Microcosm is a platform that hosts discussion forums, bulletin boards and communities.
Our product turns the Facebook model upside down: it is about what you are interested in, rather than who you know.
Communities today are run by people passionate about their particular interest but with little experience in building and managing communities, and who struggle to fully utilise the existing tools.
Users in a community want to ask questions, talk about and share their passion, but they are confounded by web sites that do not work on mobile devices and that are confusing and difficult to use.
We aim to solve these problems by making it really easy for people to get involved and stay involved.
For the site owner, we bring the benefits of a hosted platform so that they can focus on what matters most to them: their interest and their community.
Discussion is the glue that holds people together around their interest.
Within strong communities the users move beyond communicating with each other solely through discussion and start to share expertise and knowledge in the form of events, classified adverts, photo sharing, Q&A, and recommendations & reviews.
Today a user of a forum site would have to leave their forum to create an event on Facebook, a classified advert on Gumtree or eBay, a review on Amazon or ask questions on Quora.
Every piece of content on an external sites makes it harder to discover that content, to manage access (is everyone on the forum a member of Quora? or on eBay?) and this results in reduced stickiness. Discussion remains the heart and key to a community web site, but we are also building in the ability to create the type of content that leads to transactions and keeps people engaged in the community.
We believe that this will lead to a dramatic increase in the engagement level of users, whilst allowing for a solid business to be based on enabling and facilitating the transactions that emerge from the discussion.
Substantial accomplishments to date
We raised our initial seed funding of £50k on Seedrs in November 2012 in record time.
The core of our product has been built and was made available to developers in May 2013. Our back-end API documentation was also published at that time and the API is already in use by independent developers.
We have worked with a small number of customers to establish a strong relationship for testing the product, and those customers which were selected now have sites on the platform and are providing valuable feedback.
We are already involved in one of the largest cycling forums in the world and we are working towards feature parity so that we are able to bring that community to our platform.
We have built relationships with industry leaders (marketing, affiliates, consumer web products) and continue to receive valuable feedback from them. With their help and insight, we continue to make minor course corrections in our strategy to help prove our market sooner.
Initially we will operate a CPA (cost per action) driven business model focused on affiliate (referral) fees for reviews and recommendations.
Affiliate fees earn 2-5% of the total of a transaction on third party E-commerce sites. As an example; if a photography forum user recommends a lens to another user, and subsequently a lens is purchased as a result of following the link within the recommendation, then the E-commerce provider will pay Microcosm a 2-5% referral fee.
For larger community sites we will own transactions such as ticket sales for events, and per-listing fees for classifieds. This should provide a more stable source of revenue at 5%-10% of the transaction.
We also plan to provide a paid access reporting solution to brands and merchants to provide insight into how a number of audiences (e.g. all cycling sites) across the platform are talking about or engaging with them. We will also provide the ability for brands and merchants to provide customer support and market research across applicable sites.
Our experience has shown that we should be able to achieve a minimum of £4 per user per year for each active user on a forum using the CPA revenue model alone. We define an active user as registered and logged in within the last month. Our experience also shows that the average lifetime of an active user is 4 and a half years.
This is a volume based business that requires low running costs and high user engagement to produce a substantial profit. Our aim is to offer such a compelling experience to the user that we can get to £10 per user per year and 6 years of lifetime per user.
We have not yet proven the revenue potential of the reporting and customer support product for merchants and brands. We are opening discussions with brands and initial feedback is that brands support this approach and believe that their sales and marketing effort will be, in part, through direct engagement with their customers.
Use of proceeds
This follow-on round of investment would be used to:
1) Increase the pace of development by engaging an external agency and hiring a front-end developer
2) Spend more time speaking to a wider range of customers and ensuring we are solving their pain points with existing products
3) Build out additional capabilities in our hosting facility by acquiring additional server hardware.
The goals are to:
1) Achieve feature parity with existing community software so that we begin to import/on-board existing community sites
2) Prove the engagement mechanisms within the forums that we host (that our product keeps users engaged and creates tight communities)
3) Prove that the experience is a compelling enough offer that we are able to win key customers from our competitors (Vanilla Forums and vBulletin) - this has a pre-requisite on our first goal.
We plan to use the proceeds sparingly so that we are able to stretch a 12-18 month runway from this funding.
We are initially targeting medium sized (100-10,000 active user) communities centred on hobbies, pastimes and interests.
Of that market, we will focus on interests that perform best with affiliate fees. We aim to create revenue, to re-invest, as soon as possible and this means prioritising hobbies and pastimes that involve equipment such as cycling, photography, automotive, golf, fishing, etc.
Our target market will expand in scope to include all hobby and pastime community/group sites as our capabilities and revenues increase.
Our growth plan is similar to that of Facebook, with a period of mastering engagement and supporting strong communities before focusing on high-growth:
2013: 10 sites and 50k users
2014: 100 sites and 200k users
2015: 250 sites and 375k users
2016: 1,500 sites and 1. 5m users
2017: 7,500 sites and 7. 5m users
Characteristics of target market
The market is very substantial, with the top 1% of forums having over 375m combined users, and it is fragmented with a wide variety of competitor products in use across that top 1%.
We think the market fragmentation has been driven by constraints of commodity hosting companies, with software being selected by communities based on the capabilities of those hosting providers. This has led to LAMP (Linux, Apache, MySQL, and PHP) products dominating the market place and a focus on making the product work within those constraints being prioritised above that of the user experience.
The products on the market have almost universally failed to respond to the shift to mobile, and the non-technical nature of the majority of forum owners has resulted in few forums independently overcoming these issues.
Change is now long overdue, and there is a desire to benefit from the reduced costs of cloud hosting and to produce a compelling offering to mobile users.
We have a two-pronged approach:
1) Target two interest areas
2) Target a specific competitor product and version The first approach involves targeting cycling and automotive forums.
Cycling has been chosen as one of the founders already owns one of the largest cycling communities in the world, and this site will soon be migrated to Microcosm. We will then use that to attract other cycling sites nationally and internationally whilst approaching British Cycling and other organisations to build partnerships with local cycling clubs and groups.
Automotive has been chosen as this has been proven by Internet Brands (a competitor for the largest communities) to be one of the most profitable interest verticals. We have already built relationships with automotive forums and key individuals , so that we have a pipeline of existing forums to import, and leads to pursue.
The second approach involves focusing on the specific pain-points of an existing competitor product (vBulletin 3. 8) and ensuring that our product comprehensively addresses those issues.
For the cold approach, we feel that targeting an existing competitor directly will allow Microcosm to clearly solve some of the key pains that the site owners experience today and that this will create a more compelling sales pitch. It is essential to us that we are able to prove that Microcosm can not just compete with, but steal business from our main competitors.
We believe that we have four significant advantages over our competitors:
1) Mobile friendly
2) No technical knowledge required by site owners
3) Mixed content forums
4) Proven business model and revenue stream.
The first advantage is that Microcosm uses a responsive HTML design that works really well on mobile and tablet devices. Statistics show that mobile devices now account for a third of pages viewed, and yet our competitors have not addressed the user experience on these devices.
The second advantage is solving the pain of site owners by no longer needing them to manage the hosting, upgrades, and complex administrative interfaces. We make it very easy for these leaders within the community to lead.
The third advantage is solving the pain of users who want to create content beyond discussions. We believe that making this easy and yet more powerful will prove to be a unique experience that reflects their expectations from Facebook.
The fourth advantage is that we've already proven the effectiveness of the CPA-based business model. We believe this will continue to outpace revenue for competitors who rely on banner advertising. We consider an important aspect of the revenue model is that it has to be baked in from day one. We believe that products such as Skimlinks and ForumRunner both lead to a significant degradation in the quality of service provided to end users by slowing the web pages, limiting functionality, and privacy invasion.
Our competitors still retain one key advantage over Microcosm, the extensibility that comes from self-hosting: technical users are able to "hack" their products. We believe that this is an acceptable weakness as the percentage of forums that customise using such code hacks is a very small percent of the available and addressable market.