Sunday, June 19, 2011
The Magic of the Disappearing Ad Spend
There was a great article from the NY Times yesterday about how internet start ups are eliminating their marketing budgets from the equation when valuing their company. They call the process ACSOI which stands for Adjusted Consolidated Segmented Operating Income. Start ups from Pandora to Groupon use this to show what their company would have earned without the money they spent acquiring users. To me this seems a little crazy as your marketing spend should definitely be a part of your overall expenses as a company. If you're going to start taking large pieces out, why stop there? Here's a link to the article, so you can decide for yourself.
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Wow, interesting article. I think these companies are so delusional, especially Groupon, who is quoted in this article as saying that the cost of maintaining subscribers "is far lower than the expense of gaining them in the first place". I feel like Groupon is going to be in for a rude awakening once it starts facing increased competition from Facebook Deals & Google Offers, both of which are barely off the ground at this point. I guess only time will tell...
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