@Magwheels5 that looks pretty accurate to me and I agree and...

@Magwheels5 that looks pretty accurate to me and I agree and love your work. Looks very conservative but with very little track record to go on this is wise. I'd suggest direct sales conversion will improve as they have larger reference customers to discuss in the meetings, also as this higher conversion reduces CAC he will hire more sales people increasing the number of meetings taking place. Keeping this constant is a good way to be conservative in estimates though especially as it is difficult to predict the rate at which these things with change. Even with these numbers it is easy to see 2-3x growth of MC over 12 months and 5x+ in 2 years, with lots of upside risk especially from the google partnership.

In addition to 1) direct sales and 2) freemium/trial conversion there is also 3) the self-signup portal which will allow for rapid scaling, more on that in a moment.

Mat mentioned some other future revenue channels to me also which provide further upside potential:

4) Partnerships with advertising agencies - decent agencies have hundreds of customers, Adveritas are looking into the possibility of signing contracts with these agencies to provide TrafficGuard to all their customers on terms agreed with the agency. Mat used to work for a marketing agency which is where he discovered this ad fraud problem and that there was no good products available to solve it, so I suspect he has a great understanding of how to crack the market from this angle.
5) Events - Mat wants to run events like fire side chats for Cheif Marketing Officers leveraging Adveritas' relationship with large existing enterprise clients who have agreed to be used as a case study i.e. JD.ID. This could be an effective way to target larger customers and compliment the direct sales channel
6) PR - as their portfolio of large customers grow Mat intends to create industry awareness of Trafficguard via trade press. With the self-signup portal and presence on the google cloud marketplace they can use channels like this to fill the sales funnel up with interested customers and there is very little friction for them to flow through into the pool of paying customers.

@fourbees asked about how easily TrafficGuard is integrated into someone's ads, going to go on a bit of a tangent but it's related. As with the above, this is all in my own words but closely based on the email conversation I had with Mat. Hope you don't mind me sidetracking your thread, but it's a good one so thought it's a good place to add some more valuable analysis

Signing up with TrafficGuard takes 10 minutes via the self-signup portal which is the same as Xero’s self-signup portal. You’re right fourbees, this customer acquisition strategy is aimed at the mass market and will help a lot with scaling up very quickly. Small companies, tens of millions of them, are spending $100-$20k/month on ads. Adveritas advertises to these businesses through traditional marketing like Facebook, LinkedIn, Google ads, etc. and some even come to Adveritas organically so cost $0 to acquire. The target here (as well as via direct sales channel) is to achieve a LTV:CAC (lifetime value of customer : cost to acquire customer) of 3:1 - this is generally considered the ideal ratio for a software company because if it is lower, they are spending too much on CAC and if it is higher, they could be spending more and achieving a worth while return on that extra spend until the lower return on extra marketing spend brings the ratio back to 3:1. Mat monitors this ratio and will spend more on sales and marketing as CAC comes down to maintain that ratio which will accelerate growth. With the top down strategy, they win unicorns and then small businesses see that and think “if it’s good enough for them it’s good enough for us” so winning small businesses becomes easier, they get more organic growth, these 2 things bring down CAC and justify more sales and marketing… growth accelerates.

It enables rapid scaling but monitoring churn of this customer base is complicated. Problem is some small companies advertise only seasonally, annually or in some other lumpy fashion. As it’s self-signup Adveritas don’t have great transparency into future spend, if a customer did not spend last month, they are no longer counted as a paying customer. Doesn’t mean they have churned necessarily. Bonus is Adveritas makes a 2% cut of ad spend from these customers. Mat is considering a different method of reporting on the growth of these customers. Rather than number of customers something like the amount of ad spend being protected by TrafficGuard for uncontracted customers may be a more suitable metric for investors to gauge growth of this customer cohort. Mat has said to me that he doesn’t consider churn of these customers as an issue. They must have some guage of effective churn in order to calculate LTV but I haven't asked about this.

At the enterprise level (~$10k+ monthly ad spend) Adveritas signs 12 month contracts with customers, this is where ARR is derived and they have experience no churn. The customer agrees to a minimum monthly spend at a base price of say 1% of ad spend. If they exceed that minimum spend they then pay a higher rate for excess ad spend.

So as an example, let’s say the excess rate is 1.5% and they agree to a minimum $1m monthly ad spend. That’s $120k of ARR. However, if they spend $1.5m on ad spend on a given month, they pay 1.5% for the extra $500k = $7.5k.

I think this is really smart, they have a $ value for minimum spend but if the customer gets a higher return from their marketing spend after implementing TrafficGuard (LTV:CAC goes up due to prevention of fraudulent ad interactions, this justifies higher advertising spend) they will spend more on advertising, paying the higher rate. In the short term Adveritas makes revenue in excess of their ARR at a higher margin and in the long term the customer increases their contractual minimum spend, increasing ARR.

That's the extent of what I worked out 2 weeks ago, sorry for the delay in sharing, I've been busy and also giving myself and friends a chance to accumulate some more shares. I think Mat has planned every aspect of our business very intelligently, considered every risk and is very well prepared to scale up rapidly. I consider 3-5x gains over the next 2 years very highly likely and see a lot of potential for faster revenue growth providing an even higher return.

GLTAH, Harry