🕵️ Breaking Down Business
Welcome to Breaking Down Businesses📝
We’ll be taking a look at interesting companies or protocols, assess how they’re generating revenues, and guesstimate their earnings 📈
Personally, I’m fascinated by the culture of indie hackers, solopreneurs, and bootstrapped companies that are able to generate massive profits for the core teams at an extremely high margin.
In contrast, crypto businesses and protocols are often fairly unclear in terms of their monetization model, focusing on the technology first-and-foremost, instead of commerce.
That’s not necessarily a bad thing— but in the current macroeconomic and funding environment, crypto businesses need to refocus their attention on one thing:
“How do we make money?”💰
This newsletter is co-written byMarco Manoppo
Today we’ll coverEtherscan. For many (if not all), it’s an extremely familiar name. Yet, their stories are often under-told.
Which… is odd.
Etherscan is akin to agateway tool for crypto market participants when they first learn about on-chain transactions. It is the go-to place to assess on-chain movements and to understand what’s going on under the hood.
Etherscan: The Master of Block Explorers
Etherscan is a tool that helps usersnavigate the Ethereum blockchain- more commonly known asa block explorer. With80millionpage views per month, Etherscan is one of the most popular websites and widely utilized tools in crypto.
Etherscandoesn’t have a token. Although it’s operating at the heart of the crypto-web3 ecosystem, Etherscan is considered more as a “traditional SaaS business” that isn’t entirely on-chain native. It simply provides tools for users to better understand blockchain transactions.
Since its inception in 2015, Etherscan has become the go-to block explorer. By 2023, Etherscan has expanded into18+ blockchains.
How Does Etherscan Make Money?
Etherscan, like many other software companies, generates revenue through the services that they provide. That said, Etherscan isprimarily a B2C business, although they have some B2B products. Alas, advertisem*nts will be a non-trivial element of Etherscan’s ability to generate revenue.
At a high level, Etherscan generates revenue from:
Let’s do some revenue guesstimation.
Newsletter: $120,000 - $300,000 / year
At 1 million subscribers, Etherscan can charge between $20,000-$50,000 per issue depending on the CPM. Since its newsletter isn’t a “core” business and we haven’t talked about the open ratio, let’s discount it by 50%.
Etherscan can charge $10,000-$25,000 per newsletter issue and itseems to be postingonce a month. In total, they can bring home$10,000-25,000 per monthfrom the newsletter.
Website Ads: $2.4M - $8.64M / year
There are 4 types of website ads, broken down to home page banner ads, banner ads, header text ads, and button ads.
Honestly, this revenue heavily depends on how Etherscan decides to monetize it. As you can see from the example below, it depends on the niches, methods of monetization, and the state of the industry.
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Guestimating ad revenue based on website traffic is extremely tricky as it varies widely according to industry, niche, and geography. For context, it can vary from$0.10 - $50 per 1,000 views.
The super general formula is:monthly traffic / 1000 * RPM.
The RPM varies from around $15 per 1000 impressions to $100 for niches such asinsurance and real estate. Let’s assume that crypto has anRPM between $30-50.
Using an extremely high-level estimation, I’m forecasting that; Etherscan’s ability to monetize, the fact that there are 4 different ad placements, and crypto’s higher RPM rate will net Etherscan between:
🔸 80 million page views per month. According toPlaywire, a 10 million page view should net a minimum of $25,000 per month. At this rate, Etherscan should net$200,000 per month.
🔸 8 million unique visitors per month. According to the Quora source above, 500,000 unique views on a gaming niche net $45,000 per month. At this rate, Etherscan should net$720,000 per month(assuming that crypto has at a minimum equal RPM with a gaming niche).
We have absolutely no public data on these numbers.
If we assume that Etherscan converts the following percentage of its unique visitors (8M) into buyers at the lowest rate ($199/month):
0.1% → 8,000 clients paying $199/month →$1.91M / year
0.5% → 40,000 clients paying $199/month →$9.55M / year
As for Etherscan’s Explorer-as-a-Service (EaaS), it is more of a one-time deal (perhaps with some sort of retainer fee). Most of the on-chain services listed on its website,token approvals, and blockscan chat are still in beta.
Thus, we’re guesstimating that this falls somewhere in the low 7 figure annually ($1-3M).
Headcount and Burn
Etherscan has29 employeesaccording toLinkedIn. LinkedIn classifies the top 5 “departments” as follows:
Let’s create a scenario to guestimate how much Etherscan needs to spend on the 5 departments listed above:
In total, for the 5 departments listed above, Etherscan needs to spend between$2.5M - $4.33Mannually.
However, it’s important to note Etherscanoperatesout ofMalaysia. This will substantially reduce salary expenditures. A more realistic assumption would put the annual headcount burn at around 50% of the rate stated above - bringing the tally to$1.25M- $2.15M annually.
As always, this number isjustthe headcount burn assessment. It doesn’t include other operational costs such as third-party vendors, office spaces, and many more.
Earnings
Our high-level estimation leads to the following:
Etherscan makes:$5.43M - $21.49M / year
Etherscan burns:$1.25M - $4.33M / year
Our back-of-the-napkin math leads to:
What's Next
It makes perfect sense for Etherscan to get into theinsightsbusiness.
They have all of the blockchain data they need to launch something similar to Dune’s dashboard or Nansen’s wallet tagging. This seems to be a relatively easy vertical for Etherscan to expand on without spending too many resources.
The fact that Etherscan is not capitalizing on this trend led me to believe that they’re already extremely profitable in the domicile that they conquer (raw blockchain data) and branding (website traffic/advertisem*nt dollar).
Etherscan is at a good place. They're outside of the US and they haven't launched any token yet. As the blockchain ecosystem matures, it would be interesting to see how the undisputed king of block explorers decides to enter the market.
