
Sorry, your “cool” webapp is probably not going to make money - paraschopra
http://paraschopra.com/blog/entrepreneurship/webapp-is-not-going-to-make-money.htm
======
MicahWedemeyer
Beware the fatigue that sets in with these "boring" money makers. It can be
very difficult to keep your motivation high when working on something like
this, especially in the beginning where you're not making money and no one
takes you seriously. With a funky web app, at least your friends and family
might understand it and think it's cool.

Doing a startup already takes a lot of motivation. It's significantly harder
if you're working on something that you're not passionate about.

(Note: I don't disagree at all with the author. I just want to point out that
there are downsides to this approach as well.)

~~~
jdietrich
The single most important anecdote I've ever heard about software is this:

In the early days of VisiCalc, Dan Bricklin travelled with his Apple II,
demonstrating his software to potential customers. The response from 'computer
people' was generally fairly muted - they didn't see what spreadsheets did
that they couldn't already do in BASIC. People with no experience of computers
assumed that computers could do damned near anything, so they weren't
impressed. The response from accountants was quite different.

There was one particular instance at a trade fair, when Dan noticed a smartly
dressed older gentleman paying very close attention to his demonstration. At
the end of the demo, he approached Dan with a cheque already in his hand. Dan
noticed that the man's hands were shaking; Although at the time an Apple II
was an expensive purchase, the gentleman looked like he could comfortably
afford it.

Dan asked him if he was nervous. The gentleman responded with great
excitement, explaining that what he had just seen would completely transform
his job. He talked about his career as an accountant, how his work had been
changed by the introduction of tabulation machines and electronic calculators;
He explained how this new invention would free him from countless hours of
tedious calculation, allowing him to effortlessly play with numbers.

To Bricklin, VisiCalc was a clever little piece of software that paid him a
good wage. To the gentleman, it was a complete transformation of what he did
all day, a liberating technology, even a new lease of life. VisiCalc restored
his interest in his work and made him genuinely excited to get up in the
morning.

If we see functional business apps as boring, it is only through our own lack
of imagination. Few of us are likely to significantly change the computing
industry, but each of us has the very real opportunity to transform another
industry. As software developers, we are uniquely privileged in being able to
turn some small part of someone's work into play. As Steve Blank so often
points out, when we look beyond our own walls and see how we could help people
do things, the possibilities are limitless.

~~~
ABrandt
I don't mean to detract from the message of this story, but source? I'm hoping
you can point me in the direction of similar stories of software lore.

~~~
toumhi
Dan Bricklin' story (and many others inccluding interviews of the founders of
37 signals, apple, adobe, yahoo, flickr etc) is featured in "Founders At
Work". Great inspirational read, but there is no trace of an old trembling man
with a cheque though :-)

------
jacquesm
This is absolutely true.

The problem with a market driven approach is that it's hard to convince people
to get in to 'glorified bookkeeping' or other stuff like that. Industry
applications typically are not sexy but they're a fantastic way to make money
because businesses don't have a problem to pay for things that will save them
money, time or both.

If you're in it for the money go for b2b any time over b2c, b2c is sexy,
everybody will write about you if you score but the fact is you most likely
won't.

~~~
paraschopra
Yep, agree with your recommendation of B2B. Going B2B instantly simplifies a
lot of issues that startups face because (as you say) businesses are usually
inclined to pay money for services even if it is in $100-$1000/mo range.
Consumers, on the other hand, will cringe at the sight of paying $5.

99 cents apps, thanks so much for setting expectations of consumers that
everything on the web should be free or sub $1 range.

~~~
cubicle67
you know what 99c apps have done?

They've got people _paying_ for software. Normal people. People who have
probably never paid for software in their life, save for Office (probably
bundled with their PC), and a few XBox games

They've got used to paying 99c for apps, then they've slowly adjusted their
price expectations up to the $5-10 range for iPad apps, and the advent of the
Mac Store looks like helping ease prices people are willing to pay even
higher. Pixelmator has sold more than a few copies at $30. Cheap for what it
is, but people are buying it. _Apple have trained people to pay for software_

~~~
jacquesm
As opposed to all that open source stuff for free in the repositories, yes.
But paying for _software_ is something that has meanwhile been superseded by
people paying for _services_ , and that's where the real money is in the long
run.

Someone paying $10 for your software is great but not as great as someone
paying $4.95 monthly for the use of a service.

The difference is that if you intend to hold on to your userbase on a
subscription basis that fart apps are not going to cut it (pun intended), you
will have to deliver value for the money your subscribers pay you.

Apple has not conditioned people to pay for software any more than google has
conditioned people to click on ads, both companies simply used their economies
of scale to make it worthwhile to market to their particular audience, google
through their adwords (not adsense!) program and apple through their app
store.

Just wait for the 'facebook phone' and it's associated app store, it's only a
matter of time.

It's not as though Steve Jobs invented 'software for sale' with the app store,
software has been sold to individuals and businesses alike for decades now,
the things that have changed the equation here are:

    
    
      - download sites for PC software
      
      - open source
    
      - massive piracy

~~~
ido

       software has been sold to individuals and 
       businesses alike for decades now, the things 
       that have changed the equation here are:
       
         - download sites for PC software
         
         - open source
       
         - massive piracy
    

How are those (except for open source) new? Piracy has always been massive, in
the past even more than it is today. Do you know anyone who actually payed for
any piece of c64/atari 8-bit software?

And for a long time the first place to get software from (particularly games)
were BBSs.

In these times of Steam, App Store(s) & easy on-line purchases via the likes
of Paypal I expect people actually buy software a lot more often than in the
80s or 90s.

~~~
jacquesm
The internet has changed the piracy game completely, copying a cassette tape
or ROM was time consuming and required some skill.

Download.com and Tucows basically destroyed the shareware movement, barring a
few exceptions.

The upside is that there are now _many_ more people that are using software so
the markets are much larger in potential and the area where the app stores
shine are convenience.

A few clicks to download and pay for a piece of software is a massive
convenience when compared to the hassle that used to be involved in buying
licensed software.

~~~
trotsky
_The internet has changed the piracy game completely_

Eh, were you actually around then? Copying floppy disks was generally just as
easy as anything else, and the skill level of the average computer user was
much, much higher. Based on my experience I'd say piracy per capita was nearly
100% in the 80's. These days there are large swaths of computer users who
simply don't install anything that isn't pushed at them, let alone browse
through TPB. Before the Internet became popular in the mid 90's a large number
of BBS's were dedicated to piracy.

Keep in mind ASP on software is a fraction of what it once was. In 1983, Lotus
1-2-3 sold for $495. Duplicating the functionality of the $150 Office Home and
Student would have been over $1000.

~~~
jacquesm
I actually made pretty good money in the early 80's from programming games and
later selling licensed software on the net.

Yes, large numbers of BBS's were dedicated to piracy but large numbers of
meters of shelf space in retail stores were dedicated to 'boxed' software too.

~~~
chc
I think trotsky is referring to sneakernet piracy, not the odd BBS. I was very
young in the '80s, but I remember all the computer users I knew were extremely
liberal in their sharing of programs, the same way that people were with music
cassettes. "Oh, I bought this cool game. I think you'll like it. Here, let me
make you a copy."

------
arnorhs
I think the web app-building crowd here is divided into two groups of hackers:
Those who are in it to build businesses and those who just want to create apps
that people use.

Everybody likes money, but there's a big group of people out there that only
want people to use their apps and are not in it for the money.

~~~
paraschopra
Exactly. My post is meant for people who actually want to make money. Making
apps for skill enhancement, fun and enjoyment is perfectly good. But expecting
to make money from such apps and calling them startups is not OK.

~~~
jpcx01
What do you mean it's "not OK"? Trying to building something new that people
use and love is a perfectly acceptable path to building a startup. pg had a
great post on this topic: <http://paulgraham.com/organic.html>

So you have an approach to building products that works for you. Great. But
scoffing at people who actually want to build the new amazing things that have
a real impact on the world is what I call "not OK".

After someone trailblazes the idea and builds something that gets traction,
then we can expect legions of "you guys" who just want to monkey their idea
and take a piece of the pie.

~~~
jacquesm
I think you miss the point entirely and quoting Paul Graham without
understanding what he writes is not going to help either.

What Paras is getting at here is that _if_ your goal is to make money _then_
you are probably better off building something that has that premise baked in
to it from the first moment rather than to just go and make some consumer app
that might get traction but that will be hard to monetise.

The 'people' from Pauls piece can be interpreted as both consumers _and_
businesses, and if you aim for 'people' that are willing and used to spending
money for the kind of service that you provide then you stand a much better
chance of making money than if you just 'build anything people love and use'.

Sure, youtube is a great counterargument, but barring being bought out by some
big company such a success could easily be lethal. See 'imeem' and lots of
other highly popular but ultimately losing propositions.

Making money should not be an afterthought, it should be a focal point if that
is your motivation to do this sort of thing. If you do it for fun or because
of a drive to change the world for the better, if you're already rich from
past ventures and any one of a hundred other reasons why you are not currently
in it for the money then sure, go ahead and do that thing that scratches your
itch.

But if you plan on paying the bills focus on where the money is made first.

~~~
jpcx01
Nah. pg's post fits perfectly here. Specifically the part "Don't be
discouraged if what you produce initially is something other people dismiss as
a toy."

This is exactly what paras is doing. Dismissing apps he doesn't think can make
money as toys. Why should the focus just be on making money?

Saying "if your goal is to make money" is sort of strange to me anyways.
Probably because my goal is not to make money, but to build new and
interesting things that have an impact. Focusing just on money to start seems
like the path to building yet another 37signals basecamp knockoff.

~~~
jasonlotito
> Saying "if your goal is to make money" is sort of strange to me anyways.
> Probably because my goal is not to make money, but to build new and
> interesting things that have an impact.

That's sort of the point Paras is making though. If your building a new and
interesting things to have impact, but your expecting it to make money and
calling it a startup, it's not OK.

> Why should the focus just be on making money?

He's not saying it should.

> Dismissing apps he doesn't think can make money as toys

He's not doing this either.

~~~
jpcx01
I am expecting to make money. And I am calling what I do a startup. And the my
goal of the startup is to build new and interesting things.

I guess thats not OK

~~~
jasonlotito
You're being obtuse on purpose. But I'll bite:

> I am expecting to make money.

Merely expecting to make money doesn't make money. You have to have a plan to
make money. You can expect things all you want, but they won't happen.

> And I am calling what I do a startup.

You can call what you do a startup. Calling it a startup doesn't make it so. A
rose by any other name and all that jazz.

> And the my goal of the startup is to build new and interesting things.

See, that's your problem. You don't even know what you are building. "New and
interesting things"? What is that? You have to be specific.

So, literally, you are expecting to make money from a startup where you build
new and interesting things. You don't know what those new and interesting
things are, or how you can make money from it, or even if you can make money
from it. You don't have a business plan. You don't even know what market
you'll be in (the building new and interesting things market?).

~~~
jpcx01
You're right, I'm not really happy with my input in the thread. Obtuse is a
good word for it.

I doubt we have that different of an outlook. My passionate disagreement with
the original author however is the belief you have to put making money above
all else. I've seen too many startups end in failure (many of them clients)
because they tried to monetize too early, or put nickle and diming customers
above user satisfaction.

~~~
chc
I think you've got the article exactly backwards. As I read it, the point is
not that you have to put making money above all else. The point is that your
chances of making money improve dramatically if you consider first _what
people are willing to pay money for_.

I find that the other approach is _more_ likely to invent the kind of annoying
and harmful revenue strategies you're criticizing. A product that has a built-
in market of customers waving money does not need to stoop to that level to
turn a profit. You can focus on making a product that your customers like and
making sure they know about it.

How you prioritize making money is up to you. The OP is a helpful tip on
getting it if you want it.

------
Maro
The article's market-first approach:

    
    
        * Find an industry (ideally, an old fashioned one) where people are making money
        * Find the single differentiator which will put your app apart in the already established industry (read or research what pain points are still not addressed by top 3 solutions)
        * Make a web app, market it, refine it based on feedback, monetize the app
        * Slowly incorporate all standard features expected out of a solution in that industry so you can shoot to be a market leader
    

I think this sounds great, but the key point is "read or research what pain
points are still not addressed by top 3 solutions" which I think is very hard
from outside the given industry.

~~~
paraschopra
Well there has got to be at least one "hard" part in making money, otherwise
wouldn't everyone be doing the same? There is no easy way to make money or
successful but it isn't impossible either.

I will give you my example. When I was starting out with Wingify (Visual
Website Optimizer), I had absolutely no idea or industry connections in online
marketing industry. But I started reading blogs, used existing solutions,
talked to people and then eventually figured out that sufficiently large
number of people do A/B testing, pay for it and right now it is hard enough to
justify a new solution that simplifies it. The idea of "Visual A/B testing"
wasn't something I realized overnight. It was a result of more than a year of
trying to understand pain points of a "large enough" industry.

If you spend enough time researching an industry, you will eventually find
some great opportunities.

~~~
alexro
And since you personally advocate for that route have you achieved a financial
success already (even in small)?

~~~
chc
From the links at the bottom of the OP, it would appear so:
[http://paraschopra.com/blog/personal/how-making-money-
change...](http://paraschopra.com/blog/personal/how-making-money-changed-my-
perspective-on-startup-ideas.htm)

------
angrycoder
For some, building software is the answer to the question: 'How can I make
money?'

For others, building software is the answer to the question: 'What would I do
all day if I didn't have to worry about making money?'

~~~
jacques_chester
I ask both questions and get the same answer.

------
slide
Paraschopra has written one of the secrets to building a low risk/high returns
web app which is re-echoed here by the founder of sharefile.com.
[http://www.sharefile.com/blog/seeking-startup-advice-look-
no...](http://www.sharefile.com/blog/seeking-startup-advice-look-no-further-
than-your-pizza-box/)

In my opinion, those of us who want to build a business from our startup,
shouldn't focus on the high risk / high return approach of building b2c apps
dependent on advertising and large user base. According to Amy Hoy, we can all
easily build a 30 x 500 wep app (<http://unicornfree.com/30x500/>). That is
500 customers paying $30 per month which gives us $15k monthly and $180,000
annually. With just 500 users and this finances in place, we can then swing
for the fences in our second start-up, knowing that we don't have to eat ramen
or beg anyone for funding in the beginning. This also ensures we have the
power to take investments only from the right kind of investors and more
importantly, it put us in a position to retain controlling shares in the new
start-up. Two examples of people that took this approach are Dharmesh shah of
hubspot and Joel spolsky with stackexchange. These were there second start-ups
after selling the 1st in the case of Dharmesh and still making money from
fogcreek in the case of Joel.

------
kayoone
As a startup founder in the internet space i can relate to this very well. For
a founder with a technical background like me its hard to sometimes get the
thinking off of the details of implementation. I like to think and work on
architecture, under-the-hood features, scalability etc, but in the end it wont
matter if noone uses the product. Users dont see and dont care for any of
that, they want to you improve what they deal with everyday. So you have to
find a good balance between that to make your product better but still work on
the overall technical structure to keep things smoothly. Also marketing
probably is much more important than the quality of your code or even app.

------
revetkn
"So, instead of an image-gallery app, why not make a survey software
specifically targeted at, say, event attendees."

Shameless plug: check out our startup, <http://yorn.com>, which does exactly
this.

~~~
e-dard
Your site design completely rocks. It's fantastic.

------
swombat
I would add, even better is to start with the delivery channel. If you've got
ways to reach a market which spends money, you're yet another step ahead.

~~~
paraschopra
Interesting. Can you elaborate what you mean by delivery channel?

~~~
swombat
Delivery channel = A way to reach the market.

For example, maybe you have ideas for products in half a dozen industries, but
in one of those industries you happen to have a good friend who works in it
(and thus has contacts there) and know the editor of one of the industry trade
magazines. Those are both delivery channels into that industry. Compared to
another niche where you have no contacts, it is much better to build a startup
for that niche where you have some way to reach the market.

This may be already implied in your mind, but a lot of people wouldn't get it
from reading your article. They'd start listing out industries and then
picking one of them. I'm suggesting: list out your deliver channels first, and
go from there (as a kind of step 0 in your process).

For example, Stack Overflow had two excellent delivery channels to reach
programmer communities around the world (Joel and Jeff's blogs). It's fair to
say that those two channels "made" stack-overflow.

~~~
paraschopra
Yes, I think if you are considering multiple industries that make money you
will automatically gravitate towards the most "practical" one where you have
more familiarity. That said, in my opinion in any industry creating a delivery
channel is not incredibly difficult but it does give you an unfair advantage
while starting out.

~~~
swombat
This actually brings up a third alternative... start with the industries, as
you suggest, but then, as part of your hypothesis-resolution (see
[http://swombat.com/2011/1/7/how-to-evaluate-and-implement-
st...](http://swombat.com/2011/1/7/how-to-evaluate-and-implement-startup-
ideas-using-hypothesis-driven-development)), try to create delivery channels
into those industries that you like.

Then follow the one where you best succeed into building delivery channels.

Best of both worlds?

------
16s
Solid advice.

Young people have to learn this the hard way. Today, it seems everyone wants
to write a FaceBook type app and be hugely popular with mainstream folks (a
household name). However, there are tons of devs (mostly people you seldom
ever hear about and who hardly anyone knows) making a great living writing
libraries, device drivers and other non-killer, yet useful software.

------
jonknee
That explains what I'm working on right now to a T. It's an industry that is
currently being run on fax and lots of manual data entry. A big key for us was
having connections with people inside, which made it easier to learn exactly
what they were looking for and then ultimately set up sales meetings.

------
ojbyrne
Ideally, you want a "cool" webapp that can provide an entry into a viable
market. The "cool" part gets you noticed among early adopters, who talk you up
until you get noticed in the marketplace. Because there is some cost in
getting into those marketplaces - you have to set up booths at trade shows, or
get PR in industry specific publications. "Coolness" can reduce those expenses
or help you get partnerships or funding.

------
alexro
Yes, but ... we are on YC site and at least twice a year we hear about cool
companies appearing out of the blue with crazy idea and some of them get
acquired or start bringing profits.

So, the 'cool' factor will continue to have its benefits and is a good method
to actually get going initially.

~~~
swombat
I believe DHH coined the name for those: Lottery tickets.

<http://www.justin.tv/hackertv/b/259414909>

~~~
StavrosK
I've been calling them that for years now, and I suspect others have too, so
the term is hardly novel, but that's exactly what they are.

Throw enough things at the wall, a few will stick.

------
robryan
I prefer to look at it this way, I'm taking an area where I think the current
solutions are lacking and creating a solution was gives value both in terms of
time and money saved. Yes as a side effect I can charge decent money for a
product which generates more money in savings and extra profit than it costs,
but amount of money isn't the real motivation.

I'd much rather work on something that fits this criteria than the so called
"cool" webapps.

------
jonknee
Something to keep in mind in the B2B market is you can charge _a lot_. Do your
research and find out how much time your software will save the company and
price your solution closer to that than what it costs you to produce and
support. You'll never get a consumer to pay $1,000/m for your web app, but if
you can save a company 25 hours a month they're getting a steal.

------
angdis
The key word here is _probably_.

There is room enough for both blue-sky idealists and pragmatic business
grinders. We need both and both are likely to fail more often than they
succeed.

It might be easy to criticize somebody who follows their passion and then
fails on business issues but there are many ways to measure "success" and not
all of them line up with a VC's definition of "success".

------
evolution
"Money or the ability to make it doesn't impress anybody around here. " --
Mark Zuckerberg (the social network)

------
middlegeek
Making money may not be the primary goal of these apps. I for one have been
working on a few things that probably will not make me money but are great
experience, are teaching me a lot and hopefully will give me a little
notoriety for the day I build my first money maker.

------
cabalamat
> _If making money is the objective, I suggest going with the market-first
> approach_

That's one way to do it, but not the only one. For example, it's not how Apple
designs products -- their design criterion is whatever Jobs likes.

~~~
chc
I think this is pretty naive. Apple's products, for the most part, are very
successful. Either Steve Jobs is just extraordinarily average or they do quite
a bit of market research. In fact, one of Apple's first hires was a guy who
specialized in collecting data from user-testing and figuring out how to make
applications better fit how they were used in the real world.

------
SeanDav
No disrespect at all to the author, but when I see advice on how to do
something I always ask. "What have you done that proves that your advice
works?"

If this came from Paul Graham, I would probably sit up and take notice but
here, meh.

Still the blog is well written and the advice is worth a try if you are wired
that way.

~~~
jacquesm
> If this came from Paul Graham, I would probably sit up and take notice but
> here, meh.

Right, because all wisdom in the startup scene flows from those that have made
millions during the .com boom.

Really, people like Paras are running start-ups _today_ and are making money
_today_ , not 10 years ago, and even if Paul Graham is a very smart and
capable person if it came to picking someones brain about running a start-up
today I'm pretty sure that there is value to be found with both parties rather
than just with those that succeeded in the past.

> Still the blog is well written and the advice is worth a try if you are
> wired that way.

So, you disagree with yourself?

If you're running a start-up you should take your advice where ever you find
it and weigh it according to the rules of applicability to your situation, no
matter what the source. You can even learn a lot from failures, no point in
limiting your input to just the success stories.

------
gersh
1/10 isn't bad odds. After your fifth app, you should have pretty good odds.

