Costs of online business

BurningMoney

I saw an online business being pitched on a repeat of the Dragons Den last week. The site was a video site for food recipies and was called www.ifoods.tv. It has since been renamed www.lookandtaste.com. I did some googling and found that it had since secured €400K worth of investment after the dragons den episode from Enterprise Ireland and some private investors.

What I'm wondering is how on earth a video site for food would need €400K in capital? The site itself seems fairly basic development wise and I presume they already had most of it built before dragons den as they gave a demo of it to the dragons. So why would an online business like this need €400K? I'm asking because I am considering starting an online business myself and I'm wondering are there some unforseen costs as I wouldn't have thought this site would cost a fraction of that amount. What do the developers here think www.lookandtaste.com cost to put together and why did they need 400K?

Seth Brundle

When you get venture capitalists involved, they want a large return ASAP so operating via a shared hosting a/c wouldn't be feasible. Videos would presumably chew up bandwidth so a strong hosting a/c is definitley required.

You would also need constant updates so paying journos/reviewers/staff/whatever adds up.

You would also need some form of marketing strategy which also costs money.

This is all before you start paying for developers, designers, etc.!

Did the one on Dragons Den not give a breakdown of what the money was for?

BurningMoney

kbannon wrote: »

When you get venture capitalists involved, they want a large return ASAP so operating via a shared hosting a/c wouldn't be feasible. Videos would presumably chew up bandwidth so a strong hosting a/c is definitley required.

Is hosting streaming video much more expensive than hosting standard web pages? Are amazon s3 servers an option?

You would also need constant updates so paying journos/reviewers/staff/whatever adds up.

No reviewers or journalists on this site and as far as I can see nearly all the videos are by one of the sites founders who himself is a chef.

You would also need some form of marketing strategy which also costs money.

Ok

This is all before you start paying for developers, designers, etc.!

I think they already had the site up and running before they were on the dragons den but even still the sites functionality seems very basic, its a basic cms with a video streaming module/extension. Cant see how it would cost that much.

Did the one on Dragons Den not give a breakdown of what the money was for?

I cant remember but they were looking for alot less than 400K on the programme. I think they were looking for about 100K, but even at that I can't see how it could cost so much as it is basically a video site with all the videos done by the owner himself.

Seth Brundle

BurningMoney wrote: »

Is hosting streaming video much more expensive than hosting standard web pages?

Not unless there is a lot of traffic!

BurningMoney wrote: »

Are amazon s3 servers an option?

no idea!

BurningMoney wrote: »

No reviewers or journalists on this site and as far as I can see nearly all the videos are by one of the sites founders who himself is a chef.

Is he graded somehow making them somewhat 'exclusive'?

BurningMoney wrote: »

I think they already had the site up and running before they were on the dragons den but even still the sites functionality seems very basic, its a basic cms with a video streaming module/extension. Cant see how it would cost that much.

Fair enough but they went on DD with some kind of idea in mind of how to spend the money. I actually think I saw them on it but I don't recall what the cost breakdown was.

BurningMoney wrote: »

I cant remember but they were looking for alot less than 400K on the programme. I think they were looking for about 100K, but even at that I can't see how it could cost so much as it is basically a video site with all the videos done by the owner himself.

How much would it cost to do a professional quality video between recording, editing etc.?

At a guess, I'd say that a lot of the finance would have been spent on marketing however.

Eoin

BurningMoney wrote: »

Is hosting streaming video much more expensive than hosting standard web pages?

I don't think it needs to be streaming in the traditional sense, as it's not broadcast live - so presumably flash files would work fine. The only real difference then is the (very) small increase in storage costs, and potentially more expensive bandwidth.

BurningMoney wrote: »

Are amazon s3 servers an option?

There are a lot of variables that would have to be taken into account. I have looked into Amazon cloud computing for work, but our requirements and usage would be very different.

Off the top of my head, I reckon the pricing wouldn't be all that favourable - unless your site's traffic characteristics showed that you needed a new instance to be started up at peak times and then shut down later when it's quieter.

tiptap

400k for an online business looking to generate alot of traffic is not alot.
The money spent on advertising, affiliation, cost per clicks, cost per acquisitions ramp up very very quickly.
The only aim of sites like this is to generate traffic and sell it on. To generate the traffic costs lots of dollars, and the more competitive area you're in, the more is costs.

Evil Phil

^^ What tiptap said.

Also, developing a site like that for 400k would be tight budget. That's a custom built site, its not some joomla plugin. As much as you can see on the front end, their staff have access to a lot more that you can't see. 400k is not a lot just for the development alone, even less when you take in all the other aspects of running a business.

bSlick

Evil Phil wrote: »

^^ What tiptap said.

Also, developing a site like that for 400k would be tight budget. That's a custom built site, its not some joomla plugin. As much as you can see on the front end, their staff have access to a lot more that you can't see. 400k is not a lot just for the development alone, even less when you take in all the other aspects of running a business.

Eh, development wise you could knock that site up in less than 3 days using drupal/joomla. Maybe that's what they shoulda done instead of building a custom solution and saved themselves a couple hundred K.

mneylon

I don't see how you could justify spending that kind of money on development alone.

Costs you would have:

- design
- some development
- marketing / PR
- more marketing PR


The main problem is the income side of the equation.

Evil Phil

Blacknight wrote: »

I don't see how you could justify spending that kind of money on development alone.

Well if you have to pay a project manager, 3 good developers and a tester for year you're already into the region of 250k. And that's just salary. Then you've your technology costs, maintenance costs, premises for your dev team. 400k could be spent pretty easily.

I think you're underestimating the development effort in a site like lookandtaste.com

Trojan

That site is a very nicely customised Wordpress install. Development of that site did not cost 400k and I'd guess closer to 2% of that, including custom graphics. Videos appear to be hosted on YouTube - no server costs there.

However, there is also an iPhone application and a Twitter application. Development costs there could have been significant, I'd guess between 5 and 20k each.

Audio/video equipment, marketing and general business overheads (including salaries) are my best guess for the majority of the cash.

But Niall is online on Twitter & his blog regularly. If you're really interested, get in touch with him directly - he might be able to give you some advice and maybe satisfy your curiosity too

Trojan

I popped Niall a quick note - hoping he'll swing by and answer some of your questions!