makayla3tg1: Making Money Advertising

When we think of scientists, we often picture distinguished researchers in white coats, methodically conducting experiments in labs that run like well-oiled machines.

Unfortunately things are usually less glamorous. Science labs have a lot going on, and while they’re generally very focused on making sure safety protocols are followed and contamination is minimized, there are some things that are a little less organized. Like ordering supplies — oftentimes reagents are either ordered in excess (resulting in waste) or forgotten about until they’re needed (resulting in delays).

Quartzy, a startup that’s part of the most recent Y Combinator batch, is setting out to fix that problem. The company launched around 18 months ago and has 4,500 scientists worldwide using the service — and there are plenty more who could use help keeping their supplies in check, many of whom are spending thousands of dollars on supplies every year.

At first glance, the service seems a bit like a science social network. You sign in and create a profile, then link up with your coworkers and other colleagues. But founder Adam Regelmann explains that the site isn’t really about connecting with your colleagues in a social sense — rather, it’s about keeping track of which supplies your lab has in stock, and what needs to be ordered . He adds that it’s a problem he’s faced himself as a MD and PhD from Columbia, which is when he had the idea for the company.

Anyone in your lab can log in to see the current inventory status, which helps make sure that they don’t place order requests for things that they don’t need. The site also lists expiration dates, which is important for reagents that only last for a relatively brief amount of time (like some enzymes).

Inputting the inventory information into the system is something each lab will need to do themselves — there’s currently no direct integration with vendors, so your inventory won’t automatically be updated each time you order more supplies. Regelmann says this is partially because the industry is very fragmented, so labs are oftentimes ordering their supplies from many different vendors (some of which use arcane technology) which makes integrations difficult. Update: Regelmann adds that while the service doesn’t tie in directly with these vendors, Quartzy does allow labs to upload their existing inventory Excel spreadsheets to quickly get their labs up and running on the service. And Quartzy also includes online versions of each supplier catalog, so you can quickly add supplies to your database by keying in vendor names and catalog numbers — the system will automatically populate the rest of the information.

Quartzy does more than keep track of your lab supplies. It’s also building out a review database for supplies commonly used in laboratories (you can rate how effective a given enzyme was, for example). At this point the database is fairly small, with around 1,000 reviews, but it’s an idea that has potential.

Also very cool: Quartzy has a feature that’s the scientist equivalent of asking your neighbor for a cup of sugar. It’s quite common in scientific communities for researchers to ask friends and colleagues in other, nearby laboratories for a certain reagent that they only need a small amount of (Regelmann says he’d get five or so such requests per week during his research days).

Quartzy helps with this by letting users run a proximity-based query that lets them see if anyone in their city happens to have what they need. And it’s smart about doing this — any results you see will be anonymized. You can send a message to the anonymous researcher and ask if they can spare a dash of whatever you need (they’ll be able to see who you are), and if they’re interested they’ll respond.

So how does Quartzy make money? So far Regelmann says that the company is focused entirely on growth. Down the line it will let science supply vendors purchase advertising on the site, giving a very targeted channel directed toward a group of people who are typically hard to reach (he explains that many vendors often have time informing scientists about new products). And scientists will get exposed to new products they might not have otherwise known about, so it stands to be a win-win situation.

Quartzy’s team currently includes three programmers in addition to founders Regelmann and Jayant Kulkarni.

Twitter is raising money at a $7 billion valuation.

Cue the bubble-bubble talk. Cue the Twitter-doesn't-have-a-business-model talk.

Please.

We estimate that Twitter is doing around $100 million in revenues through its emerging ad business, and selling access to its firehose.

"So freaking what?" we hear the naysayers say. "A $7 billion valuation on $100 million in revenues is insane!"

Really?

Look at it this way: in 2001, Google earned $7 million in profits on $86 million in revenue.

Anyone who had invested in Google at a $7 billion valuation in 2001 would have been called the world's biggest moron. (Especially considering the fact that an actual bubble had recently popped.) A 1000X profit multiple!

And anyone who had invested in Google at a $7 billion valuation in 2001 would also have tripled her money in three years, when Google went public in 2004 at a valuation above $20 billion. (And if she'd held on to her stake, made a 20X return over 7 years.)

Of course, not every company making $7 million in profits is worth billions. But every once in a while, a few of them are. And it's investors' job to invest in several of those that might look like the next Google, be mercilessly mocked by the armchair quarterbacks, and have enough winners out of the lot that they can laugh all the way to the bank.

Here's what Twitter has in common with 2001-era Google:

A simple, beautiful product that users love and that's growing like wildfire

A professional CEO and a visionary, involved co-founder.

Twitter also has network effects that Google doesn't have, but these aren't as important as most people think.

But that's not the thing that makes Google and Twitter worth billions, as opposed to hundreds of millions.

The thing that makes you worth billions is a revenue-generating product with huge momentum.

It doesn't matter the absolute numbers of your revenue, whether it's $100 million or $10 billion or $10 million. What matters is the slope of the curve. Whether customers can't get enough of your product, as was the case with Google when they launched search advertising and couldn't believe just how many people were buying.

(The reason the absolute value of the numbers don't matter, by the way, is that the value of an asset is the net present value of its future cash flows. In an early stage business, growth rates are more important to estimate future cash flows.)

From 2001 to 2004, Google's revenue grew from $86 million to $1.5 billion. That's staggering.

Is Twitter going to achieve similarly stunning revenue (and profit) growth?

Nobody knows, but stranger things have happened.

If we had to guess, we'd say Twitter insiders, including Google board member John Doerr, see Twitter's revenue growth and it makes them think Twitter could grow revenue that fast.

We wouldn't be surprised if it did.

Don't Miss: The Next Twitter Trend (We Hope): #Twintros

makayla3tg1

Monday, August 1, 2011

Making Money Advertising

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