How much is a new user worth?

[CLains]

This is clearly the most important issue we are facing now. Not spending is equally dangerous. There is no safe way when all the world can copy and outdo us. Fortunately we have DNS, Music, Play, etc. that can all help each other experiment and find what works. However, there are so many trajectories and possibilities, both for getting capital and for spending it, that it may be best to focus on the most robotic and least complex options.

Suggestion out of a hat: something like 6% inflation, with 2% to delegates, 2% to referral campaign, and 2% to interest rate. This would give 1 million dollars for referrals (10$ per signup, 100 000 new users), 10 000 dollars to each Delegate per year (enough to get excited), and +4% interest on every bitAsset. Then we could still brag that we have lower inflation than Bitcoin, and we could use devfund to increase cash for referrals etc., which would increase shareholder confidence that it will work.

I would also like to note that Ripple/NXT was completely outrageous and at odds with the chatter in the whole crypto community at the time they launched, and their market cap rose happily in spite of it - smart money is smart, chatter is not.

[bytemaster]

Well that isn't really a PoW vs PoS issue now is it?   It is a community / social issue.  Bitcoin developers could turn of PoW and directing mining rewards to development and use PoS while still saying there will never be more than 21 million BTC.   It is a matter of what the "developers" + "merchants" + "users" are willing to accept.   It is a social issue...

Right, so it's about how the community at large perceives the inflation. Bitcoin is called a deflationary currency because it's inflation is set to a known schedule that (apparently) will never be changed. So, to the Bitcoin community, that makes it ok. They also use "fair distribution of coins" to justify mining as well.

For this type of "market mining" to be justified, it has to be set on a predictable, "set in stone" schedule that will never change. As far as referral programs go, there is no reason to reinvent the wheel. Just base it on what has already proven itself a massively successful model: affiliates.

I mean, there is nothing decentralized or autonomous about this type of referral program. This is basically invictus saying "we're going to opt for a one time inflationary period / loan / whatever in hopes that our bonus attracts users" without asking the question "Is giving a $100 one-time bonus even going to attract the desired demographic?"

Now, if we used 5% inflation per year decreasing by 0.5% over the next 10 years (or whatever formula we think is optimal), to allow any user to refer other people and get paid only if the referee generated revenue, you have a decentralized AND autonomous marketing program that is 1000x more efficient than a debit card bonus because it taps into the collective creativity of our community. It allows for viral, memetic spread.

A decentralized referral program that cannot be gamed!   This requires identity verification to ensure users are unique.    My "decentralized" approach to this is to allow delegates to fund campaigns and allow shareholders to vote on delegates based upon their proposed campaign.   You have to work with partners to prevent massive fraud like Bitcoin is seeing with the "mining referral model".   

[Stan]

Like I said elsewhere, network effect is everything and competitors are able to copy the code + add dilution + buy network effect.

In the end, it all seems to come down to this pragmatic point: 

Do we as a community want to own shares in a competing approach or let CutePuppyShares own it?

It doesn't seem that we can dictate that a dilution solution shall not exist.  The community only has a say whether it bears the BitShares brand or not.

Its up to each developer to choose what gives her the best chance at becoming #1.
Then her competitor gets to choose from whatever cards have not been played.

... unless she finds a way to do both, perhaps under different brands.

[Method-X]

Well that isn't really a PoW vs PoS issue now is it?   It is a community / social issue.  Bitcoin developers could turn of PoW and directing mining rewards to development and use PoS while still saying there will never be more than 21 million BTC.   It is a matter of what the "developers" + "merchants" + "users" are willing to accept.   It is a social issue...

Right, so it's about how the community at large perceives the inflation. Bitcoin is called a deflationary currency because it's inflation is set to a known schedule that (apparently) will never be changed. So, to the Bitcoin community, that makes it ok. They also use "fair distribution of coins" to justify mining as well.

For this type of "market mining" to be justified, it has to be set on a predictable, "set in stone" schedule that will never change. As far as referral programs go, there is no reason to reinvent the wheel. Just base it on what has already proven itself a massively successful model: affiliates.

I mean, there is nothing decentralized or autonomous about this type of referral program. This is basically invictus saying "we're going to opt for a one time inflationary period / loan / whatever in hopes that our bonus attracts users" without asking the question "Is giving a $100 one-time bonus even going to attract the desired demographic?"

Now, if we used 5% inflation per year decreasing by 0.5% over the next 10 years (or whatever formula we think is optimal), to allow any user to refer other people and get paid only if the referee generated revenue, you have a decentralized AND autonomous marketing program that is 1000x more efficient than a debit card bonus because it taps into the collective creativity of our community. It allows for viral, memetic spread.

[Riverhead]

I think if we are going to appeal to a wider audience than crypto community, we don't even need to mention BTSX at all, what needs to be communicated to a regular user is this - you can transact in BitUSD and don't worry about conversion rates, get rebates for the purchases and if you store BitUSD long term you can get much higher yield than your bank can give you on your savings account.

This makes sense. When a bank advertises savings and checking accounts they don't mention anything about their share price.

[bytemaster]

I hope you take into account that if BTSX are diluted then it's going to have a disatrous effect on the perceived network ability to store value.

Bitcoin will forever benefit from the mythology "there will never be more than 21 million bitcoins" while BitsharesX will get "these guys expand the money supply on a whim in order to win more money".

PoW advocates will have a prime example of why PoS is inferior to PoW for securing a money able to store value in the long run like gold is.

I think if we are going to appeal to a wider audience than crypto community, we don't even need to mention BTSX at all, what needs to be communicated to a regular user is this - you can transact in BitUSD and don't worry about conversion rates, get rebates for the purchases and if you store BitUSD long term you can get much higher yield than your bank can give you on your savings account.

Exactly!  +5

[valzav]

I hope you take into account that if BTSX are diluted then it's going to have a disatrous effect on the perceived network ability to store value.

Bitcoin will forever benefit from the mythology "there will never be more than 21 million bitcoins" while BitsharesX will get "these guys expand the money supply on a whim in order to win more money".

PoW advocates will have a prime example of why PoS is inferior to PoW for securing a money able to store value in the long run like gold is.

I think if we are going to appeal to a wider audience than crypto community, we don't even need to mention BTSX at all, what needs to be communicated to a regular user is this - you can transact in BitUSD and don't worry about conversion rates, get rebates for the purchases and if you store BitUSD long term you can get much higher yield than your bank can give you on your savings account.
As far as market peg holds and BitAsset yields are higher than inflation, there would be no questions about network's ability to store value.

[bytemaster]

http://blog.referralcandy.com/2014/01/23/paypal-referrals/

Referrals helped PayPal get 7 to 10% daily growth, catapulting their user base to over 100 million members. [2]
According to David O Sacks, original COO and product leader of Paypal, Paypal used to literally pay people to invite their friends:

“Initially users just had to sign up, confirm their email address, and add a (unique, authorized) credit card.* The money was simply added to their account.
This was real money. Users could send it to someone else or withdraw it. So it was a real cost to PayPal. We must have spent tens of millions in signup and referral bonuses the first year. (PayPal acquired 1 million users by March 2000 and 5 million by summer 2000.)
The bonuses were gradually phased out, first by reducing them to $5, then by adding more verification hoops (like bank account verification) so they became more difficult to get. Then they were eliminated altogether.”

Referrals turned out to yield better marketing ROI than the alternatives.

Once PayPal achieved a critical mass of early adopters they dropped the Refer-A-Friend bonus for regular users, but they kept it for Merchants. They dropped the Merchant bonus too, once they reached their target numbers. [3]

referral-paypal
The last vestigial remnant of Paypal’s referral system.
Here’s an excerpt from Peter Thiel’s CS183 startup class describing how PayPal tried advertising and biz-dev, but ultimately found $20 for each new customer to be the lowest CAC:

PayPal’s big challenge was to get new customers. They tried advertising. It was too expensive. They tried BD deals with big banks. Bureaucratic hilarity ensued. Over ice cream, the

PayPal team reached an important conclusion: BD didn’t work. They needed organic, viral growth. They needed to give people money.

So that’s what they did. New customers got $10 for signing up, and existing ones got $10 for referrals. Growth went exponential, and PayPal wound up paying $20 for each new customer. It felt like things were working and not working at the same time; 7 to 10% daily growth and 100 million users was good. No revenues and an exponentially growing cost structure were not. Things felt a little unstable. PayPal needed buzz so it could raise more capital and continue on. (Ultimately, this worked out. That does not mean it’s the best way to run a company. Indeed, it probably isn’t.)”
If it worked so well, why did they remove it?

An educated guess: Fairly straightforward cost-benefit analysis.

Diminishing returns at (massive) scale. PayPal is a payments system, which is greatly dependent on network effects. The more people use PayPal, the more it becomes worth it to join the bandwagon. Eventually, the number of people using PayPal alone would’ve been incentive enough for new users to sign up, rendering the incentive unnecessary.
Customer Acquisition Cost (CAC) begins to exceed Customer Lifetime Value (LTV). Signups are free to do, and so it’s practically a certainty that the system would’ve been gamed by eager opportunists. For any other business, this would’ve turned out really, really ugly. PayPal probably factored in exploitation and misuse into the cost of customer acquisition. Also, when you have MILLIONS of customers, the load on your infrastructure must be unbearably costly.
“It occurs to me now that PayPal is one of the few businesses where you could use a direct financial incentive like that and not have it be an excessively extrinsic incentive to use the site.” – Yishan Wong, early PayPal employee, now CEO of Reddit [source]
What are the implications for regular businesses running referral programs of their own?

For ecommerce businesses, I recommend incentivizing the purchase, not the sharing or signup. If you pay people to share or signup for an account, you’ll end up with loads of shares and signups, but few purchases. Worse still, the high-quality influencers that you want to court will get turned off by the spammy behavior associated with your product. So don’t do that.
Study your costs and benefits very carefully. This is the responsibility of anybody running a business, and you probably shouldn’t outsource it to anybody else. If you make a $20 profit on a product, giving a $10 referral reward is very reasonable for every successful sale. You still profit AND get great marketing. You may be tempted to sacrifice more profits for greater reach, but you may face diminishing returns. You’ll have to study your costs very carefully, and experiment prudently.
Ensure that your product/service is compelling even without any added incentives. This should go without saying!
Referrals worked great for PayPal, but that doesn’t mean your business will flourish if you give away money the way they did.

PayPal was taking hefty risks because it was trying to dominate a ‘winner-takes-all’ market, and there were people willing to finance such risks because of the potential returns.

An effective referral program has to have incentives that are not only substantial but relevant. Specifically, you want to incentivize the customer behavior that makes sense for your business.

Actionable steps to get the most out of your own referral program:
Make sure that your incentives are substantial: People will refer a good product to their friends without incentives, but it’s possible for incentives to be so low as to be insulting, tarnishing what would otherwise have been a gesture of goodwill. As a super-vague rule of thumb, anything less than $5 is usually not worth the trouble for most customers. But it really depends on what you’re selling. If it’s an expensive product, the reward should be proportional.
If possible, make your incentives relevant to your product: Ask yourself, what is the “lifeblood” of your product. For Dropbox, it was storage space. For World of Warcraft, it’s in-game social proof. For PayPal, it’s money. For Freemium games, it’s in-game credit. What about for ecommerce businesses? That’s a challenge for you to solve, as an entrepreneur or marketer.
Remember, referrals aren’t magic. They can only amplify what you already have.

You can’t just create them out of thin air, you need to have a product that people actually want to talk about.

Once you’ve got that, the most you can do is to set things up such that it easier for your delighted customers to share their love for your product with others. That can make all the difference.

[BldSwtTrs]

Perhaps if we had not done the inflation and marketing (or just did less marketing), we could have grown to a market cap larger than BTC anyway but just 1 year later than with the excessive marketing. Would getting to the same point 1 year earlier be worth the additional dilution of shares? I don't know, it depends on what the shareholders want (and a large fraction of the shareholders, preferably at least 50% share approval).

1 year in the crypto world is comparable with 10 years or more in other sectors... Don't you have the same feeling?

I agree with the primary point that "throwing money at the problem" without looking at the "best use of funds" is foolish.

Generally speaking there is a "natural rate of growth" that Bitcoin has adopted... means we will get there in 3 to 5 years absent competition.

I think it all hinges on competition and speed to market.   There are so many derivative based solutions on the horizon that we want to grow... there is also the fact that jumpstarting can greatly accelerate your n^2 network effect growth.   The first 100,000 users take a lot longer to get than your second 100,000 users.   

So obviously everything we do we consider "cost/benefit" and "alternatives" and "opportunity cost".     

I hope you take into account that if BTSX are diluted then it's going to have a disatrous effect on the perceived network ability to store value.

Bitcoin will forever benefit from the mythology of "there will be never more than 21 millions bitcoins" while BitsharesX will get "these guys expand the money supply on a whim in order to win more money".

PoW advocates will have a prime example of why PoS is inferior to PoW to have a money able to store value in the long run like gold is.

Well that isn't really a PoW vs PoS issue now is it?   It is a community / social issue.  Bitcoin developers could turn of PoW and directing mining rewards to development and use PoS while still saying there will never be more than 21 million BTC.   It is a matter of what the "developers" + "merchants" + "users" are willing to accept.   It is a social issue...

You will also note that for everyone that is a fan of a fixed supply, the fast majority of the population thinks a growing supply of money is necessary.  Granted their economics are all wrong, but the principle remains that each network will attract different users. 

If there is 10% inflation on a BTSX chain then the "shorts" / "longs" would factor that into their decisions.  IE: you don't go short unless you think the network will grow by more than 10% necessary to make money by shorting the dollar.    This is what makes BTSX unique.

I agree it's a social issue. That's mean perception and symbols are important. And not only within the community, but primarily, if growth is the goal, outside it.

With that decision you will choose to aim to be Google rather than Gold. There is nothing wrong with that as long you are aware that with that decision you are giving up the other path.

[bytemaster]

This idea did not come from the marketing department, they are working on something entirely different.   

Where did the $100 number come from?  I asked myself what threshold would it take for me to even consider opening an account at a new bank.  I asked friends and family.  I asked "how many hours would I spend learning and filling out paperwork?".    At $100 many people are willing to at least take the time to hear the offer and understand it (listen to the pitch), even if they don't go through with it.   Below $100 most people aren't interested in taking the time to hear the full offer let alone go through with it.   

Marketing is focusing on capturing and directing users to BTSX and explaining it to them... helping them PURCHASE btsx and giving them some free BTSX funded by referal fees paid by 3rd party services (such as exchanges, etc...).   So their plan and my plan are opposite sides of the coin and complement each other. 

[bytemaster]

Perhaps if we had not done the inflation and marketing (or just did less marketing), we could have grown to a market cap larger than BTC anyway but just 1 year later than with the excessive marketing. Would getting to the same point 1 year earlier be worth the additional dilution of shares? I don't know, it depends on what the shareholders want (and a large fraction of the shareholders, preferably at least 50% share approval).

1 year in the crypto world is comparable with 10 years or more in other sectors... Don't you have the same feeling?

I agree with the primary point that "throwing money at the problem" without looking at the "best use of funds" is foolish.

Generally speaking there is a "natural rate of growth" that Bitcoin has adopted... means we will get there in 3 to 5 years absent competition.

I think it all hinges on competition and speed to market.   There are so many derivative based solutions on the horizon that we want to grow... there is also the fact that jumpstarting can greatly accelerate your n^2 network effect growth.   The first 100,000 users take a lot longer to get than your second 100,000 users.   

So obviously everything we do we consider "cost/benefit" and "alternatives" and "opportunity cost".     

I hope you take into account that if BTSX are diluted then it's going to have a disatrous effect on the perceived network ability to store value.

Bitcoin will forever benefit from the mythology of "there will be never more than 21 millions bitcoins" while BitsharesX will get "these guys expand the money supply on a whim in order to win more money".

PoW advocates will have a prime example of why PoS is inferior to PoW to have a money able to store value in the long run like gold is.

Well that isn't really a PoW vs PoS issue now is it?   It is a community / social issue.  Bitcoin developers could turn of PoW and directing mining rewards to development and use PoS while still saying there will never be more than 21 million BTC.   It is a matter of what the "developers" + "merchants" + "users" are willing to accept.   It is a social issue...

You will also note that for everyone that is a fan of a fixed supply, the fast majority of the population thinks a growing supply of money is necessary.  Granted their economics are all wrong, but the principle remains that each network will attract different users. 

If there is 10% inflation on a BTSX chain then the "shorts" / "longs" would factor that into their decisions.  IE: you don't go short unless you think the network will grow by more than 10% necessary to make money by shorting the dollar.    This is what makes BTSX unique.

[bitcoinba]

It is not enough to just look at potential market cap gains by subsidizing new users. We also have to look at opportunity cost. If we need to dilute BTSX shareholder's stake by 50% in order to fund marketing that grows BTSX value by over 100% is it rational to take that approach? It depends on if we could have gotten that kind of growth without needing to spend as much through the dilution.

If we are not strategic about this we may just end up spending a lot of money on marketing and having BTSX market cap grow larger than BTC, but at the cost of too much BTSX inflation. Perhaps if we had not done the inflation and marketing (or just did less marketing), we could have grown to a market cap larger than BTC anyway but just 1 year later than with the excessive marketing. Would getting to the same point 1 year earlier be worth the additional dilution of shares? I don't know, it depends on what the shareholders want (and a large fraction of the shareholders, preferably at least 50% share approval).

Bytemaster, you shouldn't be seriously considering your proposal until you first:

• Build a stable, user-friendly, lightweight client on major desktop/laptop/mobile platforms.
• Enable important security features such as: cold storage with offline transaction signing, multisig with companies that support it in the style of BitGo, user-friendly ways of setting up the cold storage and paper backups and even splitting and sharing backup keys to trusted friends and family using secret sharing cryptography.
• Get more exchanges in various jurisdictions around the world (especially in the US) that allow direct exchange of Currency/BitCurrency pairs.
• Allow BTSX shareholders to vote on hard inflation rate caps where the threshold of stake approval needs to be above some fixed percentage limit.

Sure, you may think if you can grow the value of BTSX early, I3 will have more money available to spend on developing the above. But in my view your proposal is a complete waste of money (and can actually create a negative effect, reducing user's perception of our product) if you first haven't solved the above points.

 


Some food for thought.


Are there any statistics or research of supportive arguments based on factual analysis to support; a $200 cost per acquisition (plus card issuance fees), $100 referral fee (which seems like an expensive commission to affiliate marketer actually) and an ROI?

In another thread it was mentioned that the new Marketers (perhaps from St. Martin, and maybe Brian's new venture) would be getting compensated by measuring a rise in the market cap of BTSX. If so, are these the same affiliate marketers that are proposing this plan? If yes, how are those fees for Market cap rise going to be paid to them and how much are they? It should be added to the cost of the campaign.

What is going to be the primary method of communicating this potential offer? Something tells me email marketing primarily? Are there additional costs for the communication or are those assumed by the affiliates?

Perhaps this would be a good thread for the Marketing gurus that have been mentioned to be working on BTS to actually weigh in a give us some perspective based on their relevant experience and success with similar strategies? 

Or is this just an idea that Dan is brainstorming independently? If so, maybe now would be a good time to shed some light on the ulterior Marketing strategies or campaigns being developed by the Marketing team in order to have points of comparison?

Sorry, but I have more questions than solutions. It is difficult to even began to evaluate such a campaign when we have had such little discussion about the actual Marketing department, and their ongoing strategy, roles and responsibilities.

[BldSwtTrs]

Perhaps if we had not done the inflation and marketing (or just did less marketing), we could have grown to a market cap larger than BTC anyway but just 1 year later than with the excessive marketing. Would getting to the same point 1 year earlier be worth the additional dilution of shares? I don't know, it depends on what the shareholders want (and a large fraction of the shareholders, preferably at least 50% share approval).

1 year in the crypto world is comparable with 10 years or more in other sectors... Don't you have the same feeling?

I agree with the primary point that "throwing money at the problem" without looking at the "best use of funds" is foolish.

Generally speaking there is a "natural rate of growth" that Bitcoin has adopted... means we will get there in 3 to 5 years absent competition.

I think it all hinges on competition and speed to market.   There are so many derivative based solutions on the horizon that we want to grow... there is also the fact that jumpstarting can greatly accelerate your n^2 network effect growth.   The first 100,000 users take a lot longer to get than your second 100,000 users.   

So obviously everything we do we consider "cost/benefit" and "alternatives" and "opportunity cost".     

I hope you take into account that if BTSX are diluted then it's going to have a disatrous effect on the perceived network ability to store value.

Bitcoin will forever benefit from the mythology "there will never be more than 21 million bitcoins" while BitsharesX will get "these guys expand the money supply on a whim in order to win more money".

PoW advocates will have a prime example of why PoS is inferior to PoW for securing a money able to store value in the long run like gold is.

[James212]

Marketing btsx as a currency is a mistake.   Market it as a virtual company that is raising money to grow.   

This statement makes a lot of sense to me.

 

[bytemaster]

Pandora's Box... *inflation*.... can come in two forms "unrestricted" and "restricted"...
There are two kinds of restrictions... rate and duration....
Bitcoin has "restricted inflation" at 10% per year that halves ever 4 years... that isn't pandoras box according to crypto community...
Having a similar plan... Inflation of 10% per year that falls to 1% over 10 years as a MAX inflation, then controlled and directed by delegates and thus ultimately the shareholders who are being inflated.

Like I said elsewhere, network effect is everything and competitors are able to copy the code + add dilution + buy network effect.

You claimed this was attracting the *wrong kind of user*.. the "spenders".   This is actually not about the "spending" which is something we all do.  This is proving to users that they can easily access their savings without spreads... that a dollar in their wallet is a dollar they can spend.   Once they see *that* working then they see the YIELD and become savers. 

You will not attract savers with any yield if they think it is too hard to get in/out of... if there is "too much setup cost / risk".   You are not really giving these people money, you are paying for a test drive and sales pitch.   

If you are worried the inflation (capped at 10%) will cause your BTSX to grow slower than it would without the inflation or even fall in value then you have options of buying BitAssets that pay yield. 

Serious investors with large stakes must approve of the inflation and these serious investors know that using the term "inflation" is FUD when "dilution" and "capital infusion" are more accurate metaphors.  Serious investors don't invest in tech, they invest in people with tech. 

Obviously a DAC with dilution and ability to raise capital can be cloned from BTSX or if BTSX adds dilution then one without it can be cloned.  In fact, both can exist at the same time and the market can decide.    The DAC without dilution can even copy all of the software features paid for by the DAC with dilution and maintain feature parity...  as an "investor" having to place bets on which DAC will be more successful and generate a higher real return... now it becomes far complex than simply saying "hey I was diluted by 10%" in one and "hey I gained 1%" in the other... you have to ask yourself  how much is your 90% worth vs how much is your 101% worth. 

Dilution to pay miners... BAD...   Dilution to get early adopters... good!  It worked for bitcoin.   Think of early Bitcoin CPU mining as dilution to get people to "try the software".  How do you "prove" they have tried the software?  Well Proof of Work!   Proof of Work allowed people to get the coins and USE the coins.... once they realized they had value then it went "viral".   The only problem is Proof of Work is no longer a way to convince people to "try it for free".    It has become a situation where professionals are stealing all of the "free" samples and the coin holders have no way of turning off the tap....