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Google and Facebook are often cited in this regard because they are _exceptions to the rule_. It's bad practice use them as the example.

by mvkel 15y ago

chrisacky 15y ago
If there are exceptions, then there isn't a rule. Everything we do is best practices and guess work, there isn't a scientific formula to being successful, what works with X, probably won't work with Y. It's just a probabilities game, and by and large, 99% of companies can't approach it the same was that Google and Facebook did. (FWIW I agree with you, just not the way you phrased it).
- StavrosK 15y ago
  That's just nitpicking, though. Here, "rule" means "what happens 99% of the time".
GFischer 15y ago
However, Fred Wilson (Venture capitalist) does advocate something of the sort: "You can't monetize web services very well until you have an audience of scale. Jason Calacanis suggests that 10mm monthly uniques is where you have scale. I think it can be less in some cases (highly targeted services) and more in some cases (social nets). But every ounce of time, energy, money, and brainpower you spend on thinking about how to monetize will take you away from the goal of getting to scale. Because if you don't get to scale, you don't have a business anyway. " http://www.avc.com/a_vc/2008/01/twitters-busine.html http://www.avc.com/a_vc/2008/01/twitters-busine.html
vibrunazo 15y ago
Just out of curiosity, can anyone give an example of a company had massive scale (10m mau), but then ultimately failed because couldn't convert them into payers? There are probably some, but I can't recall any. So I'd love to study them.
- mvkel 15y ago
  Maybe not 10m, but Kozmo comes to mind. They raised $250mm They had huge demand but expenditures were too high (doing stupid stuff like delivering packs of $0.50 gum) Also, Groupon? :D
- cube13 15y ago
  I guess we should define failure here. Is it basically bankruptcy, where the startup couldn't survive(or could barely survive) even after several rounds of funding? Or are we talking about situations where the startup is bought out, but just continues to lose money for the new parent company? Digg comes pretty close to the first definition. They had around that number of monthly uniques, and have pretty much lots most of the visitors(and therefore ad revenue) in the last few years. They hemorrhaged money and weren't able to find a buyer. It hasn't completely failed, especially after the reorg they did a couple of years ago, but it's definitely a shadow of it's former self. As for the second, I guess Youtube around 2009 might count, considering that they were still losing money for Google at that point(Credit Suisse's analysis said that they were losing around $475 million, and RampRate's analysis said $174 million). However, this is pretty much only a business failure, not mindshare, and Google was still willing to drop money into them to get them to profitability.
- phil 15y ago
  XMarks is a classic example -- in 2010 they announced that they would be shutting down because their user base (2m mau or so?) did not bring in revenue to support operations. In the aftermath of the announcement they sold, presumably at a fire sale price.
teyc 15y ago
+1 And these companies have big hockey stick curves and the right amount of funding It is a high risk trajectory.

Google and Facebook are often cited in this regard because they are _exceptions to the rule_. It's bad practice use them as the example.

by mvkel 15y ago

Google and Facebook are often cited in this regard because they are _exceptions to the rule_. It's bad practice use them as the example.

chrisacky 15y ago

If there are exceptions, then there isn't a rule. Everything we do is best practices and guess work, there isn't a scientific formula to being successful, what works with X, probably won't work with Y. It's just a probabilities game, and by and large, 99% of companies can't approach it the same was that Google and Facebook did. (FWIW I agree with you, just not the way you phrased it).

StavrosK 15y ago
That's just nitpicking, though. Here, "rule" means "what happens 99% of the time".

GFischer 15y ago

However, Fred Wilson (Venture capitalist) does advocate something of the sort: "You can't monetize web services very well until you have an audience of scale. Jason Calacanis suggests that 10mm monthly uniques is where you have scale. I think it can be less in some cases (highly targeted services) and more in some cases (social nets). But every ounce of time, energy, money, and brainpower you spend on thinking about how to monetize will take you away from the goal of getting to scale. Because if you don't get to scale, you don't have a business anyway. " http://www.avc.com/a_vc/2008/01/twitters-busine.html http://www.avc.com/a_vc/2008/01/twitters-busine.html

vibrunazo 15y ago

Just out of curiosity, can anyone give an example of a company had massive scale (10m mau), but then ultimately failed because couldn't convert them into payers? There are probably some, but I can't recall any. So I'd love to study them.

mvkel 15y ago
Maybe not 10m, but Kozmo comes to mind. They raised $250mm They had huge demand but expenditures were too high (doing stupid stuff like delivering packs of $0.50 gum) Also, Groupon? :D
cube13 15y ago
I guess we should define failure here. Is it basically bankruptcy, where the startup couldn't survive(or could barely survive) even after several rounds of funding? Or are we talking about situations where the startup is bought out, but just continues to lose money for the new parent company? Digg comes pretty close to the first definition. They had around that number of monthly uniques, and have pretty much lots most of the visitors(and therefore ad revenue) in the last few years. They hemorrhaged money and weren't able to find a buyer. It hasn't completely failed, especially after the reorg they did a couple of years ago, but it's definitely a shadow of it's former self. As for the second, I guess Youtube around 2009 might count, considering that they were still losing money for Google at that point(Credit Suisse's analysis said that they were losing around $475 million, and RampRate's analysis said $174 million). However, this is pretty much only a business failure, not mindshare, and Google was still willing to drop money into them to get them to profitability.
phil 15y ago
XMarks is a classic example -- in 2010 they announced that they would be shutting down because their user base (2m mau or so?) did not bring in revenue to support operations. In the aftermath of the announcement they sold, presumably at a fire sale price.

teyc 15y ago

+1 And these companies have big hockey stick curves and the right amount of funding It is a high risk trajectory.