E.g., suppose a Web site starts to take off,
that is, has number of users per day
increasing rapidly. Then, a crucial number
in the growth is how soon can
one server computer generate
enough revenue to pay for a second server
computer? That is, we're talking
about a start on exponential growth.
Well, long the M. Meeker KPCB reports said
that can get paid about $2 per 1000 ads
displayed. Okay, maybe now that's down
to $1.
Okay, suppose send just one ad per Web page.
Get, say, a server with an 8 core AMD
processor at 4.0 GHz for $1000
and send on average
24 x 7 just one Web page per second.
Then the monthly revenue would be
1 * 3600 * 24 * 30 / 1000 = 2,592
dollars.
So, in two weeks, get another server.
So, we have essentially exponential
growth with a doubling time of a little
less than two weeks.
So, we have, in the history of (legal)
business, about the fastest growth,
the best business opportunity, of all
time.
But we were talking 8 cores, right?
At 4.0 GHz, right? If the Web pages
are relatively simple, then we're
talking being able to send maybe 8 Web pages
a second. And we may have more than
one ad per page. Okay, assume
as above but 8 pages a second with
4 ads per page and get
1 * 8 * 4 * 3600 * 24 * 30 / 1000
= 82,944
dollars a month in revenue. That was one
server. So, in a spare bedroom get a
wire rack shelf unit at Sam's Club
for $100 and put 12 midtower cases
of such servers on that rack. Have
an electrician upgrade the house
circuit breaker box and run 240 V
to the spare bedroom for the computers
and a big window unit A/C. Also put
a propane powered backup generator
on a concrete slab in a small hut
out back. Now we're up to ballpark
$1 million a month in revenue.
So, we're talking ballpark $10 million
a year in pre-tax earnings. At a P/E
of 40, we're talking a company worth
$400 million, from a spare bedroom.
Is the Internet a great opportunity
or what?
Sure, the issue is getting the users.
But with the users, there's only
a small window of time when even a
dirt poor founding entrepreneur
would take equity funding. And
without the users, still there would
be not equity funding.
Net, it looks like equity funding
and Web sites mix like oil and water.
If the site grows, if it doesn't, in
either case, there's little or no role for
equity funding.
Of course, if have just a Web site,
may have only a lifestyle business.
Okay. Not so bad.
What about "focus"? User's
focus when the look at the
screen; my focus when
I have to work on all the issues
in the startup and, then, in
addition the ads and, thus, lose
my focus; something else?
For user experience, with
my Web pages, the ads are fairly
easy to ignore. The pages are dirt
simple with essentially no JavaScript --
so that pages don't jump around.
And all the layout is just via
tables so that I know to the last
pixel where everything is.
The content the user wants
is on the left, and some ads
300 x 250 pixels are on the right.
Simple.
So, I'm guessing that the
ads will not be very distracting, e.g.,
won't hurt the ability of the
users to focus on the content,
i.e., won't yield a poor user
experience.
E.g., suppose a Web site starts to take off, that is, has number of users per day increasing rapidly. Then, a crucial number in the growth is how soon can one server computer generate enough revenue to pay for a second server computer? That is, we're talking about a start on exponential growth.
Well, long the M. Meeker KPCB reports said that can get paid about $2 per 1000 ads displayed. Okay, maybe now that's down to $1.
Okay, suppose send just one ad per Web page. Get, say, a server with an 8 core AMD processor at 4.0 GHz for $1000 and send on average 24 x 7 just one Web page per second. Then the monthly revenue would be
dollars.So, in two weeks, get another server. So, we have essentially exponential growth with a doubling time of a little less than two weeks.
So, we have, in the history of (legal) business, about the fastest growth, the best business opportunity, of all time.
But we were talking 8 cores, right? At 4.0 GHz, right? If the Web pages are relatively simple, then we're talking being able to send maybe 8 Web pages a second. And we may have more than one ad per page. Okay, assume as above but 8 pages a second with 4 ads per page and get
dollars a month in revenue. That was one server. So, in a spare bedroom get a wire rack shelf unit at Sam's Club for $100 and put 12 midtower cases of such servers on that rack. Have an electrician upgrade the house circuit breaker box and run 240 V to the spare bedroom for the computers and a big window unit A/C. Also put a propane powered backup generator on a concrete slab in a small hut out back. Now we're up to ballpark $1 million a month in revenue.So, we're talking ballpark $10 million a year in pre-tax earnings. At a P/E of 40, we're talking a company worth $400 million, from a spare bedroom.
Is the Internet a great opportunity or what?
Sure, the issue is getting the users.
But with the users, there's only a small window of time when even a dirt poor founding entrepreneur would take equity funding. And without the users, still there would be not equity funding.
Net, it looks like equity funding and Web sites mix like oil and water. If the site grows, if it doesn't, in either case, there's little or no role for equity funding.
Of course, if have just a Web site, may have only a lifestyle business. Okay. Not so bad.