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Jonathan Andrew Wolter

Archive for October, 2006

Success in Web 2.0 – Notes from Paypal cofounder Max Levchin and YouTube cofounder Jawed Karim

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Reading time: 6 – 9 minutes

I went to the ACM Reflections Projections conference this weekend. There were top speakers, including the co-founder of Paypal, Max Levchin and the co-founder of YouTube, Jawed Karim. Here are some highlights from their talks.

Max Levchin: co-founder of Paypal.com and current CEO of slide.com

Millionaire Before Graduation: Entrepreneurship in the Post-Post-Bubble Internet

ACM Conference 2

Speaking to an audience of undergrad and graduate students at UIUC, Max stressed if you’re an entrepreneur:

“You should start a company right now.”

But what is an entrepreneur? And what if I don’t have an idea yet?

“An entrepreneur is someone who desperately wants to start companies. He or she doesn’t even care what they are about, or which one.”

The important thing is starting. Max says you’ll never get it right the first time. So start now. Fail a few times while you are young. Paypal was Max’s fifth company. He started his first in his Junior year in college, and every one that wasn’t successful taught him what had to change for the next time.

When you start, the idea is cheap. It’s okay to be mostly interested in starting the company. Some people say in starting a company it is 90% hard work. No, says Levchin:

  • 40% is hard work.
  • 50% is having a great team

When you start a business, start it on the web. Why?

  • It’s really cheap
  • You get really fast feedback

However, don’t start selling something to enterprises. Enterprise sales cycles are slow, expensive, and require loads of salespeople. (You don’t want salespeople on your team early on either. Just tech people.) Make things work, and satisfy your direct-to-consumer audience.

Once you’re up, you need to record metrics on everything. Obsess over all of your data. You’ll discover the pages people actually use is different from what you expected them to use. Iterate. Bring what people use to the front. If you’re still in school, take lots of stat classes. It makes the metrics easier.

Remember you will fail.

Failure is your true test. It’s really good to fail in the beginning… If failing anytime is good: now is best. [So get to work and take risks so you'll fail, so you'll learn, so you'll succeed!]

Tenacity is number one. You must be willing to fail 10 times for success in the 11th.

When you’re succeeding and you need to monetize, Levchin has three strategies:

  1. Advertising – with Google Adsense, and other ad networks
  2. Premium Subscriptions – this is tough though if your competition has these too, and you end up competing on price
  3. Memberships – monthly, yearly, etc.

Jawed Karim: co-founder of YouTube and current masters student at Stanford

YouTube: From Concept to Hypergrowth

ACM Conference 3
Jawed is the 2004 UIUC CS graduate who, after a 5 year tour at Paypal, co-founded YouTube. 19 months after launch, YouTube is one of the most-visited sites on the web.

  • More than 100 million videos are served daily.
  • A new video is uploaded every second
  • The average user spends 30 minutes on YouTube per day

Prior to YouTube, what did video sharing look like? FTP uploads to a private website [or peer to peer] was the best way to share a video. People without websites and technical savy couldn’t share. Downloaders would have to download the full file, have the right codecs, and finally be able to view the clips. Discovering other related videos was not easy, and there was no way to post comments about a video you enjoyed. In 2004 the “Bit Torrent effect” emerged, which was scalable – but it lacked social aspects, simplicity, and was mostly for hard core geeks.

In 2005 Jawed and friends decided to create some sort of video sharing app inspired by Flickr and hot or not.

On Feb 14, 2005, work began.
ACM Conference 1

We launched the site with a bunch of “stupid videos” … except no one one used it but ourselves. We pitched it to our friends. We wrote to all the Wired reporters (no replies). We talked to lots of VC’s (they didn’t call back.)

By May 2005, it was very frustrating. 50-60 videos were uploaded. They had an idea:

We posted an ad to the San Francisco Craigslist asking for girls to post videos to YouTube. If we thought they were attractive, and they posted 10 videos, we would send them $100 via Paypal.

No girls responded.

In June 2005 YouTube got revamped. “Related Videos” was added, to make the site more sticky. And instead of Jawed and co-founders spamming all their friends, they added a button “Email a friend” so the visitors could do that for them. Everything was changed to encourage user interaction. Make people want to spend more time on the site.

August 2005, YouTube gets Slashdotted. Things started taking off from here. The community did things they never expected. People would leave video responses to other people’s videos. So they created the Video Responses product. Pretty soon they had $3.5 Million in capital from Sequoya, and then you all know about the Google acquisition.

One lesson Jawed pushed home was:

Just because experts reject an idea does not mean it is a bad idea! In certain areas, there are no experts.

If you’re out there creating innovation, you may be the expert.

As we look for the next big thing, Karim suggests it will explode from newly emerging secondary technologies. Start a company that will make something that was previously difficult, easy.

And expect failure. Jawed worked on numorous other projects that failed, before hitting big with YouTube including a geographic aware IM client that grew to about 50,000 users before he pulled the plug. An interesting article about him, as the silent YouTube partner, may be found here.

Update 10/28/2006: A video of Jawed’s presentation is now on YouTube, watch it below:

Written by Jonathan

October 22nd, 2006 at 2:58 am

Posted in Uncategorized, online business

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