Analysis of Quirky: Do Consumers Know What They Want?

The most important footnote:

"Quirky also sells products through retailers, which I am confident are not included in this data."

From the May 2013 Forbes article[0]:

'Sales this year will reach $50 million, he predicts, without a hint of modesty, with “a huge chance of us crushing the s–t out of that number." That’s contingent, though, on Quirky solving its distribution problem. While retailers sell 95% of its inventory...'

Quirky is focused on 1) generating the best ideas and data on new products, 2) rapid prototyping of the best of these products, 3) testing them in the marketplace, 4) accelerated production runs in their Chinese facilities, 5) building out their distribution channels.

Let's get something clear: Quirky is a Manufacturer not a distributer. This analysis only shines light of Quirky as an online distributor which it is not.

[0] http://www.forbes.com/sites/jjcolao/2013/05/09/can-a-crowdso...

So let's look at this from an inventor's perspective:

Feeling exuberant, I know Quirky will vet and accept my idea. According 109 of 823 accepted projects are on sale, so I have a 13.24% of getting my first dollar. Royalties are paid out to contributors on 10% of gross revenue. The idea originator automatically gets 40.5% of this revenue. So I would get a 4.05% royalty. Products are approximately $30, so my per unit royalty is ~$1.20

Let's say my cost for well thought invention idea is $1000 (includes time, drawing, cardboard prototypes, etc). Looking at the spreadsheet attached to the blog the average total units sold per product is 28378. However, this is a heavy tailed distribution, so we'll make two estimates (from eyeballing the spreadsheet, I divided the total units sold range into 1/3)

a 33% chance they will sell 500 units a 33% chance they will sell 5000 units a 33% chance they will sell 50000 units

So expected sales will be

$1.20 * (1/3 * 500 + 1/3 * 5000 + 1/3 * 50000) = $22000

So my expected value on idea submission is

(1 - 0.1324) * -1000 + 0.1324 * (22000 - 1000) = $1912.80

So I can expect to make about $2000 for a product idea on Quirky. Don't hold back any criticism on this analysis.

Interesting. Reminds me of survey bias - where people answer one way because they think that's what you want to hear, or because it aligns with their own perceived values, but they _act_ a completely different way.

Can surveying the crowd for inventions produce mass-marketable ideas? Probably. Does a large part of the value chain have to do with marketing and distribution? Undoubtedly.