Ask HN: Examples where you make something people want, but are unable to profit?
I'm asking this to test the YC mantra "make something people want."
73 comments
Any non-excludable goods, which includes public goods (which are also non-rivalrous) are very difficult to profit from. These include lighthouses, laws, national defense, clean air and water, a sustainable population of fish and game, and so forth.
I say "very difficult" because search engines, for example, are non-rivalrous and non-excludable in practice. They are "public goods". The trick is, access to the attentions of and data generated by search engine users is excludable, and this is the good that Google actually sells. But any sort of non-excludable good from which your consumers cannot generate an excludable good you can sell for others would be unprofitable.
Programming languages (mentioned by another post) are another good example of a public good: they are non-rivalrous, and while they may be excludable as long as you sell the only compiler/interpreter/runtime and sue everyone else who writes a different compiler/interpreter/runtime, in practice no one will pay for a programming language anymore so you have to make it non-excludable for it to even exist in the outside world. Likewise, Google is probably excludable in the sense that they can set up a paywall before you use it, but in practice Google has chosen to make the search engine non-excludable and it's hard to see how a paywalled search engine would work (though I won't rule it out as a possibility).
I say "very difficult" because search engines, for example, are non-rivalrous and non-excludable in practice. They are "public goods". The trick is, access to the attentions of and data generated by search engine users is excludable, and this is the good that Google actually sells. But any sort of non-excludable good from which your consumers cannot generate an excludable good you can sell for others would be unprofitable.
Programming languages (mentioned by another post) are another good example of a public good: they are non-rivalrous, and while they may be excludable as long as you sell the only compiler/interpreter/runtime and sue everyone else who writes a different compiler/interpreter/runtime, in practice no one will pay for a programming language anymore so you have to make it non-excludable for it to even exist in the outside world. Likewise, Google is probably excludable in the sense that they can set up a paywall before you use it, but in practice Google has chosen to make the search engine non-excludable and it's hard to see how a paywalled search engine would work (though I won't rule it out as a possibility).
Paywalled search can definitely work, given that you are searching an exclusive data set. Look to Lexis Nexis.
But when a non-paywalled alternative comes about (see Google Law), it threatens to eat its lunch.
I think people view for-pay information brokerage as unfair, unless it comes with service. If it's something they know costs the other party 0 marginal cost to provide, people start resenting them, which causes the paywalled service to hurt doubly hard when a free alternative comes about - even if they follow to free, people might stay away out of spite.
I think people view for-pay information brokerage as unfair, unless it comes with service. If it's something they know costs the other party 0 marginal cost to provide, people start resenting them, which causes the paywalled service to hurt doubly hard when a free alternative comes about - even if they follow to free, people might stay away out of spite.
I think people view for-pay information brokerage as unfair, unless it comes with service. If it's something they know costs the other party 0 marginal cost to provide, people start resenting them
I think you are projecting your own personal views, or possibly views which are non-negligible in your social circle of tech-rich cash-poor twenty something males, onto the population at large. Empirically, people will pay for LOTS of things that have zero marginal cost. A short list: airplane tickets, gym memberships, list of bankruptcy sales in Chicago (my dad is a real estate agent and has had stacks of this weekly publication for as long as I can remember -- that info is expensive and worth every penny), and WoW.
I think you are projecting your own personal views, or possibly views which are non-negligible in your social circle of tech-rich cash-poor twenty something males, onto the population at large. Empirically, people will pay for LOTS of things that have zero marginal cost. A short list: airplane tickets, gym memberships, list of bankruptcy sales in Chicago (my dad is a real estate agent and has had stacks of this weekly publication for as long as I can remember -- that info is expensive and worth every penny), and WoW.
I may be, but I don't think most people think of those things you list as having 0 marginal cost, as they're tangible goods or services (although the listings one is a bit sketchy, I think a lot of people view being charged a lot for access to that sort of info as highway robbery, despite its very real value). The cost of information has been anchored at $0 repeatedly over the past decade, and we now use that reference point when deciding the monetary value of new info.
I think I was probably off the mark in my post. It's likely not the marginal cost they're considering, it's likely just that $0 is the new reference cost for info in many people's minds.
I think I was probably off the mark in my post. It's likely not the marginal cost they're considering, it's likely just that $0 is the new reference cost for info in many people's minds.
Is Matlab an exception to your statement on programming languages? They are following your hypothetical of owning the only implementation, and people are certainly willing to pay for that proprietary language + implementation rather than use another. Arguably being a somewhat niche language makes its market and competition smaller, but it's a very large niche, spanning several industries and many academic institutions.
Alternatively, Matlab may succeed because it straddles a couple of different categories. It could be argued to be a language, an implementation of that language, a development environment... since it's very goal-oriented, it could even be seen as a more traditional piece of software with an unusually hard-core scripting language.
Alternatively, Matlab may succeed because it straddles a couple of different categories. It could be argued to be a language, an implementation of that language, a development environment... since it's very goal-oriented, it could even be seen as a more traditional piece of software with an unusually hard-core scripting language.
Matlab is predominantly used by engineers and scientists rather than programmers. I suspect it is an exception to most general rules that govern programming languages and environments for this reason.
All good are partially non-excludable and partially excludable (e.g. you can exclusively sell the name of a lighthouse; restaurants which exclusively sell food give away for free, to the whole city, the option to buy food. This free option has concrete value, e.g. houses near many good restaurants, or one amazing one, are worth more.). It's just a matter of degree. And solved with a little creativity.
And you can do the google trick with programming languages: Microsoft's C#, which supports its platform. Another example is postscript - a highly specific language tied to a system.
You can also make money by implementing a language that someone else created: java vendors e.g. BEA Systems; C++ vendors e.g. Borland; and SQL vendors.
You can also make money by implementing a language that someone else created: java vendors e.g. BEA Systems; C++ vendors e.g. Borland; and SQL vendors.
"Make something people want" is primarily valuable as a negative test:
You probably won't profit if you make something people don't want.
But making something people want doesn't correlate nearly as well with whether or not your product is commercially viable.
You probably won't profit if you make something people don't want.
But making something people want doesn't correlate nearly as well with whether or not your product is commercially viable.
And there are oh so many ways to totally botch the execution. You can make the best thing in the world and still fail because you couldn't market it and no one ever knew that it existed.
And even if you do market well, the timing may be completely off or you may have bad luck.
True. Capturing value is not the same as creating value.
But if you don't create any value, it's easy to capture it.
But if you don't create any value, it's easy to capture it.
[deleted]
Medicine for the 3rd world. It's a big problem.
Can you point to someone who developed a useful medicine for 3rd-world diseases and failed to make money?
Few diseases are confined to only extremely poor areas. Medicines against malaria, for example, are a robust business. If you developed a good vaccine, you could make a lot of money selling it in Brazil, China, India, and other developing countries. The reason there is no vaccine isn't because there's no money to be made, but people have actually tried pretty hard and been unable to develop vaccines that aren't as risky as the disease itself.
Few diseases are confined to only extremely poor areas. Medicines against malaria, for example, are a robust business. If you developed a good vaccine, you could make a lot of money selling it in Brazil, China, India, and other developing countries. The reason there is no vaccine isn't because there's no money to be made, but people have actually tried pretty hard and been unable to develop vaccines that aren't as risky as the disease itself.
The point is that most customers in the Third World are not able to afford the price point that makes such medicines profitable.
The workaround since 2000-01 or so has been differential pricing or licensing for the Third World. But this took decades to get agreements for that to happen.
Here's a good page about the situation with HIV drugs. http://www.avert.org/generic.htm
The workaround since 2000-01 or so has been differential pricing or licensing for the Third World. But this took decades to get agreements for that to happen.
Here's a good page about the situation with HIV drugs. http://www.avert.org/generic.htm
I would argue that if a medical device/drug was developed for the third-world as opposed to being a developed world hand-me-down, it would be profitable. Good book on the topic "Fortune at the bottom on the pyramid".
Programming languages and tools.
There are some counter-examples (e.g. Franz, LispWorks), but I think it's best to just consider this sort of work a labor of love.
There are some counter-examples (e.g. Franz, LispWorks), but I think it's best to just consider this sort of work a labor of love.
It costs $90 year to have the tool to get in iphone appstore.
The game console dev kits are very expensive (at least they have been when I looked)
Is MS Visual Dev thingy free?
There is free version of probably every language out there. But, that doesn't mean people aren't making money selling that language. Cobol compilers come to mind.
The game console dev kits are very expensive (at least they have been when I looked)
Is MS Visual Dev thingy free?
There is free version of probably every language out there. But, that doesn't mean people aren't making money selling that language. Cobol compilers come to mind.
Visual Studio "Express" is free, but doesn't have many of the features of the for-pay versions.
http://www.microsoft.com/exPress/download/
(Link also includes downloads for betas of Visual Studio 2010 & trial edition of for-pay versions.)
Visual Studio is quite expensive and yet it is selling very well to enterprise markets.
The trick is to pick the right customers.
The trick is to pick the right customers.
I think you meant "The trick is to own the platform and then sell the tools you must use to develop on it at an absurdly high price."
Which platform is that? Windows? .NET? It's perfectly possible to target both without using Visual Studio. Microsoft has somehow[0] convinced people that using VS makes their lives easier. Lots of people pay for IntelliJ too. I think the trick here is to get people hooked on languages that have a lot of boilerplate and therefore require a powerful IDE to be usable, then sell people the IDE.
[0]Based on personal conversations with individual VS users, it actually appears that VS is what many developers want or think they want, not just something forced on them by management.
[0]Based on personal conversations with individual VS users, it actually appears that VS is what many developers want or think they want, not just something forced on them by management.
No, I wrote exactly what I meant. As others have pointed out you can use many other free tools, or even free versions of Visual Studio itself.
People pay absurd money (up to $10k per seat) for Team Edition which provides entire enterprise developer/tester/database/architect/team workflow instead of just IDE.
If you build something truly valuable people will pay, so long as they have the money. Like I said, the trick is to find the right people.
People pay absurd money (up to $10k per seat) for Team Edition which provides entire enterprise developer/tester/database/architect/team workflow instead of just IDE.
If you build something truly valuable people will pay, so long as they have the money. Like I said, the trick is to find the right people.
Microsoft's compilers are generally free. What you pay for is the IDE. Even those come in free 'Express' editions.
First, many of the enterprises don't pay all that much for Visual Studio. And, having previously been in the compiler business, I don't think very many compiler producers make any money at that game. If you could see the internal cost numbers for what it takes to put Visual Studio together and to maintain it, it would be hard to see how they could anywhere near profit from it. Back in the day, there was a report that they had 50 programmers on the C++ compiler alone.
Perhaps Walter Bright can make money writing compilers, but that would be an exception. I think that you will find that compilers and other language tools are sold in conjunction with something else.
Perhaps Walter Bright can make money writing compilers, but that would be an exception. I think that you will find that compilers and other language tools are sold in conjunction with something else.
Visual Studio Express is free.
Plenty of tenured professors and very well-paid research associates create these sorts of things...
UC, MIT, Bell Labs, Google, Microsoft, Sun, ... the list goes on and on.
UC, MIT, Bell Labs, Google, Microsoft, Sun, ... the list goes on and on.
I give out free $100 dollar bills. People want it, I don't profit.
Not monetarily, but i'm sure you engender a lot of goodwill. By the way, i am in the business of accepting free 100$ bills, perhaps we should meet? ;)
"Make", not give.
A quibble really. I could make diamond rings that are worth $1000 and sell them for a $10. Lots of people would want them.
There are a million easy ways to make $0.10 by spending $1.00
There are a million easy ways to make $0.10 by spending $1.00
I make counterfeit $100 bills and give them out. People want them. I don't profit. :-p
We really need to remember that "make something people want" is a specific piece of advice relative to building a product. We get all giddy about this advice because as programmers, that's what we love to do; build things. But a business depends on many many more things than just your product. I'd argue that a company's product is, at max, 30% of what matters to the profit-generating system as a whole.
So to answer your question: it is irrelevant. And I encourage you to separate "product" from "profit". Because if you want to make profits, you need to master business and marketing. Making products is for those programming guys. The great thing about HN, is that we think we can do both ... and we can! - Just remember that they are different hats for a reason.
=)
So to answer your question: it is irrelevant. And I encourage you to separate "product" from "profit". Because if you want to make profits, you need to master business and marketing. Making products is for those programming guys. The great thing about HN, is that we think we can do both ... and we can! - Just remember that they are different hats for a reason.
=)
Twitter
I very strongly doubt that they will be unable to profit. They've just managed to rack up so much funding without doing so that they haven't made it a short time priority yet. If they had no master plan for huge profitability only idiot VCs would continue investing.
If anyone has an idea for how they will make money, they are keeping them to themselves. I haven't heard of a single plausible idea.
Twitter will make money using premium accounts, selling access to the stream, selling their own premium clients, and selling targeted advertising.
You know they have considerable income right now, right?
Still, VCs can waste a lot of money on a bad idea with no real plans of revenue generation. Boo.com & Napster were both great examples who burned around $120m each (Boo's revenue strategy was apparently to spend $120m wooing big names in the fashion industry and throwing parties, whereas Napster's strategy was to spend $120m getting sued for enabling music theft).
What I've found is that there's almost always some people that want any particular thing. The two really big questions are 1) How many of them are there? 2) Can you make money off them?
#1 is much tougher. If you're in a niche inside a niche inside a niche and you end up with 10 paying customers sending you $20/mo it's technically "working", but too small to be worth it.
#2 is easier. The situation Twitter is in. They have tons of users and now it's purely a matter of ingenuity to come up with a way to profit in a big way.
#1 is much tougher. If you're in a niche inside a niche inside a niche and you end up with 10 paying customers sending you $20/mo it's technically "working", but too small to be worth it.
#2 is easier. The situation Twitter is in. They have tons of users and now it's purely a matter of ingenuity to come up with a way to profit in a big way.
It depends on your definition of profit. You can make something people want and end up with a business that makes $10K profit, but you won't be quitting your job to run that business.
If that's $10K profit after paying your employees and yourself reasonable salaries, then you're off to a sustainable start, and should stick it out. You're probably still growing, and if your marginal costs are not too high, any further growth should be almost pure profit.
If it's $10K without paying yourself, then you've got some work to do, but if you can live lean off your savings, you may still be able to improve the situation to the point where the business is sustainable or better.
If it's $10K before you pay your employees, find a new business, this one's not going to happen.
If it's $10K without paying yourself, then you've got some work to do, but if you can live lean off your savings, you may still be able to improve the situation to the point where the business is sustainable or better.
If it's $10K before you pay your employees, find a new business, this one's not going to happen.
Fully on demand cable television. So many people tell me "I'd love it if I could just pay per channel and forget about the other channels."
That got me thinking it may be something to exploit. Not so, with infrastructure costs swallowing up so much of the potential profits. People will just have to deal with all the channels they end up paying for. So, it's either the internet or bust if you don't want to play the cable game.
That got me thinking it may be something to exploit. Not so, with infrastructure costs swallowing up so much of the potential profits. People will just have to deal with all the channels they end up paying for. So, it's either the internet or bust if you don't want to play the cable game.
http://mbusreloaded.com/umbus -- several hundred people use it every day, all of them cheap/lazy college students who aren't going to pay for the privilege. The value of advertising on the system seems to be barely greater than costs (a few tens of dollars per month) and the current advertiser is behind on payments.
Jury is still out, but free/freemium music services look hard. (People don't seem to want subscription services.) lala sold allegedly because they weren't getting to profitability fast enough, imeem struggled, and Pandora needed an act of the United States Congress to deal with sharp increases in streaming royalties.
A huge thing to note, even with a large number of unprofitable cases, is not that the YC mantra is flawed, but more likely systems may not yet be in place to facilitate profitability. For example, if there were an awesome micropayment solution I'll bet a lot of currently unprofitable sites could find profitability.
Agreed - I think the minimum viable visa charge (due to high minimum fee) and the increased abandonment rate due to the hassle of using your CC is holding a lot of things back.
I think this is a very necessary startup, but one that's going to be very difficult to pull off well, and will require serious cash.
I think this is a very necessary startup, but one that's going to be very difficult to pull off well, and will require serious cash.
There are a lot of broken bodies on the micropayment road. Millicent & Peppercoin come to mind to start. Maybe the world has changed since then, but if you were doing a company on micropayments and came to me, I'd want a clear answer as to what you would do that everyone else did not.
You're ignoring the fact that 'want' is just one of many considerations people make when spending money. Things like 'need' and 'affordability' are going to factor in too. Want is probably just the strongest.
I probably should have given another example, as micropayments was just one. Another example would be having a self-serve ad space selling system where sites could negotiate directly with advertisers rather than rely on AdSense percentages.
4chan is probably the best example of this. Loads of people want an image board but it isn't profitable.
It's skirting profitability though. From http://www.4chan.org/news/?all#95
"We've long since shed the notion of recouping costs through donations, and instead turned to ad revenue for covering operating expenditures. Our entry into the wild and not-so-wonderful world of advertising has been mixed. We've added more ad positions to the site over the years to offset rising overhead and been bounced around between so many ad networks and account managers that I'd be hard pressed to list them all. But we've succeeded—4chan is still here, after all."
"We've long since shed the notion of recouping costs through donations, and instead turned to ad revenue for covering operating expenditures. Our entry into the wild and not-so-wonderful world of advertising has been mixed. We've added more ad positions to the site over the years to offset rising overhead and been bounced around between so many ad networks and account managers that I'd be hard pressed to list them all. But we've succeeded—4chan is still here, after all."
I was curious - apparently 4chan costs upwards of $85k to run... http://www.4chan.org/faq
Making something people want : easy.
Making something people want enough to pay what it costs to create it : hard.
Making something people want enough to pay what it costs to create it : hard.
Amazon is losing $2 on each e-book. Sometimes forward thinking innovations take a while to get profitable. Sometimes the market is too small. There may be 5 people who want it, but it costs more than they can afford.
Discussed in: http://news.ycombinator.com/item?id=979905
The CrunchPad? Ignoring the legal problems, it sounded like people would buy it at cost but with any markup it would be too expensive.
It's a tautology (how do you know they want it? They're willing to buy it!), but a useful one.
When the cost of production exceeds the market value you are unable to profit.
I think a better motto is "Make something people want to pay for."
The problem with that is that people will always want to pay less.
Free software. (but only if you confuse the two meanings of free)
Charles Goodyear
Wikipedia needs 7mm in donations but only has raised like 2mm so far.
Hiphopgoblin had a bunch of people who proclaimed their love for the site, but I doubt any one of them would have paid cash for it. Maybe I could have cooked up some sort of new media advertising plan had I realized enough traffic, but I decided to abandon..
People's love is a revealed preference when they vote with their wallets.
Hiphopgoblin had a bunch of people who proclaimed their love for the site, but I doubt any one of them would have paid cash for it. Maybe I could have cooked up some sort of new media advertising plan had I realized enough traffic, but I decided to abandon..
People's love is a revealed preference when they vote with their wallets.