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Author Topic: Fred93 - new prospectus good, but ...  (Read 10498 times)

onthefence

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Re: Fred93 - new prospectus good, but ...
« Reply #15 on: December 08, 2008, 05:55:45 am »

One detail:  At one point prosper intentionally turned away one segment of their customers by raising the minimum credit score required to borrow.  They were right to do this, because the loans from that bottom end of the HRs were so crappy.  But now if you want to track growth, you should really adjust the earlier numbers downward.

Here is a rough cut.  All loans funded by Prosper excluding HRs & NCs.
http://www.lendingstats.com/loansFunded?lenderId=&dtiLow=0&dtiHigh=-1&loanAmountLow=0&loanAmountHigh=25000&_rs=1&_rs=2&_rs=3&_rs=4&_rs=5&_rs=6&accountVerified=&homeOwner=&automaticFunding=&submit=Generate

For perspective, all HRs & NCs combined consisted of a max of $700k.
http://www.lendingstats.com/loansFunded?lenderId=&dtiLow=0&dtiHigh=-1&loanAmountLow=0&loanAmountHigh=25000&_rs=7&_rs=8&accountVerified=&homeOwner=&automaticFunding=&submit=Generate

I'll try to dig into the low loans funded numbers, but the marketing & advertising expenses look interesting.  The last 3 months (July 1st-Sept 30th) are low compared to the year prior.
« Last Edit: December 08, 2008, 06:09:06 am by onthefence »
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onthefence

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Re: Fred93 - new prospectus good, but ...
« Reply #16 on: December 08, 2008, 07:18:23 am »

This fact is troubling.  I don't have a diagnosis for why the numbers look the way they do.

I'm not a marketing guy, so I may not be the best person to figure this out, but even I feel that I can speak with some authority when I say that blogging about turkey dinners and black dresses is unlikely to be the magic strategy for pulling in ever-growing numbers of borrowers.  Prosper probably needs to change their marketing person again.

Data is from the Prospectus.  Colors that are the same are from 3 month chunks that I could not separate from the whole so I just divided the dollar value from the time period.



Mar-06    Jun-06    Sep-06    Dec-06    Mar-07    Jun-07    Sep-07    Dec-07      Mar-08    Jun-08  Sep-08
211,366   211,366   211,366   211,366   802,781   802,781   626,457   631,046   1,056,397 1,056,397 171,141

« Last Edit: December 08, 2008, 07:26:36 am by onthefence »
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onthefence

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Re: Fred93 - new prospectus good, but ...
« Reply #17 on: December 08, 2008, 07:51:13 am »

Marketing Dollars Per Quarter overlaying AA-E loans funded.



So it looks like they are spending 3.58 cents in advertising for every AA-E loan dollar they bring in.
(Or 3.40 cents in advertising for any grade loan dollar they bring in.)
« Last Edit: December 08, 2008, 08:01:35 am by onthefence »
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cubbiesnextyr

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Re: Fred93 - new prospectus good, but ...
« Reply #18 on: December 08, 2008, 11:21:45 am »

Marketing Dollars Per Quarter overlaying AA-E loans funded.



So it looks like they are spending 3.58 cents in advertising for every AA-E loan dollar they bring in.
(Or 3.40 cents in advertising for any grade loan dollar they bring in.)

That's a cool graph, how did you make it?  Excel?  I should learn how to do that.
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onthefence

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Re: Fred93 - new prospectus good, but ...
« Reply #19 on: December 08, 2008, 02:43:45 pm »

I took the boring graph above, widened out the bars in excel.  Took a snapshot.  Took a snapshot of Eric's CC graph. 
Put my Excel Graph on top of Eric's on a 2nd Layer, stretched it out to match & set it's translucency so that it looked decent.
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ira01

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Re: Fred93 - new prospectus good, but ...
« Reply #20 on: December 08, 2008, 05:09:20 pm »

So it looks like they are spending 3.58 cents in advertising for every AA-E loan dollar they bring in.

That's a losing proposition -- They only get 2% (AA-B) or 3% (C-HR) as an origination fee, plus the 1% lender servicing fee (and both fees used to be consdierably lower).  And there are marginal costs involved in originating more loans, such as more credit pulls and verification/CS costs.
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Fred93

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Re: Fred93 - new prospectus good, but ...
« Reply #21 on: December 08, 2008, 07:35:13 pm »

So it looks like they are spending 3.58 cents in advertising for every AA-E loan dollar they bring in.

That's a losing proposition -- They only get 2% (AA-B) or 3% (C-HR) as an origination fee, plus

Oh my you seem so negative.

The 3.6 cent number seems incredibly low to me.  So low that I'm scratchin' my head trying to figure out what could be wrong.  There are damn few companies that have a cost of acquiring a customer that low.  If the number is right, and if advertising does drive sales (causality never clear from such correlations) then Prosper could pump the advertising budget, and ramp up the business.  No brainer.

Risk_Reward

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Re: Fred93 - new prospectus good, but ...
« Reply #22 on: December 08, 2008, 07:38:25 pm »

So it looks like they are spending 3.58 cents in advertising for every AA-E loan dollar they bring in.

That's a losing proposition -- They only get 2% (AA-B) or 3% (C-HR) as an origination fee, plus

Oh my you seem so negative.

The 3.6 cent number seems incredibly low to me.  So low that I'm scratchin' my head trying to figure out what could be wrong.  There are damn few companies that have a cost of acquiring a customer that low.  If the number is right, and if advertising does drive sales (causality never clear from such correlations) then Prosper could pump the advertising budget, and ramp up the business.  No brainer.

It is 3.6 cents per dollar not per customer.  So, for a $5,000 loan that is $180. 
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Fred93

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Re: Fred93 - new prospectus good, but ...
« Reply #23 on: December 08, 2008, 07:48:45 pm »

It is 3.6 cents per dollar not per customer.  So, for a $5,000 loan that is $180. 

:D :D :D Oh.  So that's what was wrong!  I knew 3.6 cents/customer sounded crazy.   :D :D :D

Now it makes more sense. 

$180/customer sounds more like what one would expect.  This is a major problem for the Prosper model.  Need a crack marketing person to discover the secrets. 

ira01

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Re: Fred93 - new prospectus good, but ...
« Reply #24 on: December 08, 2008, 07:49:26 pm »

So it looks like they are spending 3.58 cents in advertising for every AA-E loan dollar they bring in.

That's a losing proposition -- They only get 2% (AA-B) or 3% (C-HR) as an origination fee, plus

Oh my you seem so negative.

The 3.6 cent number seems incredibly low to me.  So low that I'm scratchin' my head trying to figure out what could be wrong.  There are damn few companies that have a cost of acquiring a customer that low.  If the number is right, and if advertising does drive sales (causality never clear from such correlations) then Prosper could pump the advertising budget, and ramp up the business.  No brainer.

It's 3.6 percent, not cents.  That's $360 on a $10K loan.  I handle the advertising for my family's business, and I like to have a positive ROI on our advertising expense -- i.e., I like to generate more in revenue from advertising than it costs -- but maybe I'm just funny that way.   :ninja:  
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patio11

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Re: Fred93 - new prospectus good, but ...
« Reply #25 on: December 08, 2008, 08:16:14 pm »

You clearly cannot work for a Web 2.0 startup then, what with your obsessive focus on "profit" ;)
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onthefence

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Re: Fred93 - new prospectus good, but ...
« Reply #26 on: December 08, 2008, 08:50:25 pm »

There appears to be a correlation between advertising & loans funded.  Advertising expenses increase, loans funded increase.  Advertising decreases & eventually, loans funded will decrease also.

For October, loans funded were $3,027,177, which for prosper is nice to know.  Although their advertising cost for the 3rd quarter had dropped down to $171,141, either their prior high dollar advertising had some staying power, or they are building brand recognition.

As far as advertising expenses go, their referral program appears to have been one of the best bang-per-buck.  The referrer got 0.5% of the loan amount.
http://prosperlending.blogspot.com/2007/06/prosper-referral-program.html
This is far better than their going 3.4% expense on advertising per dollar brought in.

If they could only keep the program out of the hands of spammers & link spammers, it would seem the program would pay off for now.
Using "groups" as an advertising platform failed.  For the most part, they competed with each other to suck in people who had already arrived at the Prosper website.  Plus it encouraged group leaders to pump & dump loans.
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