You're assuming that people are willing to pay for your product up front for 12 months. If your price point is so small that an annual subscription is under $20, then it doesn't really make sense to charge monthly. I was speaking mainly for higher priced items.
I would definitely agree that there is a time and a place to debt-spend your way to profitability.
But consider the fact that some companies, even once they have hit the ball out of the park with thier original goal, still have no way to be profitable doing it.
At some point YouTube becomes a public service charity, not a business.
Lots of people want YouTube and it is on track to lose nearly $500 million this year. The fact that Google bought it doesn't mean they've created a business.
Build something people want. That's not good enough.
Build something people will pay for. That should imply enough want and will keep you around long enough to keep providing it.
I always notice people seem to read this book and assume that it's an instructional manual on how to live. It's just making points about the fundamentals of power.
I think it's a travesty that he was beaten down so bad by the negativity that he had to leave in the first place. This wasn't a vacation, it was a retreat - for the wrong reasons.
The reality is that the Web is so big now that you can start smaller firms for next to nothing in lots of niche markets. That doesn't mean VC is broken, it just means that smaller firms can exist without it. You're not going to start Amazon or NetFlix without follow-on capital. You can start a Web gadget company that makes $50k just fine though.
Agreed. Part of what I'm wondering is how viable the venture model is when the amount of revenue a category can generate gets quickly reduced from a free competitor that can operate at a fraction of the cost.
That's why I mentioned PlentOfFish. Probably not the best example, but if they are doing $10m as one of the leaders in the category, that doesn't spell a great future for others in the classified dating model. There are only so many of those major categories (like jobs, autos, dating) available.
The other trend is that advertising just doesn't pay the bills, even in mass amounts. I'm familiar with a handful of private companies that are doing millions of uniques per month and can't even pay a modest staff and support cost to stay afloat. The idea in the past was that with enough traffic the ad dollars would pay for free, but even that's not entirely working.
It's true about those who are endlessly fueled by creating something - that doesn't change. You might not do it for money, but I'm not sure that really matters.
I sold my first company in 1997 and am launching my 10th in January. It never gets old.
This is a very familiar path among hyper growth companies - the point where the expense of growth outstrips their ability to convert to revenue. As long as the site keeps growing and adding users, they will continue to have a strong ability to feed the beast with more raised capital. I mean really - how many other companies are growing like they are? Especially in this market. They should have no problems at all getting access to more capital.
I'm just not seeing the ad dollars add up. I know of sites doing millions of uniques per month that can barely earn enough in Adsense (not the best model) to pay the cost of servers and rent. At all of the sites that I've run (Go BIG Network, Swapalease.com, GotCast.com, etc.) the ad revenues are always an afterthought. If we had to survive on those $$ alone we would be screwed.
This whole line of thinking is great for companies as a whole. If it forces more companies to be more responsible and efficient with capital, I don't see a problem.
Not really the point when discussing the investor market. If companies don't have quick exits, the typical venture investor can't make their fund operate.
That said, I do believe building a company that creates value on the basis of selling a profitable product is all that matters.
At Swapalease we tried different offer combinations on our payment page including price ranges, price/offer packages, and free trials. Pretty much every price and feature combination you could think of. The point was that we needed to actually put those offers out there in order to understand what the market was truly ready for. When we ran surveys we basically got "we want to pay nothing". If we had gone off that feedback alone, we would have had a completely unrealistic idea of what the true price points would be. Instead we settled on $99 because we found that when an ACTUAL customer (not a survey responder) went to post their vehicle, that was the price point that had the highest take rate.
In regard to HOW we did it, we simply posted the pricing on the payment page. Prior to the payment page you only had to list your year/make/model to start your listing. We then tracked the number of people who went to the FIRST page (year/make/model) versus the number of people who went to the payment page (where the offer was presented) and got a sense for what offers had the highest conversion.
If you put in your year/make/model the idea is that you have interest. So theoretically the same person interested in listing their vehicle for free and the one listing for $500 are going to click to the next page. If we had presented price on the first page we would not have known whether users were bailing on the price or their intent.
I'll stick with my gallardo and continental gt. nothing compares to listening to a v10/12 rip the road apart! although admittedly, I do miss a stick shift.