In this episode of Startups For The Rest Of Us, Rob and Mike talk about creators versus fans. They discuss some cautionary tales of building products on someone else’s platform and the potential risks.
Items mentioned in this episode:
Mike: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about creators versus fans. This is Startups for the Rest of Us episode 418.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Mike: Things are good this week. Fall is in full effect as the leaves fall off the trees, we live near a lake and the view of that gets better for us. It’s kind of definitely feeling the season’s change and kind of gearing up to do more work in Winter. I took late Spring, Summer and an early Fall off. I’ve been off work since I left Drip in April, so it’s been about six months. Now, I’m kind of starting to ramp up little bit on Tiny Seed, tinyseedfund.com which is the accelerator that I mentioned on the show a few weeks back and things are picking up and going really well with that.
We’re in fundraising mode in essence and that’s going, I will say, quite a bit better than I thought it would. The hypothesis is I think this is needed in our space, I think that bootstrappers and people who want to kind of fun strap things needs and some funding and better funding source and some guidance, and then that there will be people who are interested in supporting that, and based on our models, making money obviously, because it’s an investment. But you don’t know, it’s a hypothesis when you start.
Then the more that we’ve talked to people it’s like, “This is really interesting.” This is something that I feel the momentum building as we speak and I’m pretty excited about that. It’s exciting for me to be working on something new. I haven’t done anything new since starting Drip which is 2012. It’s fun to do that.
Mike: Awesome. On my end, last month, I started doing some paid advertising through the one paid ad that I was doing. I added about 600 email addresses to my mailing list and they’re still kind of working their way through an email campaign that I have set up for them. I have no idea what my eventual conversion rate will be on them. But we just have to just kind of see how that all shakes out. I’m kind of looking at what other things I can do in November and then December and January etc. I’m kind of looking forward to the future, but we seem to have had some reasonable success so far with that.
Rob: Sounds good. How are you feeling about Bluetick? Are you optimistic? Are you in a rut or in a valley right now? What’s your sentiment?
Mike: I don’t know. It’s hard to separate, I’ll say, the business side of things from the personal side of things. Last week I mentioned that I was diagnosed with sleep apnea and I got a CPAP machine and my sleep has started to get noticeably better already. It’s hard to say whether or not like, I don’t want to call it apathy but it’s just like general tiredness, it’s been more than a year or so, just general exhaustion working on it.
It’s not that I’m not excited to work on it or that I don’t want to, it already got things going or make good progress on it, but with the sleep, I feel more energetic just in general. I’m thinking that that’s actually like I said, I’m trying to differentiate between, “Is it just utter lack of sleep? or is it like, “How the product is going.” Obviously, there’s a correlation between them but at a financial level, Bluetick has kind of been meandering. It doesn’t have like hockey stick growth. It goes up some months and goes down some months and it’s just not where I want it to be. But it’s also been really hard to make any substantial progress on it because of the lack of sleep.
Rob: It’s tough, right?
Mike: Yeah. I’m looking at it, saying, “Well, if I can actually start sleeping and get more productive days on a consistent basis…” because before I would have maybe two or three out of a month which is awful. You can’t make progress like that. This week alone I’ve had like three. Obviously, a 300% increase but yeah, I’ll see how it goes and I think that I’ll probably know more in a couple of months.
Rob: Yeah. That makes sense. Like I said last week, it’s tough to have that chronic stuff that you’re fighting against. It’s hard enough to start a company like this without also having to fight another battle on another front. A colleague of mine said, “I can have a tumultuous work life if my personal life is calm and supportive and I can have a tumultuous personal life if my work life is calm and supportive. But if both are in tumult at the same time, it’s just too much.” That’s when people melt out, that’s when you either leave the job, you get a divorce, bad things happen, and you have to make a change, or you come to a breaking point. It sounds like you have the challenge on the business front and then on the personal front—and it’s not easy fighting both those battles.
Mike: like I said, I’m consciously optimistic at this point. The sleep issues will be at least partially resolved and then my expectation/hope is that those will translate into more consistent progress on the Bluetick side. We’ll just see how it goes because I mean honestly, even with sleep, it may not eventually work out. I don’t know, we’ll see how it goes.
Rob: What are we talking about today?
Mike: Well, I have a subscription to Medium and one of the articles that hedge…
Rob: You’re the one.
Mike: Yes, I’m the one.
Rob: You’re the one person that subscribed to it. Did you just do it to get rid of the annoying pop-ups?
Mike: There were articles that I actually wanted to read, and there’s various authors who I read a bunch of their stuff and, it just kind of made sense. It was one of those things where I can pay the $50 a year or not, but if I don’t, then there are certain articles like I go to click on them and they say, “Oh, you can’t read this because you need a Medium subscription.” and yes, I know that there are ways around it but I didn’t really care. It’s $50 a year, I’m totally cool with helping to support those authors. That’s just kind of my point of view on it. It wasn’t enough that I was like, “Oh, I don’t want to pay this, they’re dastardly.” or something like that. It’s just like, “Yeah, whatever.” It’s not that big a deal to me.
Rob: Yeah, I wouldn’t do a work around. If I believe in the content, I pay for the content. I think at this point in our careers, we need to a: value creators and b: not be such cheap bastards that you’re not going to pay somebody $4 a month to help support what’s going on. If it’s a big corporation trying to take a bunch of money from me, then of course, I’m going to fight that tooth and nail. But assuming that some of this is distributed to the writers themselves or at the office themselves, that’s the point of it, I don’t see a reason to try to do some lame work around.
Mike: Yeah, and that was it. Knowing that it was going to support those authors. I will admit that I used those workarounds early on because I was like, “Well, is the content that’s behind the pay wall, is that the same?” or similar quality and everything else like, “Is it the same type of stuff or is it just like completely different.?” It’s the same type of stuff it was just, I want to read it based on what the headline was or what the first couple of paragraphs were and I was like, “Oh, I actually want to read the rest of this.” It’s worked out.
I’d totally renew my subscription when it comes up. If you’re interested in learning more about that, score Medium and you start reading a few different things. Some of them are really interesting and some of them aren’t. But I mean you’re kind of supporting, I think all of the authors that you read their articles because I think that they track what you read and how much you read it and they attribute the money that you pay on a monthly basis to whichever people that you read their content.
Rob: Yeah, and it’s tough because when Medium came out it’s kind of like, “What? How are you going to do this at Williams? You’ve obviously had success with Blogger and Twitter, but this seems like a real tough gamble.” But he raised a bunch of money, buckets of it, because he’s at Williams and really hasn’t found a business model that’s made it work and then when they went to pay, and they started the ads, and they started the pop-ups it’s like, “It’s predictable.” and it’s irritatingly predictable.
It’s another Silicon Valley company that launches with no business model, that in the end just went pissing off or screwing their users, and that’s frustrating to me. It’s a similar thing to, I mean I can throw out dozens of examples, but one that reminds me is Outright which is an accounting software and it was free. It’s an accounting software that’s free. I remember even the CEO, when they launched I said, “How can this be free?” and he’s like, “Well, we want it to be free for everyone and we think that should just be table stakes and then we’re going to charge for tax preparation and these other things and that’s going to make it work.” Well, that was his line but really what they’re trying to do is get a bunch of users and then sell.
Because they sold to GoDaddy and it’s a [shit] product now. It’s terrible, they haven’t touched it. I think we used to use it for academy stuff, we had to switched to Zero. I had three or four accounts at Outright and it’s terrible.
Mike: No, we still use it.
Rob: Do we? I hate that program and it used to be good, but they decided to Silicon Valley model of, “We don’t care about our users. We’re going to launch. We need a bunch of free users. Look, here, we have an exit.” and that’s the difference. I don’t disagree when people have an exit. I mean I’ve sold companies but do it in a way that you don’t screw your employees, you screw your customers, you screw your partners, don’t do that. Have some something. I don’t know if it’s ethics or morals or it’s just like, do the right thing by people and that’s where I get irritated. I’m not saying Medium has gone that far. But I am annoyed every time I go there and there’s some annoying pop-ups.
Mike: I think that there’s a correlation between like the Silicon Valley startups. You and I, we started this podcast kind of in direct opposition to those because as you said, it’s predictable. This happens almost every time. They build a product, they don’t really know who they’re going after, or who’s going to buy it, or who’s going to pay the money, or how they’re going to make money and then they do a bunch of stuff. They get users, they use that to get to the next funding level and eventually, they turn around and bite the people who got them there.
Whether that’s because they sold the company to somebody else and they just say, “Okay, it’s not my problem anymore.” or they do things like put in annoying ads and pop-ups because they didn’t have any business model to begin with, or they’re like Facebook and they start selling all your personal information. It’s predictable every single time.
Rob: Right, or Twitter. Remember they just screwed all the developers who were using their API at one point, remember that? They just said, “Yeah, we’re not going to do that anymore.” Or Google who used to give us the best search results and now the top five of any given search results are a bunch of ads that they say are sponsored in small writing, but my kids don’t know that those are ads, my mom doesn’t know those are ads, she thinks they’re results. Google was always against pay-to-rank and that’s exactly what they’re doing now. We’ve just named five companies who’ve all done this off the top of our heads. We could probably name 50 more. Shall we get back to the episode?
Mike: Sure. Know that our next episode will be a rant. But actually, the topic that we’re going to be talking about today was this article that I found on Medium. It’s named, The Power Struggle for Dungeons & Dragons’ Soul. I thought it was interesting because I read this article and it was all about how originally TSR was the company and Gary Gygax and his team, built dungeons, dragons as to what it was. They sold it to Wizards of the Coast in ’97 and Wizards of the Coast has basically owned it ever since.
Throughout that time, they have done various things to promote the game but at the same time, they own the license to the rules, the content, all the stuff that they distribute. But Dungeons and Dragons has always been like this world that was created or a style of gaming that was created and then people build their own stuff and bring their own stuff to it. There’s this really big do-it-yourself culture inside of Dungeons and Dragons.
I would say there’s a very strong analogy you can make between something like that where you’ve got a platform and you have all these creators who are kind of adding on to it and like the world of software where you have the Twitter API and then there’s all these people that are saying, “Hey, I can use that to create this or I can do that.” so they build on it and then the platform creator turns around and bites them.
In reading through this article, the one thing that struck me was that the analogies are so strong. The very first thing they said was, “Oh, the Dungeons and Dragons rules tend to be complicated and software will help you avoid that minutia.” so software developers came in and started saying like, “Hey, I’m going to build this tool for the game and distribute it.” and Wizards of the Coast said, “Well, yeah. Here’s an open gaming license.” They created this back in the year 2000 and they basically licensed some of their content to be distributed within those tools. The problem is, it wasn’t all of it.
Rob: Yeah, that’s right. It was the gaming engine and to be honest in 2000, that was revolutionary. It was the third edition of Dungeons and Dragons. It was the rules engine itself, but you couldn’t take their proprietary monsters or their proprietary spell names. There’s a bunch of stuff they kept behind. But man, that sparked a huge kind of revolution in terms of all these games. I used to say, “I want to build my own role-playing game.” and a bunch of people want to do that.
You have to come up with all your own game mechanics. I can’t use the 3D6 or the 118, I guess it’s 3D18 ability score, strength, intelligence, wisdom, constitution the ones that Dungeons and Dragons uses because they’re copyrighted, and they’re protected. They opened that up which now 18 years later it seems like, “Yeah, of course they should have done that.” but no one had done that before.
I mean there’s always been massive kind of in-fighting even within the creators themselves like Gary Gygax kind of co-created DnD with this guy Dave Arneson. Dave Arneson sued him every other year for five years in a row about who owned what. It was just super unclear. It was just riddled with lawsuits and has been from the start.
Mike: If you go back and look at the history of it a little bit in terms of what the open gaming license is. Well, I’ll actually have this linked into the show notes. But they have things in here like, “What do you mean by free in terms of the open gaming license?” They actually talk about the concept of free as in beer which is just it’s fascinating that there’s that. They borrowed a lot from open source licenses because they said like with some of the text of their manuals, you could take that and put it directly in.
Normally, it would be a copyright violation and they said, “No. These sections of the manuals, you can copy word-for-word and distribute them but these other things you can’t.” so they restricted certain pieces of it but not all of it. The vast majority of it, you can do whatever you want with it and republish it but then, there’s small sections of it that are actually important sections that you can’t do anything with. It’s almost like an API where you got access to a lot of things but there’s certain things they hold back because they want to basically be in control of them. It’s really not any different than like Twitter saying, “Okay you can have this API but we’re not going to give you the ability to create polls via the API. Only we can do that.”
Rob: This is a tough one. Where are we headed with this? Because I can get into, I believe, if I was Wizards of the Coast, I would hold some stuff back because it’s their business model. Their business model is selling content. It’s selling a game engine and it’s selling content around that game engine, adventures and then expansions to the game mechanics, new classes, new spells all that stuff. They held all that back because if they give it all away, that’s their business, you know I mean. Are we going to debate that part or are we headed in a different direction with this?
Mike: Well, I think it’s just an interesting question of what as a creator of the platform are you holding back from your customers or users versus what they’re allowed to do with it. Because like the things that they hold back for example, you can play the game without them. It’s just that they’re also the popular pieces of it that people want to use like certain sub-races or what have you. I think this is going to be more of a discussion about, “How do you treat your users?” for one. Wizards of the Coast offered their own set of tools in the marketplace called DnD Beyond and they allow people to distribute their own content through it, but they also compete with them at the same time.
Do you trust, I’ll say, the platform vendors? If you put something on Apple’s ecosystem, are you guaranteed that they’re not going to compete against you. Of course, the answer to that is no. They can create anything they want and so could Microsoft or Twitter or what have you. But certain companies are more likely to, I’ll say, leave pieces of the business alone because they know that they want third party vendors to come in and develop on their platform and they don’t want to squash them. They want to kind of foster that. Because as soon as they start squashing these smaller vendors, people are going to take notice and say, “Well, if you’re going to build exactly what we put on your platform and develop, and you see that it’s successful, you create your own version of it and then bundle it…” back in the situation of Microsoft being threatened to be broken up into four different business units back in 2000 because they’re abusing their monopoly position of the distribution engine.
Rob: Wizards of the Coast, when I look at it, the amount of stuff they’re giving away is shocking. The stuff they give away on dndbeyond.com, they have a free plan, that’s all I have. I can pretty much play the game with all that. I mean you can download that the starter rule book and all the materials for free as PDFs legally off of their site. Now, I paid whatever it is, $14 or $15 for it on Amazon, The Dungeons and Dragons starter set for fifth edition because I wanted to print versions of it, I don’t want to print it all out and always be trying to flip around through it on my iPad. But you could get this for free and then even like the expanded spells and expanded monsters are all on DnD Beyond in electronic format for free and it’s fully searchable.
In my opinion, they have done a great job of expanding the free bubble. Expanding the free circle because the free circle was almost nonexistent 10 or 15 years ago. It just keeps getting bigger and bigger but as a result, they then have to have other things around it that they can add to that. My son and I are casual DnD fans, we play it, we like it but we’re not buying all the supplements and all the extra stuff because we don’t have time to consume all of that. For the casual gamer, it’s great. I am spending some money. We buy miniatures and we buy other stuff that I think helps the ecosystem.
But if you’re intense about it, if you’re a hardcore gamer, a hardcore Dungeons and Dragons player, then you’re going to buy that expansion stuff and that’s the gamble Wizards had to take because to me it’s a gamble. Can you make up the lost revenue back giving this other stuff away with the expectation that people are going to buy the other stuff you put out. I think that’s part of what we’re talking about here, right? If you’re building on someone else’s platform, you’re taking a gamble. If you build a platform, how much of it can you release for free without cannibalizing your business model.
Mike: One of the things I find interesting is that there’s nothing that I’ve found that is I’ll say a concession for purchasing their content in another form for example. If you buy some of the books themselves, you can’t then plug in a license key or anything like that into their online system that provides you access to the content that you already bought.
Rob: You bought a physical copy. You’re just saying they don’t give you the digital copy free with the physical. Is that what you’re saying?
Rob: Yeah, I mean they could do that if they wanted. But I don’t feel like they’re required to do that, do you?
Mike: I don’t. But if you’re paying a subscription for it which is like there’s the free plan and then there’s the paid plan. But the paid plan doesn’t give you the access to the things that you already purchased in physical form, that’s my point. It’s like they’re charging you a subscription fee to allow you more things inside of the software and it’s like you can create more characters for example. If you want to see a particular monster that’s in a book you already purchased, you can’t have access to that. You have to buy the digital copy of the book which is another $30 to $50 or whatever. You’re basically paying for twice.
Rob: But if you wanted a digital format then don’t buy the physical one, like that’s what I would say. Your subscription is $3 a month or $5 a month, it’s not expensive and that gives you capabilities of the software itself. But then there are these tomes that they spend thousands and tens of thousands of person hours developing with art and all this stuff, it’s expensive to write that stuff. If they wanted to give that away as an all access pass, to me, that’s another tier all together and my guess is someday they might do that.
The Kindle Unlimited or comiXology Unlimited where you can just pay $5 or $10 a month and you get access to not everything in the Kindle store, but you get access to the ones that people make available. They could do that and then it’s a content subscription. I think that the subscription you have with DnD Beyond is more about the capabilities of the software, isn’t it?
Mike: No, if you go in and do you log in and you say, “Okay, let me take a look at the monsters,” there’s like official monsters and stuff like and you go to click on some of them that says, “Oh, you have to purchase the monster manual in order to see this.” It’s like, “Well, I have a physical copy of it. I already purchased it. You’re just allowing me to see it now inside of the software.” Do you see what I’m saying? You already purchased the content.
Rob: You purchased it in paper format though. It’s not their obligation to give it to you in all 17 formats that exist. Should you get a PDF, an EPUB, a Kindle version, when you buy the paper copy? I don’t think that they need to do that, they can.
Mike: I’m not saying that they do, yeah, I totally agree with you. I hear you. I completely agree with what you’re saying but the problems they’ve, I’ll say. created is that they started publishing these things like two or three years before they came out with their online version, so that’s a problem that they’d like basically just looked at and said, “Yeah, we’re not going to deal with this at all.” The whole article is basically about one, them basically pissing off their fan base because of that, because these people have invested $300, $400 or $500 into buying the books and then Wizards of the Coast comes along and says, “Hey, use our online software. You can’t use things that other people have developed because it has the copyrighted material in it. You can’t use those tools. ”
It’s like, “How do you use software to basically just search for stuff? ” for example, something simple like that. They’re like, “Yeah, you can’t do that.” And then they compete with you side by side and they take 30% of whatever it is. You can use some other source material, publish it on the market place and they will take 30% of it.
Rob: Sure, it’s an app store model.
Rob: Right, but they compete with you. You’re actually competing with them, if you think about it. They own the license, they own the marketplace. They could just say, “No user-generated content. Go use…” I forget, “…drive through RPG. ” and there’s all these other peripheral market places. They made the choice to let people publish their stuff and to let other people compete with them. You don’t have to put your stuff on there, right?
Mike: No, you don’t. But there’s two different licenses you can choose from when you decide to create something in their world and one of them is the open gaming license, the other one’s the DnD Beyond license. DnD Beyond license lets you use things from their world, but you can only publish it in DnD Beyond. If use the open gaming license, you have to publish it elsewhere. It’s not even allowed in DnD Beyond.
They’ve got a split license system that they think seems to have solved the problem, but it doesn’t solve every problem, of course. Like I said, it kind of comes down to what is the vendor doing that you are not going to be able to work around? What are the things they’re doing that are not fair to you as a creator on that platform? What are they not allowing you to do?
Rob: Yeah, that makes sense. Let’s get back to the point, because we’ve kind of dug through this, but let’s bring this around to software. How does this apply? Where are we going with this in terms of startups?
Mike: Yeah, so as I said there’s a lot of analogies between this particular situation and software where as I said, Twitter is cracking down on their API right now. I get, in certain cases, you have to do that to prevent abuse and right now, Twitter’s cracking down a lot on apps that are bot related, because they don’t want tons of bots on their platform, they want people.
And then there’s others the similar situations where like you got WordPress plugins for example, or Microsoft Office add-ins, or Gmail plug-ins, you are very much reliance upon the vendors’, I’ll say, good graces to allow you to continue doing that and are they going to build a product that does the same thing as yours? TweetDeck, for example competes with other Twitter automation products. Stripe is starting offer in app dashboards and that competes with things like Baremetrics and ProfitWell. I think it’s, I’ll say, a cautionary tale of, “be careful what you wish for,” in terms of the marketplace because you might get it.
Rob: Yeah, that’s right. I think it’s very difficult. The platform is viewed as this holy grail, “If you can build a platform everybody else is building on, then you’ll make a lot of money.” That’s something a lot of Silicon Valley companies strive for. It is also a headache. It is hard to manage because once you have a platform people are building on, those creators—well, they’ve spent money and they have a right to expect that you’re not going to turn around screw them, and sometimes for the greater business, you make the decision to turn around and screw them and that sucks.
I see both sides of it when I look at what Wizards is doing DnD Beyond, I think overall, they are pushing forward, and they are doing the best they can. I don’t think they’re out to screw people. I do think that the licensing stuff is a challenge. I don’t think there’s anything they can do to not piss at least somebody off, when you have tens of thousands of people dealing with, creating or whatever, someone’s going to be upset about something. I’m not saying no one should be upset.
But then on the flip side, when you look at Twitter and Facebook and Google, some of the other things we’ve mentioned, they have done things that I feel like are, I don’t know, downright evil in terms of the sense of don’t be evil, that they’ve really just purely to grow their own bottom line and keep shareholders happy, do things to their ecosystem that, frankly, they said they wouldn’t do or they implied they wouldn’t do and then they turn around and screw a lot of people. They put people out of business, they do real damage. I see both sides of it. I think sometimes the creators and the builders on these platforms get a little too whiny about it or a little too entitled of like, “Well, Wizard shouldn’t be able to do this,” and I don’t necessarily agree with some of that, but I also see the other side of it.
Mike: Yeah, I mean I feel like they’re entitled to do whatever they want, but at the same time, you kind of have to respect the position you’re in is because of the people that you kind of invited to use the platform. I think what’s a little irksome about this is they aren’t really clear about what the future holds. When you’ve got this black box of how it operates and what the future road map for it looks like, it’s hard to make your own decisions about what to do with your business. If you’re a creator and you’re putting things out there and you’re trying to build a business from it and they’re not real clear about what their intentions are for the future, it makes it hard for you to make decisions. Ultimately, the fate of your business, to some extent, is in their hands. They can come out of left field and kill you at any time and there’s very little that you can do to stop it. You can complain but, that may only go so far.
The bigger problem is that, if you don’t have a good understanding of what’s going on inside the company, you can’t predict the future or tell when their business is suffering from the outside and they could be put in a position where they have to make tough choices that are going to hurt you, in order to just either become profitable or simply to stay in business and sometimes, I think their hands are tied as well.
Rob: Yeah, that’s a good point. Typically, I keep saying that Silicon Valley startups, I’m not trying to be generic and paint everybody with a brush, but it does tend to be these heavily funded startups that are clawing after market share and just burning through cash. When I hear one of them is having financial difficulties, either just rumored or they’re a public company and so you know that they’re missing earnings like Twitter has been and Yahoo was, and we hear these companies in trouble. As soon as I hear that, I think to myself, “They’re going to scratch, claw, and screw everyone they can including their users, including their customers, including their partners in order to somehow turn this around. ” They’re doing it for the survival. Once I hear that I’m always backing away like, “Okay, I’m going to be using this tool less.”
I’m just kind of waiting for them to turn around and kind of make decisions that are going to be negative for everyone else’s experience. This is the hard part about building on someone else’s platform. Remember when Facebook—the games came out, Facebook apps, I guess, and then there were all these games like, what was it, FarmVille.
Mike: Yep, FarmVille, Candy Crush.
Rob: FarmVille just got huge instantly and it was like, “Oh my gosh, the company that built that, this is amazing,” and I remember thinking this isn’t lasting, Facebook isn’t going to let it last,” and then they didn’t, remember? And then they tweaked the algorithm on the news feed and all these companies went from whatever it was, down to 10% of their revenue overnight, and that’s it. You fall as quickly as you go up. I don’t view that as a sustainable business. I mean, it’s really, really hard.
I can think of very few platforms that you can build your business on and count that it’s not going to change and screw you in the next two year. Especially if they’re heavily funded and they don’t have the revenue model worked out yet and they eventually want to go public. Eventually, they’re just going to figure out a way to take more money from you, you won’t have a choice or to just build the same functionality you’ve built and usurp you and you won’t have a choice.
Again, building on someone else’s platform is not something you shouldn’t do, but know that you’re going to get screwed at some point and figure out what your exit strategy is before that happens. That’s how I would approach it.
Mike: You’re saying get out no matter what as quickly as possible.
Rob: My personal thing. If I were to build on the next Facebook or Twitter or even Amazon, like people launching Amazon, launching their ecommerce shops on Amazon, I know they get traction fast. But have you seen how many Amazon private label things there are now? I used to buy Duracell and Energizer batteries on Amazon, now they have Amazon Basics. They’re cheaper, I think they arrive the same day here in Minneapolis if I order them. Luggage, I almost bought an Amazon Basics luggage because it was cheaper, it was nice it was highly rated. They are basically looking at all these categories and they’re just figuring out a way to basically screw their vendor.
Again, I’m not saying you shouldn’t do that. But if you get in and you get traction, count that that’s not going to last. That’s not a 10-year business. There’s no chance Amazon will let you take that kind of profit margin for 10 years. They’re going to figure out a way to take it from you.
Mike: I find that odd. On one hand, I get it because they’re a public company and they’re always looking for ways to make more revenue and push their stock price everything. But at the same time, if you develop a reputation for doing that, does it hurt your chances as a platform provider? I think with Amazon, at the moment, the answer is no. But longer term, 10 or 20 years down the road is that going to hurt them? I don’t know the answer to that. I think it depends a lot on specifics of which platform and kind of what it does.
Rob: That makes sense. It depends on, “Are you so big that it doesn’t matter. ” Obviously, Twitter was not, Twitter hasn’t figured out. I mean, they’re struggling. Amazon may be, they may be big enough that it doesn’t matter. Salesforce sucks. I never tried to integrate with them. It’s a 9-month process. They try to charge you a bunch of money just to integrate, it’s insane.
Everyone whom I spoke to, all the SaaS vendors, except for maybe one, got months into the process and eventually just gave up and put their hands up. People had invested hundreds of hours and built the whole thing and then just walked away from it, but they’re still successful. They are big enough that they can kind of do what they want. I think it goes both ways.
Mike: I guess the question for the people listening to this is like, “What do you do when you get to that point? ” I think your thinking is definitely, sell out as quickly as possible and get out. I think that’s a risk, that’s a basic risk profile. You’re not comfortable with the risk.
Rob: And mitigation, totally. Here’s the thing, these are great. If you think of WordPress plugins and Microsoft Office add-ons, the Gmail plugins, even Salesforce add-ons, whatever. I mean if you’ve built a little lifestyle business and you get a couple hundred grand in revenue, the odds of them squashing you are pretty low. But as soon as you’ve built kind of a high six, or seven, or an eight-figure business and you’re really cranking it, and you’re hiring employees, and you’re growing and all that stuff, that’s when it’s like that’s not going to last. I don’t know of many platforms that are going to let you just sit there and do that.
Mike: Right. That kind of goes to the thing I said earlier, what happens 10 or 20 years out, and they’re small enough that you’re not going to grow into this massive business entity in that 10 or 20 years, or if you have no intentions of doing that then it probably doesn’t make nearly as much of a difference. But if you do have plans for that then developing your own platform is probably a better way to go than leveraging theirs.
Rob: Yeah and that’s the struggle. From both sides of it, if you’re building your own platform, you’ll have to manage these challenges. Know that if you get a bunch of developers or a bunch of people using, or consuming, or creating, you’re eventually going to make someone mad. You’re going to piss somebody off. If you have 10,000 people, five are going to be mad at any given time or maybe it’s 500 that are going to be mad.
That’s probably okay, it’s just people’s opinion. You get groups of people and that’s going to happen. But you try to do right by them and you try to have a long-term vision about taking care of the people who made you what you are. If you’re building on someone else’s platform and I think we have talked that through, there are risks. It’s not that you shouldn’t do it, just be aware of the risks going in. Don’t be naive and think that because someone’s offering something for free that they’re not trying to get a bunch of users and sell.
Mike: I think the quote that sticks out from the article is for fan creators, the new status quo is all about dodging wizards hovering mallet. They gave an example of somebody who would put something out there and technically violated their copyright terms of service inside of the license, but Wizards of the Coast was selling it and making 30% off of it for over a year and then they decided, “Well, yeah, we don’t want you doing this anymore.” and then they killed it.
Rob: I wonder if they decided that or if nobody had noticed.
Mike: It was one of their top selling products. It was one of the top selling products in the marketplace. How do you not notice that?
Rob: I don’t know. I’d want to dig in, I mean I’m not trying to defend Wizards, they’re a big company. I’m not trying to say that they’re on the right, but I’m always a little hesitant when I read things like this. These stories, it’s easy to be dramatic and kind of throw stones at the big 98-pound gorilla. I would like to hear more about that. If everyone inside knew about it and they’re like, “Oh, we’re just going to make 30%.” I don’t think 30% on that thing made a damn bit of difference to them. I don’t think that’s why they were doing it. I don’t think Wizards were just like, “Yeah, but we’re going to make money. Let them infringe on our copyright.” I think the fact that it sold for a year and then was taken down is pretty dang unfortunate though, that sucks. It doesn’t look good.
Mike: Right. And I think that’s the question that people have. Well, if they’re going to let this go on, if you make a mistake, for example, and you create a larger business out of it and you start hiring employees and they don’t tell you early enough on that, “Hey, there’s been a mistake here or you’re violating copyright.” Your business would not get to that point. Let’s say, you got it to $15,000 a month and you hired two or three people, and then suddenly they come in a year later and say, “Well, this is wrong. You can’t do this.” and then it’s like, “Okay, well, now what?”
Rob: Right. Yeah, that was a good one. Thanks for bringing that article in. It’s always nice to discuss. It’s a little bit different and it’s definitely a form of philosophical conversation, but I do think that it’s fun to think through and fun to put into the mind set up of this goes on in a lot of different ecosystems. Sometimes it’s a hobby and sometimes it’s business and startups, and what does that look like from both sides, and what are some things you should be aware of as you kind of plan for what you’re building.
With that, I think we’re wrapped up for the day. If you have a question for us, call our voicemail number 888-801-9690 or email us at email@example.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.