The business result had to be razor thin commissions, if any. The site depended upon the larger stores providing volume of products, which they really had no incentive to do. There was also real internal cost to those businesses of providing the feeds to Ferrit, and the power of their brands were also being diluted. It just wasn’t a good deal for retailers, and the resulting revenue for Ferrit was never going to be significant.
I (wildly) estimate that the average commission paid by retailers was 2-4% – that’s a guess really, and it is a critical number that I would dearly like to hear from an insider.
The shonky revenue model was overlaid with a cost structure that was inexcusably large. We all saw how much money that Ferrit blew on often appalling advertising, but what didn’t really come out was that that spend was only a third of total spend. The development and operations/sales spends were also inordinately high, and also fraught with error.
Apparently a lot (or substantially all? – need sources) of the development and marketing was outsourced, which increases costs substantially and reduces control. Telecom would have paid top dollars for top firms, but clearly failed to manage them well, and gave them a technology burden that was just too much to handle. A lot of people made good money from the Ferrit debacle, but they are not necessarily proud of their involvement.
Meanwhile the end game team of 24 employees and another 13 contractors was huge – and I suspect that most of these were in sales/operations.
All of this was simply unsustainable on top of a revenue model that never had any industry credibility.
At the beginning of 2007 Ralph Brayham said that Telecom had spent $24m to date and was going to spend another $12m in the next financial year. It’s now two years later, and so, if nothing changed, I would estimate Ferrit’s total spend in the range of $40-60m. Others have estimated more – around $70m.
The overall economics of Ferrit was pretty appalling. Some numbers flying around twitter and here guesstimate that Ferrit was unlikely to have made more that $500,000 in gross profit throughout its existence, and was in fact more likely to have made substantially less than that.
If we estimate that Ferrit spent $70m then we see that the return on that investment was about 0.7% – a pathetic number. My own estimate of all-time revenues is between $200,000 to $400,000, or a return of 0.28% – 0.56% of a $70m investment. That’s a very rough estimate, and again I would be fascinated to see actual facts.