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Ah, you fell for it too. How much does it actually cost to run the foursquare that millions of users liked? Hint: not very much. If you can't make that "not

Ah, you fell for it too. How much does it actually cost to run the foursquare that millions of users liked? Hint: not very much. If you can't make that "not very much" back from ads, you should sell to someone who can.

wpietri 12y ago
If you settle for barely breaking even, your investors will replace you with somebody who believes they can take your company and have a chance of making ridiculous money. They will do that even if it is a 20% of wild success and an 80% chance that you will drive away the millions of users. Why? Because merely covering core operational costs doesn't do anything to pay back the investors who put in $160 million.
- bandrami 12y ago
  Why do you have "investors" with a low-margin, low-cost business model?
  - wpietri 12y ago
    I'm having trouble understanding what you want to know here. Is this whole VC funding thing new to you? Assuming so, the short answer is that the venture capital ecosystem is about investing in businesses before we know what kind of businesses they'll turn out to be. This was especially true for free-to-use social apps like Facebook, Twitter, and Foursquare. Those only make sufficient money if their scale is very large. It's also hard to know what their true monetization opportunities are until they reach scale, which is why Twitter and Facebook didn't really bother with pursuing revenue until they were huge. This worked out pretty well for the winners. But it has a known failure mode for the losers: things that might have been good small businesses end up getting totally destroyed in the rush for glory and riches.
  - bdcravens 12y ago
    You're describing pretty much every B2C startup ever. Many of which I promise you're using today.
juliangregorian 12y ago
Ha. Hahaha. How many apps at that scale have you run? Foursquare is on AWS[0] and serves 40 million users. Their monthly spend there is probably at least in the 10-20k range. And this is before even considering that they had 135 employees at the time[1] and swank offices in a hip neighborhood in NY. Making all that back with "ads", especially when your platform is almost completely on mobile, is not a cakewalk. 0: http://aws.amazon.com/solutions/case-studies/foursquare/ http://aws.amazon.com/solutions/case-studies/foursquare/ 1: http://www.businessinsider.com/what-exactly-do-foursquares-135-employees-do-all-day-2012-8 http://www.businessinsider.com/what-exactly-do-foursquares-1...
- deleted 12y ago
  [deleted]
  - juliangregorian 12y ago
    More armchair quarterbacking. You don't just pick up and move to save a buck when you have a whole company running on AWS' specialized architecture. There's a lot of process and a lot of overhead that factor into that consideration. A lifelong Mac user, for example, couldn't seamlessly jump into Windows just because "it's cheaper". Even if you ran on bare metal on colocation, I doubt you save more than 50%. That's time wasted that could be more fruitfully spent iterating on profitable ideas. Plus that's exactly why you took investment capital in the first place, so you didn't have to do all that fiddly stuff. It's always better to maximize revenue than to minimize costs. On that note, the cost of paying all those salaries is probably 10-50x the Amazon bill, but you can't really cheap out there either.
- moe 12y ago
  they had 135 employees at the time[1] and swank offices in a hip neighborhood in NY. Making all that back with "ads", especially when your platform is almost completely on mobile, is not a cakewalk. How about firing 120 employees and moving to a smaller office, just until you've figured out how to make money?
  - deleted 12y ago
roel_v 12y ago
"How much does it actually cost to run the foursquare that millions of users liked? Hint: not very much." OK, why don't you enlighten us?
achompas 12y ago
Are you sure about that hint? The AWS case study linked below http://aws.amazon.com/solutions/case-studies/foursquare/ http://aws.amazon.com/solutions/case-studies/foursquare/ mentions "stream[ing] hundreds of millions of daily application logs each day." These logs must be at least 0.5K w/ metadata (probably more), so we're talking about...what, 100GB/day of application logs? Alone?? You're not persisting those using cron + MySQL--they likely use Kafka/Kinesis, many threads/instances subscribing to topics, and a large, horizontally-scalable db or Redshift to manage them. Note that I haven't even addressed querying those logs (I believe 4sq uses Hive, the case study mentions Tableau). That all costs money. We also haven't mentioned reviews for their millions of locations, user auth, check-ins, app development (web/iOS/Android). Each of those is a problem for a company with a MM-level user base. Do you have some kind of intimate knowledge of their monthly engineering costs? EDIT: 4sq website says 2M legit businesses, 65M total places.

wpietri 12y ago

If you settle for barely breaking even, your investors will replace you with somebody who believes they can take your company and have a chance of making ridiculous money. They will do that even if it is a 20% of wild success and an 80% chance that you will drive away the millions of users. Why? Because merely covering core operational costs doesn't do anything to pay back the investors who put in $160 million.

bandrami 12y ago
Why do you have "investors" with a low-margin, low-cost business model?
- wpietri 12y ago
  I'm having trouble understanding what you want to know here. Is this whole VC funding thing new to you? Assuming so, the short answer is that the venture capital ecosystem is about investing in businesses before we know what kind of businesses they'll turn out to be. This was especially true for free-to-use social apps like Facebook, Twitter, and Foursquare. Those only make sufficient money if their scale is very large. It's also hard to know what their true monetization opportunities are until they reach scale, which is why Twitter and Facebook didn't really bother with pursuing revenue until they were huge. This worked out pretty well for the winners. But it has a known failure mode for the losers: things that might have been good small businesses end up getting totally destroyed in the rush for glory and riches.
- bdcravens 12y ago
  You're describing pretty much every B2C startup ever. Many of which I promise you're using today.

juliangregorian 12y ago

Ha. Hahaha. How many apps at that scale have you run? Foursquare is on AWS[0] and serves 40 million users. Their monthly spend there is probably at least in the 10-20k range. And this is before even considering that they had 135 employees at the time[1] and swank offices in a hip neighborhood in NY. Making all that back with "ads", especially when your platform is almost completely on mobile, is not a cakewalk. 0: http://aws.amazon.com/solutions/case-studies/foursquare/ http://aws.amazon.com/solutions/case-studies/foursquare/ 1: http://www.businessinsider.com/what-exactly-do-foursquares-135-employees-do-all-day-2012-8 http://www.businessinsider.com/what-exactly-do-foursquares-1...

deleted 12y ago
[deleted]
- juliangregorian 12y ago
  More armchair quarterbacking. You don't just pick up and move to save a buck when you have a whole company running on AWS' specialized architecture. There's a lot of process and a lot of overhead that factor into that consideration. A lifelong Mac user, for example, couldn't seamlessly jump into Windows just because "it's cheaper". Even if you ran on bare metal on colocation, I doubt you save more than 50%. That's time wasted that could be more fruitfully spent iterating on profitable ideas. Plus that's exactly why you took investment capital in the first place, so you didn't have to do all that fiddly stuff. It's always better to maximize revenue than to minimize costs. On that note, the cost of paying all those salaries is probably 10-50x the Amazon bill, but you can't really cheap out there either.
moe 12y ago
they had 135 employees at the time[1] and swank offices in a hip neighborhood in NY. Making all that back with "ads", especially when your platform is almost completely on mobile, is not a cakewalk. How about firing 120 employees and moving to a smaller office, just until you've figured out how to make money?
- deleted 12y ago

roel_v 12y ago

"How much does it actually cost to run the foursquare that millions of users liked? Hint: not very much." OK, why don't you enlighten us?

achompas 12y ago

Are you sure about that hint? The AWS case study linked below http://aws.amazon.com/solutions/case-studies/foursquare/ http://aws.amazon.com/solutions/case-studies/foursquare/ mentions "stream[ing] hundreds of millions of daily application logs each day." These logs must be at least 0.5K w/ metadata (probably more), so we're talking about...what, 100GB/day of application logs? Alone?? You're not persisting those using cron + MySQL--they likely use Kafka/Kinesis, many threads/instances subscribing to topics, and a large, horizontally-scalable db or Redshift to manage them. Note that I haven't even addressed querying those logs (I believe 4sq uses Hive, the case study mentions Tableau). That all costs money. We also haven't mentioned reviews for their millions of locations, user auth, check-ins, app development (web/iOS/Android). Each of those is a problem for a company with a MM-level user base. Do you have some kind of intimate knowledge of their monthly engineering costs? EDIT: 4sq website says 2M legit businesses, 65M total places.