Scale first, monetize second | Hacker News Reader

Scale first, monetize second

venturefizz.com

18 pointsventurefizz14 comments

"[T]he ultimate revenue model may surprise you. as the product develops and evolves and your community grows, the revenue model is likely to reveal itself in an entirely new way."

Or fail to materialize altogether. Remember the dot-com bust?

"Scale first, monetize second" can be a recipe for disaster. (It can also work well, but that doesn't make it a general-purpose rule.)

What happened in the bust was they achieved neither revenue nor traffic scale. The only thing the founders scaled was VC money. That's the ultimate disaster.

I'll grant that monetizing advertising without scale may be futile. However, the flip side of this is that monetizing too late shapes a company into a VC addict, always pushing the fund raising lever for another scale pellet. Few media sites make it at all, hoping they can scale their way to viability. At a certain point, entrepreneurs need to tell VC's to get out of the way with their the-first-hit-is-free scale advice.

Okay, sure, if you have a ton of funding and love throwing money away, then this is a great plan.

Scalability can be bought, but not without cold hard cash. A decent product and related revenue model has to be built.

Of course a VC doesn't want you to monetize too quickly, they want the company to be huge, but only after the founders holdings are fully diluted. The average technical founder is taken advantage of in a major way by the average venture capitalist under the guise of the status quo.

rebuttal: "premature optimization is the root of all evil" -- Knuth

Why bother making something scale before you know whether there is demand or profit?

In the context of the author's comments, you're scaling to meet demand, and delaying experiments with profit. Unless you're serving the bot community, it's hard to imagine how you would scale without demand.

Well, scale can mean "spend time and money building infrastructure that supports lots of traffic" -- doing this before getting the traffic is premature optimization.

But, scale can also mean "get lots of traffic" -- this is growth, not optimization; in this case, trying to optimize revenue before the growth happens could be considered premature optimization.

Just so we're clear, lose money on every user, and try to acquire more users as fast as possible?

I work in the trading business, and in the trading business there's a running joke -- we'll lose money on every trade but make it up on volume! I didn't know people actually practiced such a strategy.

This is exactly counter to Mark Pincus' advice. You want to monetize to be able to control your company. http://www.youtube.com/watch?v=S7YaVVpK1G4

How many perfectly viable web properties have failed because they decided they were going to scale to 1MM uniques before they monetized and ran out of cash? A lot.

I've seen my share. I won't ever buy into this hype again. You don't open a grocery store without a cash register, why start a website without a revenue plan?

Monetize is the dumbest word. Just write profit.

"Monetize" != "create profit"

"Monetize" == "create revenue".

You can monetize a free service by charging $1 for it, suddenly start bringing in $1 mill/year ... and still be profit negative because you're spending $2 mill/year on engineering.

going from $0 to $1M is a hell of a lot harder than going from $1M to $2M. even though you're profit negative, if you got that far, you're 95% of the way there.

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