Month: October 2015

If you are aware that you want to find something, you search for it. There was a time when searching wasn’t easy, so you had to rely on your memory cache of known things. You could argue that ads were useful in filling that cache, particularly for things that you had not needed or experienced up to that point. Now that we have instant online search, that problem is no more.

Sometimes you’re unaware that you want to find something, but you’d be pleasantly surprised if a genie told you “here’s what you didn’t realize you wanted.” That’s what predictive search is about. A perfect predictive search agent would either shut up (perhaps most of the time) or give you extremely relevant results in anticipation of a query that you haven’t articulated yet. Unfortunately, online ads are not that genie. If that were their purpose, we could say that irrelevant ads are a poor implementation of predictive search.

Some argue that with better ad technologies there will be fewer mismatched ads: it will become easier to match products to consumers at the right time. That assumes that every product for sale can be matched to a consumer at a given point in time. Why should that be true? One of the uses of advertising is discovering whether people are interested in a product or service. Suppose a chef from a different galaxy came to our planet and opened a restaurant. Not being sure of the tastes of humans, he starts with his three favorite items on the menu: fish, steak, and uranium. It won’t take our alien restaurateur very long to figure out which item he should stop offering. There may be large numbers of things advertised that nobody cares for; a product genie would immediately tell the advertiser “don’t waste your money, I’ve analyzed humanity and nobody in their right mind wants this.”

Because that product genie does not exist, advertising will continue to be a mechanism for (in)validation of products for the foreseeable future. As a result, we will continue to see ads that we’ll perceive as annoying or irrelevant. No product-consumer matching technology should try to find hungry people interested in ingesting uranium.

The traditional competition between companies has been about the price and quality of their products. For most startups that haven’t reached product-market fit, that shouldn’t be a real concern. As Justin Kan puts it:

Startups mostly don’t compete against each other, they compete against no one giving a shit

— Justin Kan (@justinkan) June 27, 2015

But why and how do startups compete against no one giving a shit? For one, starting a company has never been easier so there are lots of them. “I am the founder of a startup” says little about a random person you meet in Silicon Valley. Imagine that Wimbledon expanded from 128 to 65,536 players. More people would be able to say “I played at Wimbledon” but the average participant would not have a sponsor or be able to make a living as a tennis player. As this “Wimbledon expansion” slowly took place, the traditional competition moved to a later stage. In the beginning, startups compete against other businesses in areas such as:

• attention. Because there are more products and services that ever before, there is a significant chance that nobody will learn about what you’re doing. In that sense they don’t compete just against other startups or large companies; they compete with the background noise of the online world that all of us generate.
• employees. If your startup makes backup cameras for bicycles (“parallel parking your bike is now easier than ever with BikeSeatCam!“), you want to hire the people lots of other companies in completely unrelated markets also look after.
• funding. That’s perhaps the closest thing to a startup league competition. Investors must decide where to put their money, and often choose among startups that are unaware of each other’s existence. Still, this is the fiercest competition most startups will face. You can study the weaknesses of a specific opponent and perhaps exploit them, but when competing against the faceless crowd there are no shortcuts: you must be significantly better than most.
• customers. That comes after surviving the other types of competition long enough to have a product out in a validated market. Most startups will never have the luxury of reaching this stage.

Many founders I’ve met have a hard time understanding the nature of this competition, and adjusting their thinking to compete in those terms. For example:

• Getting attention is an art, and many underestimate how important it is. If you’re doing something wacky (“our drones keep your cellphone in front of your face so you can watch Netflix while you jog outside!”) or controversial (e.g. Peeple this week), attention comes more easily. If your product is relatively boring, you’ll have to figure out how to get the attention you need.
• Attracting employees is a multidimensional task: some people are lured by the promise of working with known industry figures, some want to take on a sexy project, others value the potential of the business. What you have to do to attract the right employees may be unrelated with the nature of your business. For example, your customers may not care at all about your software stack but your potential employees will obviously prefer some tools over others. Is there anything that makes your company a unique place to work?
• Fundraising is literally selling. A startup is selling a part of itself in exchange for funds to operate. Investors are people who buy investments in the same way that consumers buy daily necessities. Even though this is obvious, I keep meeting startup founders who believe that investors are like their rich uncles. In reality, investors are more like shoppers in a giant grocery store filled with unknown stuff: should I buy some gluten-free Twitter substitute or try the “I can’t believe it’s not Uber” instead?

If you’re reading this post you’ve probably heard the YCombinator mantra “make something people want.” Even though it has a zen-like air of wisdom, I find it as actionable as “score more points than your opponent.” There are countless reasons making something people want is really hard. One of them is that if you startup cannot rise above the background noise and get the right amount of attention, it will never find out if it’s on the right track. For startups, loudness is a virtue.