Written by Mihai Dragan on Thursday, February 25th, 2010 ( One response )
Tags: economics, entrepreneurship, online startups, Running the business, studies
Online startups are interesting micro-economies. Most of the systems are based on several variables like number of users, conversion rate and others, directly depending on the type of business systems they do (or do not) develop.
I have been studying the whole concept and focused on some of the variables that are usually left out.
The assumptions
The online startup I’ve studied to get a glimpse into this was an hypotetical online game. I’ve assumed the the game will be launched with a PR/advertising campaign, delivering an initial traffic to the website.
The game would sell power-ups to gain revenue. Other assumptions I have based my study on are that users would enter the website, register if they feel like, drop out and erase their account if it is just not their cup of tea, invite friends which would might or might not respond and of course, play.
The conventions
In order to test the user’s behaviour we will use several conventions, following Registration Rate (RR), Spread Rate ( SR – number of invited users / month / user ), Response Rate ( ReR – number of invited users actually visiting the website / month ), Dropout Rate ( DR – users cancelling / abandoning their ), Conversion Rate ( number of registered users buying upgrades), Medium cost per product (MCP).
I have also thought of a formula to determine purchase intent (PI), directly proportional to monthly visitors increase, RR and Influence rate of registered users (SR/ReR).
The Purchase Intent is Inversely Proportional to Dropout Rate (DR) and Medium Cost per Product (MCP).
The results
Although the concept hasn’t been tested on real life scenarios (I am looking for entrepreneurs willing to share some data for the study – 100% confidential) I guess I can outline some conclusions:
- Number of initial users is important but not the most important
- Spread rate (SR) is the single most important Indicator to be taken into account. Incentivize potential users to spread news and you have a booming business. Fail to do that and all the money in the world spent on advertising won’t guarantee safe revenue returns
- The response rate (ReR) is not actually that important. It doesn’t actually matter users being influential but rather willing to share information with their microcomunities
- Conversion rate (CR) is important but it will take more than that to have a really successful product. A tenfold increase in conversion rate is useless unless the registrants numbers goes up.
- Micropayments are the best choice. Increasing Medium Cost per Product (MCP), while having a steady increase in user base, means decreasing potential revenue. Increasing cost by tenfold will decrease potential sales by more than 50%
- Dropout rate (DR) is basically irrelevant as long as the dropouts are outpaced by new registrants.
- So, if it is something you should be focusing on as an online entrepreneur this is Spread Rate, Micropayments, and number of initial visitors.
I hope this helps.
Written by Mihai Dragan on Wednesday, February 3rd, 2010 ( Start discussion )
Tags: internet, new-age, social system, utopia
Or rather … the country. The continent. The world of the Internet.
A rather interesting idea crossed my mind last night. I was thinking about the global challenges that humanity is facing today. The ones we all know about: global warming, crash of the economy as we knew it, globalization, unequal distribution of wealth (read some about it here) and many others.
I thought about the ants. As individuals they are insignificant. As a group they are amazing. They construct structures we are not able to (maintaining the proportions). They are organized and act as a whole organism.
So do humans, but with one big issue – the communication. We worked pretty well in tribes, cities but now we have to communicate globally. Our social structures are expanding. The rules we use to organize do not apply any longer. What rules should we establish now?
The mind of the many
The internet is a chaotic and at the same time a self organizing thing. A brain if you like. Its neurons are the people that use it. The connections – its synapses. We started thinking globally and not just as a metaphor.
We might now use this concept and develop it. We could create a new country, a new continent, with new rules that apply to new times.
This structure would not be one led by governments but by the best performing citizens, just as our brain controls our body. There won’t be any taxes that we don’t already pay. The economics would be self balancing and self adjusting.
Social status would not matter. What would matter would be the outcome of one’s efforts. The best intellectuals, the best concepts would rise to the top, no matter the race, sex or ethnicity.
The system would be called Internetism, the social system that gathers the best of previous ones.
Is it an utopia or a reality we are yet to accept?
Written by Mihai Dragan on Tuesday, February 2nd, 2010 ( 9 responses )
Tags: agency, mb dragan, three years
I started MB Dragan, the agency I run today, with a dream in mind – creating a new, better, interactive agency. The best in the world.
Three years have passed but they seem like ten to me. It was harder than I would have ever imagined. The last one was the hardest. It was full of sleepless nights, stressful deadlines and issues I never thought I would have stumble upon.
I wish I could say everything went by like a breeze but it didn’t. Some people let me down and I’ve let others down. Promises got broken. Some dreams too.
I had tough choices to make. Choices that keep me awake at night. I’ve made mistakes of which I am sorry. Mostly in my private life.
But through the darkest times I’ve realized how bright some stars can really shine. I am thankful to have met people like mr. Alex Buga, Gabi Nistoran and Andrei Gheorghe, which became my associates. I am honored by their presence and trust.
It’s not just about them. I thank all those I can still call colleagues and which I treasure more than I can say, although it’s getting harder to say it, being a larger group now.
We are the fastest growing agency in Romania. The people that joined this group are the best of breed in this domain. With a background like this, things aren’t always easy but the goal and path that lie ahead seem clearer by the day. We will be the best digital agency in the world. The agency for tomorrow.
