless/timeline-apple-
| iphon...
|
| 2. https://www.nytimes.com/2002/08/19/business/apple-s-chief-
| in...
| kareemm wrote:
| 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?
| justaguyhere wrote:
| 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?
| jjn2009 wrote:
| You kill the idea _because_ it is so expensive, if you cannot
| easily reach consumers for a small amount of money then the
| demand side is low. It 's cheaper to reach consumers who are
| willing to click links because they actually need a service.
| anstosa wrote:
| Ansel from PSL here.
|
| That's not quite right. Ad pricing is a marketplace like any
| other. The "demand" in the marketplace is demand by
| advertisers to get in front of any particular set of
| eyeballs. The price will be high if many advertisers are
| interested in the same group of people (and low if not).
| Price is an important metric for determining customer
| acquisition cost but you can't use it to infer customer
| demand. You instead use impressions, click through rates, and
| conversions rates to do that.
| nscalf wrote:
| 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.
| eschulz wrote:
| 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 wrote:
| ... or a soul mate, aka dating platforms.
| [deleted]
| thorwasdfasdf wrote:
| 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.
| jtolmar wrote:
| 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 wrote:
| 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.
| binklee wrote:
| 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...
| arnaudsm wrote:
| 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.
| virgilp wrote:
| > even with exciting user feedback and crazy conversion rates,
| it probably will never scale
|
| How so? With crazy conversion rates, all you need is capital.
| Capital is readily available nowadays, if you need that
| marketing budget you can get it. Unless you do something
| inherently stupid like selling 1$ for 50 cents...
| arnaudsm wrote:
| I was a student in debt at the time. Fortunately this project
| caught the eye of a fellow HNer and helped me get my first
| job in the bay area.
| myth_drannon wrote:
| 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 wrote:
| 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.
| cabaalis wrote:
| 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 wrote:
| 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-...
| throwawayjava wrote:
| _> 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".
| lowdose wrote:
| So these guys have to read up on some articles about multisided
| marketplaces which what they where 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.
| nunez wrote:
| How do you explain Angie's List then?
| smallgovt wrote:
| Can you clarify what you mean by "supply and demand matching is
| terrible" for dog walking platforms?
|
| It seems like if the primary qualifier on marketplace success
| is the ease at which two parties can cut out the platform, dog
| walking would not pass.
| edouard-harris wrote:
| Perhaps surprisingly, dog walking platforms like Rover do
| experience alarming levels of defection (when participants do
| a side deal and cut out the platform). The dynamic seems to
| be that you generally take your dog out for a walk at a
| similar time every day, and this regularity (and comfort with
| a specific dog walker that you've grown to trust) leads to
| more frequent defections.
| edouard-harris wrote:
| 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 wrote:
| 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
| teej wrote:
| I've seen some writing on what makes marketplaces resilient
| to "supply side defection" as you call it, but I'd love to
| hear your take. Specifically I'd love to hear more about
| structuring to leverage the relationship, or anything else
| you think is important.
|
| What specific structural things are important?
| emrehan wrote:
| I really liked their methodology. How can I learn more of it?
| jjn2009 wrote:
| One Million Followers by Brendan Kane although not directly
| related shows similar usage of ad platforms for content
| testing.
| saadshamim wrote:
| @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?
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