ValleyGeek

James Hong delighted the SDForum SIG with his stories of being a successful entrepreneur running the popular web site HotorNot.com. His presentation was a brilliant series of stories interlaced with demos of HotorNot. What follows are my notes of his talk

Themes

1. Boredom is a great motivator.
2. Do something you love.
3. Be scrappy. Being smart and creative is more important than being funded.
4. Do not give up.

James graduated from Berkeley at the top of his class but realized that he did not want to be a hardware engineer. Because of his great people skills (you have to see him in action to see what great people skills mean) he allowed HP to convince him to work in marketing. He was stuck in supporting sales and overloaded with tedious customer calls. James eliminated his job by building a web based FAQ during his spare time (nights) in spite of the objections of his boss . (Theme boredom is a great motivator). He then lead a team at HP to build Wireless Test Equipment that did over $150 million in revenue in an year. James went on to get an MBA from Berkeley just to leave his job at HP.

James then went on to ride the last boom all the way to its gory end. He started a B2B site focusing on the construction industry in which he practically had no interest. (Theme Do what you love.) After that startup went bust he did Xmethods a directory for web services.  HotorNot was his third startup. (Theme Do not Give Up).

HotorNot started as joke between James and his room mate. They built the first version in 3 hours while consuming around 6 beers. The next day they emailed 40 of their friends about the site and had over 40,000 unique visitors by the next day. Now I wish I had access to those 40 email addresses. They must be the real Connectors of the Internet age.

Smart and Creative

This is the most important part of the story. James had a very simple goal with HotorNot. It was to be his cash cow. His way of earning his freedom (in his words FU) money. The very first night James realized that he was going to run into huge bandwidth bills. He decided to host all the pictures at geocities and get yahoo to serve all the photos. The websites scripting part was hosted on a celeron PC that he stuck in his partners graduate office at Berkeley. (Theme scrappy). As HotorNot grew in popularity James was looking for cheap hosting. HotorNot was attracting a lot of good press so he decided to approach RackSpace which was trying to IPO at that time. RackSpace had positioned themselves as a host that let people scale easily. James offered to make HotorNot the poster child for RackSpace in return for hosting nearly 20 machines. He also approached Ofoto to host photos. In fact he directed users to sign up at Ofoto to upload photos and got referral fees from Ofoto converting a cost center to a profit center.

PR Strategy

James realized that HotorNot was too edgy a site for behemoths like Yahoo! or MSN to replicate. Most likely his competitors would be other startups. The way to win the battle was through publicity. James became a publicity whore. However he gorked the hierarchy of newspapers. News becomes popular through two routes :-

1. The story jells in the grassroots till a big newspaper covers it
2. A big newspaper covers it and all the smaller newspapers follow its lead.

New York times is a newspaper that acts as a news source for other newspapers. So James ensured that HotorNot was covered by NYTimes. James and his partner revealed their identities to NYTimes. This scoop made the story all the more lucrative for publishing. James realized the journalists do not want to cover the same story twice. Thus he sucked away oxygen from his competitors by getting to the press first. Because of his great network he was always able to get reporters to take a look at his  site (a friend emailing a friend till it reached the right person).

Generating Revenue

HotorNot generates revenue from both advertising as well as its subscription service MeetMe. Advertisers demanded that the site be clean from offensive content. Unlike other dating sites that hire employees to check every photo submitted, HotorNot uses voluntary moderators who vote if a particular photo is safe. HotorNot also has a no contact info on the photographs policy which lead to the MeetMe subscription service. Interestingly HotorNot does not compete with the large dating sites such as match.com. They serve a different demographic (18 - 25). Are very informal. And differ from the other sites in 3 of the 4 Ps of marketing (Product, Price and Promotion).

Reasons for success

HotorNot is the original web 2.0 site. It is all about user generated content. Around the start of this decade digital cameras became really popular, everyone had at least one digital snap (perhaps emailed by a friend). And people wanted to share these photos and receive feedback about them. James made a point about how HotorNot is very similar to how people behave in a bar. You check out other people mentally rating them and then you try to smile and flirt with someone. The person can either respond favorably or reject you. HotorNot models this behavior with its Rate and Meet parts. (Editors Note I was really surprised to see how well this fits with point 5 of Clayton Christensen’s What makes a good disruptive business model?). James pays a lot of attention to the user interface and design of his site. He said that a good product manager is always in the mind of the user and knows what the user would like or not like. He quoted Larry Page as saying that the user interface of Google was as important as the search algorithm for it success.

Future

Now that James has made his freedom money he wants to swing for the fences and is interested in making big changes to HotorNot. If you are looking for a job check this out.