Dennis Yu

How to scale up your agency: a fresh approach

Leave a Comment / affiliate marketing, finance and economics, people management, promoting yourself, social media, Stand Up for the Little Guy /

A colleague and I were discussing “leadership” and what that truly meant.  We came up with this analogy, which I hope you’ll enjoy. Imagine you move rocks for a living.  The more rocks you move, the more you’re paid.  You don’t move rocks, you don’t get paid.  Thus, you understand the direct linkage between putting in time and compensation.  This is the hourly wage model– some rock movers get paid more than others, whether flipping burgers, working in a big corporation, or drilling teeth. The more teeth you can drill, the more you’re paid.  Are you a corporate wage slave or someone who is paid piecemeal?  This was me for twenty years of my life– a prostitute selling my time for money. Whether I billed $5 per hour or $250– it was the same thing. One day in the proverbial quarry, you decide that moving more rocks to get paid more was not the right answer.  At best, you might move 20% more rocks than the other guy on a particular day, but it wasn’t sustainable.  So you leave the quarry for 7 days, much to the surprise of your fellow laborers. In that time you move no rocks and make no income. THE SHIFT But when you come back, you are driving a bulldozer.  Now, in one day you are able to move 100 times what a single laborer can do. But to get that bulldozer, you had to temporarily earn nothing– plus spend money to buy the vehicle and spend time learning how to drive the thing.  Your fellow laborers, noses down, continue to keep moving rocks— they don’t look up to see you in the bulldozer. They have heard about bulldozers in magazines, but never thought it was something possible for them. You hang out with the other guys driving bulldozers.  You have newfound wealth, which is fleeting since the crowd you run with also enjoys the same standard of living.  You’re right back in the middle of your peers.  It feels great to be 100 times more productive than you were before, but you’re not quite fulfilled. ANOTHER SHIFT So you leave the quarry again and disappear for 7 days.  In that time you move no rocks and make no income.  And when you return, you are back with 100 bulldozers and 100 other eager new bulldozer operators. You’ve opened a bulldozer training school!  Flocks of manual laborers who used to move rocks now come to be trained by you.  And you make a commission on the rocks they move since these laborers didn’t have enough money to buy their own bulldozers.  These laborers are now moving 100 times what they did before, but given the costs of training, equipment, and profit, they only make 10 times what they did before.  Still, they are happy. And you are temporarily happy.  With 100 bulldozer operators moving 100 times as many rocks as a single man can do, you’re at 10,000 times your earlier productivity.  Your lifestyle has changed, too.  You have a Granite Card from American Express and have a new mansion in Boulder. People admire you–you’re a ROCK star. They think that the secret to your success is getting stoned. But it’s not enough– something inside you is not quite satisfied.  You can only train so many new bulldozer operators per day.  You’re still moving rocks in a sense, just mass quantities. Growth in your bulldozer school is directly related to the amount of time you’ve put in.  So one day you close the bulldozer school.  The press thinks you’ve gone mad– that you’ve lost your marble. SCALE UP AGAIN You disappear for 7 days.  And when you return, you’re holding a brochure in your hand– “How to Open Your Own Bulldozer Training School”.  You’ve created a franchise model, where you are training up other school owners. You have first-hand experience in training new bulldozer operators, so new school owners can rely on your experience.  You now have sold 100 franchises, each one with a happy owner training 100 bulldozer operators, who in turn do the work of 100 laborers.  That’s 1 million times leverage. THE LESSON You would not have been able to pull this off unless you had personal experience moving rocks, driving bulldozers, training bulldozer operators, and running a franchised business.  You were able to take your knowledge and multiply it.   If you didn’t intimately understand each aspect of the business, scaling up would have just multiplied losses. Now examine your life and what you do.  Are you moving rocks or are you multiplying? Writing software is a multiplication process.  You can write one copy and sell it an infinite number of times.  You could hand-build a single PPC campaign for a client or perhaps write a campaign management tool that can do it over and over in an automated fashion.  But just like the rock-moving analogy, if you aren’t a practitioner with hands-on experience in managing campaigns, your automation won’t be effective.  There are lots of guys selling software that builds websites, manages PPC campaigns, creates SEO reports, sends out emails, and does a variety of tasks. If you want to create massive value, consider the rocks that you are moving. Can you write software or processes that can make life easier for others– or perhaps do some task faster, more effectively, or at a lower cost?  Everyone has something they know exceedingly well.  What is that skill for you?  You don’t have to be able to write code.  Software is nothing more than rules for machines, just like processes are rules for humans. Mcdonald’s is a software company that just happens to make burgers.  People go to Mcdonalds’ not because it has the most delicious burgers, but for the consistency of the food and the experience. You can take pimply-faced teens all over the world, minds distracted with their latest relationship dramas, speaking different languages, skilled or not– and still turn out that same value meal each time. That’s a

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Calling Dan Gilbert: Our Solution to Detroit’s youth unemployment issue

Leave a Comment / finance and economics /

Nearly a quarter of youth in the United States are unemployed:   And Detroit’s unemployment rate, though steadily improving, is at 18.8%, over double the national average of 7.7%, according to the latest figures from the US Bureau of Labor Statistics:   High youth unemployment multiplied by a high unemployment area yields a 59% youth unemployment rate, according to Data Driven Detroit. Kids graduating from Michigan State and the University of Michigan are leaving the state to find jobs elsewhere.  Yet companies like Grand Circus, part of Detroit Venture Partners, exist to train world-class technologists. Quicken Loans relocated most of their staff to Detroit– with 9,200 working downtown now.  Bizdom is a startup accelerator that is ranked one of the nation’s 10 best. And though the city of Detroit filed the largest municipal bankruptcy ever in July, at $18 billion dollars, the area is ranked #3 in the nation for finding a tech job. Dan Gilbert, the outspoken billionaire who is behind many of the initiatives to rebuild Detroit, says Detroit’s best days are to come. We visited with a few of the portfolio companies this past week to witness first-hand the entrepreneurial energy.                                                 My New Friend Tony! We met some of the folks at Detroit Venture Partners, the head of training and development at Quicken Loans, the CEO of OneReverseMortgage, the social team at Quicken Loans, an independent film studio, Tom Silverman of Tommy Boy, and a few others.    We saw downtown revitalized, and safe. A picture from the rooftop pool of our hotel:     Yet many still are misinformed. Witness opinions on what it’s like to be in Detroit. Here is a good example:   And at the end of this trip, we found ourselves saying that we’d actually consider moving our company to Detroit.   Why? Strong labor pool– more loyal than in San Francisco and at a lower cost. Tight community– a network of companies that supports one another, unlike New York City. Vision– We’ve drunk Dan Gilbert’s Kool-Aid, as we believe strongly in teaching young graduates and creating employment. Dan– if you’re reading this. Put some money in our company and we’ll move folks to Detroit to grow our business here, plus train and recruit locally. Let me show you our plan for Detroit. My cell is (817) 913-0780. We want to achieve greatness in creating MASSIVE employment in the tech sector– doesn’t matter if it’s lead generation for Quicken Loans or driving sales for the local mold remediation company. The principles are the same and highly scalable with gamification techniques, which those of all ages understand. We are relentless to find a way. And we expect to hear a YES before a NO. This post was edited and posted by Drake Grey, an analyst on his very first day with our company. He’s 21 and would be excited to move to Detroit. What do you say? Best regards, Dennis Yu Chief Executive Officer, Content Factory

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Why some technology companies fail and others succeed

Leave a Comment / finance and economics, internet marketing training, people management, social media /

Many folks speculate why Google has overtaken Yahoo! in search or why Facebook has dominated in social networking, versus Friendster. I believe there’s one key factor— if you’re running a technology company, you need a technologist at the helm.  Larry and Sergey of Google were Ph Ds (or about to be) in Computer Science.  The last few folks who have run Yahoo! were anything but technology people– one was a film executive, one was a financial analyst, and another is a professional manager.  Running a technology company requires a deep understanding of what’s coming next in a rapidly changing world.  And to not have a keen pulse is to drive in a dangerous fog. Facebook was founded by Mark Zuckerberg, a young computer science genius– not a 55-year-old male who is good at manipulating spreadsheets.  If you see a social networking start-up being founded by 55-year-old males who are probably not even on Facebook– run in the other direction as fast as you can.  The folks who can best guide a company are those who connect deeply with their customer base.  How can you start and manage a company if you don’t use the product yourself?  Even the guy who runs Hair Club for Men is also a client, so the commercial goes. Of the technology companies we see fail, it’s not just age.  Often it’s also a lack of a balanced core team.  Salespeople hire salespeople.  Engineers tend to like to hang out with other engineers.  It just works that way somehow, as people hire folks who are like them.  But to operate a technology firm, you need folks who are experts in sales, engineering, marketing, finance, and other disciplines.  And the technologist should be king in the technology company, in the same way, that Nike was started and run by a star athlete, Phil Knight.   Does Frito Lay have a technologist at the helm?  No, they have a marketing person, since that’s the firm’s core expertise. So watch out for technology companies that don’t have any engineers in sight or believe that engineers are commodity products that can be contracted out or hired offshore.  If you are a business person and are thinking of starting a company in the Internet space, my advice to you is to quickly find a technical co-founder.  You’ll thank me later for this advice. A great entrepreneur knows what he knows- and more importantly, knows what he doesn’t know– finding someone to complement him or her.  If you’re an engineer, find a strong marketing/sales ally and make him a business partner.  Your freelancer will give you great results for a couple of months, maybe longer– but eventually will flake out on you, which is why they’re freelancing. Are you a technologist— and if not, do you have a technologist that is part of your founding team or is at least a CTO-level person?  If you are one of these companies that’s lacking a technologist, but wondering why you may be having trouble executing, I hope this article helps shed some light on why.

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Compete or Die!

Leave a Comment / finance and economics, Stand Up for the Little Guy /

One of our new clients was held hostage by a programmer that built a custom CMS when WordPress would have done just fine.  This programmer also did his own hosting, which failed quite often, allowing him to bill the client for time to fix things.  The client was complaining about being held hostage and here is my response to him.  If you are a business owner, consider whether you have chosen folks who are world-class in what they do.  If you service clients, consider if parts of the service you offer are available today elsewhere for free– painful as that may be to admit: Let’s just say this– your site gets so little traffic that there is no reason for this sort of thing to EVER happen. You should not be in the business of hosting, nor should this fellow.  That’s why there are the GoDaddys, The Planets, and the Amazons of the world, who have invested significantly to solve generic issues like this.  It would be akin to you wanting to get a ride to the airport and the cabby saying that he has to stop to fix his custom-made car. That cabby should just buy a car from one of the big auto manufacturers and drive that.  Yet, if he really is a car hobbyist, he should do that on the weekend in his garage, not charge his paying customers.  This is something we see quite frequently in our space– engineers that prefer the fun of building your own when off-the-shelf works great and costs almost nothing.  That’s why this fellow decided to build his own CMS when WordPress does almost everything you need, is the world’s most popular CMS, and is free. However, it’s more fun to learn how to build your own, you get paid for it, and you can hold your customers captive if you make mistakes along the way.  The problem with custom software is that when only one customer uses it, it’s likely to be VERY buggy, as it hasn’t been time-tested by millions of customers. And when there’s only one developer, you’re limited by the time and knowledge of one guy, who is unlikely to be world-class in PHP, content management systems, hosting, and whatever other topics. In our world of website stuff, we see one man shown all the time on a suicide mission to try to beat the world in multiple ultra-competitive niches.  Me, I like to make sure we do a few things world-class where we have a unique advantage (such as Facebook advertising and local lead gen) and leave the rest to where we can buy off-the-shelf software or partner with the other companies that are #1 in the space. What do you think?  It will be pretty hard to argue this– to say that because of one of two particular requirements for your site, that it justifies doing something completely from scratch versus using something free and easy.  But we see this all the time. Jack Welch, who used to run General Electric, talked about being #1 in every area they compete or to get out. If you’re not winning or have a unique advantage, you’ll eventually get crushed.

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Why loyalty programs are failing and how to fix yours

Leave a Comment / facebook marketing and advertising, finance and economics /

An article in MediaPost today highlights why few companies are delivering upon their loyalty programs. In a nutshell, consumers want personalized rewards, whether it be through their grocery store cards, airline frequent flyer program, or other points-based systems.  But marketing departments are not able to personalize because they are unable to collect the data needed to personalize offers and internal organizational hurdles prevent companies from unifying their data across multiple silos. I was fortunate to spend a few years at American Airlines to perform analysis on the AAdvantage program– to learn firsthand how the granddaddy of loyalty programs operated. Some challenges and how we overcame them: Incomplete customer data The website, reservations deck, and gate agents all had separate customer databases. If you were a smart customer, you could complain at all three locations and earn triple the points. So if a bag supposedly fell on your head from opening the overhead bin, you could get miles for the inconvenience, and the agents at the airport, on the phone, and from the website wouldn’t know that you were already compensated.  The solution– create a unified customer database. This is quite expensive, and has political issues to solve, but is well worth the effort.  When you can create a single view of the customer’s activity, you can measure their overall profitability and create programs to incent the right kind of behavior. Mass blasting (spamming) customers Email marketing is so easy and inexpensive that SVPs of Marketing are tempted to spam customers.  After all, if sales increased by changing the newsletter frequency from monthly to twice a month, why not weekly? We’ve seen this approach taken at a number of large brands.  Not only is this a customer turn-off, but goes against the whole point of offering personalized offers that are most appealing to where a customer is in your lifecycle and their stated preferences.   Part of status is being remembered for your particular likes (mints on your pillow and extra towels if you’re a hotel customer), not to get the same message delivered to everybody. The data crypt What used to be called a data warehouse, then later called a datamart, then called business intelligence, then enterprise analytics is really just the same thing with a new name each time. Even if you can embark on a $20 million project to consolidate customer data into one spot, the bigger issue is actually getting it out.  Most marketing managers believe they have to speak a special prayer to the high priests of IT to be granted access to the database. The inability to easily access the data– no matter what expensive analytics tool you might have bought– prevents the marketing manager from being able to do the analysis necessary to create a tailored menu of rules. Without a menu of actions and corresponding points, and then being able to adjust payouts based on what’s working, a loyalty program bleeds.  And the more data you have in your scoring model, the more complex it is to calculate status, as you’re dealing with an increasing number of empty fields for variables and bad data.  So perhaps you were able to get a data append from a third party– let’s say Acxiom– and now you have gender, income, and the type of car they drive.  How is that affecting the ways to earn and burn points in your loyalty program? IT doing Marketing and Marketing doing IT Managing a loyalty program is really an exercise in user psychology, but it requires some technical execution.  You’re really looking at video game design and trying to influence their behavior.  An average IT administrator is not going to understand this, nor is a traditional brand marketer that has done media buys for 20 years. If you have a loyalty program in-house, ask yourself who is running it.   The answer is finding folks who are well-versed in data analysis (crunching SQL statements in the database) and also understand user psychology.  Writing SQL is for engineers, you say?  Look at Amazon, where they require marketing managers to know how to query a database.  It’s not that hard.  How are you going to structure and adjust rules for earning and burning points by customer segments if you’re not able to go in there and hands-on be able to run reports?  Summary– the weakest link Well there you have it– all it takes is one break in the chain and your loyalty program has a problem.  If you aren’t able to collect user data– transactions and preferences, you can’t create personalized offers. If your marketing people can’t properly access the data, that expensive database just sits there. If you have the wrong people trying to solve the problem, it’s a guy with a hammer who thinks everything looks like a nail. I’d say that brands would be well-served to hire folks from Nintendo, Blizzard, and other companies in the gaming industry to help revamp their loyalty programs. This is nothing more than a video game.  

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How Jack in the Box reminds me of the Jetsons, airport security, and video games

Leave a Comment / finance and economics, people management, social media, social media /

I stopped in at a Jack in the Box today and noticed no employees at the register.  Customers were ordering through a kiosk.  This beautiful touch-screen marvel spoke in English and Spanish and upsold you at every turn– would you like bacon on that?  How about upgrading to a large one?  Just a little more for seasoned fries! A couple hours ago, I had a similar experience checking in at the airport– except I had to swipe my credit card first and then they asked if I wanted to upgrade to first class.  Same thing at the supermarket, where they eliminate clerks (who aren’t going to reliably and aggressively upsell every customer in that cheery voice), but also will tell you that there’s an unexpected item in the bagging area. If you’re at least in your 30s or have watched older cartoons, you might remember the Jetsons.  They had a touch screen display where the family could order dinner items, too. To make the analogy complete, Jack in the Box would merely have to automate the back of the store, too– to have a factory method as efficient as Toyota making Camrys with robotic precision. The trouble is, as great as this utopia sounds (if you’re a fan of Deming or other efficiency gurus), in practice, it’s not so simple. The fellow ordering above tried to order a value meal no less than 4 times– not being able to navigate the menus and submenus and finally giving up.  It’s not easy for everyone, even with picture menus.  Sometimes you just need a human involved. But in the long run, I believe that social game dynamics will simplify a complex process, whether it’s buying a hamburger, checking in at an airport, getting your annual physical at the hospital, or configuring your local search campaigns. Games and points will make complex processes easier, especially those that don’t appear to have video game dynamics at first thought. Watch the gaming models permeate nonprofit fundraising, factory methods– or maybe even serious stuff such as CPR training.  Do you remember when Mcdonalds’ first implemented those timers next to each cash register so that everyone could plainly see how many seconds the average order was per cashier?  You’ve taken a mundane, hourly job and turned it into a video game because now there’s a score.  No other process improvements or bonuses for better service– there’s just an added element of measurement. And that’s enough.  Imagine adding a timer next to airport check-in counters. Think it would work? Any system or set of processes is really nothing more than a video game– as it contains a series of rules with rewards and punishment, with accompanying stimulation. A Las Vegas slot machine is nothing more than a malfunctioning ATM.  That blue-collar timecard punch clock is the most boring video game ever— as it doesn’t blink, make satisfying sounds, or dump coins into the collection tray in exchange for good work. Is there something in your business or your life that can be made more pleasurable or efficient by re-evaluating it from the lens of game dynamics?

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You can buy marijuana legally in Colorado

Leave a Comment / finance and economics, social media /

Want to know what’s one of the hottest areas in local?  Medical marijuana dispensaries.  I read in today’s Denver Post that dispensaries are popping up everywhere. The license fee is only $3,000 and there is no cap on the number of dispensaries that can open.  This land grab is a result of Amendment 20, passed a decade ago. So if you want Denver medical marijuana, it’s easy. You can fill out your forms online and even have your pot delivered to you.– maybe they’ll have a 30-minute guarantee to see if it can beat the Dominos guy.  And there’s even a referral program, where you earn free pot for referring friends– no limit on referrals either. I don’t see this program being a part of Commission Junction or Affiliate.com anytime soon, but you do have to consider what the economic impacts of this are. The fact that there’s no limit in Colorado on how many dispensary licenses can be granted is in favor of the consumer– there is more competition.  However, should there be a price war, it would cause a shift in the illegal market for marijuana, forcing drug dealers to get licenses and, in effect, legalizing the sale of marijuana.  One dispensary even has a low-price marijuana guarantee.  Not sure how that works– perhaps you have to bring in a coupon from a competitor or a note from the guy on the street corner? And what about advertising?  Will all these new businesses advertise on “pot” versus “marijuana”, since most stoners can’t spell properly?  I can just imagine all the people shopping for pots and pans now seeing a sale on pots– but not getting what they expected.  It’s just like my friend who wanted to buy sporting goods at Dicks and typed in dicks.com– oops. What’s also interesting is that the $3,000 annual license fee was set based on what they charge Denver strip clubs— which maybe says something about their feelings toward this type of business.  And the requirements for getting a license are somewhat loose– you can’t have a criminal record and also have to be of good “moral character”.  At least folks can’t open dispensaries within 1,000 feet of a school or daycare– else the city I love is quickly going to pot. Update: In 2008, the Colorado Department of Health processed 5,000 new medical marijuana cards– and it took them 10 days to process cards.  In just this past week, they have received 1,800 applications and are now backed up to 12 weeks to process cards.  It would appear that something is out of control. Are there really that many more people suffering from cancer, AIDS, or another type of ailment?

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Google AdWords Bid Simulator– observations

Leave a Comment / finance and economics, internet marketing training, search engine marketing /

The new Bid Simulator, which you’ll see in the keywords tab, forecasts how many clicks and impressions you’ll see at different bid levels.  It only shows the simulator for some of the keywords– not sure what logic is used to choose which ones.  It certainly isn’t search volume, since some of the lowest volume terms in our campaigns have the Bid Simulator icon. Important to note that the Google AdWords Bid Simulator doesn’t predict the future— rather, it estimates what would have happened in the last week had everything else stayed the same except for your bid.  Google explains it here. In this first screenshot, you see that we’d get nearly the same traffic at any bid price for this keyword.  Note that the estimated impressions are the same.  By bidding higher, we move to a better position.  We are currently bidding $3 a click to get 63 clicks, but if we drop our bids to $1.01 (a third of the price), we get only 3 clicks less (a 5% reduction).  Thus, a 200% bid drop for only a 5% click volume drop– for you economics students out there, that’s significantly inelastic. Why?  At some point, you’re already in the first position, so bidding higher won’t matter.  Google’s AdWords bidding auction, as clearly explained by Hal Varian (Google’s Chief Economist and the author of my undergrad Econ textbooks) in this video, shows that our price is based upon an increment of the next highest ranked bidder and your Quality Score.  P1 = B2Q2/Q1.  In other words, the price you pay to be in position 1 (P1) is the AdRank of the advertiser in position 2 (Bid of Advertiser 2 x the Quality Score of Advertiser 2)– then divided by your Quality Score. On high-volume, highly competitive terms, you would expect to see a more gradual fall-off in this bid curve.  Normally, you’ll get hit with the double whammy of more clicks at a higher cost per click— if clicks and CPC are both increasing by 50%, then you’re hit with an overall cost increase of 1.5 squared, which is 225%. What I think Google may have neglected to include in their Bid Simulator is the impact of site links in position 1, which give a tremendous boost to position 1 advertiser.  This estimation would be hard to do, given that the feature is not in wide release– though BlitzMetrics is fortunate enough to have enough accounts that we have a few of them with this beta feature enabled. Here is an example of a Bid Simulator shown when there is hardly any data— on a tail term with phrase match on.  Were there enough ad data, we’d be able to calculate the Incremental Cost per Click (ICC).  Don’t make fun– the ICC is the term that Google uses to describe this concept– namely, the additional price you pay for incremental clicks, measured by the change in cost divided by the change in clicks.  If you’re bidding up, your ICC is significantly higher than your average CPC, which averages in all lower click costs. Overall, I find the AdWords Bid Simulator partially helpful.  Looking at the average position I believe is nearly as good, since Google won’t tell you the bids and Quality Scores of the other advertisers anyway. It also doesn’t appear to take into account the effects of negative keywords, dayparting, geo-targeting, and other settings (at least based on their internal PowerPoint showing the actual data used versus estimated for Bid Simulator. The next step for Google is to make recommendations on how to increase profit based on the simulation.  If I raise my bid to get more traffic, then I’m also decreasing my profit per click.  Google should tell me what bid makes the most of this trade-off.  Currently, all of Google’s recommendations seem to be to increase bids, add keywords, and increase the budget, so not sure if they’re going to do this any time soon. However, it is true that if you use Conversion Optimizer, you can’t use Bid Simulator and that using Conversion Optimizer is effectively maximizing profit if you know the right CPA target.  Love to hear about anyone’s experiences here with Bid Simulator, ICC, Conversion Optimizer, and other estimation tools.

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World’s largest group dating site goes from free to subscription based

Leave a Comment / facebook marketing and advertising, finance and economics, Guest Posts /

A guest post by Adam Sachs, co-founder of Ignighter, a group dating site with great relationship advice and a fun place to work I’m Adam Sachs and I run the world’s largest group dating site. Since our initial launch as a Facebook Application in January 2008 and subsequent relaunch as a destination site in August 2008, we’ve amassed a significant inventory of group daters using our free service. However, if you’re simply growing a free user base at a steady, continuous pace (read: you haven’t detonated a viral bomb like only the Facebooks and Twitters of the Internet have) then after a while, the free model starts to seem unsustainable. Acquiring new users on a free site has a cost. User acquisition could be costing you money (PPC ads, live sponsored events) or even just costing you time (Commenting on blogs, marketing via Twitter). But until you can establish a lifetime value for a new user, then you are simply shelling out for marketing while seeing a virtually nonexistent ROI. With no ROI and no value associated with each user who registers for your site, it’s only a matter of time before you run out of money, time, and the ability to keep acquiring them. Your investors probably won’t be too happy either. It’s taken Ignighter a while to come to this realization, but now that we have, we are beginning to experiment with incorporating paid functionality into the website. Introducing a paid model to Ignighter doesn’t just benefit the company, however; we predict it will benefit our user base as well. Below are a few Pros and Cons that we predict to encounter when transitioning from a free to paid service. We can revisit these pros and cons in a few months and see how accurate they proved to be. Pros: Money is finally coming IN the door. Money means more users. If you are making more per user than you are paying to acquire them, then the goal is to spend as much money as possible to acquire them. I’d pay $25 to get $35 back, wouldn’t you? Money means better users. When you offer a free service, you get registrations from people of drastically varying levels of interest and relevance to your site. When people on the not-so-interested-in-meeting-new-people-but-it’s-free-so-I’ll-try-it-anyway end of the spectrum register, they’re actually adding what we affectionately call “shit inventory” to the site and hurting the experience of the registered users who want to use the site for its intended purpose. Incorporating a paid level will naturally introduce a tiered system of users to the site, facilitating an experience that groups users based on their intentions and expectations. Asking people to pay will also help to make your users more passionate about the company. Paid users will now be part of a community that they’ve invested in and helped to create. Money means happy investors. This one is pretty self-explanatory. Cons: It’s not so easy It’s not so easy to convince someone to be one of the first to pay for your service. Before you can establish a track record of the value that you’re providing to the user it can seem like you’re asking them to pay a taste-tester to the King of Zamunda. It’s not so easy to build the damn thing. At Ignighter this fundamental shift is requiring a ton of web development and business development resources. This kind of thing can’t be half-assed, you have to give it your full attention and planning. It’s not so easy to accept that it’s going to work beyond a shadow of a doubt. But isn’t that what startups are all about?

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