I was just scrolling TikTok one night, minding my own business. Then I get hit with this ad:
Got my attention. That song is super viral on TikTok right now (a key get views) and that device looks super interesting. Now that I am in the business of breaking down businesses, I decided to investigate this business a little more.
I clicked over to their website (www.lyghtorb.com). I inspected their page and found that they are on Shopify. I went ahead and purchased one for $29.99. My order number was 1189. If you know anything about Shopify, you know for any store the first order number is 1000. This meant I was the 189th order for LyghtOrb.com.
I made that purchase on 6/19/2021. It is now 6/30/2021 and I have not received any shipping updates for the product. I emailed them yesterday, and I have not received a response back. But since it was the end of the month, I wanted to check in to see what order they were up to now. I got order number #1222.
In 11 days, LyghtOrb has 33 orders. This shocked me. This ad has 383.7K views and 7401 hearts (likes). I thought for sure since this video was going somewhat viral, that the product would be selling like crazy. This only adds to my belief that its tough to make conversions as a brand on TikTok.
Business Model Breakdown
It appears this company is selling about 3 of these items a day. That’s just over $100 in revenue per day in the last 11 days. I can estimate they have generated just over $6K in revenue since they started their store (I would have to guess they got an early burst of orders and then it slowed down). At best right now they are on a run rate of $50K revenue for a year.
I went to go check if I could find any other advertising or selling channels for their product. I do not see them advertising on Facebook or Google. I also do not see them selling on Amazon. But I do see a ton of other sellers selling the same exact product on amazon:
This product looks like the classic dropship model. Find a product on Alibaba, spin up a website, find an advertising channel, and then dropship (which would explain why I have no shipping notifications for my first order).
Quick Search on Alibaba and I am able to find the exact product from multiple suppliers:
Looks like you can get this product for $10-$15 landed in the United States. Then shipping to me most likely will cost $5-$10. Which means this company is getting about $5-$10 contribution margin on every item sold. Not great but not terrible either.
TikTok Advertising Costs
Now LyghtOrb has to drive traffic profitably from TikTok and to their website. I have some experience with TikTok advertising (not successful at all). I have seen Click Thru Rates (number of people that click after seeing) about 1-2% on TikTok. And Cost Per Click around $0.15 – $0.45.
For this breakdown lets assume the best for LyghtOrb: 2% Click Thru Rate and $0.15 Cost Per Click.
The ad I have seen has 383K views. That means 7,660 people (2%) clicked through to the website. At $0.15 per click that is $1,150 of advertising costs.
As I said before it looks like LyghtOrb has generated about $6K in revenue. Most likely they are able to get these items landed in America for $15. That is about $3,330 in COGs and most likely another $1,998 in shipping the product to the final customer. Add in their advertising costs on TikTok and we are at just under $6500 in total costs.
It is a high likelihood that this operation is currently losing money. And its most likely why they have upped their price from $29.99 to $34.99.
Is This A Scam?
Maybe. This has all the signs of a get rich quick dropping scheme. You see people on TikTok, YouTube, Instagram that want to teach you how to make money online. This is what is taught, find a product, spin up a website, drive traffic, and dropship the product. So it doesn’t necessarily mean its a scam, it could just be a poor idea of trying to generate money.
One thing is for certain this website/company will not be around long if they keep up the same operations. Slow shipping times, slow to respond to customers (if at all), and they have a phone number on their website that does not work. People lose trust with these types of websites real quick.
However on their site I found this statement:
It is not a complete lie because the video is going somewhat viral but they absolutely are not selling at a viral pace. It could be just a selling tactic for them but I do lose faith in a company when they resort to selling tricks like this.
I do hope I get my product, I think its a really cool device and I would like to try it out. But if I don’t, it will not be that big of a deal. I will either get a refund from the company or I will be protected by my credit card.