Ask HN: Enough profit to replace a day job?
As far as i know, a successful startup is supposed to make you rich or well off, but what about a web app that brings enough profit to replace your day job? I've been programming for about 6 months and i don't have nearly enough experience to venture into the real startup world. Is the failure rate still really high for web apps that make, let's say, $1000-$2000 profit a month or are there tons of these, but we just never hear about it because it's so common? Can web app revenue stay stable or are web apps that make at least $1000 profit/month "doomed" to eventually grow substantially?
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Can web app revenue stay stable or do web apps that make at least $1000 profit/month "doomed" to eventually grow substantially?
The user base of most web apps is driven largely by epidemic effects: Most new users are "infected" by a previous user, either as a feature of the application (e.g., paypal's create-an-account-to-receive-your-money) or via old-fashioned word of mouth. As such, the growth should look approximately like a logistic curve.
In general it takes at least 5 years to reach the saturation point on the logistic growth curve; google reached that point a few years ago, and facebook is reaching it now. Prior to that point, you're still growing approximately exponentially.
Which is all a long-winded way of saying: If it takes you 5 years to reach $1k/month in profits, you might end up staying there; but if you can reach $1k/month in 2 years, you're probably going to end up a lot bigger than that.
The user base of most web apps is driven largely by epidemic effects: Most new users are "infected" by a previous user, either as a feature of the application (e.g., paypal's create-an-account-to-receive-your-money) or via old-fashioned word of mouth. As such, the growth should look approximately like a logistic curve.
In general it takes at least 5 years to reach the saturation point on the logistic growth curve; google reached that point a few years ago, and facebook is reaching it now. Prior to that point, you're still growing approximately exponentially.
Which is all a long-winded way of saying: If it takes you 5 years to reach $1k/month in profits, you might end up staying there; but if you can reach $1k/month in 2 years, you're probably going to end up a lot bigger than that.
Google hasn't saturated the search market. They're doing something like 50 ~ 100% YOY growth in number of searches in Japan and the United States. This is partly due to getting their toolbars installed as the default in more places and part in moving the entire userbase towards search as an activity.
We're very quirky in our usage of computers. I live on the Internet, and Google reports that I've done in excess of 20,000 searches. That works out to about 25 a day. I'm going to guess many of us have roughly similar numbers. The average user, on the other hand, does something like 30 a month if you can believe Comscore et al. Move them a little from where they are to where we are and Google gets to make another round of money hats.
We're very quirky in our usage of computers. I live on the Internet, and Google reports that I've done in excess of 20,000 searches. That works out to about 25 a day. I'm going to guess many of us have roughly similar numbers. The average user, on the other hand, does something like 30 a month if you can believe Comscore et al. Move them a little from where they are to where we are and Google gets to make another round of money hats.
Google hasn't saturated the search market
I didn't mean to say that they had. Google awareness however, has saturated the market.
I'm dividing startup growth into two phases: First, an exponential "people become aware of your product" phase, and second a much slower "convince people that your product is useful / better than the competition / etc." phase.
How much growth you get in that second phase will depend on the market and your competitors, but it will never come close to the first phase -- and that first phase generally takes about 5 years.
Of course, none of this applies to you, since bingo cards don't really act like an internet startup -- you're getting traffic from google, not from your users saying "hey, there's this really cool website you should check out".
I didn't mean to say that they had. Google awareness however, has saturated the market.
I'm dividing startup growth into two phases: First, an exponential "people become aware of your product" phase, and second a much slower "convince people that your product is useful / better than the competition / etc." phase.
How much growth you get in that second phase will depend on the market and your competitors, but it will never come close to the first phase -- and that first phase generally takes about 5 years.
Of course, none of this applies to you, since bingo cards don't really act like an internet startup -- you're getting traffic from google, not from your users saying "hey, there's this really cool website you should check out".
You must also consider competition. Myspace's relative lack of competition catapulted it to the #1 spot within 3 years [1]. Facebook overtook it at Myspace's 5 year mark.
Alexa isn't scientific, but surely some inferences can be drawn from their data: [2]
If you feel you have a superior product, or that you could out-compete someone else, then consider quitting your day job. If you're making money, someone will form a cargo-cult version of your business. Be ready!
[1] http://en.wikipedia.org/wiki/MySpace
[2] http://www.alexa.com/siteinfo/myspace.com
Alexa isn't scientific, but surely some inferences can be drawn from their data: [2]
If you feel you have a superior product, or that you could out-compete someone else, then consider quitting your day job. If you're making money, someone will form a cargo-cult version of your business. Be ready!
[1] http://en.wikipedia.org/wiki/MySpace
[2] http://www.alexa.com/siteinfo/myspace.com
Wow, interesting analysis. But don't you this it is a too generic statement? A lot depends on type of product and type of market.
The author asked a very generic question, so I did my best to give him a very generic answer. :-)
Do you have a citation for the 5 year logistic growth curve? Or is it a 'common knowledge' thing.
That's the first time I've heard about it, I'd like to know more.
That's the first time I've heard about it, I'd like to know more.
No citation, I just pulled it out of the air based on thinking about big startups and where they seem to be at in the exponential / levelling off / saturation curve.
But it seems to be approximately right. It took 5 years (1998 -- 2003) for Google to claim the #1 spot for search engine market share; twitter launched 4 years ago and seems to be just reaching the point now where everybody is aware of it (so its growth now will be from increasing the awareness-to-signup conversion rate, not by making more people aware of it); and facebook launched 6 years ago and their growth (in users per day) seems to be slowing down now.
I'm not saying that companies can't grow after 5 years, of course; but there does seem to be a general tendency that the growth for a single product seems to peak at about that point.
But it seems to be approximately right. It took 5 years (1998 -- 2003) for Google to claim the #1 spot for search engine market share; twitter launched 4 years ago and seems to be just reaching the point now where everybody is aware of it (so its growth now will be from increasing the awareness-to-signup conversion rate, not by making more people aware of it); and facebook launched 6 years ago and their growth (in users per day) seems to be slowing down now.
I'm not saying that companies can't grow after 5 years, of course; but there does seem to be a general tendency that the growth for a single product seems to peak at about that point.
I just want to reinforce cperciva's last point. My observation of 100+ startups that I have worked with or known well is that the growth of a single product often peaks at year 4 or 5. After that, it tails off. Good companies are the ones that keep the innovation going so that there is a new product that continues to drive value for the company around that time.
Apple is probably the most obvious and clear example of this (iPod - 2001, iPhone - 2006, iPad - 2010), but the pattern holds true in many software companies I know.
If Apple doesn't come out with something arguably innovative around 2014-2015, then it's time to sell, then?
Self confidence is not a sin. You are no less well prepared than many folks here (my previous management experience was a WoW guild, and many quite talented folks go to YC straight from undergrad).
I know some folks with software that fits your description, but most either consider it a failure or have it on autopilot. They typically do not talk too much about it. Absent putting something on autopilot I think that certain dynamics of Internet marketing favor sustained growth over statis but there are plenty of examples of either. For example, an app reliant on Google will tend to grow automatically over time as the site accumulates trust and Google grows the search pie. All bets off on app store.
Do not assume existence of a profit cap. Google does not stop sending traffic after you hit your projections.
I know some folks with software that fits your description, but most either consider it a failure or have it on autopilot. They typically do not talk too much about it. Absent putting something on autopilot I think that certain dynamics of Internet marketing favor sustained growth over statis but there are plenty of examples of either. For example, an app reliant on Google will tend to grow automatically over time as the site accumulates trust and Google grows the search pie. All bets off on app store.
Do not assume existence of a profit cap. Google does not stop sending traffic after you hit your projections.
If you're not looking for a homerun, I suggest you look at niche markets.
I'm making about 15k/yr w/ my niche product: http://createyourproglang.com/. Where I live it's not enought to replace my job, but it's a nice complementary income.
There was a nice thread recently on HN about ways to find & test a niche market: http://news.ycombinator.com/item?id=1454221
I'm making about 15k/yr w/ my niche product: http://createyourproglang.com/. Where I live it's not enought to replace my job, but it's a nice complementary income.
There was a nice thread recently on HN about ways to find & test a niche market: http://news.ycombinator.com/item?id=1454221
This wouldn't necessarily have to be a web app. If you are talking "web" then it could be any monetized site. This could be a blog, informational site, simple ecommerce or even a collection of a number of each of the above to combine for the amount that you are looking at. Of course, you are likely going to have a smaller upside with a blog than you would with a web app. In other words, TechCrunch (a blog running on Wordpress) is a successful tech news site but it doesn't have the same potential as Facebook.
I don't see why there would have to be a high failure rate for web apps which might bring in 1 - 2K per month. That's a business and as long as it's paying for it's cost and your time then there would be no reason for it to fail other than flagging interest of the owner. That range for two developers with no other income would be a problem, but for someone who spends a few hours a week on the app and has a day job, then it might be a nice income boost.
I don't see why there would have to be a high failure rate for web apps which might bring in 1 - 2K per month. That's a business and as long as it's paying for it's cost and your time then there would be no reason for it to fail other than flagging interest of the owner. That range for two developers with no other income would be a problem, but for someone who spends a few hours a week on the app and has a day job, then it might be a nice income boost.
In many countries, 1/2000$/m is a full time income, not just a nice income boost :)
Including the United States, for many folks with high school education only. They rarely get 80pct yearly raises. We have it pretty good.
Well, talking about web businesses in general. I think there are a lot of these lifestyle web businesses around where people are making enough to support themselves, but are not crazy rich.
It's a bit of a contrast to the VC/silicon valley world where people get investments and try to build a massive business.
It's hard to quantify a failure rate when the cost of starting a web site is so low. I have 200+ domains, but only a few "real" websites. In some ways each of those un-used domains is a failure. :)
It's a bit of a contrast to the VC/silicon valley world where people get investments and try to build a massive business.
It's hard to quantify a failure rate when the cost of starting a web site is so low. I have 200+ domains, but only a few "real" websites. In some ways each of those un-used domains is a failure. :)
Well, talking about web businesses in general. I think there are a lot of these lifestyle web businesses around where people are making enough to support themselves, but are not crazy rich.
So true. Because the barrier of entry for most of these businesses is so low, you're competing against a huge pool for that $1k-$2k a month. You're competing against 3rd worlders to whom $1k-$2k is a TON of money. You've competing against stay at home moms for whom anything close to minimum wage they can do in downtime is perfectly fine, etc. You have to have something that makes your business not worth competing against for these people or they WILL do it for less.
So true. Because the barrier of entry for most of these businesses is so low, you're competing against a huge pool for that $1k-$2k a month. You're competing against 3rd worlders to whom $1k-$2k is a TON of money. You've competing against stay at home moms for whom anything close to minimum wage they can do in downtime is perfectly fine, etc. You have to have something that makes your business not worth competing against for these people or they WILL do it for less.
There's no magic, web apps don't just take on a life of their own.
To build a web business takes a lot of hard work, dedication and persistence, just like anything else in this world that's worthwhile.
To build a web business takes a lot of hard work, dedication and persistence, just like anything else in this world that's worthwhile.
Truly. Making that amount of money is non-trivial. The web is a chaotic, crowded place filled with free stuff. For most of us, it takes a clever idea and persistence to make anything over small change.
It's actually very easy to make a web service that makes a couple thousand dollars a month, if you stay away from 2 startup pitfalls:
1) Don't rely on advertising to monetize 2) Don't target it to consumers/end-users (if you're selling a web service, obviously this does not apply if you are selling an actual product)
There are many B2B niches right now that have terrible software solutions people are willing to pay for improvements to.
For example: About a year ago, I created a very niche web service for Internet marketers. It was basically a PayPal subscription tacked on to a few custom scripts I wrote to automate certain marketing tasks for myself. I didn't advertise it at all except for posting on a couple of Internet marketing forums I frequented. The site only had a few hundred visitors a month, however about 10% of those converted and became subscribers. Within a couple months, I had about 30 subscribers paying $50 a month to use the service.After I wrote the code for myself, the site required no work to maintain, the subscriptions were coming in on autopilot, it was an easy $1500 a month with no effort.
I was surprised at how easy it was to make a little extra money this way- the key was focusing on a very specific, small B2B niche, and creating a paid subscription service that was far superior to anything else that was available.
1) Don't rely on advertising to monetize 2) Don't target it to consumers/end-users (if you're selling a web service, obviously this does not apply if you are selling an actual product)
There are many B2B niches right now that have terrible software solutions people are willing to pay for improvements to.
For example: About a year ago, I created a very niche web service for Internet marketers. It was basically a PayPal subscription tacked on to a few custom scripts I wrote to automate certain marketing tasks for myself. I didn't advertise it at all except for posting on a couple of Internet marketing forums I frequented. The site only had a few hundred visitors a month, however about 10% of those converted and became subscribers. Within a couple months, I had about 30 subscribers paying $50 a month to use the service.After I wrote the code for myself, the site required no work to maintain, the subscriptions were coming in on autopilot, it was an easy $1500 a month with no effort.
I was surprised at how easy it was to make a little extra money this way- the key was focusing on a very specific, small B2B niche, and creating a paid subscription service that was far superior to anything else that was available.
How did you evaluate it was a small niche? Are you getting any growth in terms of customer signups per month?
It's a web service that only marketers running certain ads on a single ad platform would need, I know there's not that many people doing things this way.
At the same time, since my target audience was so well defined, I could quickly build a service that would do exactly what they need compared to broader, non specialized services.
At the same time, since my target audience was so well defined, I could quickly build a service that would do exactly what they need compared to broader, non specialized services.
As far as i know, a successful startup is supposed to make you rich or well off, but what about a web app that brings enough profit to replace your day job?
That's an interesting perception. I have a web-based startup and I'm located in the Midwest. There is a huge entreprenuerial scene here, but web-based startups are as rare here as elevation changes.
Of all the entrepreneurs I know here, the vast majority of them make just enough to get by with a little stability, and you'd be hard-pressed to find someone who doesn't consider that a success.
I think a web-app making $1k-$2k a month with relative stability is a great thing to have, a good source of income, and even potentially a successful business, though by popular definition (as you pointed out), it probably isn't a "startup".
That's an interesting perception. I have a web-based startup and I'm located in the Midwest. There is a huge entreprenuerial scene here, but web-based startups are as rare here as elevation changes.
Of all the entrepreneurs I know here, the vast majority of them make just enough to get by with a little stability, and you'd be hard-pressed to find someone who doesn't consider that a success.
I think a web-app making $1k-$2k a month with relative stability is a great thing to have, a good source of income, and even potentially a successful business, though by popular definition (as you pointed out), it probably isn't a "startup".
Why do you want to do this? Because you don't want to work for the man, because its hard to service your web app and keep your day job? Do you have a family that is getting strained from this?
If you are young, on your own, and can manage it - keep both. Theres no reason to go independent soon as one of your apps goes Ramen profitable. Consider the situation where profit plummets quickly before you can figure out how to turn it around and you can't pay your bills. You'll be scrambling for a job and you may end up taking one you don't like.
Consider why you are thinking about doing this, and look at your own situations and emotions on the subject. We can give great advice but in the end you'll know you situation better than anyone else - even if you explain it.
If you are young, on your own, and can manage it - keep both. Theres no reason to go independent soon as one of your apps goes Ramen profitable. Consider the situation where profit plummets quickly before you can figure out how to turn it around and you can't pay your bills. You'll be scrambling for a job and you may end up taking one you don't like.
Consider why you are thinking about doing this, and look at your own situations and emotions on the subject. We can give great advice but in the end you'll know you situation better than anyone else - even if you explain it.
The obstacles are not as high as you think. I know many people have a rather poor opinion of affiliate marketing, but if you want to free up your time to work on interesting projects, I'd say it's definitely the fastest way to 1-2k a month, will very little maintenance required. If you'd like examples of folks who are doing it in a respectable, non-spammy way, see the following (and they are definitely doing well over 1-2k):
http://www.getinvisiblehand.com/
http://camelcamelcamel.com/
http://picclick.com/
http://www.getinvisiblehand.com/
http://camelcamelcamel.com/
http://picclick.com/
I wouldn't venture a guess about the actual failure rate, but I'd bet that there's way more profitable web apps (and correspondingly, lots of failed attempts) out there than you think. As a single or small team, $1-2k profit/month is pretty doable when your primary costs are just server hosting.
If you can find a way to leverage SEO or inherent viralness in your product, you can rely on a reasonable amount of consistency, but it maybe be averaged over months as opposed to month to month.
Some people can work on things on the side of their day job until they reach a good level. For us, we knew we wouldn't get anywhere with such non-committal focus (my co-founder was also in a different city which made it harder). We just made sure we had enough cash runway and quit. Reached profitability about 1.5 years after quitting and have been doing it for 4+ years now. It's amazing how much "business" you learn along the way when you're fighting to stay alive. It's not easy, and definitely more work than a normal job, but it's a fantastic experience.
If you can find a way to leverage SEO or inherent viralness in your product, you can rely on a reasonable amount of consistency, but it maybe be averaged over months as opposed to month to month.
Some people can work on things on the side of their day job until they reach a good level. For us, we knew we wouldn't get anywhere with such non-committal focus (my co-founder was also in a different city which made it harder). We just made sure we had enough cash runway and quit. Reached profitability about 1.5 years after quitting and have been doing it for 4+ years now. It's amazing how much "business" you learn along the way when you're fighting to stay alive. It's not easy, and definitely more work than a normal job, but it's a fantastic experience.
I'd venture out to say that we just don't hear about the smaller web-based businesses that make good money, because they aren't making millions or have millions of users (mainstream tech media only covers businesses like these). Similarly, a big VC deal is a sure way to get noticed.
So yes - I truly believe that is possible to build small, sustainable web-based businesses selling a digital product or service of sorts. And if you're clever about running your idea as a business, then there's no reason why you shouldn't be able to quit your day job in favour of working for yourself.
So yes - I truly believe that is possible to build small, sustainable web-based businesses selling a digital product or service of sorts. And if you're clever about running your idea as a business, then there's no reason why you shouldn't be able to quit your day job in favour of working for yourself.
Yes, there are tons of online lifestyle businesses that make enough to support their owners. And they don't necessarily take years to build. It just depends.
Generating significant revenue from advertising is tough because it requires a huge audience. But a lot of lifestyle businesses are driven but a more old-fashioned business model: you make something of value and charge a fair price for it. The failure rate of these businesses is lower than that of VC-style startups.
Good luck!
Generating significant revenue from advertising is tough because it requires a huge audience. But a lot of lifestyle businesses are driven but a more old-fashioned business model: you make something of value and charge a fair price for it. The failure rate of these businesses is lower than that of VC-style startups.
Good luck!
There are tons, we have our own frequently cited example of Patio11's Bingocardcreator, a lot of the small optional plugin apps you can buy for 37 signals products and general tools like Balsamiq Mockups and Noble Samurai (flash apps). They're the ones I know of just reading this site, I'm sure there's a ton of b2b ones as well we don't know about.
But even with a simple web app you need to know a fair bit about a lot of different aspects of web programming. On the otherhand building one is one of the best forms of practice :)
But even with a simple web app you need to know a fair bit about a lot of different aspects of web programming. On the otherhand building one is one of the best forms of practice :)
If you take a look at patrick's bcc sales page http://www.bingocardcreator.com/stats/sales-by-month , it shows that it took him more than a couple of years to be profitable enough to comfortably quit his day job.
Do you know the Techzing podcast? One of the hosts has a freemium Twitter/social media tool that's generating $1k/month after one year of effort, between coding and marketing. You could listen to previous episodes to hear how it evolved.
Yes, there are quite a few sites that make 1/2000$/m, and yes, you rarely hear of them. That's not to say it's easy. It does tend to take some time to get there (ie. a few years).
The likelihood that your project will grow beyond what you want is very low. After all, you can always close it to new customers.
Our app (http://letsfreckle.com) was growing only slightly per month, until we really started promoting it. Now it's growing how we like.
But we could have coasted along at $5k/mo forever.
There are lots and lots of small web apps making a nice tidy living for their owners, but yes, they don't get talked about because it's not sexy enough for the tabloid nature of "startup" news coverage. Only the extreme win, extreme fail, and extreme weird (bingo cards, teaching your parrot to talk) get major traction over time.
Our app (http://letsfreckle.com) was growing only slightly per month, until we really started promoting it. Now it's growing how we like.
But we could have coasted along at $5k/mo forever.
There are lots and lots of small web apps making a nice tidy living for their owners, but yes, they don't get talked about because it's not sexy enough for the tabloid nature of "startup" news coverage. Only the extreme win, extreme fail, and extreme weird (bingo cards, teaching your parrot to talk) get major traction over time.
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