Thursday, May 14, 2009

Sexy versus Profitable

So I have worked in Silicon Valley, Washington DC area and southern California for a variety of companies. Most recently in Silicon Valley, which as well know is the hotbed of the technology sector. It is also the hotbed of sexy and many times money losing technology ideas. Does anyone seriously believe facebook has actually been in the black yet?

In our quest to build the next better mouse trap, I think many times we overlook the profitable for the sexy. Unfortunately, sexy doesn't pay my bills, profitable does. Sexy doesn't pay the dinner bill when I take the sexy girl out (yes that was a play on words and a terrible one at that), profitable does.

Let's compare two products.

The first product is a technology service. It has several million users. It has VC backing, a board of directors, and multiple employees. Their product is the hot product and everyone is jumping on the bandwagon. It is the definition of sexy in the technology world.

The second product is a simple household product . It has a great trademark and everyone has seen their commercial.

Many people would say the first product is what they want. It is sexy, they are in the news and they can brag to everyone how awesome their product is. Me, I want the second product. What are the two products?

Twitter has yet to make a profit, is not sure how to monitize its product, has to report to a Board of VC's and continually worry about having enough server capacity to keep up with its service.

The second one, costs (at my estimate) no more then a dollar to produce, is run by a single guy, has great brand recognition and sells for 19.95 plus 7.95 shipping and handling. I imagine, even worst case scenario he is netting a profit of 5 bucks per sale, and has admitedly sold over a million units. He would not continue to be on the air if it wasnt profitable. I would posit he is making more then 5 bucks per sale. I would imagine he is making 5 bucks a unit just on shipping and handling.

What business would you want to own?

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