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

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 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.

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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.