How will it make money? Why new startup founders must answer this question
Thursday, May 18, 2017/
“If you’re building something for the internet, whether that is on the web or mobile, it needs to be made monetisable from day one,” says Philadelphia entrepreneur Joshua Davidson.
Writing in Medium, the ChopDawgStudios co-founder says he first discovered the gravity of this lesson as a teenage tech developer when he built a fan site for a New Jersey theme park, which was attracting more than 2500 fans everyday and over 40,000 monthly hits.
When the park’s president at the time, Mark Kane, asked how the site was making money, Davidson “couldn’t comprehend the concept”, which left Kane dumbfounded.
So Davidson then tried to get a “return on investment”.
“Immediately upon introducing advertisements, I angered a passionate fan base, a community,” he says.
“My little website had become a sellout. No one liked it. User activity decreased. Competitors popped up left and right.”
This experience from 2005 is one Davidson sees playing out among new startups and founders to this day.
Even if a product “isn’t at a point worth paying for yet”, he says, it’s critical to have a strategy in place to get return on investment.
“If you, deep down, believe this, why not offer monetisation at a smaller rate at the start?” he says.
“You’re still able to make something and not feel like you’re overcharging either.
“If you have advertisements and no one is willing to pay for ads yet, why not just display your very own ads? You’re still managing the expectations of your users.”
And this is the bottom line, he says — setting expectations from the get-go.
“Nothing is more frustrating, more insulting, more spit in their face than telling a user what they have used for free will now cost money, even if it is just ads being introduced,” he says.
“Imagine, for most of the products we use daily today, you have been using them for free, just to be informed suddenly, you now need to start paying.”