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Spit-balling the Startup Racket

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Yesterday I wrote an article about how the startup culture and business can reach a point of diminishing returns -- about how in many businesses gatekeepers adopt policies best suited to them and not the market, about how people honestly trying to help may not know their own selection bias, and about how there is a subtle motivator in the startup world to be "about" startups, without actually doing anything.

Today I thought I would quantify that a bit, using you guys as guinea pigs.

The goal? To find how how much money there could be in simply talking about startups, ie, what is one of the things in the industry causing dysfunction.

I posted my article on HackerNews, my virtual watercooler. It went pretty high. I've been trying to stay off HN, but checking a few times yesterday I'm guessing that it stayed on the front page for 12 hours or so.

What kind of money could that generate?

Looking at other sites I have, I've found that a tightly-focused site can generate between 1 and 2 bucks per hundred viewers using AdSense. My blog is about 1/100th of that, but if you are careful about how you control the topics and provide value, I believe you can at least make a buck per hundred viewers.

Yesterday there were 6,873 viewers of the article as of midnight. Extrapolating a bit, and just using the back-of-the-napkin, let's go for 10K viewers in all. That means if you write a startup article (as a successful writer with a tightly-couple audience) you should be able to get about ten thousand people to read it. Once again, from looking at other sites this is not an unusual number. Of course Joe Schmoe is not going to get this kind of traffic, but lots do.

Running the numbers, looks like yesterday's article could have generated about $100. Not bad for 15 minutes work.

But it gets better. AdSense is notorious for giving the blog owner just a small portion of the total amount being paid for an ad -- anywhere from 1/5th to 1/10th of the total price of the ad actually gets paid to the writer. Google keeps the rest. Assuming 1/5th, that means you could have sold that same ad to a set of dedicated advertisers for around $500.

But it gets better still.

Good sites -- sites that stay on-topic and provide new, fresh content, should easily be able to drive that kind of volume everyday, either through using rotating authors, more popular articles, or providing a social-ranking system portal, like Digg or HN.

But you can still take it up another level.

If, instead of selling ad space, you sell a service or product, like access to online repositories, a make-your-startup-hum book, or one of the many hangers-on to the startup world (lawyers, accountants, staff augmentation people, you know who you are) the value increases by another order of magnitude.

It's not hard to envision a situation where a person made it big in a startup one or two times, wrote a book (largely ignoring or minimizing their own selection bias) and is picking up several thousand dollars a month or more simply bullshitting about startups online. This can be a powerful incentive, even to people who don't need the money.

To them, they're bringing in an audience and generating revenue -- they must be providing value to somebody. But to the user, a simple case of hero worship or the insecurity or just trying to wring every little piece of information possible from this source could be causing them to visit even though they've long reached the point of diminishing returns.

That's not saying that these folks are con artists or that somehow the industry is crooked. It's just an example of how we can easily get at cross-purposes without realizing it. I personally think everybody I know in the "helping people create startups" business is good and honorable -- I haven't met any crooks. But that doesn't mean that the system isn't whacked, that lots of people aren't wasting their time and money, or that there are incentives that are not aligned with the greater common good.

Lots of noise-to-signal here, and it's not readily apparent that this is the case.

I am going to stop blogging about startups for a couple of weeks now, lest I become the very thing I am criticizing. I blog in order to clarify things in my own mind. This is something that has been festering for many months. Glad to have finally gotten it out in written form. Hope it helps you to realize if you are in the same boat as I am.

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About this Entry

This page contains a single entry by DanielBMarkham published on April 28, 2010 1:46 PM.

The Startup Racket was the previous entry in this blog.

Agile Does Not Mean Doing the Impossible is the next entry in this blog.

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Recently I created a list of books that hackers recommend to each other -- what are the books super hackers use to help guide them form their own startups and make millions? hn-books might be a site you'd like to check out.
On the low-end of the spectrum, I realized that a lot of people have problems logging into Facebook, of all things. So I created a micro-site to help folks learn how to log-in correctly, and to share various funny pictures and such that folks might like to share with their friends. It's called (appropriately enough) facebook login help