5 CEOs That Need To Get Fired | Hacker News Reader

5 CEOs That Need To Get Fired

blog.wired.com

34 pointskwamenum8644 comments

Zuckerberg should be commended for his talent and vision but if you have do take out a loan to keep your company afloat because you don't have enough revenue (as was widely reported) and you are STILL not worried about having a business model something is wrong. He recites his "we are not worried about revenue for at least a few years, we just want to grow" line religiously but it seriously sounds like entrepreneurial advice crica 2006. Get with the program!

This is the modus operandi for basically every web 2.0 company. I think never before in history has there been such a large number of businesses springing up and carrying on blithely with no idea how they're going to make money.

It's because they were told sometime in the last decade that you could make a site profitable through ads alone. Because it worked for Google so incredibly. They forgot that Google works because they target massively relevant ads to people who are looking for links to begin with.

Interestingly enough, Facebook's revenue plan involves making money off of Live Search ads, as of the last month or so. Essentially, they're ripping off Google as honestly as they can: by emulating them. I'm interested in seeing how they'll fight against embedded Google search: that's their huge competitor right now.

Is there something inherently wrong with this?

I don't see anything inherently wrong, really. It's just strange that, given the point of starting a business is to make money, there would be so many businesses out there running along seemingly without much concern as to revenue. If your aim is to build a large user base and flip, that's fine, but keep in mind that it's an unsustainable business model. It's basically a crapshoot.

Again, what is strange about that? There's hundreds of variations to end a chess game as there are hundreds of variations to make a business work. If you're already determined to be an entrepreneur you wouldn't be a stranger to crapshoots and experimentation.

I'm not saying that one person taking on an extreme high risk endeavor is strange. Happens all the time. What's strange is that such a huge cluster of people are doing it.

The anomaly is the multiplicity of the occurrence, not the occurrence itself.

It should be applauded. Free market. Good things bubble up and stay alive. Their personal choice in allocating their labor. Good for everyone. Blah blah. All that jazz. <3

I think never before in history has there been such a large number of businesses springing up and carrying on blithely with no idea how they're going to make money.

Ahem... web 1.0

I find it hilarious that you think a company with 100 million users need to have revenue figured out within 5 years.

Are you implying that it doesn't? How are you supposed to pay for all of those salaries?

It seems like until they have the business model figured out it's not a business -- it's a charity.

0. Almost every major corporation leverage in order to grow in order to capitalize.

1. Companies don't have time-lines to figure out how to make money. Google didn't hit on AdSense until years later. Amazon didn't get out of silly pro-forma victories until after a long time. Who are you to claim they need to figure out a slam dunk business model?

2. Facebook has revenue, it has enough revenue to cover its overhead, what is it doing wrong?

3. It uses the ginourmous amount of investment money for infrastructure to grow bigger -- which for all intents and purposes they are experiencing, why is this faulty?

4. Calling it a charity seems like naivete or glibness on your part.

Bringing up examples where a bad plan happened to work is not evidence to follow the example. Google and Amazon took the hard road and it isn't like many companies survive and thrive with the "defer" model.

If I create a website tomorrow where I give DRM-free music away legally on an ad-free site I will have 110 million users in 2 years. I will still lose millions a year and my business model will still read [fill in the blank]. Having a lot of users is not an excuse not to have a business model.

His point is that Facebook IS making revenue. And they do it from ads, mostly.

If you gave away DRM-free music on an ad-supported site, and found a way to make people want to click those ads, you'd have a good model - providing you found a good way to provide DRM-free music that people wanted. For Facebook, the problem is that they took a long time getting an ad model to work. Their new one is a pretty effective one that takes advantage of the best parts of Facebook. I think they've rounded a difficult corner.

They lose tens of millions each year because they are relying on cheesy display ads. That is not a sound business model. Ads are not going to support users on a social networking site like fb, in my opinion.

revenue!=profit

Are you familiar with their financials? Their sales decks? Their full range of advertising products?

Are you aware of the revenue for other social networks? MySpace is going to clear $1 billion in revenue this year, a year faster than Google did. Facebook isn't doing the same numbers but they could, they limit the advertising in order to increase user experience and pursue non-traditional advertising to avoid having their site end up as a friendster. These are strategic decisions, and if it takes them 10 years to fulfill it then, great. That's on them. Maybe that sort of investment secures them 25 or 50 years of high margin profits.

There is no textbook time-line for companies to follow.

Yeah.

I kind of understand the argument that Facebook wasn't running a very good system for revenue: until they released their targeted ad system, they were fairly hit-and-miss and their ads never seemed interesting. Now, they've done what Google did: they made their ads relevant and very much part of their bigger system. I've clicked a few ads, now, because I'm seeing things that I want to click. That's a big breakthrough for Facebook.

Google and Amazon? Bad plans that happens to work?

Your music site could be monetized in hundreds of various ways. You don't know which traditional ones would work if you don't try. And if you're big enough -- here's the magical part -- you can even get to try non-traditional routes that might just click. That's the whole point of drafting up business models and financial projections and replacing it when need be.

But if you can get 110 million users in 2 years, can cover overhead for 200 top notch engineers and a legion of sales/bizdev team as well as world class infrastructure, hey, I'm not going to be calling you out for not having figured out how to make money on it.

You say "charity" like it is something bad.

From http://www.paulgraham.com/good.html

Another thing we tell founders is not to worry too much about the business model, at least at first. Not because making money is unimportant, but because it's so much easier than building something great.

A couple weeks ago I realized that if you put those two ideas together, you get something surprising. Make something people want. Don't worry too much about making money. What you've got is a description of a charity.

But Facebook isn't acting like a charity. Not like Wikipedia is.

If they start asking user directly for money, I'd be incredibly surprised.

I can't imagine PG directing that essay either toward a business the size of facebook now nor toward someone with the intent of telling them to get to facebook's size before having profit (let alone revenue) figured out. It's one thing to have an application and not have the price points figured out. It's an entirely different thing to not have any idea at all how you'd substantially monetize your customer base. In fact you might not even consider it a customer base but just consider it an expense base.

Of course I've nothing against charities. I think I might have a problem with it if I invested with the expectation of a direct ROI. The parent to my comment seems to contend (evidently? am I being trolled?) that it's ok to be five years into a business without not only not having a notion of how you might profit, but not even having a clear source for a plausibly profitable source of revenue.

On second thought spending money without the notion of a return is not even a charity, it's consumption.

I'm not going to be putting words into pg's mouth but if he's not going to be ecstatic that a YC company can grow into Facebook's size in just 5 years then I don't know what could possibly excite him.

He has, however, mentioned that he doesn't like the fact that companies take buyout offers within a year or two of starting up because that decision to sell prohibits them might limit them from being big, great, companies.

Big companies that can walk into a room and just push people around because of their sheer size. Companies that can introduce and try out both traditional and non-traditional advertising methods, companies that can sign lucrative exclusivity contracts, companies that can get 250 million in the bank at insane valuations, companies that can establish connective tools with other major websites.

Considering their competitive advantage and global reach of Facebook, I'm more willing to give them the benefit of the doubt for the time being.

PS. People that disagree are trolls. Classy.

This is a very familiar path among hyper growth companies - the point where the expense of growth outstrips their ability to convert to revenue. As long as the site keeps growing and adding users, they will continue to have a strong ability to feed the beast with more raised capital. I mean really - how many other companies are growing like they are? Especially in this market. They should have no problems at all getting access to more capital.

Most companies don't grow in this type of market because they are not giving the product away for free. Give me a good product, and let me give it away for free and I will give you a fast-growing company.

investors usually move to replace founders with more experienced executives.

I don't like that at all. Captains sink with their ships, it's the most time tested adage of being a leader. The notion that investors pull out the founders and replace them with Executives I think showcases a problem with how we analyze human relations in business: people are expendable and don't matter as long as they can keep the gears turning that pad wallets.

I understand the point of business: make money. But when did it become fashionable to give up the ability to command your crew just because a petty officer comes along and says "get lost" just because he's paying the bills? Pay the bills or not, I stand by my opinion: a captain should sink with his ship.

Got a shitty founder, teach him how to be a better founder and in the end you'll all benefit. Or are we all just too greedy to give a damn?

If I go the startup route, I'll do it without investors. Start small. Then earn a little, grow a little, and make smart business decisions. Repeat. I'd much rather be on a solid foundation in ten years than on top of the world in two and back on the streets in another.

Right on the money, except for Dell. The company is putting money into key trend and technology. Case in point: the netbook and the 19 hour battery life laptops.

I figure my thoughts are just as randomly justified/qualified as Wired's:

If Facebook replaced Zuckerberg, I bet users wouldn't be opposed to paying a monthly subscription.

I agree that the Blockbuster CEO needs out. I think he has even been quoted mocking Netflix as non threatening.

I don't know what I feel about Jerry Yang. I feel like Yahoo's situation has to be more complicated than coverage conveys.

> By any reckoning, Jerry Yang should be out of a job.

> The Yahoo CEO spent a good part of the year fighting off an unsolicited bid by Microsoft which valued his company at about three times what it's worth today.

That seems pretty clear cut to me. In terms of share holder value, that's pretty catastrophic.

What's good today might not be good a year from now.

Not that I necessarily believe that that applies to Yahoo's decision... but it is something to consider.

I don't want to defend Mr. Yang, but I appeal to everyone to remember that people said exactly the same thing when Apple rejected Sun's offer of $24 a share, a 50% premium over their stock price (at the time) of $16.

And soon thereafter, if memory serves me, AAPL fell even lower as the arbitrageurs cut their losses.

A fair point, until you figure in this: http://news.yahoo.com/s/afp/20081106/bs_afp/usitinternetyaho...

"'To this day, I would say the best thing for Microsoft is to buy Yahoo,' Yang said"

If he wanted to sell, he should have done it then, not now.

You're so right about Jerry that I regret not saving my entire week's allowance of upmods for you. But I think we're in violent agreement on the point. There is a difference between wanting to sell all along and wanting to stay independent. If he wanted to sell all along and he was just playing negotiating games, I have no sympathy for him and his board. They should face the full wrath of the shareholders.

On the other hand, if he wanted to make a go of it independently and it's a case of things falling apart to the point where he's going back to Ballmer on his knees... I have sympathy for him. In Apple's case, after rejecting the buyout they went with Plan B, engaging in one of the greatest "HR Acquisitions" in history. Jerry's Plan B hasn't worked out quite so well.

Jerry gets an unfair rap. I really hope Yahoo can make it through this rough patch without succumbing to the fangs of the big M.

First of all, Yahoo is still a young company, relatively speaking. There are a multitude of far worse examples in stock-price fluctuation and company valuations over time. For those who disagree, I'll point you to one of the pioneering (and free!) resources for such information: Yahoo! Finance at http://finance.yahoo.com/

Second, how can anyone blame him for wanting to keep Yahoo independent from Microsoft? It's Microsoft, for the sake of Pete. The number and types of stakeholders (which are technically different from shareholders, but still important) are a different breed. There was a time I had a stock portfolio, and I owned shares of both Microsoft and Yahoo! -- for very different reasons: I admired the formidable online presence of Yahoo, and I thought (at the time, in early 2005) that Microsoft had a great business in its console gaming business with the X-Box.

Third, Microsoft's bid for Yahoo is a reactive to the shift to changes in the market. And one of the (highly intangible) advantages of being a first-mover is bargaining power over distribution channels. Yahoo, being in its more formidable online position (as interest switches from desktops to the web) operates in an entirely different sphere than Microsoft and should be able to reap the rewards of their investment in the online sphere. If shareholders don't see it now, they will someday -- if they allow Yahoo! to continue independent.

Short-term greed kills innovation.

> If Facebook replaced Zuckerberg, I bet users wouldn't be opposed to paying a monthly subscription.

I'm curious as to why you think the users willingness to pay is linked to Zuckerberg being the CEO.

Could you elaborate?

I think he is saying that the new CEO would be willing to implement subscriptions and the fb community would comply. I don't think anyone is waiting for Zuck to step down so they can pay a fee to talk to their friends :)

Actually, I think Facebook users would just go elsewhere. Remember that they are college and high school kids with no income, so they don't have a lot of money to spend. That's why Facebook ads don't work.

Most college students have a certain amount of discretionary funds. They just tend to exhaust it very quickly.

They can and should practice price discrimination. Charge those who can afford it more and those who can't less. Getting a fraction of 110 million users to pay even 5 dollars annually could actually double their revenue (strange but true).

"I bet users wouldn't be opposed to paying a monthly subscription."

If Facebook started charging a monthly fee to be a member it would die a swift death. What Facebook should do is start charging for additional services beyond a basic profile. For example: basic profile is limited to 20 photos/month, $2/month gets you unlimited.

Last time I gave some serious thought to FB's revenue problem this is what I came up with.

They'd have to find a way to sneak in a few initial tiny costs that don't abruptly cut off users who don't pay (i.e. limiting # of photos etc...). Once you get enough people with their credit card info in there, make it easy as heck (one-click) to upgrade to "Premium" or something and push the Premium site hard.

Microsoft does this with their Xbox Live service. It's so ridiculously easy to spend money on that service once they get your CC# for something tiny. All you have to do is press the X button (or something) to buy just about anything.

My girlfriend just spent 3 hours copying her contact info from one phone to the next. Facebook could easily charge people for exporting their contact info into other applications.

Two words: Student discount. Students pay nothing, but once you're out in the working world, pay a nominal annual fee ($10-25). You could cheat it, but then you'd be labeled on the site as a student forever. It may even be a "coming of age" thing for Facebook users...I wouldn't know, I don't use that site.

It's interesting that the article seems to be using a reddit backend. Notice the url of the vote links: http://reddit.wired.com/ceos/...

It's nice to see reddit integrated into Conde Nast's other properties. I wonder what else they have in store for the technology.

i have failed to understand the criteria for the list, while i can understand yangs failure, i do not think that facebook has come to an end yet as it is rather new model nobody understands.

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