Ari Paparo Dot Com

Do you care about revenue or profit? Answer this question and I’ll tell you if you belong at a start-up or a big company.

Your quick response is enough to judge. “Real” businessmen will always be on the profit side. What’s the point of business if there’s no profit? And what’s the value of a business if not the discounted cash flows (profit in cash form)?

Yet, no entrepreneur or small company CEO I know cares much about profits, except as a way to validate their business as “profitable” or “cash flow positive.” Entrepreneurs talk about “run rates” and “growth,” both of which are measured in revenue.

Where’s the disconnect?

In the digital arena, there is a largely unspoken assumption that costs can be reduced by bringing businesses to scale and by applying technology. Many digital businesses build revenue by throwing bodies at the problem. Yahoo! originally had people classifying every site on the Internet to create their directory; Netflix had (and still has) people in warehouses sending out DVDs; GroupOn has salespeople calling every local business trying to create deals. 

The assumption of eventual scale allows start-ups to focus on the really hard problem, attracting customers and their money — i.e. revenue. The assumption can be translated and parsed as “once the revenue is there at a sustained rate, the processes can be automated, technology can be applied to the problem, and the profits will follow.”

In larger companies there is far less tolerance for money-losing businesses. There is no shared assumption of future efficiency. So starting a new business in a larger company is a political minefield. Everyone who runs a profitable existing business will be wondering why the unprofitable new enterprise is allowed to exist. The expenditures on the unprofitable business will be scrutinized and concern will be expressed. It is in this way that new ideas are killed at bigger companies.

But what’s really interesting is what happens when the small, growing-but-unprofitable company is acquired by the larger, profit-seeking company. Under what criteria is it judged? Is it still allowed to grow to scale, or does the profit imperative kick-in too early to realize it’s ultimate objective?

So what do you want, profits or revenue?

One of the best sources for insights about product development comes from observing how your users avoid using your product. It is often a huge shock to a product manager when they sit next to a loyal user or paying customer and watch them do something totally bizarre in order to work around a perceived shortcoming you never knew about in the first place.

Some examples:

• Since Twitter doesn’t easily let you prioritize tweets for reading later, a friend clicks on all tweets that seem interesting, then clicks their “Read Later” link on Instapaper, then feeds the Instapaper RSS feed into their Flipbook account.
• In my last job the services team insisted on being able to upload video files directly to our CDN using FTP even though there was a web UI for secure uploads. Turns out that using the UI you couldn’t share video files between creative executions, so it created lots of extra work.
• My kid isn’t allowed to play Angry Birds on my iPhone. Why? Because I don’t want him to unlock levels I haven’t unlocked, and there’s no way to switch users.

Well, I think we are in the middle of a massive, widespread workaround regarding social networks and status updates. Let me explain.

I am a Foursquare user, a Yelp contributor, and overall active social being on the web. And every one of those services offers me a helpful “post to Twitter” option that I politely uncheck. While I’m at it, I also decline to post to Facebook. These two services are the widest and most social of my online networks, yet I don’t want to spam my friends with anything but the most interesting updates. Essentially, I’m working around the inelegance of these social services by censoring myself.*

There is a disconnect between the competing ideas that Facebook and Twitter are a) Social, like a great big party where you want to make sure not to be too boring, and b) Informational, where your affiliation with different parties filter the noise of the world into a signal of interest and relevance to your life. While both services started our purely social, they are quickly moving to the informational, and still have a world of work to do to get there.

So what would I really like to share with my “friends” and store in my stream?

• Every song I listen to
• Every place I eat, drink, shop
• Every TV show I watch
• Everything I read that is even vaguely interesting
• etc etc

And my friends shouldn’t mind, since the services they use to follow me should only show them the parts they find interesting. But until we get there (and we’re not close) we’re stuck with two alternatives: 

1. Use specialized social networks for each type of activity (Ping for music, Foursquare for going out, etc) so we don’t clutter up our “primary” stream
2. Continue self-censorship, causing sub-optimal usage of the tools and untold millions of missed connections.

* - For those of you who follow me, the natural reaction to this post is “oh my God, he would actually post more if he could?” Yes. Yes I would if I could.

Update as of Jan 2011: I’m Back. Keeping MovableType updated proved virtually impossible (if anyone knows what a “.Lips” directory is, please let me know). 

For links to the archives to my old blog, go to my new Ari Paparo Dot Com homepage.

Old Post:

About a year ago I found that I was using Twitter as my primary blogging mechanism and only occasionally updating my long-form blog at aripaparo.com. So I tried an experiment where I would use Tumblr to integrate my tweets with my posts, and it would be cool and all that.

Turns out, since 99% of what I write are the tweets, if you want to know what I’m up to, you can just go to my twitter feed. That’s how my Mom keeps track. Or better yet, “friend” me on Facebook, no muss, no fuss.

With that said, I’m going to make an honest attempt to keep my old blog at aripaparo.com up to date. So update your RSS readers (for those of you who still use those), update your bookmarks in whatever cloud-based bookmark management system you might choose, and stop coming here.

Thanks.

Him: There’s no proof we landed on the moon. Me: I don’t think you know the definition of “proof”.

Convinced the kids that the Saturday after Thanksgiving is “Self-Sufficiency Day” (Yay!), where kids around the world look after themselves

For the record, the proper tool for a TiVo that won’t give you back a DVD is a hammer. Screwdriver or Allen wrench: too subtle.

Too early for leftovers? Maybe just some stuffing…

Baby has toddler’s underwear on her head. Comic genius.

Holy shit that’s a big sweet potato.