Revised NetTaxi gross profit projection. In post #30294 I projected revenues for the NetTaxi deal. In post #30616 I corrected some of the assumptions made in the original projection post but never did take the analysis all the way through. In this post, I will finish the corrected projection.
NetTaxi is a web mall which has grown in popularity from 80 million page views per month when this deal was announced to 90 million page views per month as recently reported by Philip L. What this means is that if a person goes to the site and views 10 pages (the average according to REW's source), that is 10 page views. Thus, 90 million page views per month divided by 10 pages equals 9 million people visiting the NetTaxi site per month.
All NetTaxi members are given a 3-unit promo card. We will assume half the people visiting per month are members and half are surfers.
What will the 4,500,000 surfers do? We will use REW's source who says 3-5% are looking for music; 3% is 135,000 people who will click on the MyMusicCard site. Once these 135,000 people who are looking for music get to the site, we will assume that 25%, or 33,750, make a purchase in any given month. Half (16,875) will buy one CD. We will assume TSIG pays $.25 per CD sold to a NetTaxi person as "suggested" by Sword resulting in $.75 profit per CD (16,875 CD's x $.75/CD = $12,656).
The other half (16,875) of the purchasing surfers will buy one Music Card and one CD. CD gross profit is same as above, $12,656. Card revenue is $5 x 16,875 or $84,375 per month. So the gross profit per month for the surfing half of the 9 million is $97,031 (or $1,164,372 per year)
The other half (4,500,000) are members of NetTaxi who are given a 3-unit promo card. We will assume that 75% of the members (3,375,000 people) with a promo card will visit the MyMusicCard site over a 12-month period (or 281,250 people visiting per month). Of the promo card visitors, in any given month, 20% (or 56,250 people) will buy one CD (56,250 CD's x $.75 = $42,187).
Of the 3,375,000 promo-card owning members who will visit over a 1-year period, 1 out of 15 (or 225,000 people) will buy Music Cards. The card revenue is 225,000 cards x $5/cards = $1,125,000 over a 12-month period. So promo-card owning members will bring in [$1,125,000 + 12($42,187)] = $1,631,244.
Surfer gross profit and member gross profit is $1,164,372 + $1,631,244 = $2,795,616.
Sword made a big deal about the (alleged) "fact" that NetTaxi people would buy all Top 100 titles on which TSIG loses money. Paul Henry made a point that Amazon (?) gives a very good deal on NY Times best-seller titles. The reason this works is that 3% of sales are in this category. His implication is that a similar low percentage of MyMusicCard sales would be Top 100 titles. I have assumed a $.75 profit per CD in my calculations. This does not take into account shipping. Profit on some CD's is lower and on some it is higher. The bottom line is that TSIG has the option to do Top 100 fulfillment themselves if volume warrants.
Please note that due to the lack of a track record, it is impossible to reliably predict buying behavior under these circumstances. A gross profit of $2.8 million should be considered a "soft" figure. The above analysis is summarized below. Note that the NetTaxi people are divided into 2 populations—"surfers" and "members"—who are presumed to act differently.
***Revised NetTaxi Gross Profit Projection***
90 million page views per month, 9 million visitors to NetTaxi per month
half are surfers (*)(4,500,000); half are members(**) (4,500,000) with a 3-unit promo card
*3% (or 135,000) of surfers will click on MyMusicCard site
*25% (or 33,750) make a purchase in a month
*half (or 16,875) will buy 1 CD
*$.75 profit per CD, or $12,656 in surfer CD gross profit per month
*half (16,875) will buy 1 CD and 1 Music Card
*$12,656 + $5(16,875) = $97,031 is surfer gross profit per month
*surfer gross profit per year is $1,164,372
**75% of 4,500,000 members (3,375,000) will visit the MyMusicCard site in a 12-mo. period
**282,250 members will visit in a single month
**20% (56,250) will buy 1 CD
**$.75 x 56,250 = $42,187 per mo. member CD gross profit
**over 12 months, 1 out of 15 will buy a Music Card (225,000)
**$5 x 225,000 cards is $1,125,000 in yearly member card revenue
**member gross profit per year is $1,125,000 + 12($42,187) = $1,631,244
annual gross profit (surfer and member) is $2.8 million
Regards, Suzanne
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