Making it up in volume

Years ago, I was brought on as tech advisor to a company building out something along these lines (social engagement, not “watching movies,” but still.) These efforts usually just burn money until investor patience runs out, because engagement arbitrage is hard and competitive.

Underneath all the hand waving it’s an attempt to create an economy: users do a thing to get tokens, which they can use to buy a thing, and advertisers pay you a premium to fund the tokens in exchange for highly instrumented access to the users.

The question is always, ultimately, “what premium do you have to charge over ‘normal’ advertising and thing-obtaining costs to make your role in this economy profitable? Do you deliver enough value to both parties that they will bother using you as a middleman?

Or, of course, you could just ask credulous investors for piles of money and run it at a loss until you figure out your next gig. That’s actually way simpler.

In the case of the company I was advising it took days of wildly sketching whiteboard diagrams and walking them through their own spreadsheets to get them to accept that they were, under all the movement, losing money selling people donated products at above retail.

And honestly, that is impressive.