Weeks 5 & 6 have been incredibly difficult and tough for the Giftless team.
Gaining visibility of key metrics that determine at least the short-term fate of Giftless has been a key focus of mine. It was neither an easy nor a fast process to be able to isolate our traffic and truly understand our business’s metrics and data.
And now that we have clear and isolated visibility of our different traffic sources, the feasibility of the Giftless gift discovery application has been seriously challenged.
Traffic growth occurs through one of 3 means, viral, sticky or paid.
In the case of Giftless, sticky growth is unlikely because most of the pages are dynamically generated, there is little to no static content and because our landing page has a Facebook connect login, we also have a high bounce rate. Also getting deep linkage in its current form is impossible.
Viral growth is also unlikely, Shopycat is the epitome of a gift recommendation engine powered by social media and even with its huge seed that is Walmart’s customer database, Shopycat hasn’t gone viral.
That leaves Giftless with paid growth, which would be ideal for Giftless if our CPA < LTV. Unfortunately for us, the data is not suggesting it will be. Now that we have clear visibility of our campaigns in complete isolation, we have realised we have the following CPA’s for Signups.
Interest based ads = $2.20
Generic ads > $29
Personality targeted ads > $40
So our best case scenario has a CPA of $2.20, but this for a signup not a customer. Our average commission is %5, considering that if 100% of our signups converted to customers, we would need to sell $44 worth of goods to break even.
However, we realise that the absolute best conversion rate we could achieve is %5, which means our break even point is actually $880 worth of goods sold. Unfortunately this is unrealistic and so rules out paid traffic as our mechanism of growth.
On the flip side we actually have some solid data that is quite positive. Which added to our confusion of the question at hand, pivot or persevere.
Facebook ads targeting interests have extremely high CTR, in one example, the CTR of an interest based ad “Discover Star Wars Gifts” had a CTR 600% higher than a generic “Discover Great Gifts” ad.
The signup rates are far higher with interest based ads 10% (Discover Star Wars Gifts) versus 3% (Discover Great Gifts)
The average session time of a user acquired through these “Discover Star Wars Gifts” is also far longer than those acquired by the “Discover Great Gifts” ad too.
We considered going down the B2B route, we considered a customer segment pivot, we considered accepting the realisation that Giftless is simply a long term play.
Ultimately, with the wisdom of the AngelCube mentors we decided to pivot.
We did this by looking very closely at all of our competitors and identifying the key characteristics of why they are succeeding. Then we took the common themes of success and distilled them into our own new business model.
The common themes were:
- simple user experience
- viral as a core feature
- Facebook wall posting and lots of it
- Group purchasing of gift cards
- Gift Card Market
The most interesting competitor I studied was Wrapp. Wrapp has one of the most beautiful business models I have ever seen. It leverages the customer database of its partners for user growth and it gets the customers its partner companies to market for both Wrapp and the partner company.
Wrapp has created the most effective and efficient social media marketing platform to date. It also combines a combination of conversion techniques such as people who use coupons spend more than those without and that conversion rates of traffic directed from social media can be as high as 71%.
Our pivot is based around Wrapp’s business model and adding a group photo card as the core user case scenario. We are currently validating our the key assumptions of our pivot and I’ll have some more information next week regarding this.
To be honest, it has been incredibly difficult having to pivot so late into AngelCube. But learning how to validate or invalidate a business so quickly is in and of itself a skill-set and I feel 10x the entrepreneur for having mastered it.