What are the criteria for giving up on startup ideas?
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Peter Denton, PSL's Idea Validator at Venture Support and New Business Validation, explains how startup costs can be discarded based on criteria such as advertising costs and competitors. Is introduced in the actual example.
PSL Studio Kill: Xylo ｜ Features
https://www.psl.com/feed-posts/psl-studio-kill-xylo
According to Denton, the PSL rejects nine out of the ten ideas tested. One of the ideas that Denton and colleagues conceived was Xylo, an online platform that matches teachers and students for music education.
Denton spent a week testing Xylo and came to the conclusion that it should be 'rejected.' One of the causes was the large difference between the results derived by Google's estimator and the actual profit.
Denton tested on the assumption that Xylo is a marketplace business that earns a portion of the revenue from lesson bookings. Using Google's estimator to calculate the cost and number of
Based on the above results, Denton conducted tests on both Google and Facebook to show three types of ads to see the actual number of visits to the ads. The results are worse than Google estimates, and Denton speculates that this was due to a 'competition between ads and organic search'.
The click rate (CTR) on Facebook was up to 0.68% for the ad 'Tech Enabled', and the average cost per click (CPC) was $ 3.75 (about 410 yen).
The following image is the advertisement of 'Tech Enabled'.
Similarly, Google displayed the following three types of advertisements, but the CTR was only 0.65%.
Denton set up the following funnels based on Google's estimated model and the results of his own research on CTR:
・ CTR 3% (approximately 27,360 visitors) out of about 900,000 searches.
・ Acquire 20% (approximately 5400) conversions (people who click 'sign up' on the landing page).
・ Approximately 10% (approximately 600) of the users will be paid members.
The ad expected 600 customers, but even though each of the 600 customers took three lessons and earned 20% commission from a $ 60 per hour fee, sales were still 2 It will be $ 1,600 (about 2,365,800 yen). Xylo's operation was deemed deficit, as Google estimates that it would cost approximately $ 80,000 in advertising costs.
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As for the market size, MakeMusic , a website that provides information for music leaders, estimates that there are about 100,000 music educators in the United States. However, there are already excellent services and famous services such as TakeLessons and Yousician provided by competing companies, and as a completely free service, thousands of guitar instructors on YouTube provide various music education. Denton came to the conclusion that 'Xylo should give up.'
According to Denton, about 30% of users who saw ads on Google Ads came to access, 'Denton says,' There are a lot of competent SMEs competing in the field of music education. I don't know if we need an intermediary like Google. '
By bialasiewicz
Xylo was not completely abandoned, but Denton solicited opinions from colleagues because of its strengths of being affordable, easy to use, compatible with all genres and languages, and usable on many platforms. We are working on improving our operations.
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