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Are you implying that it doesn't? How are you supposed to pay for all of those salaries? It seems like until they have the business model figured out it's not

by iigs 18y ago

Are you implying that it doesn't? How are you supposed to pay for all of those salaries? It seems like until they have the business model figured out it's not a business -- it's a charity.

alaskamiller 18y ago
0. Almost every major corporation leverage in order to grow in order to capitalize. 1. Companies don't have time-lines to figure out how to make money. Google didn't hit on AdSense until years later. Amazon didn't get out of silly pro-forma victories until after a long time. Who are you to claim they need to figure out a slam dunk business model? 2. Facebook has revenue, it has enough revenue to cover its overhead, what is it doing wrong? 3. It uses the ginourmous amount of investment money for infrastructure to grow bigger -- which for all intents and purposes they are experiencing, why is this faulty? 4. Calling it a charity seems like naivete or glibness on your part.
- kwamenum86 18y ago
  Bringing up examples where a bad plan happened to work is not evidence to follow the example. Google and Amazon took the hard road and it isn't like many companies survive and thrive with the "defer" model. If I create a website tomorrow where I give DRM-free music away legally on an ad-free site I will have 110 million users in 2 years. I will still lose millions a year and my business model will still read [fill in the blank]. Having a lot of users is not an excuse not to have a business model.
  - unalone 18y ago
    His point is that Facebook IS making revenue. And they do it from ads, mostly. If you gave away DRM-free music on an ad-supported site, and found a way to make people want to click those ads, you'd have a good model - providing you found a good way to provide DRM-free music that people wanted. For Facebook, the problem is that they took a long time getting an ad model to work. Their new one is a pretty effective one that takes advantage of the best parts of Facebook. I think they've rounded a difficult corner.
    - kwamenum86 18y ago
      They lose tens of millions each year because they are relying on cheesy display ads. That is not a sound business model. Ads are not going to support users on a social networking site like fb, in my opinion. revenue!=profit
      - alaskamiller 18y ago
        Are you familiar with their financials? Their sales decks? Their full range of advertising products? Are you aware of the revenue for other social networks? MySpace is going to clear $1 billion in revenue this year, a year faster than Google did. Facebook isn't doing the same numbers but they could, they limit the advertising in order to increase user experience and pursue non-traditional advertising to avoid having their site end up as a friendster. These are strategic decisions, and if it takes them 10 years to fulfill it then, great. That's on them. Maybe that sort of investment secures them 25 or 50 years of high margin profits. There is no textbook time-line for companies to follow.
        unalone 18y ago
        Yeah. I kind of understand the argument that Facebook wasn't running a very good system for revenue: until they released their targeted ad system, they were fairly hit-and-miss and their ads never seemed interesting. Now, they've done what Google did: they made their ads relevant and very much part of their bigger system. I've clicked a few ads, now, because I'm seeing things that I want to click. That's a big breakthrough for Facebook.
  - alaskamiller 18y ago
    Google and Amazon? Bad plans that happens to work? Your music site could be monetized in hundreds of various ways. You don't know which traditional ones would work if you don't try. And if you're big enough -- here's the magical part -- you can even get to try non-traditional routes that might just click. That's the whole point of drafting up business models and financial projections and replacing it when need be. But if you can get 110 million users in 2 years, can cover overhead for 200 top notch engineers and a legion of sales/bizdev team as well as world class infrastructure, hey, I'm not going to be calling you out for not having figured out how to make money on it.
sanj 18y ago
You say "charity" like it is something bad. From http://www.paulgraham.com/good.html http://www.paulgraham.com/good.html Another thing we tell founders is not to worry too much about the business model, at least at first. Not because making money is unimportant, but because it's so much easier than building something great. A couple weeks ago I realized that if you put those two ideas together, you get something surprising. Make something people want. Don't worry too much about making money. What you've got is a description of a charity.
- unalone 18y ago
  But Facebook isn't acting like a charity. Not like Wikipedia is. If they start asking user directly for money, I'd be incredibly surprised.
- iigs 18y ago
  I can't imagine PG directing that essay either toward a business the size of facebook now nor toward someone with the intent of telling them to get to facebook's size before having profit (let alone revenue) figured out. It's one thing to have an application and not have the price points figured out. It's an entirely different thing to not have any idea at all how you'd substantially monetize your customer base. In fact you might not even consider it a customer base but just consider it an expense base. Of course I've nothing against charities. I think I might have a problem with it if I invested with the expectation of a direct ROI. The parent to my comment seems to contend (evidently? am I being trolled?) that it's ok to be five years into a business without not only not having a notion of how you might profit, but not even having a clear source for a plausibly profitable source of revenue. On second thought spending money without the notion of a return is not even a charity, it's consumption.
  - alaskamiller 18y ago
    I'm not going to be putting words into pg's mouth but if he's not going to be ecstatic that a YC company can grow into Facebook's size in just 5 years then I don't know what could possibly excite him. He has, however, mentioned that he doesn't like the fact that companies take buyout offers within a year or two of starting up because that decision to sell prohibits them might limit them from being big, great, companies. Big companies that can walk into a room and just push people around because of their sheer size. Companies that can introduce and try out both traditional and non-traditional advertising methods, companies that can sign lucrative exclusivity contracts, companies that can get 250 million in the bank at insane valuations, companies that can establish connective tools with other major websites. Considering their competitive advantage and global reach of Facebook, I'm more willing to give them the benefit of the doubt for the time being. PS. People that disagree are trolls. Classy.

by iigs 18y ago

Are you implying that it doesn't? How are you supposed to pay for all of those salaries? It seems like until they have the business model figured out it's not a business -- it's a charity.

alaskamiller 18y ago

0. Almost every major corporation leverage in order to grow in order to capitalize. 1. Companies don't have time-lines to figure out how to make money. Google didn't hit on AdSense until years later. Amazon didn't get out of silly pro-forma victories until after a long time. Who are you to claim they need to figure out a slam dunk business model? 2. Facebook has revenue, it has enough revenue to cover its overhead, what is it doing wrong? 3. It uses the ginourmous amount of investment money for infrastructure to grow bigger -- which for all intents and purposes they are experiencing, why is this faulty? 4. Calling it a charity seems like naivete or glibness on your part.

kwamenum86 18y ago
Bringing up examples where a bad plan happened to work is not evidence to follow the example. Google and Amazon took the hard road and it isn't like many companies survive and thrive with the "defer" model. If I create a website tomorrow where I give DRM-free music away legally on an ad-free site I will have 110 million users in 2 years. I will still lose millions a year and my business model will still read [fill in the blank]. Having a lot of users is not an excuse not to have a business model.
- unalone 18y ago
  His point is that Facebook IS making revenue. And they do it from ads, mostly. If you gave away DRM-free music on an ad-supported site, and found a way to make people want to click those ads, you'd have a good model - providing you found a good way to provide DRM-free music that people wanted. For Facebook, the problem is that they took a long time getting an ad model to work. Their new one is a pretty effective one that takes advantage of the best parts of Facebook. I think they've rounded a difficult corner.
  - kwamenum86 18y ago
    They lose tens of millions each year because they are relying on cheesy display ads. That is not a sound business model. Ads are not going to support users on a social networking site like fb, in my opinion. revenue!=profit
    - alaskamiller 18y ago
      Are you familiar with their financials? Their sales decks? Their full range of advertising products? Are you aware of the revenue for other social networks? MySpace is going to clear $1 billion in revenue this year, a year faster than Google did. Facebook isn't doing the same numbers but they could, they limit the advertising in order to increase user experience and pursue non-traditional advertising to avoid having their site end up as a friendster. These are strategic decisions, and if it takes them 10 years to fulfill it then, great. That's on them. Maybe that sort of investment secures them 25 or 50 years of high margin profits. There is no textbook time-line for companies to follow.
      - unalone 18y ago
        Yeah. I kind of understand the argument that Facebook wasn't running a very good system for revenue: until they released their targeted ad system, they were fairly hit-and-miss and their ads never seemed interesting. Now, they've done what Google did: they made their ads relevant and very much part of their bigger system. I've clicked a few ads, now, because I'm seeing things that I want to click. That's a big breakthrough for Facebook.
- alaskamiller 18y ago
  Google and Amazon? Bad plans that happens to work? Your music site could be monetized in hundreds of various ways. You don't know which traditional ones would work if you don't try. And if you're big enough -- here's the magical part -- you can even get to try non-traditional routes that might just click. That's the whole point of drafting up business models and financial projections and replacing it when need be. But if you can get 110 million users in 2 years, can cover overhead for 200 top notch engineers and a legion of sales/bizdev team as well as world class infrastructure, hey, I'm not going to be calling you out for not having figured out how to make money on it.

sanj 18y ago

You say "charity" like it is something bad. From http://www.paulgraham.com/good.html http://www.paulgraham.com/good.html Another thing we tell founders is not to worry too much about the business model, at least at first. Not because making money is unimportant, but because it's so much easier than building something great. A couple weeks ago I realized that if you put those two ideas together, you get something surprising. Make something people want. Don't worry too much about making money. What you've got is a description of a charity.

unalone 18y ago
But Facebook isn't acting like a charity. Not like Wikipedia is. If they start asking user directly for money, I'd be incredibly surprised.
iigs 18y ago
I can't imagine PG directing that essay either toward a business the size of facebook now nor toward someone with the intent of telling them to get to facebook's size before having profit (let alone revenue) figured out. It's one thing to have an application and not have the price points figured out. It's an entirely different thing to not have any idea at all how you'd substantially monetize your customer base. In fact you might not even consider it a customer base but just consider it an expense base. Of course I've nothing against charities. I think I might have a problem with it if I invested with the expectation of a direct ROI. The parent to my comment seems to contend (evidently? am I being trolled?) that it's ok to be five years into a business without not only not having a notion of how you might profit, but not even having a clear source for a plausibly profitable source of revenue. On second thought spending money without the notion of a return is not even a charity, it's consumption.
- alaskamiller 18y ago
  I'm not going to be putting words into pg's mouth but if he's not going to be ecstatic that a YC company can grow into Facebook's size in just 5 years then I don't know what could possibly excite him. He has, however, mentioned that he doesn't like the fact that companies take buyout offers within a year or two of starting up because that decision to sell prohibits them might limit them from being big, great, companies. Big companies that can walk into a room and just push people around because of their sheer size. Companies that can introduce and try out both traditional and non-traditional advertising methods, companies that can sign lucrative exclusivity contracts, companies that can get 250 million in the bank at insane valuations, companies that can establish connective tools with other major websites. Considering their competitive advantage and global reach of Facebook, I'm more willing to give them the benefit of the doubt for the time being. PS. People that disagree are trolls. Classy.