Sat, Sep 6, 2014
In this series of posts I want to talk about the business model challenges that I have been/am currently working through with the development of Taskfundr.
We have looked at some of the problems with ROI for Angels, but now another dilemma adds more complication to creating campaigns.
Why multiple Angels - why not just one?
The aim of the platform is to make raising awareness and money easy for Recipients, fun and engaging for Taskfunders and rewarding in multiple ways for Angels.
When a campaign is looking to raise a significant amount, then often it will make sense to have multiple Angels to back a project. This means less financial commitment from each Angel and should therefore should give a lot more flexibility in creating campaigns.
So what's the problem
In a single word - dilution.
I will illustrate the problem with an example campaign:
Example 1
- RECIPIENT X is looking to raise £6,000
- ANGEL A & ANGEL B & & ANGEL C are each willing to give £2,000
- For simplicity the campaign consists of 4 x 30 second video tasks:
- 1 video about RECIPIENT X valued at 50p
- 1 video about ANGEL A valued at 50p
- 1 video about ANGEL B valued at 50p
- 1 video about ANGEL C valued at 50p
- To reach the target 3,000 users will need to view 4 videos each
In this example RECIPIENT X is not a charity and is a student looking to open a bookstore.
Now here is the ROI breakdown:
In this breakdown we will use a very good market CPV rate of say 30p. (Please note there are issues with this as discussed in some of the problems with ROI for Angels ).
RECIPIENT X wins massively. They receive £6,000 with no repayment. They get around £900 of video advertising for free (30p * 3000). They also garner lots of awareness for the new company. Excellent.
Each ANGEL however now gets a more disappointing ROI. As they have diluted the donation, so too have they diluted their brand association and exposure. Calculating this exactly right now is a little hard but can be considered enough to be a problem.
An ANGEL individually spends £2,000 and in exchange receives £900 worth of video advertising (calculated only using market CPV rates). Perhaps they may even estimate the brand association with let's say a further £400 of "emotional value", but that kicks in around £1,300. A deficit of £700.
Further detail required
The problem with thinking through this situation right now is I am working with untested hypotheses as to the "emotional value" of advertising in this kind of way. For all I know right now conversions could be 90% or 1% so claiming any form of quantifiable ROI is too hard at this stage.
Also not everyone will demand a direct market rate return. The reason I personally started investigating this entire market place concept in the first place is that I want to help other people out. Both charities and businesses. Personally I would value the positive brand awareness and sense of social responsibility pretty highly.
An obvious solution
"Hey, why not just reduce the value of each video task to 25p".
So to reach the target now 6,000 users will need to view 4 videos each.
Each ANGEL now gets £1,800 (30p * 6000) of market equivalent CPV. Now by the time you add in the "emotional value" you are probably achieving closer to £2,200 worth of advertising. A positive ROI of £200.
So what's the problem now?
Well actually I see a couple of problems here.
I just feel that as an end user (a Taskfunder) I am not getting much back for my effort - don't forget this is a 3-way marketplace. I would need to spend 2 minutes of my time in exchange for giving £1.
On top of that how realistic is it to think a campaign aiming to raise £6,000 is going to engage 6,000 people. That's a lot more work than getting 3,000 people who are likely more positively associated with the recipient - and by alignment with the ANGELS.
This is just a personal opinion however and is an assumption that will of course have to be validated. Perhaps in the greater scheme of things, this will be perfectly acceptable.
The other problem that isn't too bad is the direct cost to the platform. Delivering bandwidth heavy content is expensive and serving up 24,000 x 30 second videos is not going to be cheap. In fact it will pretty much double the cost to the platform.
Just as a guide - let's say each video was 25Mb and we serve 24,000 views, that is 100Mb in storage and 600Gb in bandwidth. Using AWS Calculator that works out at around £35 for serving direct from S3 (not even from CloudFront).
When the platform receives a typical commission of say 5% it makes £300 (£6,000 * 0.05). The physical costs of the campaign need to be assessed to make sure there is sufficient margin, but I think this can be controlled using a campaign designer and factoring in worst case scenarios.
Again as with all considerations to date, it's important to just get this out there and test these assumptions as it grows.
The pros will likely outweigh the cons
I still believe that the outcome of allowing multiple angels opens a lot more up side than down, especially when considering smaller scale, local projects and also allowing the ability for overfunded campaigns to increase their funding - more to come on this topic in future posts...
So for now, the conclusion is simply "suck it and see". Any financial downside seems at first impressions to be manageable and the rest will just need to be put to the test.
Until next time! …
If you are interested in any of the ideas that I have talked about or want to get in touch about helping, launching a campaign etc then send me a tweet @jimhilluk.