
How Paypal and Reddit faked their way to traction - pytrin
https://medium.com/design-startups/9411fb583205
======
lifeisstillgood
A few years back the major tv companies in the UK underwent a scandal
involving faking tv phone-in competitions - runners on the show called in
pretending to be viewers, calls went unregistered. Almost none was intended to
gain pecuniary advantage but it was fraud. I think people went to jail.

I fail to see why the same scandal should not be seen here

Edit: Reddit is deception, hard to see fraud. Dating sites with fake profiles
are likely to be fraud if its a pay site(AFF sounds outrageous). The odd ball
is PayPal - if the eBay supplier got less money from the sale than if they had
dealt with a normal user with a credit card the I guess there could be a case
for fraud. Be interested in a real lawyers view

~~~
lifeisstillgood
Having had time to mull this over, I was not vitriolic enough. Disruption of
sclerotic industries is a Good Thing. VoIP has destroyed the International
call market and brought innovation to an industry that was impressed by Caller
ID.

But if one company achieved success in the VoIP market over its competitors by
dishonest, underhand or fraudulent means then they should be punished - enough
to end the moral hazard.

This is why Über and the like are facing opposition from disinterested parties
- because "disruption" of an industry by new technologies is a Schumpter style
positive - but it is not a Cloak of Immunity for any particular company
engaged in that disruption. We do not have a good track record in this - and
that matters.

~~~
lostlogin
I'm not so sure. Where does one draw the line? A quiet restaurant fills its
window seats first to make it look busy. New businesses give out their
invoices starting from strange numbers such as 26792 rather than 1 to make
things look better. I'm handed 2 for 1 vouchers by shops and food places to
make them busier. Amazon sells (sold?) books at a loss to drive others out of
business (a technique used countless times in the non-internet. There is a
line there somewhere, but I'm not sure where it is. Obviously fraud and
dishonesty is not ok, and most my examples I am fine with. However I'm sure
that different people have different boundaries.

~~~
clarifier_2014
Elon Musk on Erick Jackson (author of Paypal Wars quoted in article):

"The only negativity in recent years was due to a book called The PayPal Wars,
written by a sycophantic jackass called Eric Jackson. This guy was one notch
above an intern at PayPal in the first few years of the company, but gives the
impression he was a key player and privy to all the high level discussions.
Eric couldn't find a real publisher, so Peter funded Eric to self-publish the
book. Since Eric worships Peter, the outcome was obvious - Peter sounds like
Mel Gibson in Braveheart and my role is somewhere between negligible and a bad
seed. However, to his credit, Peter didn't realize the book would be as bad as
it was and apologized to me personally at a Room 9 board meeting at David
Sacks's home in LA."

------
mjburgess
I think we need to distinguish between "faking", "demonstrating" and
"supplying". Faking should be reserved for literally providing false data with
the intention that it's believed to be true, eg. the dating site example.

Most of those examples were not faking anything. Rentoid actually supplied a
serivce, though it wasnt "user-generated". Reddit supplied links their
potential users would be interested in.

This is a mixture of demonstrating how the service works, and supplying actual
content to potential users.

By way of contrast, what the dating site admins should have actually done, is
ask all their single friends to sign up (and any other single people they
could get their hands on directly).

It seems a perfectly good and moral business strategy to generate your own
content which is representative and useful. I think "faking it" is a bit more
questionable.

~~~
photorized
Your examples are mostly still "faking" \- faking consumer interest, faking
popularity.

Companies do that all the time.

~~~
raverbashing
No

In the case of the dating website it is faking. Because there's no way you'll
end up dating the fake profile

Not sure how it was in the case of Paypal, if it was a false order or they
would just go ahead and buy small stuff then.

But in the case of Reddit and Rentoid, it's not fake. You're getting what you
want. Links and the products to rent.

It doesn't matter if it's being provided by the founders, you're getting the
service

~~~
cryptoz
But the founders were lying about their identity when posting the links. If
the user considers the service to be "links from other users" then yes, the
content is fake. If the user considers the service to be "links", then you're
correct. Personally, I consider the service to be "links from other users" and
therefore, from my perspective, the content was fake.

~~~
bobbydavid
Lying may be too strong of a word. The users have pseudonyms; there was no
reddit real names policy. It seems reasonable for multiple pseudonyms to be
controlled by a single person.

Users may have been surprised to find out just how few other people actually
existed. But I see this as legit. It would be like a big corporation hiring
"Esprit Legal Firm" for their defense, winning in court, and hen finding out
that the company was run by a single lawyer. Obviously businesses can't lie,
but you're not required to list your own flaws either.

~~~
csdreamer7
Businesses lie all the time. I believe AT&T was busted a year or so ago for
misleading consumers that the fees attached to their phone bill were mandates
by the government. Bestbuy was busted on using different instore flyers then
the ones they shipped out.

------
liquidcool
Missed a couple big ones from companies they mentioned. Yelp paid professional
reviewers to seed cities they wanted to establish themselves in. To my
knowledge they were honest reviews, but people were still put off by it.

And the Airbnb spam debacle was left out as well.
([http://davegooden.com/2011/05/how-airbnb-became-a-billion-
do...](http://davegooden.com/2011/05/how-airbnb-became-a-billion-dollar-
company/))

For the record, I use both services frequently, but those are notable
omissions.

Really curious how much PayPal dumped into buying eBay items. Doesn't seem
like something you could do for long, so I imagine it had to be highly
targeted.

~~~
noloqy
If I were PayPal, I wouldn't primarily be focused on buying items, as it would
be very expensive strategy. I'd try sending sellers email first, indicating
that you are interested in purchasing their product and asking them if they
support PayPal. Having thousands of sellers just visiting your site to see
what this "PayPal" is about is a great way of getting your name out there at
no cost.

Also, if I'm not mistaking, buyers have no right to force sellers to accept a
payment method that the seller did not support. Of course you could try to
persuade them after you've bought their product, but insisting goes way too
far.

~~~
notatoad
>buyers have no right to force sellers to accept a payment method that the
seller did not support.

sure they do. after you've won an auction or otherwise agreed to buy you are
restricted to only the accepted payment methods, but before making a purchase
you can contact a seller saying "i'll buy this if you can accept paypal"

------
dvdhsu
Paypal buying eBay items wasn't actually the primary method for stimulating
growth. Initially, Paypal offered new users $20 for opening an account, and
$20 for referring somebody to open an account. They then dropped the bonus to
$10 for both, then $5, then $0. This allowed them to grow immensely, and they
reached 100,000 users in one month. These bonuses weren't "cheap" though: they
cost PayPal around 60-70 million.

Here's a reference - an interview between Elon Musk and Salman Khan:
[http://www.youtube.com/watch?v=vDwzmJpI4io&feature=player_de...](http://www.youtube.com/watch?v=vDwzmJpI4io&feature=player_detailpage#t=682).
It's worth a watch.

~~~
pearjuice
>60-70 million

Great strategy if they actually worked out they could get it back in x time
with y users actively using Paypal. The real step is taking the risk. What if
only half of the money returns and there is no further adoption? How did they
ever take that step? Or were they monitoring the user growth 24/7 and if it
didn't match their planned strategy, they would pull the plug on bonuses?
Amazing however they managed to pull it off.

------
blairbeckwith
I'm usually not bothered by stuff like this, but let's play some role-
reversal.

"Dating services know what men want (who doesn’t) and seed the network with
photos of Latin American models with eclectic interests (not that the latter
matters)."

In to...

"Dating services know what women want (who doesn't) and seed the network with
wealthy-looking men with genuine personalities (not that the latter matters)."

~~~
dylangs1030
I'd prefer Italian models myself but I mean they already know apparently...

On a serious note, it probably worked. This might come across as sexist, but
aren't we as men more easily "gamed" when it comes to dating? We are very
visually oriented...more so than females.

~~~
Perceval
Counterpoint:
[https://www.google.com/search?q=romance+novel+covers&safe=of...](https://www.google.com/search?q=romance+novel+covers&safe=off&source=lnms&tbm=isch&sa=X&ei=T9YYUt2vCJb_4AOw94DoDA&sqi=2&ved=0CAcQ_AUoAQ&biw=750&bih=799)

~~~
kenshiro_o
How is that a counterpoint? It only shows covers of romance novels where the
men look muscular and the women pretty. If men paid less attention to looks
than female why are there so many arguably good looking women with so many
arguably plain looking (but possibly wealthy) men?

------
Dogamondo
This reminds me of the tactics the music industry used to use to gain initial
traction for their manufactured groups and artists who had never built up an
organic following before being signed. Case in point is Lou Pearlman's
creation, Backstreet Boys, who's first album and titular single was called
"Backstreet's Back", with lyrics that alluded to the fact that they had been
around for a while and were making a 'comeback'. Their music video was noted
for having a mass of adoring, screaming female fans chasing them down the
street and going silly over them. This was before they were even known, but
eventually became a reality.

~~~
ubershmekel
Sorry, that's wrong.

"Everybody (Backstreet's Back)" is the first single from the Backstreet Boys'
_second_ international album from 1997.

They were huge thanks to their 1996 international album called "Backstreet
Boys":

>becoming one of the biggest debut albums ever and contains a number of the
band's most memorable singles

~~~
Dogamondo
Ubershmekel, you are dead right! Sorry, I stand corrected. After reading the
Wikipedia article I guess they really were 'back!'. (I was listening to
Smashing Pumpkins at the time in all honesty!)

In another example of the music industry seeding their own success, I remember
when it wasn't uncommon for a major label to ship a number of initial releases
to record stores and then buy them back to push their artist up the charts
(which were all based on record sales). The result was that the album or
single rode high up the charts getting more rotation on terrestrial radio and
MTV, until it became a self-fulfulling prophecy and eventually outsold the
buy-back investment and then some.

Thanks for the BSB correction :)

~~~
hboon
Buying your own products to ultimately boost sales is pretty common in the
media industry that has best-selling lists. New York Times Best Sellers, music
charts, and more recently app stores.

Not that I disagree with your comment, just adding a bit of detail.

------
dfritsch
I think that this is an obvious extension of what new businesses have been
doing for decades. If you open a storefront, you would do a soft opening to
test the idea and then a grand opening to generate traffic.

If I was having a grand opening, I would get every friend there, even if they
would never shop at my business, to make the place seem full and busy during
the "party".

Obviously this is not on the scale of a start up, but I think the idea of
faking initial interest is actually common for any business.

The article hints at how sinister your faking is seems to affect how much
backlash you get from it.

------
hsuresh
Another way of looking at what reddit did, is to think of them as hacking a
way to provide value to the initial users. Faking doesn't necessarily have to
be about lying, it can be used to provide value, even though the system is
designed to work well only when there is a significant userbase.

------
Tossrock
So the meta-story is that that's what medium.com is doing right now, right?

------
volume
I forget where I read it, but "Pud" of F _ckedCompany and Adbrite fame
explained how he used to run a BBS back in the day and the techniques (similar
to the blog post) he used to get traffic carried over into how he got traction
for F_ ckedCompany.

------
leokun
This is the kind of bullshit advice you get from (non-pg) mentors at YC and
places like 500-startups. Such advice has a few traits:

* It's too general to be of any use to you.

* It's too specific to be of any use to you.

* It's stuff so obvious you've probably already tried it and it obviously hasn't worked for you.

If there was a formula that worked, everyone would do it. There isn't, so
general, vague sounding bullshit is the order of the day. They might as well
be prescribing hanging garlic from your door. You get a couple of people who
have seen success one way or another, usually through being at the right place
at the right time with the right idea in a situation of extreme uniqueness,
and they are never helpful. At least not strategically. They probably are
helpful in terms of the business of startups: management and fundraising etc.

I think the real lesson is to just build your idea as best as you can and if
there's traction it'll work, if there's signal follow it, if you don't get
anywhere quickly, try harder or try something else. Or give up.

------
khadim
So should every startup fake their way to traction?

~~~
Wilya
There doesn't seem to be much drawbacks to this strategy.

I can think of very few startups that failed because of shady early tactics,
as long as it stayed only a way to get to traction, and wasn't a decisive part
of the business model. If you're small, nobody will care enough about you to
learn about your tactics. If you're big, you should have enough money to rebuy
a reputation with marketing/PR.

~~~
loceng
Except for being genuine, authentic. You can't be 90% genuine - that's not
possible.

~~~
jerf
Mmm, I think you may be confusing perception vs. reality. As much as we'd like
to think the two are inseparably joined and it's impossible to fake being
genuine (or vice versa, impossible for a really genuine thing to be perceived
as inauthentic), I don't think the facts support that idea.

------
cmbaus
I remember years ago, I had a blog entry hit the homepage of Reddit:
[http://baus.net/rails-wrong-language/](http://baus.net/rails-wrong-language/)
. I think the user that posted it was Linuxer or something like that. But the
account had a ton of karma and there was some question if it was just a bot
run by Reddit.

------
omegant
This post is perfectly timed for us. We are trying to rise a market place and
it´s really difficult to go beyond the egg and chiken problem. Even more if
the model is new and there is no data to support our point.

------
nkurz
Judging from the comments so far, I'm guessing I'm in the minority. But from
my point of view, all of the practices described are duplicitous and
unacceptable. Yes, there is a differentiation between 'faking' and 'fraud',
but this is a legal distinction. Morally, they are equally offensive.
Unquestionably, lies and deceit can be useful in achieving business success.
This does not mean that they should be condoned, much less encouraged.

~~~
paulhauggis
I see no problems with faking certain things until you have gained a critical
mass of users. As long as you're not scamming people out of money or doing
anything that would hurt them, it's fine.

Most businesses need to do this at one point or another. If you don't, you
will most likely fail.

------
gcb0
Makes you wonder if that also worked for Tesla

------
getglue
Reddit grew b/c of the fall of Digg.

~~~
davidw
This was well before that time. It was already well established when it was a
competitor to Digg.

