Illustration of Derek Powazek by Adam Ellis

If You Don’t Know How A Startup Will Make Money, Neither Do They

Yesterday I posted a discombobulation of the “If you’re not paying for the product, you are the product” truism. Judging from the feedback, I hit a nerve.

Today I realized that I broke one of my own rules. Don’t just complain, propose a solution. So here goes.

Instead of telling people “you are the product,” which creates a feeling of inevitability and powerlessness, let’s say this: “If you don’t know how a startup will make money, neither do they.”

This, I hope, will remind people that the business plans of the startups they use are, indeed, their business. They should find out how the company is making money now and what their plans are in the future. They can then make an educated decision whether to participate or not. They can also judge the company by how well they keep their word.

It’s also a clear message to startups: your business plan cannot be secret anymore. People are too smart for that, too tired of getting burned, too wary of losing their contributions when a startup dies, and too annoyed by sudden changes to the terms. Communicate your business plan from the start and you’ll avoid a thousand problems down the road.

It’s a sign of the times that when I told people about Cute-Fight, their first question was usually, “How will it make money?” That never happened back in the day.

So we’ve had an answer in our FAQ since day one. In a nutshell, it’s sponsored venues. We did the hard work to have examples like this and this shortly after launch. That way, when people asked, we could point to a real example on the website.

Now, of course, this is not the only way we plan to make money. We’ve got other ideas that we should talk about sooner than later. But the point is to have an answer and make it public.

Many startups are afraid of this kind of disclosure. There was a time when you wanted to keep these plans a secret. But times are changing. People expect to know. And if we want them to trust us, we’ve got to tell them. We can change our minds, make improvements, and respond to changing circumstances. We just then tell them again. And if we’re very lucky, they’ll give us suggestions about what they’d like to pay for. It becomes a conversation between members of a community that all want the business to succeed.

I still don’t think we should yell at developers, but we should look at sites that ask for our participation and try to see how they make money. If we can’t tell, we should ask. And if there’s still no good answer, then we should assume that’s because there isn’t one, and decide to participate with caution. Some websites may be compelling enough to warrant participation anyway (Twitter), but then at least we go in with open eyes.

So, to sum-up:

People: You are not the product. You’re a smart person making an educated decision about which companies you trust with your time, attention, and contributions. If you don’t know, or don’t trust, the business model of a company, don’t use their product.

Companies: Communicate with your users. Tell them how you’ll make money, early and often. Your honesty will help you earn their trust, and their trust is your most valuable asset.


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Hi, I’m Derek. I make awesome community-centric web stuff. I sometimes post things to Flickr and Twitter. I’m mostly harmless. More.





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