I hereby suggest that we, as the web development community, from herein going forward ban all references to uniques, pageviews and hits. The only metric that really matters to the creation of a viable web company is revenues – but more specifically profits. Not just revenues & profits, but revenues & profits per month. It’s not about making $1M in one month and nothing for the next 20 years (although, if that’s your MO, kudos to you). It’s about building a sustainable business that generates steady monthly revenues and profits.
It is very difficult for me to think of any other industry, in history, where you can build a product company with net margins (i.e. after all costs and expenses are taken out from revenues) of 50+% on a monthly recurring basis, with literally one or two people. Said another way, once the product is built, $0.50 of every dollar earned is profit. This assumes that you will be reinvesting X % of your revenues in marketing to drive future growth and building out your team. Of course, as you expand and grow your net margins will reduce significantly because of higher expenses (staff/HR, infrastructure, etc.). But the figures are incredibly attractive…almost Ponzi-like.
However, hits/pageviews/uniques don’t buy slippers for your daughter’s dance recital – so from here on out, I suggest we put more of a focus on revenues generated on a monthly basis – and not on those other metrics.
If your app/site is dependent on advertising and eyeballs, then this can’t fully apply to you. But I would suggest that perhaps you might want to look at other options & business models.
Writers Note: While I acknowledge that ‘banning’ the use of those metrics is a bit of hyperbole (there are good uses for them in some situations), I think we need a major shift in mindset from eyeballs (i.e. uniques and pageviews) to more business/profit centric metrics. Many people are uncomfortable with this idea, so I think we should start the shift now so that more and more people can get comfortable with it and migrate to it – for the long term viability of our industry’s sake. Profits don’t kill people. People kill people.
Marc Gayle is a tech entrepreneur based in Kingston, Jamaica and creating compversions with blood, sweat and care.
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Man I understand your premise and I think what you are saying works for brick and mortar businesses and most online businesses, BUT there is another section of tech start-ups that are created just to be sold later on down the road. Facebook, craigslist, myspace, even YouTube were all great ideas with no easy formula to generating income, in the beginning. Later these start-ups were sold to larger companies or created such a large user database, they created value.
My view is give me millions of uniques I will find a way to generate income, that is the value.
Chris,
I know the temptation is great to create the next MySpace, Craigslist, Facebook, and YouTube….but consider this. Would you bank the success of the rest of your career on the outcome of playing the lotto?
Well, that’s exactly what you are doing by trying to build one of those companies.
The hard cold reality is that those companies tend to be started in Silicon Valley, where there is a LOT of cash to help them sustain long periods of no revenues. We, outside of the Valley, don’t have that luxury.
For too long, we have been deluded by the fact that we can do that, when the odds are just too long. David Heinemeier Hansson gave a wonderful talk about this at Startup School in 2008 – https://www.youtube.com/watch?v=0CDXJ6bMkMY&feature=player_embedded – where he shows that the odds of you creating MySpace, Facebook, etc. are basically 1 in 1,000,000 or 1 in 10,000,000.
As opposed to trying to create a web business that generates a few million dollars in profits a year. What’s wrong with that? Why is that not sexy? The odds for you being able to do that are much more attractive, DHH says about 1 in 1,000 or 1 in 10,000. The less revenue you try to make, the better the odds.
What’s wrong with living in Jamaica on an application that is making $500K USD per year and just paying you and a few contractors for the work that they do?
That’s the whole point of this article. That’s what we need to shift our mindset to start doing – rather than trying to create the next MySpace, Facebook, Google, etc.
Good article.
Thing is, even Venture funded startups have a high failure rate and MOST investments do not meet expectations. In fact roughly 1/3 of investments will fail, 1/3 will perform below expectations and just 1 out 3 companies has a profitable exit.
The VC funds stay afloat by managing these losses while hoping for a very high return from just 2 in 10 deals.
I am talking more from a hobby/interest perspective, so I agree with you as far as any business you start needs to and should be formed to generate income. But there is another side to this where plenty of ideas are formed and executed online and they can be done with a small initial investment. If you have a little technical knowledge and some time you can see your projects come to life on the Internet, where if you did that as retail or brick and mortar it would require a larger investment.
That’s why I said thte value would come in once a company shows interest in your idea/project/start-up, or you have a large amount of unique views. It still depends on what you do with the views.
Don’t get me wrong a bad idea, online or brick and mortar is still a bad idea, remember facebook, craigslist, mix cloud, tech crunch and countless other big tech companies did not start in silicon valley, they were purchased by other companies or received investments from their online success, ie. Page views, members, etc.
I believe there are varying business models that will thrive in this global economy. Without question any web property with enough eyeballs and some traction will translate into cash from ads, affiliate marketing or even offline brand extensions.
I agree that what we ( Jamaican and Caribbean tecn entrepreneurs) need to focus on is to create lucrative niches instead of eating the dust of a MySpace or Facebook in a bid to become them.
If you’re thinking of doing a Jamaican project think of it in terms of how can you “export” this Jamaican thing to a larger audience OUTSIDE of Jamaica and make money that way.
@Chris, I hear you…I wasn’t really referring to hobbies…but more sustainable businesses. I think there is an abundance of people that want to create websites in Jamaica – for the seeming fame of it. Actually, I can’t think of one website (publicly launched) aside from a direct e-commerce site – that is made by a Jamaican that makes money from something other than ads. i.e. has a repeatable, sustainable business model. So all I am advocating is that we need to start re-framing the debate to start focussing on those apps/models.
@Jon – I don’t see how that comment relates to the article. Not being disgusting, but I honestly don’t see a correlation.
@Ingrid – extremely well said. The only thing I would modify a bit, is this notion of ‘exporting Jamaica’. I think that’s another thing that Jamaicans default to first. What I am advocating is just simply looking at problems that have decent sized markets, and then solving those problems and building sustainable companies. Then, I think by doing that, while we build our companies the Jamaican culture will shine through – just the way we do things.
This purpose of this article is to merely encourage a shift in mentality from the old way of thinking, towards adopting a more practical approach.
1. Identify a problem that needs solving
2. Is there a mass market / does your solution have wide appeal
3. Use technology to deliver your product/service as quickly and efficiently as possible, at lower cost
But if you happen to stumble upon the next MySpace or Facebook (and have the time and expertise to develop that idea on the side) then by all means!
In the meantime there’s a lot of opportunity to make money out there so don’t just sit idle while trying to dream up the next big thing.