Winning Is Better When Everyone Else Is Winning Too (Yelp vs Heroku)

I was 11 or 12 when I got my first taste of Monopoly at summer camp. I loved that game — and I think it was my first taste of business. A game that, like life in a lot of ways, was based partly on luck, partly on wit, and much of it on social finess. Sometimes you got lucky and landed on the right properties — sometimes you had to talk your pals into a seemingly innocent 2, 3, or 4-way trade that would ultimately devastate them all.

I ended up with a bad rap when it came to Monopoly — no one who had played with me once or twice would play with me again. I mean, it gets old when you’re $5,000 in the red, and instead of it being “game over”, I let you continue playing while tallying your debts.

In a business, there are usually winners and losers. How about those crappy self-checkout systems? The store wins, the vendor wins, employees lose, and customers lose (they aren’t fast, efficient, easy to use, and have too many anti-theft measures that kill the flow). You can find winners and losers in businesses everywhere, and it helps define what kind of businesses I want to start or be involved with.

Now let’s think about an internet company: Yelp. I love Yelp. Yelp decides where I eat and who I patronize in general. In the Yelp model, the readers of the Yelp content are winning. The businesses with consistent 4 and 5 stars are winning too — success breeds more success.

But Yelp does some shady things with its review system. Many claim it filters reviews based on whether small biz owners advertise (and actually, I’ve seen this first-hand). Sounds like extortion? Many think so. If you’ve ever met a frustrated small business owner who has been trashed on Yelp once or twice and honestly doesn’t deserve it (I have), you’ll know why [1][2].

That point is that someone (a lot of someones) lose. Small, local business are an integral part of Yelp’s business model, and many of them are losing, and will probably not advertise their 2 or 3 star business unless they are practically forced into doing so.

I love Yelp as a consumer, because I’m on the winning end. But as a developer, I wouldn’t have started the business. As an investor, I wouldn’t invest. In my opinion, there are better options out there. What options?

A business model where everyone wins. They exist.

I’ve grown to love and favor business models where all participants win — models where the stakeholders take on minimal risk, and all key players have something to gain. Heroku’s a great example of this. I recently bashed the crap out of their lack of execution, but the model rocks. Developers start free, serious apps on Heroku pay pretty low cost for the supposed abstraction of smart infrastructure management, Amazon gets its due, and the ultimate end users of the apps get to use a huge garden of new and exciting hacks faster than before. Who loses? Only competitors that I can think of.

When you mull over an idea as a potential new startup or project, try and evaluate who’s winning. When everyone’s winning, sales efforts are easier, recruitment is easier, and your chances of success are much higher. That’s all based on my own experience.

So yea, go find a way to help everyone win.

Notes:

[1] Come to think about it, you could argue that Yelp’s business model hinges on whether new businesses are worthy of positive reviews off the bat. Is it possible to be a stellar business from the day the doors open? If not, does that slowly whittle the (otherwise large) set of winners down? In this winners-keep-winning scenario on Yelp, I can see the long term sustainability of Yelp’s advertising revenue being in jeopardy. But extortion helps too.

[2] Special thanks to Will Barkis of Mozilla for casually theorizing that nature of high Yelp ratings and putting me into a state of thought.

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