Now working on the revenue model…

Today I spent a couple hours playing with the revenue model for the mobile app I’m interested in building.  I mentioned the revenue model in a previous post, and thought it looked a little too good, which usually means it’s off base in some fundamental way.  Well, I decided to build a completely different model based on a new set of assumptions, and sure enough the revenue potential projects into the future much differently than in the previous model.

This is good.

It means the modeling exercise is winding it’s way toward finding some semblance of anticipated reality.  Which is very good.  The worst thing in the world is to build out a new venture fueled by the hope of a phantom revenue model.

Many folks around here, in the Silicon Valley, have experienced that one for sure.  As have I.  Famplosion was started when conventional wisdom thought well of pursuing an audience for the sake of an advertising monetization strategy.  Well, just like in 2000-2001 the world shifted a little bit during 2007-2009 making the advertising revenue model a much more challenging proposition.

There’s really no shortage of thoughts in the blogosphere on why the advertising market shifted so greatly over the last couple years.  But I think the bottom line is totally a supply and demand imbalance.  As great as it is to advertise online, with the ability to track efficacy and everything, the supply of advertising inventory has increased more than the demand can muster.

And I don’t really see the trajectory of those supply and demand vectors changing anytime soon.

So, my new biz is going to chase mobile advertising!

Well, not really, that’s seriously a joke.  In fact, I’m somewhat committed at this point never to build something that requires building an audience before figuring out how to monetize.  That is like voodoo to me now.  From now on, I want to build stuff that can be sold to people who derive immediate value from the purchase.

And that’s kind of the model for my new app.  It’s a bit more complicated in that the app is actually likely to be free, but the service it provides will drive itty bitty financial transactions and the idea is to take an itty bitty fee for facilitating those transactions.

So there will still be plenty of opportunity for consumer marketing, which will be awesome and will keep me young.  But the name of the game will be to drive transaction volume by providing a solid customer experience with the app.

That model looks pretty good at this point also…not as good as the one I built a few days ago…that’s usually a good sign.  But, if I build another model that shows this is a dog that won’t hunt, I’ll let you know.

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