Back of the Envelope Analysis

January 15, 2007

I have always loved back of the envelope analysis. Yes, some things need more research and more analysis, but before you even think of doing that, grab a pen and a napkin and see what you can “figure out”.

Here is some back of the envelope analysis from Fred Wilson regarding the monetization of his blog feed:

“Here’s how I am thinking about it. I make about $1000 per month with FeedBurner [by allowing advertisements in his RSS Feed. Fred has about 10,000 subscribers]. So I am going to use half of that money to market my blog’s feed. What I want to see is how much I can increase my feed subs with that money.

Each blog sub is worth about $0.10/month to me (I have about 10,000 subs). Let’s assume that the average subscriber stays with me for 6 months (I honestly don’t know and I need FeedBurner to give me the tools to figure that out). Then the lifetime value of a sub is $0.60. If I spend $500/month, I’ll need to add 830 subs each month to breakeven.”

In probably two or three minutes he has established a set of goals to measure his results against. Goals are important.

Simple and interesting (at least to a data wonk like me). Nice.

[Full Disclosure: Fred is an investor in FeedBurner – the service he is talking about…that said it’s a great service.]

about the author

Co-Founder & CEO, FreshBooks Mike is the co-founder and CEO of FreshBooks, the world’s #1 cloud accounting software for self-employed professionals. Built in 2003 after he accidentally saved over an invoice, Mike spent 3.5 years growing FreshBooks from his parents’ basement. Since then, over 10 million people have used FreshBooks to save time billing, and collect billions of dollars. A lover of the outdoors, Mike has been bitten so many times it’s rumoured he’s the first human to have developed immunity to mosquitoes.