Regular Squash readers would know I hate the Build-to-flip mentality. By that I mean, where entrepreneurs start a business with the sole intention of building it up quickly and then selling it off, without any real thought to a developing a sustainable business model.
It enforces the preconception that Web businesses are dodgy, disposable and desperate.
However, when it comes to widgets and Facebook apps, then Build-to-flip is really the only business model and the $3 million acquisition of Where I’ve Been by TripAdvisor is a wonderful example of why.
The chances of Where I’ve Been creator Craig Ulliott being able to monetise his clever little Facebook widget is pretty negligible. In fact, given the bandwidth and processing it’s probably been chewing up, chances are it would flare-out pretty quickly under it’s own steam
However, the app is a wonderful fit for a larger organisation like TripAdvisor.
InsideFacebook which broke the story calculates that it values each user at $1.30 for the 2.3 million users of the app and notes that is 30 times what Slide paid for Fave Peeps. Mashable has declared the sale “insanity” and “ridiculous” paying that amount of money for that many users.
“We say users in a relative way, however, since these surely aren’t as valuable as the users on an independent site: they’re “borrowed” members of Facebook who could ultimately decide that they’d like to switch to a different travel app. Monetizing them, meanwhile, is also a challenge. No doubt TripAdvisor was wise to tap the youth demo through acquisition, but justifying that price seems impossible.
A quick check of Facebook shows the app debuted on around June 8: ignoring the high server costs and other expenses, Craig has made about $43,000 for every day his app has been live. Incidentally, that’s about as much as the average American earns in a year.”
Is $1.30 really that much? A lot of advertisers pay more than that for each AdSense click. I’m quite sure if TripAdvisor manages to convert a reasonable portion of those users into TripAdvisor.com users, it will more than justify the price. TripAdvisor is a wonderful service and definitely became my number one research tool when travelling last year. Where I’ve Been is a wonderfully targetted demographic. Every single person I know who has the app on their site is a big traveller.
The question TripAdvisor has to ask itself is would it get a better marketing return out of $3 million with a more traditional advertising and marketing campaign. I very much doubt it, especially given that Where I’ve Been probably has a lot of growth left in it.
So getting back to my original proposition. Flipping works for Facebook because the amount of value that a larger organisation can get out of a widget like this is just so much greater than what a one-man creator could ever hope to achive. So Craig gets a great windfall for not a lot of effort, TripAdvisor gets a sensational marketing platform and everybody’s happy. Flip on Facebook creators!