Above the Crowd

Archive for the ‘Uncategorized’ Category

A Rake Too Far: Optimal Platform Pricing Strategy

April 18, 2013:

In a casino, the term “rake” refers to the commission that the house earns for operating a poker game. With each hand, a small percentage of the pot is scraped off by the dealer, which in essence becomes the “revenue” for the casino. While casinos use the term “rake,” a plethora of interesting word choices exist which all describe the same thing – keeping a little bit of the revenue for the company that is running the service. Examples include “commission,” “fee,” “toll,” “tax,” “vig” or “vigorish,” “juice,” “the take”, and “graft” (although this last one is typically associated with ...

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Favorite Longreads of 2012

December 26, 2012:

Over the past several years, I have become a huge fan of Mark Armstrong’s web service, Longreads. For those of you that don’t know, Longreads is a Twitter handle ( @longreads ), and a web service ( www.longreads.com ) that points to the best long form content on the Internet. At its core, it’s an amazingly effective editorial and discovery engine. Combined with a product like Instapaper, it creates an online/offline reading experience that feels purpose-built for a tablet world. Many short form articles can be read quickly while you browse through your Twitter feed. But the really great articles that make ...

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All Markets Are Not Created Equal: 10 Factors To Consider When Evaluating Digital Marketplaces

November 13, 2012:

Since Benchmark’s investment in Ebay 15 years ago, we have been fascinated by online marketplaces. Entrepreneurs accurately recognize that the connective tissue of the Internet provides an opportunity to link the players in a particular market, reducing friction in both the buying and selling experience. The arrival of the smartphone amplifies these opportunities, as the Internet’s connective tissue now extends deeper and deeper into an industry with the participants connected to the marketplace 24×7 – whether they are in the office, at home, or out in the field. It is a special experience to see an entrepreneur go from a ...

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Our Most Recent Marketplace Investment, DogVacay from Los Angeles

November 13, 2012:

Earlier today, DogVacay, an exciting new startup in Los Angeles, announced that Benchmark has led its most recent round of financing . DogVacay is an online marketplace that links dog owners with passionate dog care providers who open up their own home as an alternative to the traditional cage-oriented kennel. At first blush, a web site that allows owners to book a “Dog Vacation” for their esteemed pet may seem like an unusual choice for a venture investment. However, a more analytical and detailed look at the market uncovers that this is a high potential, high probability online marketplace opportunity. The most recent Above the Crowd blog post, titled All Marketplaces Are Not Created Equal , outlines ...

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The Dangerous Seduction of the Lifetime Value (LTV) Formula

September 4, 2012:

Many consumer Internet business executives are loyalists of the Lifetime Value model, often referred to as the LTV model or formula. Lifetime value is the net present value of the profit stream of a customer. This concept, which appears on the surface to be quite benign, is typically used to compare the costs of acquiring a customer (often referred to as SAC, which stands for Subscriber Acquisition Costs) with the discounted positive cash flows that will come from that customer over time. As long as the sum of the discounted future cash flows are significantly higher than the SAC, then ...

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