Total Cost Of Ownership Of A Marketplace App – A Case Study With Swapit

In some conversations with partners and investors, I get asked what our TCO (Total Cost of Ownership) is. For those who are not sure what TCO means, here is how Gartner defines it (Gartner popularized the term in the 1980s):

Gartner defines total cost of ownership (TCO) a comprehensive assessment of information technology (IT) or other costs across enterprise boundaries over time. For IT, TCO includes hardware and software acquisition, management and support, communications, end-user expenses and the opportunity cost of downtime, training and other productivity losses.

Source: http://www.gartner.com/it-glossary/total-cost-of-ownership-tco/

Total Cost of Ownership at Swapit

swapit_marketing-dollarIn the case of Swapit, we are investing a large amount of resources into our product creation, marketing and customer retention. However, in the long run and with increasing scale, some very few factors are essential to ensure our profitability and high margin compared to our competitors. While this might feel a bit oversimplified, but from a long term perspective, our real important cost factor will be hosting charges. Hosting in terms of: bandwidth, storage, computing power. Yes, there will also be HR costs in terms of customer support etc., but with the right product, those can be minimized tremendously (just look at how Google optimized their products). So the more items we have on the Swapit platform, the higher such total costs for those will be, while our mobile app development costs will not increase on a corresponding level.

Therefore, it was essential for us to keep a very close eye on our hosting costs in the long run. We’ve built Swapit to handle billions of transactions in very short periods of time, but definitely not to cost billions of Dollars at the same time.

As of the writing of this blog post, Swapit has 111,500 registered traders, about $10M GMV posted, handled tens of thousands of comments, chat message, likes; processed hundreds of thousands of spacial queries and database operations.

Yet, our last monthly bill from Google’s Cloud Platform Service was precisely $6.82 USD.

To give you a quick overview and to show that we are on a very affordable road, here are our cloud hosting charges over the past year in USD:swapit-blog_cloud-plateform

  • May 2016: $6,82
  • April 2016: $7.73
  • March 2016: $16.29
  • February 2016: -$39.14
  • January 2016: $8.80
  • December 2015: $16.23
  • November 2015: $15.14
  • October 2015: $0.60
  • September 2015: $0.23
  • August 2015: $0.06
  • July 2015: $0.01

The numbers above are a bit fluctuating, because Google did actually overcharge us a bit last year, due to some technical issue on their side. So they actually reimbursed us in February this year.

Furthermore, we have been adding new features and integrated some optimizations to our data models, which allow us to actually lower our cost on a database size that’s rapidly increasing. To be honest, we didn’t look at the monetary costs much when integration new optimizations at our backend. Those costs were just too low to justify work on that. However, we did most optimizations because we always look for new ways to improve our user experience. Part of that user experience improvement is to process queries much much faster. Often, this comes with data model optimization or just smarter queries, which lead to much faster loading times … and more often than not, also to lower processing cost, which in turn results in lower monetary cost for hosting.swapit_marketing-chart-grow

So in the end, optimizing your own backend is good in terms of costs for short term and margin in the long-term, but also to provide a superior user experience. We believe this is one very important piece of our puzzle to attract more users than our competition.

Cost Projections

Given we are at a roughly $7 cost at 111,500 users right now, which is about $0.000063 per user per month. Let’s assume in a year’s time we managed to increase our user base to 1 million users, we’d still be well below $100 of cost per month on our platform operation side. In fact, we believe in the long run there is a need for using Swapit in all urban areas in the world. Right now more than 50% of the world’s population are living in an urban area and that trend is accelerating. So let’s be absolutely crazy and assume Swapit can achieve such a global reach (which we definitely work towards) and we manage to engage all of our users at least once a month, we’d be looking at 3.6 billion users. At that point, our cost will sum at roughly $226,800 USD per month or $2.72 million per year. Given the incredible reach we would have, that’s a very affordable cost we’d be happy to cover every month.

In short: It was an absolutely great choice to use the Google Cloud Platform for our backend.

P.S.: In the past 11 years I have been using other hosting services and I am absolutely certain, they would all have been 10-100x more expensive than our current choice.

P.P.S.: Obviously, there are a lot more costs involved to running a business like Swapit. Investing in creating a liquid marketplace and salaries are actually our largest cost positions right now and will remain to be there for the foreseeable future. However, as mentioned above, in the long their share in terms of overall costs will come down significantly.

 

Have you tried Swapit yet? It’s free. You can download it here: http://get.swapit.la

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Sprinting to Swapit for iPhone and iPad

As you might remember, we’ve started our race for launching on iOS in the middle of February by hiring Vito for that very task. It took us a couple of weeks to get up to speed and build the core foundation of Swapit on the iOS platform.

As you also might remember from my blog post over a year ago about Choosing a Platform for Swapit,  we’ve been building our backend infrastructure on top of the Google Cloud Platform. The great thing about that is, we are building Swapit for massive scale from the ground-up. Our current growth rate of 100% month-over-month over the past 2 quarters, we have so far seen zero impact on the performance of our backend platform. At the same time, out Total Cost of Ownership remain very low as well. So that was an outstanding choice of platform.

Going, Running, Sprinting to iOS

swapit-blog_leapNow, one of Swapit’s major road blocks to world domination is our missing presence on the iPhone. It’s not the only road block, but it’s a major one. When we raised our funding in December and again raised in February, one of the milestones we have attached to that funding was to bring Swapit to the iPhone and iPad as quickly as possible.

Just an hour ago, I submitted the Swapit beta 1.2 for iOS to Apple’s TestFlight. That is actually our 3rd beta, which we are testing with a very small group of testers right now. With each beta, we are increasing the number of beta testers for Swapit. In fact, we are building sprints every week that are being released to our beta testers. We a somewhat much leaner version of how sprints are defined in Scrum. Our goal is, to ship a new beta release each week, which we have been doing for the past 3 weeks already.

It is very challenging for developers to be able to deliver a working product release every week. Our team is doing their best to hold the schedule. It’s hard work, but it is definitely worth it! Having a working release of the whole app at pretty much any time during the development process, offers so many upsides: launching every week keeps our beta testers happy, they know we’re progressing and moving fast forward. At any time, we can fix a serious issue might arise in a release, which was launched a couple of days ago. So in the worst case scenario, users need to wait only a very short while to get their app fixed. At the same time, these rapid release cycles force us internally, to define small enough feature tasks that are doable within a day or two or at most a week.

Sprinting Around Corners and Cutting Short to Make the Goal

At the same time, we need to always keep our weekly release goal in mind. Even though, we might define small enough features and tasks to be completed within a week, sometimes some tasks and features suddenly turn up to be much more complex than anticipated. Therefore, we adjust the set of features and tasks for the next release in a very flexible way.

THE #1 GOAL IS TO SHIP!

There can only be one most important goal for any software / product development or basically any business related team, and that is to bloody ship your product. If you have the greatest product and never ship, who cares what it is? No one will ever use it, never ever will you be able to build a business out of that product. Almost everyone can build a product, some people might be able to finally ship and even fewer might be able to build a profitable business out of that.

We at Swapit believe, with a lot of passion and a lot more of hard work, we will be able to see it through and keep growing Swapit to a revenue generating business with very attractive profit margins.

IMG_20160325_0946483

At The Swapit Office: Get A Fresh Free Coffee And Remember What Is Really Important!
The Sign Reads: “TO SHIP is the most important feature!”

Swapit on iOS so far

Our Swapit beta 1.2 release is the most feature rich release we’ve launched so far. It is now already possible to view all items nearby, view item details (incl. pictures in gallery, price, category, condition, viewing statistics, locations, title, description, likes, comments), share items, report items, search items, show featured and highlighted items. All items in the list also sport all the information you need: image, price, distance, name, seller’s photo, likes and category.

Next week’s release will definitely sport some more features in Swapit on iOS. We’re constantly increasing the number of our beta testers for iOS. For those, who have left their contact details and haven’t received a download link yet: We will get to you very soon. We’ve got quite a number of people interested and we’re on-boarding new beta testers FIFO style. So please stay tuned. You’ll hear from us very soon!

Got an iPhone and want to check out Swapit?
Put your name on the Swapit for iOS beta list!

 

swapit-team_mugshot_patrickAbout the Author
Patrick is the Co-Founder and CEO of Swapit Limited. He has over 11 years experience in mobile and business in Asia through various ventures across very different domains. You can find our more about Patrick and the Swapit team at: http://www.swapit.la/#team