Mint, Thrive, and the Business of Personal Finance Management Tools

05Jan09

Mint, Thrive, Cake, Yodlee, Quicken Online, Buxfer, Geezeo, Wesabe, and Moneytrackin‘.

These are just a few of the many companies in the crowded field of web apps for personal finance management (PFM).  These consumer sites all perform the same basic service: aggregating data from disparate financial accounts (savings, checking, credit cards, loans etc), helping users monitor their financial status, and making suggestions for improvement.  Although the services have different focuses and specialties, they generally share the same business model.

Business Model

Unlike the typical consumer app attempting to sell banner ads for penny CPMs, these finance sites have a tried and true business model: lead generation.  The PFMs suggest financial improvements such as signing up for a higher yield savings account, a credit card with a lower APR, or a cheaper phone service.

When users take the site’s suggestions and sign up for an offer, PFMs have generated a lead for that financial company and a referral fee is paid in return.  Referral fees in the finance space are especially high, typically upwards of $50/referral.

Conversion Rates

How many people sign up for these offers?  Previously I assumed maybe 1%, and I thought I was being generous.  After all, does anyone really need ANOTHER credit card?!

But at December’s Web2NewYork Meetup, Thrive.com shared some truly remarkable statistics about their conversion rate: about 15% percent of users have taken an offer.  Within their top demographic category, that figure jumps to 25%.

Mint.com reports similar figures: “Users are clicking on presented opportunities 12-15% of the time.” But wait, it gets better!  Thrive said their users often sign up for multiple offers — on average about two.

Wow. I was blown away.

Back of the Envelope Calculations

Financial offers pay $50 per conversion, 15% of users convert, and users sign up for two offers on average. PFMs therefore make $100 from 15% of its users, which means that Mint.com and Thrive.com make $15 per user.

The challenge, then, is clear: rapidly grow the business while keeping the Customer Acquisition Cost (CAC) below $15.  I’m guessing that mainstream press has probably been the most important (and cost-effective) method to gain new users.  I would also wager that customers who find the PFM services via press (and also word-of-mouth referrals) are the most trusting and therefore the best converting users.

The PFMs also use other marketing channels to find customers, such as search engine marketing.  Thrive’s ex-CMO, for example was able to bring “SEM acquisition cost down from eCPA of over $20 to under $3.”  Of course each marketing channel produces users with differing engagement levels and conversion rates, and that needs to be taken into consideration when trying to calculate the ROI of each channel.

A screenshot of Mint.com suggesting a new credit card. (credit: crunchbase.com)

A screenshot of Mint.com recommending a new credit card. (credit: crunchbase.com)

Measuring Success

Mint is the runaway leader with 650,000 registered users.  By my estimation, Mint should have collected close to $10 million revenue in the company’s lifetime (using the figure of $15/user).

Impressive, but not enough.  The company received $18 million in VC funding so clearly expectations are set even higher.  I would expect to see some additional monetization strategies in the future: a premium service?

Thrive, which launched in October 2008, has a much smaller user base.  The company was hesitant to share specific numbers during their presentation, but hinted that they have a low double-digit number of users.  If we conservatively assume 10,000 users, the company has earned about $150,000.

Recurring Revenue

A question for my readers: once a user has taken the recommendations (and the PFM has earned their referral fees) is that the end of the opportunity?  Is this a one-time earning event for the PFM?  Or is there a way for the services to make recurring revenue?

Is there enough rotation among financial service offers that the users’ accounts are never completely optimized and users jump from bank account to bank account following the best rates?  How do the PFM companies think about calculating the lifetime value of a customer?

Aaron @ Mint, Avinash @ Thrive, etc — would love to hear feedback on my analysis and also hear what marketing channels are working well for you.

——————————————–

UPDATE: In February 2009, Thrive was acquired by Tree.com for an undisclosed amount.  Congratulations guys!

Tree.com (Nasdaq:TREE) is the company behind LendingTree and RealEstate.com and was formerly owned by IAC.   Having the financial support and web exposure/brand of a large company like Tree.com should help Thrive grow quickly and compete effectively with its larger competitors.

UPDATE #2:  In March, Silicon Alley Insider did an eerily similar analysis on Mint.com and used some updated figures.  Worth a read.

Filed under: Analysis, Lead Generation, SEM, Startups, ecommerce, media   |  Comments
  • matt @ Thrive
    Easy now, Jonathan. *grins* I'm not so sure we'll ever be publishing too much of our revenue numbers, as it isn't the core focus of what we do around here. You have to remember that Thrive was founded with helping people in mind (a very different founding story than Mint's, you'll notice) and the focus for us is on generating the revenue we need to keep doing that.

    One content I'd note with your Mint math: their "registered users" numbers most likely don't line up with their "active users" numbers, which is probably what they are basing their offer uptake rate on. So their revenue numbers are probably far, far lower than you think.

    One big difference between Thrive and Mint is that Mint is essentially churn & burn; they haven't shown much effort in building product that is meant to keep people around in any long-term way, since there is no aspirational or goal-setting part of their site. So if you were trying to look at revenue models, they are most likely thinking about first-time action, rather than lifetime value (which is how Thrive's revenue is constructed).

    Why does this matter? For one, Mint has done very little to establish trust with their users, because they are interested mostly in initial profit. Thrive, on the other hand, invests a lot in communicating a brand of trust to our users, and we see that in how often they take our recommendations over time. And I don't just meant monetized recommendations - we give plenty of advice that has nothing to do with generating revenue. The goal is to establish a partnership that lasts by creating real value and help for the people that use Thrive.

    Academic models of trust vary, but two important factors in almost all of them are predictability and dependability.

    Predictability: this is a measure of how much people have expectations that are met. This is everything from knowing what is going to happen when you press a button and have that expectation fulfilled, to a larger sense of what Thrive does and how it works in your life. I think both Mint and Thrive do this relatively well, although I do always feel like Mint over promises a tad, since their outside-the-wall content seems to imply that they will fix your entire life, not just do a little tracking.

    Dependability: this is related, but a little different, and is an area in which Thrive strives to shine. The idea here is that this is how much people believe that actions are initiated in their best interest. So not only do i know what Thrive is going to do, I also know that those actions are based in their desire to interact with me in a positive way. I know that it isn't going to try to sell me something, that the recommendations will be designed to do right by me, and that all the things they do are designed with me in mind.

    As for marketing, you are absolutely right that word of our mouth has been by far the best marketing technique for us, as has major press. I do a bunch of press interviews each week, commenting about the psychology of money, and that helps us both in demonstrating to the public that we're dedicated to this issue (raising our trust factor), as well as spreading the word about Thrive itself.
  • Hey Matt,
    Thanks for the thoughtful response to my blog entry. Sorry i'm only now getting around to responding...two months late ;-p

    You make a good point about "registered users" numbers being very different than "active users" numbers. Generally the majority of any site's userbase is inactive, no? That's one of those 90/10 things? So yes, it's possibly that I overshot my calculations for Mint's revenue.

    Regarding your point about Mint.com not establishing trust with its users..I disagree with you. The users that have signed up for mint.com have given their bank account information to the company. Obviously they trust mint!! And if you check mint's TwitterPulse, there's no lack of happy users: http://search.twitter.com/search?q=mint.com

    I can see your point about Thrive attempting to communicate a brand of trust to the users. But I think you're talking about something slightly different than trust: objectivity. Thrive users know that you have their best interests at heart, not the business' best interests. That's awesome. But i don't think Mint suffers from the reverse of that problem -- i don't think its users distrust it or think that its recommendations are ill-advised.

    Thanks,
    Jonathan
  • matt @ Thrive
    Jonathan-

    It is hard to know how much of Mint's userbase is active, as they haven't published that I know of - during the Intuit debacle, they posted numbers, but they weren't about actives versus inactives.

    One thing that has changed in the two months since this conversation started is the lead generation market. As I think some people predicted, companies are reevaluating how they pay out lead generation for things like accounts, so it is unclear that that is even a long-term viable channel. If it isn't, what other revenue options are out there for the PFM's of the world seems to be to the operative question.

    I'm not sure that I think TwitterPulse is the best measure of the success of a site, but I suppose that depends on what demographic you are going after. I think Mint appeals highly to the tech affluent, the sort of people who read Crunchbase and comment on blogs. But that isn't actually the whole US population.

    Let me give you an example. A woman called today for support at Thrive, and in between fixing her problem, she was gushing about how we are "the bomb" and how she does HR for new hires at a construction company. And every time people get hired and she does orientation, she says "we don't offer financial advice, but here are some great guys that do" and she talks about Thrive.

    That woman will never Twitter about us. She'll never post on a blog. But somewhere in the US, there are a bunch of construction workers who hear about Thrive because it offers advice that matters to them. And that matters to us.

    Your point about trust is an entirely valid one, and I think the important thing is what we trust sites to advise us on. I don't take personal finance advice from my mechanic because it isn't his expertise, and I don't take it from my bank manager because he is generally looking only for profit; the whole reason services like Thrive got created is because you couldn't trust the people taking your money to give you good advice about it. So the operative question about trust is this: what advice will we take from Mint and Thrive and other PFM's? Do we trust Mint to offer us account recommendations with our best interest in mind? Thrive? Wesabe/Rudder/etc.?

    I can tell you my philosophy: the way to get people to trust you is to be trustworthy. This isn't about marketing or branding, creating "the illusion of trust". This is about actual trust. Because all the marketing and hype and such sets us up for the problem we just had: people using our money not in our best interests, but in the interest of their bottom line. And so Thrive doesn't just appear to act in your best interest - we actually do.

    -Matt
  • User Eric
    Hey Jonathan et. al.

    Speaking as a registered (and active) user on both Mint and Thrive, I'll offer my opinion - it may be one data point, but I have personally invested in excess of 100 hours tracking my finances through Mint since the start of 2009, and as of approximately 3 weeks prior, I now do the same in parallel with Thrive.

    I think Matt @ Thrive's explanation of Thrive's model relative to Mints comes from a biased POV, but still rang true to me 100%. The recommendations I have received from Thrive speak to my desire to develop my personal financial security, and long-term growth. The recommendations I receive from Mint feel much more calculated, and oriented toward encouraging my opening of a new credit card or savings account. Now that I understand the potential "$15" gain, everything about the way the site operates seems to make more sense to me.

    To provide some color, I have no credit card debt, and not an extensive amount of savings, as I'm in my low 20s. At this point, I'm not interested in a CC with a low APR and high rewards, because I spend less than 5% of my monthly transactions on credit. Having been bombarded by credit card suggestions by Mint for over 5 months now, I admit I have been tempted to concede and open a new card that will yield me "$235 in savings in the first year". As I thought about doing this, I figured I would cancel my other card, because I don't need more than one.

    The first helpful tip I noticed on Thrive was its estimation of my credit, and recommendations it has to keep a strong credit score. I quote: "Keep your oldest credit card account open. Even if you don't regularly use the card, this will continue to improve your score the longer you have it. Try to use it at least five times per year to keep it active on your credit report." This jostled my memory and reminded me of some advice my Dad gave me when we opened the card my last year of high school, and it really engendered a real sense of trust in Thrive. Not to drive the point to hard, but ever since then I've only viewed Mint as a place where I can enjoy a beautiful Web 2.0 interface - not a location where I can rely on planning my financial goals, and considering my long-run security.

    I think Matt said it best by highlighting that Mint has "no aspirational or goal-setting part of their site." I noticed this within 1 week of using Mint, and I was delighted to find Thrive, because it does have that. While at this point the goal setting and tracking remains fairly basic, I am hoping they will be updating the site soon, because I know they have their goals in the right location.

    Speaking as a corporate consultant though, I also feel that Numbers gave a great analysis of the competitive landscape, and I worry about the long-run viability of any PFM web app. Matt - did Thrive ever consider operating as a tax-exempt org, given it seems the mission of your organization is more important than the bottom line?

    Jonathan - any thoughts?

    Eric
  • matt @ Thrive
    Eric-

    We actually did, and were originally incorporated in such a way that we could have gone either way (I don't understand the actual legalities of exactly how that all works, so I can't actually provide more details). As a team, however, I can say that we would have loved to go work for someone like the Pew Foundation or even the government, had we been given the opportunity. We all got in this to help consumers and we work hard at that every day.

    That having been said, I should note that I actually think the LendingTree acquisition is very much on target with our mission. This is a company that was started by a guy who got frustrated when he tried to get a mortgage and couldn't get terms that made any sense between vendors. We've got a ton of opportunities that LT can help us take on, and though I can't say more until we get them nailed down, I think we'll be able to build a bunch of new features that will make it even easier for people to accomplish their goals, by facilitating partnerships for every financial action that people want to take. I think the real challenge and next step is making sure that once we have the right advice in place, we make it as easy as humanly possible to follow it, so that it what I'm noodling on these days.

    -Matt
  • Ron Shevlin
    @jonathan: just to clarify, did Thrive claim 15% conversion or 15% click through on offers?
  • Hey Ron,
    Thanks for the comment. I'm pretty sure that the numbers mentioned by thrive (and also the mint numbers in the techcrunch article) refer to the conversion rate on the offers. I walked the thrive ceo through some number crunching / guesstimates to gauge whether my logic was correct and he didn't raise any red flags..

    Do you have reason to think otherwise?
  • Ron Shevlin
    @Jonathan: No, no reason to think otherwise. Although... it does raise the question in my mind: How does Thrive (or Mint.com) know for sure that an account was opened (or loan/card applied for, etc.)?
  • Scott
    @ Ron

    Probably by the size of the affiliate check!
  • @ron The 'account sign up' links are likely alliliate links and
    everything is tracked, so it's easy to tell which website referred a
    new account and credit them appropriately. I'm not sure if a middle-
    man (such as commission junction) is involved.
  • Scott
    @ Ron

    I think they'd be talking 15% click through on the offers. Anyone who has played in the affiliate space knows that they are polls a part -- both in terms of volumes, and the fees that financial institutions will pay for a lead versus an actual customer.

    I'm with numbers on this one, I think that it's the big boys like Bankrate.com who win in the affiliate space. The PFM market spend most of their budget paying third party technology providers, without a reliable revenue strategy.
  • Interesting!
  • Interesting figures, Numbers -- thanks for sharing!

    It's my understanding that Mint (and probably Thrive as well) uses Yodlee to connect to the financial institutions. From http://www.techcrunch.com/2007/10/07/mint-rakes... -- "Yodlee is the back-end piping that connects all the banks, credit cards, and brokerages together. They’ve been around for about a decade, and are used by Bank of America"

    Security technology costs are definitely something to consider. Numbers -- do you have a source for that $10/user/year figure? Would love to learn more.
  • Numbers
    After we had successful launched an unrelated startup, my partners and I were looking for another venture. With the early success of mint, this was 2007, we seriously looked into it.

    The reason we decided not to do it was a lack of a reliable ongoing revenue stream. Yet you still incurred the aggregation costs per user billed as a monthly minimum in the tens of thousands, which also included a license fee on top, and ongoing fee for additional maintenance.

    The problem arises when you sign up, say 50,000 users. Some of them will click on everything, as you've shown, most will never read the emails or log back in. But you still have to pay all the third parties for keeping the account active.
    Add to that the team of developers and support staff you need to develop this system and you've quickly blown through a few million without earning a dime.

    In my view mint will probably be bought by a publisher like Yahoo, or by a bank that wants to get serious about boosting their online banking capability, current economic conditions not withstanding. Geezeo have had an investment from thestreet.com, and therefore are more insulated. Wesabe has done some great things with integrating their technology into mass media newspapers.

    The rest of the pack (rudder, green sherpa, thrive) will not survive. The cost of doing business will kill them, and none of them have achieved enough momentum early on to push them over the hill.

    Remember that affiliates is a notoriously tough business to deal in: bankrate may be web 1.0 but its a simple model: get a high page rank, buy your competitors, and get the tens of thousands of people who type 'credit card' into G every second of the day to your site and then when they're there get them to click on as many links as possible.

    No fancy aggregation sign up, or the costs, just delivering what people want and taking their money. They will beat the pants off these web 2.0 guys every day of the week, even if they customers coming from bankrate arent the quality of a mint/rudder I'm yet to see evidence that any bank is being too picky for new customers/or if they are willing to pay a premium for it.

    Ultimately, it will be banking institutions that will be the real winners of this space: they already have the customers, they already have a technology spend in the tens of millions of dollars per annum, which makes mint all that more attractive.

    I think there'd be some smart smaller banks who will be watching many of these startups currently flush money down the toilet, with a view to picking over the carcass in a few months/a years time to integrate the technology into their business.

    Just my two bobs worth.

    Numbers.
  • Cool -- really nice analysis. Can you shoot me a quick email perhaps to identify yourself? I'd love to know who you are...numbers!

    Gmail: jwegener

    Thanks!
  • Numbers
    The costs to aggregate the data are about $10 per annum, per user, then you have all the costs for the security technology.

    So it's certainly not all net!
  • Somudro
    For recurring revenue, why not combine lead generation with CPM ads? They could also add other services - maybe portfolio management tools/recommendations, which are more fluid than choosing a bank account or credit card.
blog comments powered by Disqus