How Social Media startups are hurting my friends

Original By: bootload. Licensed under Creative Commons.
There are lots of young people coming up with great skills. They are tenacious, technically savvy, willing to work for less than established people and highly aware of emerging trends. These individuals also possess a feeling that they can make a difference, change the world and be successful. These qualities make them the perfect candidates to help launch the newest social network or bookmarking tool that is going to take the world by storm and be the next Facebook or Digg.

Sadly, there already is a Facebook and a Digg and hundreds of other variations. Unless you have big backers and/or a niche market that is in serious need of it's own social network your idea is extremely unlikely to succeed. The sheer number of 'companies' launching as social networking or bookmarking sites is reaching into the tens of thousands. How many will be successful? Maybe none, maybe one. Now I know that your social network is better, faster, cooler and more versatile than Facebook but that doesn't mean people will use it. The trend that I have been noticing lately is that people don't want to login to another site to access yet another network they have to put time into the benefit; people are already spread to thin.

"Working at a startup is a valuable experience, and making mistakes earlier in your career will save you later on. Even if the social media startup fails miserably, you have learned valuable lessons that will make your future ventures more likely to succeed." -Anoop

Anoop is so right on that and don't get me wrong start-ups are a good things especially when planned properly, not just around an idea but around a business model where revenue is a real thing, not something that will come. How are start-up leaders going to pay their employees? That's the problem; often they don't. Young people like the idea of equity but equity in something worth nothing is worth, well, nothing. Whether it's for equity or as an intern these newly minted technology and programmer masterminds are often being used as 'slave' labour.
By: MotivatedPhotos.com
So how are these social media start-ups hurting my friends? Well by not paying them a real wage is one way. Another way is by locking them into a project which may result in them missing out on real opportunities to build their careers with companies who actually make more revenue that they have expenses. Selling my peers the dream of millions of dollars from your awesome startup bookspotmark.com is the same line that was fed to big Wall Street investors in the years before the original dot com bubble. I am happy to coin this new phenomenon "dot com bust 2.0". That is exactly what it is. There is good reason that VCs are now steering away from risky social media startups.

If you are or know a talented young person drawn in by this new startup model be warned or warn those you know. Any startup without a marketing plan or an inkling of where revenue will come from should be avoided. Below is an image including a number of logos from recent startups in the technology space. The ones crossed with a pink X no longer exist and there are thousands more to come.


What are your feelings on this? Do you have personal experience? Any good experiences? Please share.

4 comments:

  1. Kemp, I'm with you in terms of the issue, but the cause lies within the choice that people are making to participate in these initiatives. If people aren't perceiving the risks, they need to learn. On the other hand, it's often a lack of knowledge about the risks that brings success - naiveté can create some interesting luck.

    I think it's a simple "Seller Beware" and if you're going to be selling your talents, make sure the buyer has the means to meet reasonable demands.

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  2. I completely agree Kemp. I've worked with a client who was trying to do exactly this. They spent hundreds of thousands of dollars building this site and promoting it. For us, marketing this was a really difficult sell because of exactly the trend you've noticed: nobody wants to sign up for yet another social networking site - let alone check up on it regularly. Especially if this new site doesn't integrate into any of the other platforms with a certain level of ease.

    Anyway, long story short, although we were actually being paid, we stopped working with them months ago and the partners are now tied up in a very public, multi-million dollar lawsuit over who's fault it is that the business hasn't delivered financially like it was supposed to. In my opinion, it just wasn't a marketable idea and it's really unfortunate that it went that far without anybody realizing it.

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  3. Great post. As with any business you have to do your homework on the industry and market before you commit to the startup. A lot of companies are ignoring the basic things you just mentioned (people don't like to log in, lack of revenue model).

    However, I argue that working at a startup is a valuable experience, and making mistakes earlier in your career will save you later on. Even if the social media startup fails miserably, you have learned valuable lessons that will make your future ventures more likely to succeed.

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  4. @Dave I agree that people need to learn, maybe the hard way to perceive the risks. I like you counter point, risk brings success. Seller beware indeed.

    @Rosa Great Story! Thanks for your contribution: a true story of dotcom bust 2.0.

    @Anoop Your point is bang on and has been added to the body of the post, thank you.

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