Investor syndrome

From Austin Storm
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Advertising we all know. Someone pays you to convince your users that they'll be happy if they buy a product or service.

Advertising is really lucrative if you run your own ad network. That's like running a casino. You can't help but make money.

If you don't run your own ad network, advertising is a scary business. You bring your user data to the altar and sacrifice it to AdSense. If the AdSense gods are pleased, they rain earnings down upon you.

And your users, of course, HATE advertising. So to keep revenue from falling, you're stuck in an arms race where you have to keep changing up your approach.

Right now, the frontier of advertising is in mobile apps. Next year it will be something else.

Maybe some of you have seen these things popping up recently; paid ads that pretend to be related links. In another few weeks, people will learn to tune them out, and a different plague of ads will descend on us.

Advertising is like the flu. If it's not constantly changing, people develop immunity.

Let's compare this to investor storytime.

Recall that advertising is when someone pays you to tell your users they'll be happy if they buy a product or service.

Yahoo is an example of a company that runs on advertising. Gawker is a company that runs on advertising.

Investor storytime is when someone pays you to tell them how rich they'll get when you finally put ads on your site.

Pinterest is a site that runs on investor storytime. Most startups run on investor storytime.

Investor storytime is not exactly advertising, but it is related to advertising. Think of it as an advertising future, or perhaps the world's most targeted ad.

Both business models involve persuasion. In one of them, you're asking millions of listeners to hand over a little bit of money. In the other, you're persuading one or two listeners to hand over millions of money.

I like to think of the quote from King Lear:

I will do such things,—
What they are, yet I know not: but they shall be
The terrors of the earth

That's the essence of investor storytime. Give us money now, and you won't believe how awesome our ads will be when we finally put them on the site.

King Lear would have killed it in Silicon Valley.

Investor storytime has a vastly higher ROI than advertising. Startups are rational, and so that's where they put their energy.

- Maciej Cegłowski