Friday, 17 April 2009

Great start up article in time. The modern dot com startup.

Thanks to Krish Sridhar for pointing me to this article in Time about modern internet startups. Its a biopic about another new web company. But the major point is just how cheap starting a internet company is these days, the intrepid entrepreneur in case, John Tayman, took an idea for a website from idea to breakeven profitability on $10,000, despite having to buy in all the programming and design skills, and without even giving up his day jobs. The article also publishes the wonderful term: Ramen profitable:

The term ramen profitable was coined by Paul Graham, a Silicon Valley start-up investor, essayist and muse to LILO (little in, lot out) entrepreneurs. It means that your start-up is self-sustaining and can eke out enough profit to keep you alive on instant noodles while your business gains traction.

Time contrasts this modern ultra light startup, with the pre dot com crash startup, like amazon, those companies, had business plans, and big venture capital funding behind them. The modern ultra light, has personal funding, and build it and see what happens attitude. This changes is large due to the fact that the skills and technologies need to make web businesses are so prevalent these days, that the capitial needed is so much smaller.

So with it so easy to start a company, are we all going to web millionaires. Of course not, the market can only handle so many ideas. There's a pot of advertising revenue (since google has most of the internet market, this roughly equal to googles add revenue), which has to pay for
all the websites that don't sell a product. Anyone great article reveals how that pot is distributed.
Right now you need to be in the top 100,000 on-line sites in order to make money in the thousands of dollars. Since an unpromoted site might have an alexis rank of 20 million. Your need a lot of marketing to get to the profitable region, worse once your in the region it probable that your have to make a lot a new backlinks in just to keep at the current place.

This isn't surprising, economic theory tells us, once the barriers to entry are low, the market rapidly gets full with companies, profit gets driven out, and price of the commodity gets driven down the cost of its production. The article above, puts the average income of those bottom rung bloggers as 13$/hour. Which is just about good enough to kept a blogger interested in working, but is hardly the "little in, lot out" dream mentioned above in time.

The internet itself, and the pot of advertising revenue is still growing, and this should help to
keep those ramen profitable companies (that are probably very useful to there readers, the dross have already be driven out, by the ramen stage), improving and going forward. But as the
internet grows and gets saturated, whats going to keep the never truly successful dreamers doing there bit for noodle money. That;s a good question, that may haunt the internet to come. Myself i think there's plenty of room for ten or more times advertising growth on the internet over the next ten years, probably given by new and innovative technologies and advertising stategies. So for those starting now, if they stick at it, and serve a useful propose, should gain
above average ricks, based on overall future growth.

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