My name is David and I like building cool stuff.

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    PPC (Pay-Per-Click) can be effective, but will not protect you. One of the popular forms of marketing today is pay-per-click advertising through programs like Google AdWords. I’ve seen entrepreneurs get really, really good at figuring out just the right bidding strategy and figuring out precisely how much they can afford to spend on a given word based on their conversion rate and lifetime value of the customer. This is all fine and good, except for one thing. PPC programs like AdWords run as a real-time auction. She who pays gets the clicks. It’s easier to describe why this is a problem with an example: Let’s say that you’re building a web-based app for home theatre installers (random example that I just made up). Let’s also say that over time, and with some maniacal focus and PPC bidding ninja skills, you figure out that you can afford to pay up to about $2.76 a click based on the traffic that these clicks generate, how many clicks lead to purchases, and the value of each purchase. Life is good. For every $1 you put in to the PPC machine, something > $1 comes out. This goes on for weeks/months. Then, all of a sudden, you wake up one morning, check your analytics and discover that for some reason, the price for your most important keyword went up. Way up. Enough that your morning coffee comes shooting out your nose. After some poking around on the Interwebs, you find out that some lame startup on the other coast just raised $5 million from some lame VC. They just emerged from the shower freshly sprinkled with a new round of funding, hired a VP of Marketing who then went out and started buying AdWords. Your AdWords. The real tragedy with this story is that this competitor is not all that bright. They don’t know that they can’t really afford to pay that much for a click and make profits (they’re not thinking about profits — they just raised a bunch of money). Your problem is not that they’re super-smart, it’s that they’re super-ignorant. And that’s the thing with PPC. You’re basically at the mercy of the stupidest market entrant. Call me simple-minded, but that doesn’t sound like a particularly effective barrier to entry when someone can just come along and drive your cost of customer acquisition (COCA) up. And, it doesn’t happen overnight — it happens immediately.
    – Dharmesh Shah - http://onstartups.com/