The Young Man's Business Model | Hacker News Reader

The Young Man's Business Model

paultyma.blogspot.com

67 pointszinxq17 comments

Best nugget of truth: The best business model is one that makes your customer money.

From my personal experience eyeballs and race to the bottom savings never work in your favor unless your'e YouTube or WalMart.

Exactly. It's much easier to sell added value than reduced costs.

Agreed. Though I am scratching my head as to what that company he linked to actually does.

Yeah, for being so impressive it fails the 30 second pitch in 5 seconds. Can't figure that out.

This is a great article, and nicely articulates the differences I see between a lot of the bootstrappers I know and the accepted wisdom on Hacker News.

In a down economy it's safer to target an existing cost stream, prospects become very risk averse about value. A lot of technologies start out as cost savers and transform: e.g. VoIP vs. POTS, initially a cost saver, now allows a much richer set of options, repeating the pattern of TCP/IP vs. SNA.

Maybe I'm just old (and by old I mean almost 40) but this is the only business model that has ever made sense to me.

I'm obviously impressed with the Facebooks and the HotorNots and everyone else who manages to make a truckload of money without any actual product or service (that I can identify the value in anyway), but I can't ever seem to get interested in doing "business" that way.

For me, if you don't actually have a real customer, or what you're doing doesn't make them money, then what have you built? It doesn't sound like a business to me...but I might just be old.

In the hacker world, there have always been people who try to make things that they think ought to exist, regardless of whether they can figure out how people will pay them to do it. On one end of the continuum, you have projects like Linux (and the original Unix), Lisp, Perl, Python, Apache, and so on -- projects where the originators never really worried about monetizing the result at all. On the other end of the spectrum are things like Facebook, Twitter, and Google, where the originators always planned to find a way to make money, but didn't worry too much about the details until they had developed a product that a lot of people wanted to use.

In any case, there are an awful lot of businesses that don't make their customers money. Consumer products, retail, mass media, home construction, automobiles. Making your customers money is basic in business-to-business, but unless I'm missing something, it's rarely a core part of a business-to-consumer model. Perhaps it's B to C in general that you're not comfortable with?

Business to consumer media businesses makes the advertiser money, in that the increase in sales revenue should exceed the cost of advertising or they won't keep buying ads. The other consumer businesses you cite--consumer products, retail, automobiles--are typically sold through distribution, and the distributor makes money on the markup. Home construction is somewhere between a service and a craft business.

Well, yes. But that isn't always the most useful paradigm for thinking about some of those businesses, and it doesn't always apply. When I go buy an iPod at an Apple store, what customer makes money off the purchase? When Safeway sells me a pork roast, what customer makes money off the purchase? When I subscribe to a premium account at ESPN, is there a customer that makes money off the purchase?

For manufacturers, it is certainly important to develop a value proposition for distributors and retailers. For ad-driven media businesses, it is critically important to develop a value proposition for advertisers. But it's at least as important to make something that people want. If you have a product that nobody wants, it doesn't matter how good the retail markup is. If you have a media property with no eyeballs, what good will really brilliant advertising packages do potential advertisers?

A media business is driven by the ability to deliver a well characterized audience, and the value those characteristics imply to advertisers.

The challenge is not a media property with no eyeballs. The challenge is what audience can you gather to sell to your advertisers. If they are undifferentiated then you have to have millions because they are not of much value. If it's presidents of Fortune 500 firms then you only need an audience of a few hundred to be able to make a lot of money.

So I would suggest it's not "people" but a well characterized audience at an acquisition cost that allows you to mark them up to your advertisers who will in turn make more money from the purchases your audience makes.

The YC mantra of "make something people want" gets interpreted in ways that cause a lot of startups to overlook the value of a niche focus.

Consumers aren't generally interested in making money - they're not profit-maximizing firms. Consumers want to fulfill whatever goals they have - caring for their family, being entertained, feeling adrenaline, getting laid, etc. Buying a home is ($#@%%^#!#($#@!!) expensive, but it makes my family warm, comfortable and secure. Buying an iPod lets me easily carry around different kinds of feelings (music) and knowledge (podcasts) that I can have whenever I want. Media entertains me, which makes me laugh, think, feel, etc. They don't make me money, but they do make me richer.

It's easy for B2C to make consumers richer (all of the Facebooks, etc do that), the tough question is which of these riches will they pay for? The consumer market (especially in the US) is so huge and wealthy (yes, even in a down market) that it's worth gambling on.

You make a great point. I hadn't even considered B to C since that's really not where I operate.

I think it is: The best business model is one that creates wealth for your customer. Be it money, time, or anything else.

zinxq: Permalinks are good.

Gender bias much?

He explains the source of the term in the article: an observation of a specific, real-life experience -- the "young man" way to repair a motorcycle versus the "old man" way to repair a motorcycle. It's not exactly his fault that no old or young women showed up to help him and his friends fix their bikes.

Gender bias doesn't mean jack-shit in this situation. The genders of the characters involved does not alter a damn thing. He could have been talking about two hermaphrodite aliens instead.

Hell, he even said, 'Now when I say "old man" here and throughout this article, I don't necessarily mean "old" (and I don't necessarily mean "man") - I mean "experienced".'

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