Friday, November 2, 2007

Nuffnang operational cost?

Putraworks was blogging about Nuffnang imposing a SGD$1 transaction fee for all cash out recently. Nuffnang claims that the $1 transaction fee is for postage, cheques, materials, and handling cost. The entry created quite a big hoo ha and was the most popular post of that day in ping.sg.

Ming, co founder of Nuffnang, saw that article and replied in the comment box, giving more details on how they derive the $1 transaction fee.

I understand this is an unpopular decision, but in the face of significant costs which I will now break down and reveal to you, this decision has been taken by the management in consideration of long term viability.

The main bulk of costs comes in the form of cheque processing. This is something you can openly verify. UOB as with every other bank now, is charging 50 cents per cheque processed.This is in addition to the cost of the cheque book which they also charge for.

In addition to this there is the postage fee, which by 1st local is 25 cents each (for a stamp). The envelope costs 20 cents each. This brings it up to 95 cents, which means 5 cents for the paper, ink and labour. Labour includes time taken to print out the letter, verify the amount, pack it, and send it off.

Labour is more or less subsidised and free in this instance.

One mistake I will admit to making and can rectify immediatly is that we did not give any lead time for implementation. As a result, this action will be delayed till november. I will update all nuffnangers in the next community update.

I look forward to your continued support.


Am glad that Ming steps out and explains the $1 fee. But as I was reading, I felt that something was wrong.

Lets breakdown the $1 transaction fee first.
$0.50 – Cheque processing fee
$0.25 – Stamp
$0.20 – Envelope
$0.05 – Paper, ink and labour

Ming is correct to say that the operational cost has gone up recently. With effect from 1 Oct 2007, UOB charge $0.50 for every cheque processed. The first 30 cheques will be waived. But lets just assume that Nuffnang have their own bills to pay too and used up the 30 cheque quota every month.

But the rest of the items are existing operational cost. Stamp, envelope, paper, ink and labour charges have been there since day one. They are nothing new. Was there an increase in prices lately? If there isn’t, then these items shouldn’t be added into the new transaction fee. In fact, when deciding the payment structure, these items would have already been put into consideration. Why is Nuffnang passing these charges to bloggers now?

So technically speaking, the increase is only $0.50. How much additional operational cost is that? Currently, there is a total of 2500 Nuffnangers. Assuming 10% of the Nuffnanger cashout every month, the increase in operational cost will be just $125 per month. Surely a company of Nuffnang size is able to absorb this little increase in operational cost.

And if you really think about it, do they really have 250 cashout every month?

The saddest part of this whole incident is not about the $1 transaction fee. It is the mentality of the management. $1 is a small amount and I'm sure everyone can afford it. But when operational cost goes up, instead of finding ways to cut cost, the management decides to pass the additional cost to consumers.

Well, passing the cost to consumers is easy. That's what our public transport companies always do.



























Actually, they didn't pass the cost to the consumers, they passed it to their "staff". The nuffnangers are the ones who "sell" the ads for nuffnang.

In my opinion, they should have raised the advertising rates to their clients instead. I don't think their clients would notice the slight increase in rates.

Or, they could have used Internet Bank Transfer instead. That way, they totally cut down the use of stamps, envelopes and cheques. More environmentally friendly and convenient too. Instead of using paper, it is only an exchange of electrons.














Well stated, my thoughts exactly. Nuffnang has a serious PR problem.
Serious community backlash.

They really need to handle things better. It's not about the $1, its the justification (which is lame, they might as well say that it costs 10c for the light used during that time, 20c for the desk usage, $2 of time spent for the person writing the cheque, 10c for signing, etc.), the lack of transparency, and the inability to handle the complaints raised.

Nuffnang can do well- but it really needs to hire someone who knows how to get the message across well.














Cobalt Paladin: You got a point. Nuffnanger are staff, not consumers. Haha.

I don't think raising the advertising rates is a right thing to do. It might scare away their clients.

Anyway, there are many ways to counter this increase in operational cost. Its sad to see that they decided to pass it to bloggers.














Entrepreneur: Agree with you that Nuffnang have some serious PR problem. But hiring someone to deal with PR is going to push up operational cost again.

The justification only managed to explain 50% of the $1 fee. The rest are existing cost which Nuffnang decides to use this opportunity to pass to bloggers.














Hey Dk: Understand your concerns, but then if you think about it, we never has any money before nuffnang or any other blog advertising community came about. Adsense didn't give s jack shit.

Agreed that it's not about the $1 and you're upset about the management passing on the cost irresponsibly to the bloggers, but maybe if you look at it from the flip side, we all can be a bit more appreciative.

I think they're working hard on their end as well, no?














Cobalt is right.

People always get things wrong. Bloggers (Nuffnangers) are NOT the consumers nor are they the client since they don't pay anything to Nuffnang, it is Nuffnang that PAYS them.

Not to mention, Nuffnang is the one that creates a value on our blogs advertising spaces. Lets be frank, before Nuffang hundreds or thousands of bloggers will never have seen the lights of a Citibank campaign running on their blog.

I think Nuffnang delivered the message across very well on the transaction cost rather than keep quiet about it. However, some bloggers nit pick on everything and are foolish enough to keep trying to kill the 'Golden Goose'.

Before Nuffnang, there were no free movie screenings for you to go for, no blogger gatherings of the scale that Nuffnang plans them and much less opportunity to earn from local ads.

I like Nuffnang... maybe it's time people learn to appreciate them too and this is coming from me.. someone who doesn't even have a blog to enjoy the benefits of their existence.














Dear all,

First off, let me say I appreciate all your comments. I can't lie and say it leaves a good taste in my mouth, but it is my duty and to my benefit that I listen to all feedback and evaluate my own perfomance.

The prime reason why I revealed the breakdown of costs, is because my core philosophy in doing business has always been transparency. It leaves you open to attack and critique alot more, but at the same time, I believe it makes the world a better place in the long run.

Truthfully, if I were to be brutally honest, there are a whole host of other costs that are not apparent to the blogger which we have assumed.

Take for example our community program. Every event we hold costs us thousands of dollars. Lots of effort and time go into planning such events. At the end of the day, we still get good and bad comments. People who say thank you, and people who say should have done a better job. It is impossible to please everyone, and we move forward with whatever encouragement we recieve, and plan the next event (Also bearing in mind that we can improve).

If anybody thinks that Nuffnang is making a pile of money off the backs of bloggers, and laughing all the way to the bank. They are sadly mistaken. We are growing, and it is looking good, but we are a startup. Both myself and timothy are not being paid a cent. Of course the developers and team is, and without family support, so many things would not be possible.

Let me give you an example. And allow me to take a personal aside to this. The weight on my personal shoulders everyday, is that whilst my peers are making money in comfy jobs in banks or consultancy firms, I have to rely on my family to support my mobile phone bill. Taking an allowance at the age of 24 is not exactly my cup of tea, but I have chosen this course of action, because I believe I am bringing something of value to the larger community.

Whilst our vision has always been to enrich others. Reality is not built merely upon dreams. Everything has a price tag out there The only people fully aware of the costs of doing this business are me and timothy. To stay afloat, unpopular decisions have to be made and taken.

Passing on costs to advertisers is not a good idea. Especially considering how difficult it is to sell online media space to them in the first place! Today only 2 percent of adspend goes online. Nuffnang is trying to grow that, but we have to make the medium as accessible as possible. Passing on $1 to them is not going to make a difference, but there are a whole host of other costs to consider.

I am of the sincere hope and do believe that most Nuffnangers do feel they are better off with Nuffnang in the picture.

To all our doubters, and critics, thank you also for keeping us alive and on our feet. We would not improve without your comments.

After the launch of NN2.0 we will almost certainly be looking at other means for you to cash out. The last thing we want to do however is to implement new systems without evaluation and planning.

Best regards,
Ming
Co-Founder
Nuffnang.com














Estee: I'm not upset over the $1. (It doesn't affect me since I'm not on Nuffnang). I just feel that it wasn't justified and am writing my comments about it.

If every business were to pass additional operational cost to consumer, then we are all doom.














Wong: Right. We keep confusing the relationship between bloggers and Nuffnang.

Since Nuffnang pays bloggers, are we right to say Nuffnang is the employer and bloggers are the employees?

So how would you feel if your boss tell you that he is going to deduct $1 from your paycheck every month from now on because the bank has raised their transaction fee? Not quite good right?

I'm not killing the 'Golden Goose' here. I doubt I'm capable of anything near that. Just voicing my comments on this issue, hoping the management would do something about the increase operational cost and not pass it down to bloggers.














Ming: Thanks for your comments. Sorry for disturbing your lunchtime.

I understand the pain of being an etrepreneur. It is never easy and it will never be. That is why not everyone take the plunge and start their own business.

I understand that there are tons of operational cost. Community events are marketing for the company and will pay back eventually.

The reason why I raise the issue is because:-

1) The actual increase in operational cost is only $0.50. The remaining $0.50 are existing cost which in the past has been absorbed by Nuffnang. So why is the transaction fee marked at $1?

2) Instead of passing this increase to bloggers, has Nuffnang explored other methods to cut down the cost?














Nuffnang is crap. Google has better ad yield.














Anon: That is a very subjective comment.














dk: I feel that it is bad PR to pass on cost to your "consumers" or "clients". People are always sensitive to cost issues no matter how nicely it is said. Then again, I am not about to cash out from nuffnang anytime soon at the rate I am earning so it does not really matter to me :)

Estee, anon, wong: Like DK, I think whether or not nuffnang or google ads or advertlets gives better yield is totally subjective. If you never get ads from nuffnang then your yield is totally ziltch. I have already mentioned that before in my blog about the cost of nuffnang vs others.














I was wondering what's the problem here. $1 is just a small matter. If you don't like it seriously don't use it. Nobody force you people to use ads on your website.

I'm not trying to be a wet blanket. But if your site is in good quality with good amount of traffic, you be earning more. $1 will be just a token of appreciation for giving us a chance to earn online.

It's already bad that some people are struggling with programs like adsense, adbrite and others. Here a local company trying to help you and all they get is complain. For example, if you hate public transport, buy your own goddamn car.

Nobody force you. Hate your work, quit! Nobody force. Don't like the $1 fee. Remove it. Thank you very much. *rants*

By the way, I myself not using Nuffnang, cos since I don't like it, I don't use it.














Ming, nobody care about how you startup or not taking money, that will be for another time when when interviewed. The issue here is that nuffnang didn't tell others BEFOREHAND about the $1 and only when others make noise about it, THEN you come in to justify and still you didn't answer the 50 cents different.

So there you go.

I repeat, it is not that others don't appreciate but on not knowing the charges. At least paypal is upfront about it that there is a charges when payment is received. If you don't like it, can use others like worldpay but in this case, NO, there isn't any notification at all.

That is why pissed others off.














Thank DK.

Ming had learn from his mistake of implementing something and not informing us ealier through email.

We just hope Nuffnang improves in the future.

Anyway, I didn't care much of the SGD$1 as my blog is working for Nuffnang, not me. I just put the ads and collect money.

One more thing, I didn't put my eggs in a single basket. Current my blog is earning more than 10 Ringgits Malaysia everyday from Advertlets. I also have TLA ads that is giving me money every months.

PutraWorks.Com














hmmm i don't know the full story but theres 1 thing I noe for sure...

Nuffnang sure does have a very very bad PR going... Just on ping.sg along, over the past 2 mths, there are about 4-5 post in top10 talking bad about nuffnang...

I think they should improve on this...

all the best...














Arzhou: I thought you got quite a number of Ads on your blog. Still can't cash out? hmmm....

Anon1: If you notice, I'm also not using Nuffnang too. :D Like I said, its just my personal comments on this issue.

Anon2: I guess the whole issue wasn't handled well.














Putera Emas: RM$10 daily from Advertlets? WOW. You have lots of traffic on your site.

jl: Yeap. Lets hope they will improve.














Food for thought... Did anyone thank NN when they reduced the cash out from 100 to 50 bucks?














@estee: why should we thank them for letting us get our money earlier? It is like thanking the government for letting us withdraw our CPF at an earlier age...

anyway I think it's a small issue, but maybe they could implement it after our first cashout?














Estee: No. But likewise, do you thank Robbinson when they having sales?

Chillycraps: Yeap. Its a small issue. I guess it can be better managed if they don't just simply pass everything to bloggers.














Hi all,

You are right in saying that the increase in cost is 50 cents. However,this does not change the fact that the total cost is above $1 and we have been absorbing it throughout.

The community is growing at a phenomenal rate, and today we have 4,000 bloggers in SIngapore and 5500 in Malaysia (Your figures were obtained from my last community update).

The rate of increase has not slowed down, and we expect fully to get to 10,000 bloggers in each country, which would mean a significant cost to us everytime somebody chooses to cash out.

With regards to lowering of cash out, I think people neglect the dynamics of this. The simple fact of the matter is that there are payment terms for advertisers. Most of the time, it is 60-90 days after campaign (They drag it on).

A significant proportion of our 4,000 bloggers get to cash out pretty quickly, which means that we are paying them out of our own coffers first before having recieved any money from the advertiser!

This is a fact with all the payouts so far. Whilst the bloggers have all recieved their cash outs, Nuffnang Pte Ltd to date, has not recieved payment for any of the campaigns we have run. This is not a discredit to the advertiser, but something that is written into the arrangements.

Cashflow in business is important, but we also believe in lowering it to $50 we are giving bloggers a world class service. NO OTHER network has this treshold.

Best regards,
Ming
Co-Founder
Nuffnang.com














Nuffnang’s Shocking News - Part 2 -> http://www.putraworks.com/2007/10/10/nuffnang%e2%80%99s-shocking-news-part-2/














I'm not an NN publisher but I've been on other affiliate networks for a while, e.g. Google Adsense since 2005.

I think NN's handling of the issue (i.e. being transparent) is laudable. They seem to treat bloggers as "partners" and not mere "affiliates".

Compared to other networks like Google and Adbrite, their commission's as high as 30% and you're unlikely to get explanations from their management.

Just remember that before NN, they'd been no one to help monetize your blog.














Ming: Congrats on hitting 4k members.

Having more members does push your operational cost up. But at the same time, the profits should be increasing at the same rate (if not higher). So if Nuffnang is able to increase their profits the same rate as their membership, then there shouldn't be any problems already. Right?

But if Nuffnang is unable to increase their profits at the same rate as their membership, then I think even the $1 transaction fee isn't going to help the company in the long run.

Is having more members pulling the company down?

I notice a lot of Nuffnangers promoting Nuffnang to their friends. Instead of being rewarded for promoting your company, they are now being slap with a $1 transaction fee because Nuffnang grew too big.

Something isn't quite right here. Don't you think so?














Putera Emas: I have enough shock already. I'll skip this one.

Larry Lim: Yes, I'm really glad that we could debate about this issue here openly.

As for monetizing blog, I'm sure there are other companies out there that does the same. Take Advertlet for example.









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1 comment:

Eric said...

How can Ming add operational cost into it? Those are overheads of the business which should be covered by the business from the other end which is the client who advertise. I mean they are not doing charity right? They are making money! So how can they speak like they are making a loss if they do not charge bloggers $1? They are simply exploiting bloggers earnings to subsidize their operational cost without notice which i find it not reasonable.

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