Make something people want, the new mantra of starter-upper types all over the world seems to have taken root. It’s a great little soundbite, and it’s the essence of the reason behind many start-ups that failed, they were making something but not something that people wanted.
You could do a lot worse than to have that tacked to the wall above your monitor. It beats ‘build it and they will come’ by a considerably margin.
What people want is not a guarantee for success either though. It’s merely a pre-requisite for developing traction, and traction may lead to something that you can monetize. Or it may not. A big audience by itself is not enough to be a business. Case in point for me is Youtube, as successful as it is - and in spite of bringing the founders a very nice windfall - it never was a business. The major thing that youtube will be remembered for is massive losses, legal trouble and to allow the Khan Academy to come in to existence. (and I think the latter makes up for much of the former, but that’s beside the point). (*see afterword)
I’d like to propose to amend the ‘make something people want’ to ‘make something people need’.
The main reason I have for that is that I believe strongly that if people (or companies) actually need your product that you’ll be in a far better spot to charge for your product. if you have something unique, and I need it my choices are simple: fork over the cash or do without it.
A nice example of such a company is salesforce. Another is ebay. Yet another is paypal (yes, ok, they’re ebay too now). And then there’s Amazon. You can be mad with them, you can love them or hate them. But whatever they do next you’ll be using them again tomorrow if only because there does not seem to be a viable alternative. Need trumps want any day, in fact need sometimes trumps active dislike and ‘do not want’.
If you’re aiming to be the next youtube then of course none of this applies to you, the ‘exit’ will be to sell your cashflow problems to the acquiring party. But if you plan to stay in business independently I’d ask you to concentrate on ‘need’ before ‘want’. It’s likely going to work a lot better for you.
The other day, I came across this blog post by Justin Vincent. He makes a number of very valid points and if you are wondering which of the three roads to the top you are going to take then I would like to suggest you read his post.
He does a good job of undoing some of the scorn heaped upon so-called ‘lifestyle’ businesses, and I found myself in agreement with almost all of it.
The one thing I disagree with is that the same knowledge that allows you to build a 10K/month business will also magically translate in to a 100K/month business, in my experience (having run both 10K and > 100K per month businesses) the larger business definitely requires more knowledge to operate successfully. The principles are the same but the devil is in the details, after all if there were no difference then there would be no reason why you couldn’t grow your 100K per month business to a million per month etc. In practice such differences do exist and all kinds of factors circumscribe the true potential of a business. But 10K per month should be fairly easily within reach of most people in the tech scene.
That said, it still is a pretty good read and I’d happily encourage you to check it out.
Reports that youtube is now ‘profitable’ circulate but I have a hard time finding actual figures that prove that youtube is now profitable on a year-to-year basis, but:
as recently as September 2010 then google CEO Eric Schmidt said that Youtube is now ‘closer to profitability’
this states “Analysts disagree whether YouTube is profitable, and Google won’t disclose YouTube’s finances except to say revenue more than doubled in 2010. Critics of its $1.65 billion purchase have melted away.
- this wired article says “Fast-forward almost four years and it looks like the Google team that was tasked with making YouTube profitable might have cracked the code. Were finally at a point where more traffic doesnt hurt us. It helps, says director of monetization Shishir Mehrotra.”
None of those are hard proof that youtube is in fact profitable, they may be, they may not be but even if they are profitable now it will be a very long time to make back the money that was pumped in to youtube to survive up to this point.
Search for Youtube profitable for more interesting reading on this subject.
If it takes a company like google to subsidize a project to the tune of multiple 100’s of millions of dollars for many years to get to profitability then it’s safe to say that going after a model like that is probably not for you.
Feel free to prove me wrong though! I’d like that :)