@andrewchen

Get the newsletter · 2018 essays (PDF) · Featured · Recent

Eyeball companies versus revenue companies

I have been spending a lot of time talking about and thinking about starting a new business. With a multi-month “windup” process like an EIR, you have a surprising amount of time to think about your interests and constraints. I think typically, without a process like this, I’d probably start tinkering away on any ol’ thing that caught my eye – I simply enjoy building new ideas, and the decision-making process on this stuff is a week or two at most, and then a couple months of initial commitment, rather than six months of hard thinking.

In fact, at this point, I’ve probably had six projects I’d count as startup-y. Many of them didn’t go anywhere, but they were all designed to be used by other people, starting with a real estate app when I was 17. Here’s a quick list of things I spent multiple months on, with other people, starting at the top:

  • Apartment listings website focused on deep coverage in local markets (never shipped since we built too many features early on)
  • Automated used book/CD/media UPC scanner and software that instantly prices and posts listings on eBay (useful for used bookstores and charities)
  • BitTorrent search engine and client embedded in an Internet Explorer toolbar (launched on Slashdot!)
  • Video website for requesting and posting BitTorrent videos with one click client (doh, people don’t like downloading clients)
  • Video website for posting Flash videos with one click from the browser (built over a couple weeks, eventually getting 15k+ videos)
  • Social shopping website for bookmarking and sharing products (doh, don’t try to build stuff for women)

I also have lots of random start-and-stop personal projects, but I don’t think these count. I could write for hours on the lessons from each of these projects, but most importantly, I’m glad that we did them. We did manage to sell one of the projects, which is always nice. (Note that this makes me 1 for 6, woohoo!)

Starting a new company is a deeply personal endevour
First off, it’s clear that starting a new company requires a lot of introspection. I think it’s very easy (and misleading) to figure out areas where you can make money, and just build that. Instead, realize that building a company requires 4 or 5 years (YouTube aside) and you have to do it in an area where you have a lot of interest and energy.

For me, that means realizing that ultimately, I get excited by the idea that random normal people use the stuff I build, and that interaction seems really tangible and interesting. I spent the last 5 years of my life helping people invest in B2B companies and working in B2B online advertising, but you can see from my projects that they were all pretty consumer-oriented.

Building for yourself (at least somewhat)
Another opportunity that was really tempting was to build products for people significantly different than me. It’s easy to go to a Walmart and see the huge outdoors section, with BB guns, fishing gear, etc. and say, “gee, that’s a huge market that no one owns – I’m going to make a big Web 2.0 outdoors company!” The problem is, when you don’t relate much to the product, and instead relate onto to “people” and “money,” I think ultimately it’s very hard to be a good steward of that product.

It took me a while to be convinced of this: A couple months back, I ran my friend Max Noy through a couple concepts like this over brunch, and he said, “Andrew, I’m sure you can make money a bunch of ways but I don’t see that as your style.” He proceeded to talk about how to take things in your life and build products to solve those problems, and why hobbies are important and useful for this reason. Thanks Max, your advice has been helpful – now leave Microsoft already :)

Does building for eyeballs work?
Another interesting question is the current vogue of “building for eyeballs.” What this means is the temptation to make things that are useful for people without any business constraints. If you just wanted people, things like communication tools and media sharing are particularly useful for getting eyeballs.

I think this is a perfectly legit strategy, if you have an eyeball company RIGHT NOW. After all, two kinds of companies are getting exits – first, companies with lots of revenue and actual businesses. The second kind are eyeball companies where dollars are being spent in anticipation of media spend following eyeballs. Anything in the middle – small without a ton of revenue – aren’t going anywhere, whereas in the last bubble they were going public!

But if you are going to start a company now, and get to maturity in 3 or 4 years, you simply don’t know if a purely eyeball company can succeed. So I think the right thing to do is to use the tools that make an eyeball company successful – great interfaces, tapping user emotions, viral growth strategies – and apply them to areas that can clearly hold value even if our little mini-bubble pops.

Anyway, that’s where I net out after 2 months of thinking about the problem – good thing I can defer making a decision for a while longer!

PS. Get new updates/analysis on tech and startups

I write a high-quality, weekly newsletter covering what's happening in Silicon Valley, focused on startups, marketing, and mobile.