BuzzFeed, and 4 More Bad Startup Ideas that Look Like Good Ideas

Xconomy National — 

Y Combinator staged its annual Startup School event last Saturday, attracting more than 1,700 young startup founders and would-be founders. Andreessen Horowitz partner (and Xconomist) Chris Dixon, the founder of Web startups SiteAdvisor (sold to McAfee) and Hunch (sold to eBay), gave one of the most interesting talks, under the title “Good Ideas That Look Like Bad Ideas.”

Riffing on earlier arguments advanced by Peter Thiel and Paul Graham, Dixon said that the best way to succeed with a technology startup is to find an idea that everyone thinks is terrible at first, but later turns out to be indispensable—like, say, the telephone. (According to legend, in 1876 Western Union declined the opportunity to buy Alexander Graham Bell’s patent for a meager $100,000, calling the invention an impractical toy. There’s some dispute over the veracity of this story, but whatever—it’s great for business textbooks.)

Dixon pointed to Google, Airbnb, eBay, Dropbox, and Kickstarter as more recent examples of ventures that initially seemed weird, niche-y, unnecessary, and unlikely to make money. To persevere in the face of such perceptions, Dixon said, an entrepreneur needs to know a secret: “something you believe that most other people don’t believe.” At Dropbox, for example, founder Drew Houston believed that the way to appeal to millions of non-technical users and beat the dozens of incumbents in the cloud-based storage market was to make sharing things on Dropbox feel just like dragging-and-dropping files to a local hard drive. So far, it seems he was right about that.

In this view of the world, the important thing is to keep plugging away, while competitors who don’t know your secret skate off in the wrong direction. Eventually, if your secret is correct, the people who initially thought your idea was idiotic will start to appreciate your true genius.

The risk with this strategy, of course, is that you’ll lock onto a seemingly dumb idea that turns out to be a truly dumb idea. As Graham points out, “the vast majority of ideas that seem bad are bad” (emphasis mine). That’s the reason Y Combinator invests in so many startups. Its partners know most of them will fail—they just don’t know which ones.

And what makes things even more difficult for entrepreneurs and investors is that an idea can start to look good once you’ve worked on it for a while, but still turn out to be bad. Webvan, the dot-com-era grocery delivery startup, is the archetypal example. The company was beloved by its customers and was widely thought by investors to have the “first-mover advantage” that would make it the Amazon of groceries. Venture firms were so convinced that they ponied up $1.2 billion—right before the business imploded, leaving a crater so deep that VCs have been scared of food-related startups ever since.

The law of averages says that there are probably still a few Webvans out there today. These companies may be raising money, hiring engineers, and adding users— the outward signs, at least according to the topsy-turvy logic of the startup world, that they must have a good idea. But many of them haven’t yet tested their ideas on a truly massive scale, or haven’t confronted key challenges that could sink their whole enterprise. Their secrets, in other words, might turn out to be wrong.

I’m going to list a few startups and products that I suspect fit into this category. In each case, there’s something about the company or the invention that I just don’t grok. Either it feels like there’s something missing from the value proposition, or there’s something that early adopters find valuable that doesn’t make sense to me. I wouldn’t be surprised to learn that a lot of other average folks (especially people outside Silicon Valley) share my views.

But I want to say up front that my suspicions could be wrong. In each case, I find myself disbelieving the company’s secret—but it could be that I just don’t understand it. Maybe I’m playing Western Union in these scenarios; maybe I’m so enmeshed in the technologies I currently use that I’m unable to see the alternatives. Or it might be, as I’m sometimes told by startup founders when I express uncomprehension or doubt, that I’m just “not in the target demographic” for these products.

I’d love to hear what you think about this list, or what other startup ideas you just don’t grok, so please leave your comments below.

1. BuzzFeed

If BuzzFeed is the future of journalism, just shoot me now. The site is dominated by photo-driven “listicles” with clickbait titles like “The 23 Most Boston Things To Ever Happen” and “15 Signs You Are Obsessed with Your Dog.” I don’t begrudge anyone a few giggles; I don’t have anything against lists (you’re reading one now); and I admit that it takes a special kind of skill to give an article BuzzFeed’s patented Ebola-like virality. But I wonder how often visitors would go back to the site if they understood that many of its articles are actually advertisements placed by BuzzFeed’s “featured partners.” And I just don’t see how BuzzFeed’s formula can keep working long enough to pay back the $46 million it’s raised from venture capitalists.

See also: Gawker, Upworthy, Distractify.

2. Uber

Uber is trying to use modern mobile technology and its network of private black limos to fix a real problem: the fact that procuring and paying for a taxi ride, in a lot of cities, can be a tedious hassle. The big stumbling block, in my eyes, is that Uber is about half again as expensive as a conventional taxi, with the difference growing even greater during hours of peak demand. As Reuters blogger Felix Salmon has pointed out, the company “doesn’t seem to have worked out how it wants to deal with the central question of cost.” Because it’s so pricey, Uber feels like a solution for the wealthy elite—a perception that’s unashamedly built into the company’s marketing and branding (and even its name).

Uber blogger Bradley Voytek says Uber costs more because it offers more: reliability, customer support, style, comfort, and reduced frustration. That may all be true. But for me, and I suspect for most people, the premium is too great. A much better service at a much higher price just doesn’t feel like a big innovation. The cheaper new UberX service available in some cities—which offers easy car ordering and payment, without the style and comfort of a black limo—may represent the beginnings of a fix for this problem. But it will still have to contend with opposition from the taxi industry, which sees the new, unregulated car services as unfair competition. I keep wondering why we can’t use technology to fix the existing industry.

See also: Lyft, SideCar.

3. Medium

If anyone knows that people are always looking for new ways to communicate, it’s Ev Williams, who co-founded Blogger (sold to Google in 2003), then Odeo (one of the first podcasting platforms), then Twitter. But it’s still unclear what need Williams is trying to fill with Medium, the online publishing platform he unveiled in mid-2012. “If you have thoughts to share that you want to impact or influence people with—beyond just your friends and beyond 140 characters—we want to provide the tools and the place,” Williams wrote in one post. Does that mean it’s supposed to be a magazine killer, as The Atlantic’s Alexis Madrigal speculates?

In support of that notion, Medium does pay some of its writers. There’s also a group editing function that lets members gather feedback from each other before they publish. And there’s a curation system, partly algorithmic and partly editorial, that determines what shows up on the front page. But there doesn’t seem to be any unifying point of view, which, to me, is a key hallmark of a magazine. And the quality of the content varies wildly. I wholeheartedly agree with Williams that “words (still) matter”—but so do structure, voice, mission, and standards, and those things are missing from Medium right now.

What it does have, though, is a really nice what-you-see-is-what-you-get composing interface. Perhaps the project’s real point is to disrupt a market dominated by an older generation of content management systems like WordPress. It’s difficult to tell.

See also: Svbtle.

4. Snapchat

Snapchat may be all about impermanence and the right to forget (the photos and short videos its users send to each other self-delete after 24 hours), but the Stanford-born, Los Angeles-based startup is building up a very large and permanent obligation to its investors—IVP, Benchmark, Lightspeed, General Catalyst, and SV Angel put $60 million into its Series B round this summer, on a reported valuation of $800 million. Perceptions that the app is primarily about sexting are probably misguided; according to one informal survey of Stanford students who use the app, most “snaps” are simply funny faces or doodles meant to evoke a quick laugh from friends, as a way of staying in touch. The messages aren’t serious in the first place, so it’s fine when they disappear.

But while that kind of ephemerality may click with college students, my question is whether the app has wider appeal, and whether its first-generation users will have any reason to keep using Snapchat once they age out of the college population. This doesn’t feel at all like a repeat of the Facebook story, where a photo-sharing service born on an elite college campus spreads like wildfire to the rest of the country, and then the world. Yet its investors are betting it will be even bigger. (When Facebook was Snapchat’s age, it had raised about $40 million, on a valuation of $500 million.)

See also: Vine, Video on Instagram.

5. Google Glass

Glass isn’t yet a business—it’s a project of Google X, the innovation lab overseen by Google co-founder Sergey Brin. But it represents Google’s bet that in the future, wearable devices will supplement or replace smartphones, feeding us news and messages and helping us query, sense, or record our environments in unobtrusive ways. Smartwatch makers think the same thing, but want to colonize our wrists rather than our direct visual fields.

I am not convinced by any of it. The fundamental problem is that a useful computer needs a rich, two-way interface. Smartphones and tablets are wonderful because they have big multitouch screens. The input modalities for Glass, by contrast, are incredibly narrow. The device understands a handful of spoken commands, and if you want to look like someone trying to wave away a mosquito, you can swipe forward and backward on the temple-mounted touchpad. That’s it. The tiny screens of today’s smart watches are no better. Short of huge improvements in speech recognition and natural-language processing technology, I’m not sure there’s any answer to the input problem, given the lack of available real estate.

At best, you could say that wearables are at the stage tablet computers were at in 2002: clunky, expensive, geeky, not all that useful, and desperately awaiting their iPad moment. Which is not to say that I expect Apple to come up with some kind of miracle wearable device—the iWatch remains a rumor precisely because Apple understands what it’s up against.

See also: Samsung Galaxy Gear, Pebble Smartwatch, Fitbit Force, Nike Fuelband, Misfit Shine.

So, that’s today’s list. I could be wrong—and obviously it’s far easier to criticize than to build. I don’t mean to question the commitment or creativity of the people behind these technologies, or the acumen of their financial backers. Still, it will surprise me if any of these products achieve success, as measured by mass adoption or consistent profitability. Some of the organizations behind them may achieve exits that enrich the founders and investors, but that’s not the same as true product success, in my book.

At some point, good ideas that look like bad ideas have to start looking good to average consumers, or they’re just bad. And these five technologies aren’t there yet.

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7 responses to “BuzzFeed, and 4 More Bad Startup Ideas that Look Like Good Ideas”

  1. rob says:

    Good article. You could do a weekly or monthly of that kind of article: Pick the top trendy/sexy start ups and put in your thoughts.

  2. Brenda Patterson says:

    Agreed — I really like this piece and your perspective and would love to see this on a regular basis. Also a “look back” over time on where things netted out a year from now, for instance.

  3. estimatorinmind says:

    Google glass is marketing towards the wrong demographic. If it went towards the construction industry, towards users that need and can use real time data to better prepare construction bids, interact with foreman and other field personal (estimators, project managers, etc..) these are the people that need to be sold on its, picture taking and streaming video application.

  4. claymation says:

    Medium, sure, but what about Twitter? The company bleeds money and remains largely an echo chamber for the technoelite. Why it is a publicly traded company baffles me.

  5. Kelsoh says:

    Uber’s at a $18 billion valuation now — who’s laughing now?

    The problem with this article is that the mindset of it is too negative. To successfully pursue a concept to its fruition you need the ability to take a leap of faith to commit 100% to executing on the product successfuly. Few can do that. If you naysay and nitpick at every idea, you will never end up pulling the trigger on an idea at all.

    • Kelsoh says:

      2 months later, Uber’s now at a $40 billion valuation.

      Whoever wrote this article is about to become the laughing stock of internet history for being so wrong.

  6. Kelsoh says:

    Quite possibly the worst article written in business prediction history. Four out of these five projects have become highly (read: extremely) successful.