Re:Lessons learned from a failed poker software business
by sokoloff on Tuesday November 18, 2008 @06:17PM
(#368886)
One example answer is that if your gross margin is anything under 10%, you shouldn't spend $100m in advertising for $1mm in marginal revenue.
Doesn't happen often in software, of course.
Re:Lessons learned from a failed poker software business
by Tichy on Wednesday November 19, 2008 @10:09AM
(#369511)
I admit you have lost me here - why should one not make that investment?
Re:Lessons learned from a failed poker software business
by sokoloff on Wednesday November 19, 2008 @12:07PM
(#369641)
Let's say your gross margin is 9%.
You spend $100K in advertising. You get an additional $1000K in revenue, on which you make a 9% profit. You bank $90K profit from this.
You're $10K worse off for having done that advertising.
I used to be all negative about advertising, but I changed my attitude since I realized that nature itself relies heavily on advertising. A beautiful flower is advertising, too. Even a flower has to announce "I am here" with colors and odors. Maybe in some cases a "social recommendation mechanism" is also at work (like the bees who inform other bees about food sources), but without such a mechanism, how are your clients going to discover you?