Providence Equity Partners? $100m? This doesn't sound like a startup. And that means they won't get startup quality people to work on it. And that means they are doomed.
This is where NBC and Fox's content is going to be available online, so this company with no name will not be going away, unless it collapses before the launch. In the long term, the advertising revenues from NBC and Fox's online video should be very respectable.
As long as the shows are free to watch, it won't be a disastrous failure because there aren't many places to easily and legally watch online network TV. The best way to compete with piracy is to give your media away. If they insist on charging for everything, it'll fail.
Large groups of people aren't good at entrepreneurship. That doesn't mean a large corporation can't give a small group of people autonomy to go off and do their own thing. You don't get all of the benefits of being a startup, but you still get some of them.
I'm not sure those are examples of entrepreneurship as much as ruthless competitiveness. At least one of those defeats was proven to be done illegally. They're all over a decade old.
You ask Google, Apple, and Ubuntu whether Microsoft scares them.
I actually was not. Whether or not you approve of MSFT's tactics, you really can't accuse them of not being able to respond to market challenges.
Google may not be scared of them, but I would personally rather take my chances against NBC (for example) than go head to head with MSFT.
It won't be a YouTube killer but this could be an intelligent strategic move to segregate their own assets and block them from YouTube.
YouTube survives because most media companies don't have the balls to protect their own assets. By creating their own portal they can create what they can force people to the site because it has content people want to see. As long as it is free and easy to use, people will use it.
All of you haters are just clowns who don't understand how the real world works. PG is flat out wrong here.
You say I'm wrong, but in your first sentence you agree with me.
I'm not saying that this site will never get any visitors. Just that it will never be anything more than a site that happens to host the content of Fox and NBC-- i.e. no more than they could have got by simply putting their stuff on their existing sites, without starting a separate company as a joint venture.
If you're so sure I'm wrong, bet me. I'll be happy to bet you money if we can think of a sufficiently precise test.
No, you said it is "doomed". If your definition of doomed means that they are not going to be the #1 video sharing site on the internet, that's a pretty interesting definition of doomed. That definition would make the following companies "doomed":
- Yahoo
- Facebook
- BP
- Unilever
- Anyone else who isn't #1 in their space
Usually when people say "doomed", they imply that something fails. A usual definition of "failure" with regards to companies is something that is unprofitable and fails to gain traction. I doubt that either of those will apply to this new venture launched by News Corp and GE - the parent companies of Fox and NBC.
Big companies make plenty of mistakes, but when this much is at stake and $100 MM is being invested by a third-party, they're going to make something happen. I'm willing to bet you that their venture will be within the Top 5 video sharing sites within 2 years of launch and will not shut down within 2 years of launch.
Perhaps he means doomed to lose money on the venture? I would say that is a pretty good measure of failure. The bet could be whether the venture ever sees black.
Uh, I dunno what sample you're looking at, but most of the YC companies I know of have a revenue model. There's Loopt (subscribers), Reddit (partners), Wufoo (subscribers), Inkling (businesses wanting to setup a prediction market), and VirtualMin (paying customers). Many of them started with no revenue model and then evolved one, but that doesn't mean they have no revenue model.
The sample I'm looking at is the sample of what's out there. "Most" implies over 50%. You've mentioned 4 companies out of over 30. I'd appreciate a clear listing showing the revenues of these companies and their profitability. Having a revenue model by no means implies profitability. YouTube has a model, I doubt that it's profitable.
Anyone who thinks we or any other venture investor would advocate flipping companies has not stopped to think about the question. The big money in venture funding comes from companies that go public, or get bought for high prices by threatening to. For any venture investor, including us, early acquisitions are the worst outcome except the company going bankrupt.
Do the math of what happens to YC in an early acquisition. They barely pay operating expenses.
Honestly. It shows how determined people are to diss you when they accuse you of doing things that are against your own interest.
Paul, it's funny how you choose to pick out areas to attack while you totally ignore my arguments in other areas. It really fascinates me how you just ignore certain arguments conveniently.
As to your response, to IPO a business requires a lot of revenue. Many of the businesses that YC are spinning out don't seem to have a revenue model. They may come up with one, but given a typical VC firm's portfolio duration, it doesn't seem likely that they will come up with a revenue model AND hit the revenue milestones required to go public.
Of course it's in your "interest" to have YC companies go public but that's a very low-probability scenario; far lower than the probability that a regular early-stage VC firm's portfolio companies will go public.
I would be interested to see the reasoning that could lead to an IPO for even 25% of YC companies.
I don't understand how this counts as a response to PG's last post. Of course 25% of YC companies aren't going to IPO, PG didn't say that. He just said that's the best possible scenario.
You've gotta remember that Paul is doing this YC thing for personal fulfillment more than anything. He's not making an enormous amount of money and he's investing all of his time.
I'm claiming that you can't pretend that your goal is an IPO when that's not even realistic. It's faking a dilemma when the only real exit opportunity for YC companies is through an early acquisition for technology/talent. You can't have a "late acquisition" or IPO when you don't generate money.
I'd bet most VC firms don't have successful IPOs with even 5% of their portfolio. What's your point? Most IPOs also happen 5+ years into a company's life so it's a bit early to call it for YC. You're also ignoring the biggest part of the YC thinking: It's harder to make something people want than it is to generate revenue once you have. See: MySpace, Facebook, YouTube, Digg, Reddit, PlentyOfFish, Flickr, TechCrunch, Google, Yahoo, ...
I think you can debate this stuff just as well without the adversarial tone. Although this subject is like beating a dead horse most people here don't mind discussing it rationally.
Useful != Want. There's a lot of objectively more-useful things in this world that people don't want for various reasons.
Making something people want is the first hard step. Growing it into something big is usually just a matter of determination and time. I'll bet those 1,000 sites are lacking in one of these areas.
Can you name any site that has attracted lots of people with something they want and can't make money?
All sorts of failed Web 1.0 companies were seemingly in this category. Webvan, Kozmo, etc. However, that is not to say if they had been operated differently they may not have made money.
In Web 2.0, it is probably too early to tell, but I suspect there are plenty of types of applications that most consumers just won't pay for and that still don't make that much money in advertising. As a result they may attract lots of people with something they want and can't make money. An example might online calendars, a la kiko. Bookmarking seems to be another. Again, though, it is too early to tell for sure. What I think will happen in these cases, is you will get Google & Yahoo offering them for free as loss leaders for their other products. I guess we'll see.
Webvan and Kozmo made millions of dollars so how do they count as companies that "can't make money"? The fact that they went out of business is irrelevant. Amazon has a similar business model, but an amazing CEO, and they're thriving.
Digg (bookmarking) is making millions of dollars. Reddit was already making money licensing their software. Delicious was sold pretty early, but could definitely generate revenue. I don't know of any online calenders except Kiko and they weren't very successful.
I'm genuinely curious if anyone can cite some actual examples of successful sites that can't make money. I believe there might be some but I don't know of any.
I'm sure they weren't in the black. That's not proof of anything though. Amazon wasn't profitable for something like the first five years even though they were making millions in revenue.
There's a lot of reasons companies fail that don't defeat the notion that you can almost certainly make money (and probably profit) off anything successful that people want.
It is certainly proof of something. It is proof that they were never in the black :)
This is very relevant. Amazon, as you correctly point out, was eventually able to figure out how to "make money" (read make profits). Webvan and Kozmo were not able to do so despite being very popular. I personally used Kozmo a lot.
If you are never able to get in the black, it means you are not a sustainable business and will keep having to go to the outside world for sustainability, either from an acquisition, private investors, or IPO. I don't consider this situation making money even if you generate millions in revenue. Maybe you do. If so, I guess we'll just have to agree to disagree.
How about Flickr, feedburner, and bloglines? I don't believe any of those were cash flow positive at acquisition, and the acquisitions were not super early.
Of course most companies are private, and therefore so are their finances. But I believe there are tons of companies that fit into the category of raising VC money, getting some traction, but then not finding enough cash flow to overcome their burn rate, and then flaming out or getting acquired. For example, has netvibes made any money yet?
You're right that it's kind of a tough for us to really figure this out without inside financial information. I'm asking the tougher question of making money instead of value. The market really judges based on value. Google bought Feedburner for its ($100M) "value" not money-making ability.
But I do think it's smarter to build a business that can be very profitable on its own, so this is more interesting to me.
Bloglines could definitely put ads on the site and make good money. It requires so few resources to run I'm sure it could be profitable.
Flickr is like a huge SmugMug which is making good profit. Advertising and freemium would have made the founders rich on its own.
FeedBurner doesn't have any place to put ads, so I'm not sure how they could possibly make money. Their market is too competitive for them to do freemium and make much. I'd count this as the first example.
If YC stays around for a very long time, which seems to be PG's plan, as t->infinity there will be an IPO. Perhaps it is unlikely to happen anytime soon, but why would he strive for something not as good?
By doomed I mean they have no hope of achieving their goal. What could be simpler?
Their goal is to create something that does more for them than simply putting their content on their own sites would have done. They will not. Failure + inevitable = doomed.
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[ 5.3 ms ] story [ 101 ms ] threadIt'll be enterprise!! It can't possibly fail, and I'm sure they have the powerpoints to prove it.
(having worked for banks/government... I can imagine how the $100 million will be spent... and I can only laugh).
"What's the first rule of government spending...? Why buy only one when you can have two for twice the cost?"
This entire venture feels like the startup equivalent of Gigli: it seemed ridiculous before it was released, and even more ridiculous afterwards.
As long as the shows are free to watch, it won't be a disastrous failure because there aren't many places to easily and legally watch online network TV. The best way to compete with piracy is to give your media away. If they insist on charging for everything, it'll fail.
But yeah, this is definitely going to fail.
You ask Google, Apple, and Ubuntu whether Microsoft scares them.
YouTube survives because most media companies don't have the balls to protect their own assets. By creating their own portal they can create what they can force people to the site because it has content people want to see. As long as it is free and easy to use, people will use it.
All of you haters are just clowns who don't understand how the real world works. PG is flat out wrong here.
I'm not saying that this site will never get any visitors. Just that it will never be anything more than a site that happens to host the content of Fox and NBC-- i.e. no more than they could have got by simply putting their stuff on their existing sites, without starting a separate company as a joint venture.
If you're so sure I'm wrong, bet me. I'll be happy to bet you money if we can think of a sufficiently precise test.
- Yahoo - Facebook - BP - Unilever - Anyone else who isn't #1 in their space
Usually when people say "doomed", they imply that something fails. A usual definition of "failure" with regards to companies is something that is unprofitable and fails to gain traction. I doubt that either of those will apply to this new venture launched by News Corp and GE - the parent companies of Fox and NBC.
Big companies make plenty of mistakes, but when this much is at stake and $100 MM is being invested by a third-party, they're going to make something happen. I'm willing to bet you that their venture will be within the Top 5 video sharing sites within 2 years of launch and will not shut down within 2 years of launch.
Do the math of what happens to YC in an early acquisition. They barely pay operating expenses.
Honestly. It shows how determined people are to diss you when they accuse you of doing things that are against your own interest.
As to your response, to IPO a business requires a lot of revenue. Many of the businesses that YC are spinning out don't seem to have a revenue model. They may come up with one, but given a typical VC firm's portfolio duration, it doesn't seem likely that they will come up with a revenue model AND hit the revenue milestones required to go public.
Of course it's in your "interest" to have YC companies go public but that's a very low-probability scenario; far lower than the probability that a regular early-stage VC firm's portfolio companies will go public.
I would be interested to see the reasoning that could lead to an IPO for even 25% of YC companies.
You've gotta remember that Paul is doing this YC thing for personal fulfillment more than anything. He's not making an enormous amount of money and he's investing all of his time.
I think you can debate this stuff just as well without the adversarial tone. Although this subject is like beating a dead horse most people here don't mind discussing it rationally.
Is it really harder to make something people want than it is to generate revenues once you have?
It's easy for you to find a few examples, but I could name 1000 social networking/bookmarking sites that are useful but can't generate revenues.
Making something people want is the first hard step. Growing it into something big is usually just a matter of determination and time. I'll bet those 1,000 sites are lacking in one of these areas.
Can you name any site that has attracted lots of people with something they want and can't make money?
In Web 2.0, it is probably too early to tell, but I suspect there are plenty of types of applications that most consumers just won't pay for and that still don't make that much money in advertising. As a result they may attract lots of people with something they want and can't make money. An example might online calendars, a la kiko. Bookmarking seems to be another. Again, though, it is too early to tell for sure. What I think will happen in these cases, is you will get Google & Yahoo offering them for free as loss leaders for their other products. I guess we'll see.
Digg (bookmarking) is making millions of dollars. Reddit was already making money licensing their software. Delicious was sold pretty early, but could definitely generate revenue. I don't know of any online calenders except Kiko and they weren't very successful.
I'm genuinely curious if anyone can cite some actual examples of successful sites that can't make money. I believe there might be some but I don't know of any.
There's a lot of reasons companies fail that don't defeat the notion that you can almost certainly make money (and probably profit) off anything successful that people want.
This is very relevant. Amazon, as you correctly point out, was eventually able to figure out how to "make money" (read make profits). Webvan and Kozmo were not able to do so despite being very popular. I personally used Kozmo a lot.
If you are never able to get in the black, it means you are not a sustainable business and will keep having to go to the outside world for sustainability, either from an acquisition, private investors, or IPO. I don't consider this situation making money even if you generate millions in revenue. Maybe you do. If so, I guess we'll just have to agree to disagree.
Of course most companies are private, and therefore so are their finances. But I believe there are tons of companies that fit into the category of raising VC money, getting some traction, but then not finding enough cash flow to overcome their burn rate, and then flaming out or getting acquired. For example, has netvibes made any money yet?
But I do think it's smarter to build a business that can be very profitable on its own, so this is more interesting to me.
Bloglines could definitely put ads on the site and make good money. It requires so few resources to run I'm sure it could be profitable.
Flickr is like a huge SmugMug which is making good profit. Advertising and freemium would have made the founders rich on its own.
FeedBurner doesn't have any place to put ads, so I'm not sure how they could possibly make money. Their market is too competitive for them to do freemium and make much. I'd count this as the first example.
Their goal is to create something that does more for them than simply putting their content on their own sites would have done. They will not. Failure + inevitable = doomed.
The evaluation of your criteria is probably impossible. It's far from simple.
It they even get this vapourware off the ground, they'll run it like Bertelsmann ran Napster.