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.]