The Story of Signal Zero: A Final Hope
TapRivals Part Deux: A Final Chapter
Once I had processed the Crypto crash and the end of our project, I realized that revenue for TokenWall had for some reason increased dramatically. It still wasn’t near what it used to be, but the increase was enough to renew some hope. The company was running on fumes and since the crypto-raise didn’t work out, we needed a win. I managed to convince myself there was one more thing I needed to try. At this point it was Q3 2018.
The idea that people could make money for “free” while playing games really resonated with our community and brought in a lot of new users. TapRivals still wasn’t hitting that magic LTV:CAC ratio, but what if we removed the need to wager from the app that was online, and instead showed video ads in front of every play session. The revenue generated from ads might have a lower LTV, but if it drove the user’s cost to zero, it could still be worth it to the player and the business.
Integrating video ads, especially on a mobile web app isn’t straight forward. We wanted to validate the hypothesis before we did all of the work to get approved on and integrate with the various video ad exchanges. We quickly iterated through the changes on TapRivals to give the users this experience, but we used a 15 second test ad. We setup small daily caps on rewards so the company wouldn’t hemorrhage its limited cash, usually $100 a day or less. The result was fantastic. We had hundreds of players playing up to thousands of times per day. Each game was hyper-casual, so attempts were generally 15 or 30 seconds, then the player could play immediately again. Each time, we showed a video ad.
Theoretically, if we could get a $5 CPM, we could generate $1-$2 per player, per day on average (Going from memory, but something like this). We estimated about half would go to rewards. If you’re not familiar with mobile ARPDAU, this is absurd. With the high retention rates we had, expecting an LTV over $10 would be extremely conservative with acquisition costs (CAC) somewhere between 25 cents to $4 per user depending on the channel and scale.
Around this time, TokenWall was causing me problems. Chargebacks for IVT had started to ramp up again, which was likely the result of the surprise scale from the previous few months and the fact that TokenWall hadn’t been the company’s top priority in 2+ years. We were collecting less money than normal, but I needed more money to follow through on the new found TapRivals action. While I worked with the ad networks on TokenWall, I raised another small investment through my network to get TapRivals part deux its proper day in court.
Simultaneous to this, we were working to get approved on as many video ad exchanges as possible while also working on the integrations. The approvals were hard (trust us, its not gambling! really!), but getting decent mediation to work with all of the VPAID nonsense that exists in the space was a formidable nightmare. To get everything prepared for scale, unlimited rewards and real monetization, we essentially had to develop our own RTB header bidding solution for video ads. It slowed us down by about 2–3 months, but we were finally ready to start spending money on growth while releasing caps on cash rewards (the two primary CoGs).
Around this time, I noticed my biggest advertiser from TokenWall had stopped paying their bill. They are a public company, and their stock price had dropped low enough that I was concerned they may get de-listed. Maybe this was why revenue had increased on TokenWall ~6 months earlier, a struggling company trying to scrape whatever pennies it could pumping all channels. I read through their public financials, and it looked like a nightmare (worse than what I was dealing with at Signal Zero by far and on a much larger scale). Chatting with my account manager yielded the typical non answers, so eventually I just started emailing middle managers and the president of the company. No time for the collection dance, I had to move. Unfortunately, the dance continued and I needed cash to launch my Esports platform.
I had been in talks with an Esports focused VC and they were very close to investing ~$500k. Ultimately they decided not to because one of their partners encountered a bug on TapRivals. The numbers looked too good to keep wasting time, I put my own cash in to get TapRivals launched. As we lifted the reward caps and started spending money on marketing TapRivals, the results were fantastic. We were breaking even in the short term with real hope of profit (LTV:CAC) in the mid-term. Revenue and scale was increasing quickly and I was able to finally relax and start planning for the immediate future. I’d planned to call back a number of the investors I’d been talking to to get the additional funding I’d need to bring the Esports platform to additional games and platforms. I felt a tremendous level of vindication and relief. For many Entrepreneurs, seeing your “idea” work and find its product-market fit is just as exciting as an exit.
Then Apple completely bans app discovery platforms and offerwalls. They had these types of bans in place before, but this time was different because they did it on and SDK level. To be clear, TokenWall was toast. Done. Ixnay. TokenWall’s revenue had been declining since 2016 and it was now 2019. That washcloth had every drop of water rung out, but the timing here wasn’t great.
This wasn’t a deathblow yet. The point of all of this was growing TapRivals and we were already doing that, but we’d need to speed up with raising etc.
Then, one day I logged into our second largest ad exchange for TapRivals, and I see all zeros. The millions of impressions had gone to none. There was an automated message in my account inbox with an explanation. Rejected by the compliance team. Over the course of the next few weeks, the same thing would happen with almost every major ad exchange we worked with. As TapRivals began to scale, the compliance teams were taking second looks and saying no. Too close to gambling, not brand safe, concerns with advertisers. In all cases accounts with Signal Zero (the company) were NOT shut down or blocked, but TapRivals the app had gone from green to red on the compliance checks. We even lost the ability to buy traffic on some ad exchanges for TapRivals. This was the deathblow.
I’d reached out to most of my account reps, but there was nothing they could do. We’d walked in the front door, told them what we were doing, went through compliance and received approval. Then minds changed. Thats how it ended. Not with product failure, the wrong strategy, a bad team or even under-funding, but with the fickle finger of compliance departments making decisions in some office building far, far away. How do you know when its over? When the revenue is gone, thats when its over.
Queue the Nicholas Cage.
Lessons and Results
If there were an autopsy report, it would read death-by-compliance. Its easy to think of business outcomes in a binary sense. We all read the headlines, which are generally focused on the biggest wins and most devastating losses. There are thousands of companies that have results that end up somewhere in-between. The company’s early success was built off $150k in investment. We didn’t raise more for years. From an entrepreneurial sense, I built 4 products in 6 years that had 75% product / market fit success rate. That is like batting 750, it just doesn’t happen. But I was too spartan. I knew I was highly capable with product and marketing, so I didn’t focus on fundraising.
What could have been done to improve this outcome? I am not sure. In hindsight, I probably would have “stopped” in 2017 when we were all ahead. But thats hard to do when there are still millions in annual revenue. TokenWall was a weird product. It was high risk, low value (multiple) revenue. The business model was simple, but the defense we had to play to keep that revenue coming in was extremely high (IVT risk management, loss prevention tech etc.). If I raised a larger amount all at once and in short order, I think we could have better diversified various projects intended to pivot the company. We should have been working on 3–4 possibilities in 2016 instead of just Oops You Died and we should have been working on 3–4 more when working on Imps (pet game) and TapRivals. We didn’t have enough people or money, though. We tried.
What’s next? I’m an entrepreneur. I can’t stop doing this. I’ve spent months now thinking through what is best for me and my family. I’ve had long talks with my wife and closest friends. If I took a “normal” job, I’d feel like I was betraying myself. If you’re a serial entrepreneur like me, then you’ll understand. Its not always about the win, its about the fight. I need to get back in that daily reality where every decision I make is inches away from fortune or failure. I just can’t wait.