The Andrew Warner Story | Hacker News Reader

The Andrew Warner Story

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78 pointsmerrick3357 comments

This interview is great stuff. Some great quotes:

"You think the teachers were proud? If a kid wanted to draw or write poetry or do anything artistic, they were full of praise. But as soon as they found out what I was doing, they shut me down. Sharing your candy with others is fine, but there was something disgusting to them about commerce.

...

Ever since elementary school, I wanted to show that businesspeople are the heroes and encourage others to become entrepreneurs."

So true! It's rare that a teacher would appreciate the selling of goods at school. Interestingly, I got busted by my principal in middle school for selling something regularly (I don't even remember what; soda, probably), but he wasn't appalled by the selling, so much as just covering his ass. He actually said he appreciate the entrepreneurial spirit, but that he just can't allow students to sell stuff to other children. (Maybe he was blowing smoke up my ass to keep me complacent, but I got the impression he was generally impressed with the "entrepreneurial spirit")

But I can totally see an elementary school teacher being completely appalled at a student selling (god forbid) goods, rather than sharing.

This quote in particular really strikes home: I hate the pansies who whine that "it takes money to make money." No it doesn’t! It takes a sense of mission. If you’re on a mission, you’ll find a way.

Sounds very much in tune with being "Relentlessly Resourceful."

Maybe that teacher was appalled at the gouging. Ten cents for a stick of gum??

That's commerce though. Each stick of gum comes from a sheet that's about as big as your living room floor and costs them about $10 to make, they then sell the entire thing for like $10,000.

Supply and demand. Gouging is a myth.

As much as I can appreciate the author's point with selling items at school, there also is a time and a place for certain things. Schools aren't shopping malls and lockers and desks aren't storefronts.

Still, schools should do more to teach business and finance skills. But that's another article. :-)

Lesson learned: There is nothing wrong in copying other peoples ideas, just make sure you execute it better than they do.

Actually: You can make a lot of money from using someone else's idea.

I don't see anything in the story that makes an ethical judgment one way or the other on the practice.

Microsoft is a shining example of this. You may or may not like them or their products, but you cannot deny it worked for them.

Lately it hasn't been working so well for them. They haven't produced a blockbuster in a long time. Be it a ripoff or original creation.

XBox seems to be the only exception. Did I miss something else?

"Let’s do the math. We paid webmasters 10 cents every time one of their users used our greeting card engine. We got paid up to $3 by venture-backed firms every time we got those users to register for these venture-backed firms’ services. That’s how we got our margins."

I think the lesson here is that making money on the internet is greatly facilitated when other people are willing to pay irrationally large amounts of money for what you're selling. Product quality may have played a role in this story, but it sure sounds like the critical step was recognizing the ridiculous inefficiency that existed in the market for eyeballs (i.e. paying $3 for something acquired for $0.10)

I interviewed Jason Fried of 37 Signals on my site. He told me that his ebook made hundreds of thousands of dollars. I think his margins were even better than mine.

What margins like these don't take into account is the years of work that came before them.

In my answers to Neil, I tried to keep my explanations simple. But I don't mean to imply that I found a way to turn nickles into dollars by salesmanship alone.

Thanks for bringing this up timr.

Let's be clear: I'm not teasing you for your business model, nor suggesting that it was easy to do what you did. I also don't care that you bought something for ten cents, and sold it for 30x more than that -- that's capitalism. You exploited a market inefficiency, and made a lot of money from it.

I am teasing the OP a little bit, because the comment that "execution" was responsible for your success is basically useless. I'm going to go out on a limb and say that the critical ingredient wasn't the quality of your virtual goods or the writing in your newsletter, but the timing and novelty of your approach.

Isn't timing and approach part of the execution?

Timing is part of execution, sure. But when people toss around the "execute better" cliché, the implication is nearly always that you can make your product better and succeed, even if your timing is abysmal and your approach is unoriginal.

This story isn't about making the better e-mail newsletter. It's about a guy who recognized that he could arbitrage traffic for massive gain.

The difference here is 10 cents for using greeting card engine..then there will drop off for the people who sign up for newsletter..then drop off in terms of maintaining+monitoring the newsletter and the final small conversion ratio in terms of newsletter subscriber signing up for the offer..because the $3 was per sign up..I am actually curious about math..because say there are 1 million subscribers and 1% of they sign up as user for VC funded company's offering then it is just 30k in revenue.. and 1% is not low in the given scenario (a reason most of the newsletters don't host ads is the returns are very low)..I want to learn more how can the returns were much higher in this scenario..unless the users were more like bzzagent where they are going to get something in return and actively monitoring the newsletter to sign up and get some cash incentive.. similar to what bzzagent does or subvertandprofit/usocial etc people do for gaming social media sites

In case some of you don't know Andrew Warner, he has a ton of great interviews on:

http://blog.mixergy.com

and here is his Hacker News profile:

http://news.ycombinator.com/user?id=AndrewWarner

“'You don’t understand,' he told me. 'If I ran ads in it, it would taint my work.'

There were a bunch of email newsletter guys who felt that way. In their stupidity, I found an opportunity."

Amazing, they're stupid because they care more about the product than making money off the product. I wish most companies were that stupid, there would be a lot better products out there.

Yeah, they didn't want to make money doing what they love. How smart.

really? I wasn't there, but it sounds more like running ads would ruin the product to them so it wouldn't be something they loved anymore. I'm amazed that the idea one should make money is so novel . . . it's like breathing, it should be assumed, how else does something sustain itself? The focus should be on greatness, making something better, pushing something forward (with the assumption that it should be able to pay its own way), not simply how to angle an extra dollar.

I wish most companies were that stupid, there would be a lot better products out there.

No, there wouldn't. They'd gradually wither away and die because they're afraid of making money from their business.

I will never understand the reluctance of so-called "entrepreneurs" who have some philosophical aversion to the idea of making money.

Note: I'm not just talking about condor's comment...I see this attitude expressed constantly here on HN and throughout the "Web 2.0" world.

its not an aversion to making money, there's no way to survive without making it. I will never understand the glorification of making money as an end, its so obvious, it should go without saying, yet here we are with yet another big bucks lottery article. the energy and focus should be on making things better, focusing on refining the product, with the obvious profit constraint.

Condor, maybe I said it a bit harshly.

Not long after we saw them, those newsletters that inspired us went out of business. It's hard to keep something going without revenue.

"those newsletters that inspired us went out of business"

Were these newsletters a "business" at all? Did they have some other payment scheme (vs ads)? subscription maybe? If it were not a business how can it go "out of business"?

I don't think you can make a better product by sacrificing your social life on nights and weekends than by working full time on it. Otherwise, ycombinator would make founders keep their day jobs.

This just strikes me as anti-commerce bias.

"Millions of people used our greeting card engine each month. Venture-backed firms paid us $1-$3 every time we convinced those users to sign up for their services."

Kind of reminds me of RockYou's Facebook advertising model. (If there is a gold rush, sell mining equipment instead of mining)

I wonder what the ROI was on the users "purchased" by the venture backed startups.

So one of our VC-backed clients accidentally showed me his investment deck. Turns out his investors were valuing his company at $7.50 times number of members.

It's part of a game that some VC-backed startups are involved with.

I bet their VC's had numbers that showed they could take the company public at $10 times number of members.

I'm much rather have a business I care about than clothes I look good in.

Sounds like he owes a lot to his brother.

I owe him more than I can say. It's not just that he's an incredible developer. In the early days, I had to deal with a lot of rejection when I pitched our company. Michael helped me stay optimistic.

Just curious was he a co-founder?

EDITED TO ADD: Just noticed, I guess his brother replied in one of threads below.

And equally, his brother owes a fair bit to him.

There is a lesson here...

We were partners and complemented each others skills well. It was exactly how a partnership should be. We shared in the business development but then went off to handle our respective tasks. And when we talked with outsiders we were able to speak with one voice.

There is no doubt a combination of solid sales guy and solid technical guy is important in a start-up. The last start-up I worked at was missing the sales guy. I'm now thinking of starting something up, and that is weighing heavily on my mind.

re: "weighing heavily on my mind."

Let me know if you want to talk. mail at awarner dot com

What percentage of his success was do to technical innovation/invention vs. business/product innovation? I'd agree that his brother is critical, but I'm not sure that's the secret sauce here.

http://venturehacks.com/articles/vertical-markets Read that (especially the technical risk versus market risk section).

I think these guys beat market risks and had relatively few technical risks.

> I’m amazed that you noticed our margins Neil.

Why is that amazing? Isn't it plainly obvious?

I'm surprised that people don't look at financials beyond the top and/or bottom line.

But at that point in the interview you've just mentioned that you made $1-$3 per user, with millions of users active each month, and you were paying 10 cents for a portion of those users. Of course the first thing people are going to is the math and realize there's a lot of money right there.

But back to why I posted my original comment, it was more the condescending tone of the "I'm amazed" part of that sentence. My gut reaction would be: "Why yes, I can multiply in my head and it is amazing, Andrew."

Thanks for your reply though, nice to see you in this discussion.

Wasn't it that they paid $.10 per user, and then, if they converted, got $1-$3? Without knowing the conversion ratio you wouldn't be able to say what the margin was.

Great point. We didn't have 100% conversion.

I kept things simple to explain how the business worked. There were other factors like this at play.

By the way, a big one was fraud. I remember seeing my first washed check. That's where someone took a check our company made out for $25 or so. Washed our ink of it, and rewrote the check for much more money.

Crazy.

Supposedly there are special inks that help with that. But even so checks are hard to control, and the company I worked for switched to paypal for international payments.

If you can't determine profit margins from those two numbers alone, there's something wrong with you. :-)

A touch of salesmanship exuberance.

I hate this phony exuberance. Along with all the "Great question!" openers.

I once had a sales guy say "here's what I'm going to do for you" and I walked out on the spot.

I simply can't deal with unctuous people.

I once heard Michael Milken interviewed by Barbara Walters. Every time he answered a question, he used her name.

I thought, he must do that habitually because it works well in one-on-one conversations, but it comes off obnoxious when you're watching it.

And now I did something similar. Thanks for the feedback.

I found the various commenting on the questions he was asked quite interesting because they were coming from someone who does a lot of interviews.

I didn't take the "Great question" as phony exuberance at all because of that, but that could just be me. Different strokes for different folks I guess.

Andrew, I had a similar experience in elementary school. I was in elementary school during the whole pokemon phase, so about 8 years ago.

I sold pokemon cards on the playground. Now, you'd usually go to the corner store and pay $3-5 for a pack of cards. I had the idea when I was at an asian night market that I could buy a box of cards for a lot less (I think about $1.50 a pack) and then resell those.

So I started out just selling packs for $2.50 or $3, a bit below the regular stores with a decent return. Which was pretty awesome at the time. I sold about 2 full boxes then realized there was more money selling single cards.

So I bought another box and some card protector sleeves and started ripping open packs. I found a bunch of valuable cards that gathered over $10 each. In total I spent about $60 on supplies and made a bit over $450 in a 3 week span.

And then I got busted by a teacher who confiscated my earnings for a day and a binder of cards. I was told that if they caught me selling anything ever again I would be suspended.

I understand that they can't allow others to sell stuff to the students, but it really hurt my entrepreneurial spirit at the time. Until I got to highschool and started reselling illegal fireworks, but that story didn't end as well, although I made a lot more money ;)

And then I got busted by a teacher who confiscated my earnings for a day and a binder of cards. I was told that if they caught me selling anything ever again I would be suspended.

Confiscated your earnings? The word is stole your earnings. The crap that goes on in school sometimes drives me insane.

And here I thought the story was about some sort of return & refund scam...

I cleared with J Crew. I told them I wore the clothes. Their policy was that you could return clothes any time in any condition. I don't think they expected anyone to take them up on it.

Laziness and embarrassment are two characteristics entrepreneurs don't have.

Amen to that last sentence. You gotta do what you gotta do to make shit happen!

okay. I am starting to JC penny right now.

A local supermarket had as their policy, that if the scanned price was wrong then you got the item for free. Well they started selling other things, with much bigger price tags than a $5 ham. My wife's uncle grabbed a BBQ set from it, but when they scanned it the price came up as $349.99, not the sale price of $299.99 and he walked away with it for free.

The store amended the policy, it now has a $50 maximum.

I always assumed those greeting card websites sold their mailing lists to spammers - and was irritated when someone sent me one. In retrospect, that's pretty cynical, bitter and curmudgeonly of me.

I love Andrew's interviews and it's nice to hear more about his story.

I love the J Crew story.

I've returned Christmas gifts (electronics) to fund my startup, but I may have to look through the closet now, too... LOL

Andrew's sister is "the Girl" of Keith and the Girl, the wildly popular podcast. So, the whole lot of them seem to be ridiculously talented.

"businesspeople are the heroes"

No. Just no. Businesspeople are useful, but, by definition, not heroic. Heroic is something else: not counting the cost.

There is also an important difference between hacker and huckster.

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