Unfortunately, our core assumptions were wrong. We made the classic top-down, young exuberant company market size goof. Meaning, we picked a market size and amount we wanted to capture. We said that the total p2p swapping volume is around 32 billion files swapped per year, and if we can convert 0.75% of that into revenue at $0.99 per swap, then – wow – we’re making a whole lot of money!
Of course, that’s a bogus way to calculate market size, and we’ve since done a bottom up analysis. We took a look at our demographic in terms of accessible numbers, did a little primary market research to gauge interest (pretty high, btw) and determined total probabal user population. We factored a relatively even growth curve, assumed some sales averages and derived our pro formas that way. Until you have real revenue, knowing your customers is the only way to forecast revenue.