Brandon Paton

My first million dollar idea (that failed)

Fri, 19 Mar 2010 00:00:00 -0400

I can’t believe it’s been over a year since I founded Impact Eleven. At its inception, I believed that ImpactEleven would be my first real success. A year later, I can comfortably call it a failure.

Impact Eleven was born during January 09’ while I was lying in bed. With the TV on, I was slowly drifting into sleep. For the better part of an hour I was fighting to stay awake to make it to the end of the show I was watching. On that January night, while half asleep, I had my first “Ah-hah!” moment.

You may have experienced something similar. While on the phone, taking a shower, or cooking dinner, a light bulb flashes above your head…

I Suddenly Envisioned the Next Big Thing!

For the following week, I did nothing but think about the idea. I damn well thought that this idea could be the next million-dollar, industry-changing company. But money wasn’t my main motivation. My excitement was fueled by the prospect of entrepreneurial success.

Impact Eleven was supposed to revolutionize advertising on YouTube. My vision for the business was to connect major advertisers with YouTube publishers, providing publishers an alternative to the YouTube Partner Program (which overlays ads on popular videos and gives a [low] percentage cut to whoever uploaded the video). Impact Eleven’s main advantage over the YouTube Partner Program would be that there would be no minimum channel popularity pre-requisite, and that the average revenue per 1000 views would be much higher than the Partner Program currently delivered.

The business model I envisioned for Impact Eleven relied on short pre-roll video advertisements that publishers would manually insert at the beginning of their videos before they uploaded them. An example of a 15 second pre-roll is embedded to the right.

The YouTube publishers would download the 5-20 second pre-roll video ad and insert them at the beginning of their videos that they upload. Advertisers would sign contracts with Impact Eleven agreeing to pay $xx CPM for the first 15 days, with an initial X number of target video views. We would attempt to match their target impression count by predicting the amount of views each of our publishers usually delivered. The advertiser would agree on a CPM for the first 15 days, a lower CPM for the following 3 months, and an even lower CPM for the following 6 months, since there is no way to remove the ad once it is attached to a video without removing the video altogether.

Finding Our First Customers

As a naive, inexperienced junior in high school, I went directly for the big fish. I thought the best way to find my first customers was to get some popular YouTube publishers to agree to include a pre-roll ad in their video. From there, I suspected I would be able to approach companies and offer them a couple million video ad impressions on popular YouTube videos. This, unfortunately, did not work as well as I thought it would.

In February of 09’, I scheduled my first sales call with Household Hacker, whose videos had received millions of views on YouTube. Dialing their number made me extremely nervous. Luckily, my nerves died down once I started talking. While on the phone with the two guys behind Household Hacker, we talked about the current state of the YouTube Partner Program and whether Household Hacker would be interested in a deal with Impact Eleven. To my advantage, the conversation turned into them giving me their input on the concept of Impact Eleven, since they knew it was a “startup.” My conversation with them gave me a better understanding of the YouTube advertising ecosystem.I did, however, make some relatively impressive progress. After sending an email to many of the most popular YouTube users, I was getting replies from users like Fred, SMP Films, Dave Days, Household Hacker, and Kevjumba. I didn’t hear back from the majority of users I emailed, including Chris Pirillo of lockergnome. Despite me being ignored by Chris Pirillo, I remained encouraged when Dave Days subscribed to Impact Eleven’s YouTube account (our one and only subscriber!).

Inexperience, Naivety, and Blind Passion

In my conversation with Household Hacker, I realized the following:

Advertisers would not want to be associated with sandy balls or Chris Crocker
YouTube could easily put us out of business at any time
The video quality of the ad depends on the individual publisher’s editing & uploading know-how
There’s no way to remove or add a pre-roll ad after the video is already on YouTube
Lack of a reliable method of measuring view views, aside from YouTube’s view counter

If I wasn’t so naive, I probably wouldn’t have spent the $10 to registered ImpactEleven.com. My inexperience led me to spend many hours working on Impact Eleven, which never financially paid off. Do I regret the time spent? Of course not! It was a fun experience, and it has taught me things that I will remember the next time I have another ‘Ah-hah!’ moment.

Failure is something that I appreciate. The only time that failure becomes dangerous is at the point that you decide failure is not an option. Failure is always an option. Keeping this in perspective can be motivating, and can help prevent one from becoming too heavily vested in a business that has shown significant signs of weakness.

After a couple months, I realized that I did not have the pieces in place to make ImpactEleven a success. Developing the idea taught me a hell of a lot about business, and for that, I was successful.

The Concept of Work and Reward

Wed, 09 Dec 2009 00:00:00 -0500

In the most general sense, the degree of “work” an individual puts forth is equivalent to the “reward” they receive; as I work harder, the reward I receive increases. A simple example would be studying for a test. The more I study, the higher my grade.

But what causes me to study in the first place? It may be for the satisfaction associated with receiving a good grade, or possibly to avoid the dissatisfaction of receiving a bad grade. Nevertheless, there is a positive correlation between the work I apply and the reward I receive.

In short, two factors motivate people to do work:

Possibility for future satisfaction
The avoidance of future dissatisfaction

The happiest workers, of course, are the ones who work for the satisfaction of the reward. Nevertheless, working to avoid dissatisfaction can be equally motivating. After all, we spend time and money having our cars inspected in order to avoid having an inspection violation in the future.

A Distorted Perception of Work and Reward

What is interesting to consider is when the correlation between work and reward is not maintained. An ordinary example, of course, would be being rejected by someone you were trying to impress, or even finding a $5 bill on the ground. In both examples, the level of work we applied did not correlate with thereward. When these instances are trivial and infrequent, they are normally insignificant.

Now, if an envelope with $500 dollars spontaneously appeared on someone’s doorstep every morning, their perception of work and reward may become distorted over time. They will eventually quit their job and learn to rely on the $500 dollars a day as their main source of income. Until, suddenly, the envelope ceases to appear, and they are forced to find a job, again. The subsequent hours spent working at their new job is for the avoidance of the dissatisfaction of having no money. Their first earned paycheck will result in no real satisfaction, as their past experience had taught them that there should be no work associated with receiving money.

The prior example demonstrates a large reward being given in exchange for no work. It may also occur that large amounts of work result in little to no reward. I might try as hard as I can to impress somebody, but because I am the ugliest person in the world, I may never be successful. In effect, I would become very discouraged over time, and eventually give up altogether. In this case, thework of impressing potential mates was reward-less work.

When a person’s experience tells them that little work results in large rewards, the person is relatively content as long as that disproportion maintains. If forced into a normal environment where the relationship between work and reward is proportional, the person will become discontent. The converse is also true, as shown below.

Although a high reward, low work scenario may seem ideal, it is the most volatile and undesirable. A balanced perception of work and reward, where the degree of work put forth equals that of thereward, and where the majority of work put forth is for satisfaction rather than the avoidance of dissatisfaction, results in the most balanced and predictable scenario.

Unfortunately, uncontrollable factors cause our work/reward balance to become disproportionate, to varying degrees. When this occurs, it is important that it does not consume you. Chances are, the proportion will return to normal sometime in the future, for better or for worse.

The Death of Traditional Media

Fri, 30 Oct 2009 00:00:00 -0400

The Internet has given traditional media an ultimatum: Adopt the ways of new media companies, or die.

Publishers of newspapers, magazines, and cable television (i.e. traditional media) are already struggling to survive in the world of new media. Market share of traditional media companies is consistently lost to new media counterparts. It’s only a matter of time before traditional media is gone for good, leaving the best adapted companies standing.

Shifts in Consumer Expectations

On the Internet consumers expect quality information, news, and entertainment to be free, convenient, and instantly accessible. It is easy for the internet based new media companies to satisfy these expectations, while traditional media companies find it much harder.

The Internet as a platform for the distribution of media incurs a fraction of the expenses associated with traditional media. Printing, shipping, and many other expenses are largely eliminated, while most major expenses of new media are scalable. This allows new media companies to provide services and content for free by relying solely on revenue from advertisers to maintain profitability.

These consumer expectations will only be enforced as the number of households with broadband internet increases. A study by Pew Internet in April 2009 says that 63% of households have high-speed internet, up 15% from 2008.

How They’ll Survive

Cable television has already begun streaming free episodes online. Websites such as Hulu.com have done a good job monetizing and consolidating shows from multiple networks into one platform. The only mistake cable networks have made is limiting the number of weeks they allow episodes to be streamed online. Scrubs, which is a show in its 8th season on ABC has only the 6 most recent episodes available online. This encourages consumers to watch episodes on illegal website that cannot be monetized by the cable networks. By offering all episodes online with no limits, networks would have a better chance of building their audience base while monetizing a greater number of video impressions.

The majority of Newspaper publications have some type of version available online. Even so, their internal infrastructure is still optimized for offline publications, which is okay as long as they are profitable in the short term. But as print media continues to slow, companies must scale back their offline publication efforts and begin to focus on their online presence. Companies who understand the evolving market and concentrate equally on online and offline publications are the companies that have the highest chance at sustainability.

One fatal mistake, similar to what has happened with online video from cable networks, is that some newspapers with simultaneous online publications are limiting access by a mandatory membership. The Internet offers countless sources of free news that are just as good as the bigger names in the industry. In order for newspapers to succeed they must exploit their name, reputation, and offline audience in order to generate momentum for their online publication, which will be their main source of long-term revenue in the future. Newspapers that restrict their content to members only, such as The Wall Street Journal, give potential online-only readers a reason to go elsewhere for their news.

Magazines, for the most part, are in the same situation as newspapers. Magazines are published weekly or biweekly, and simply do not satisfy consumers’ expectation for instant access of recently written content. Blogs and microblogs (such as Twitter) has created a viable alternative to print magazines that offer an instantly accessible source of constantly updated information and news for free. Magazines, similarly to newspapers, should follow the model set by today’s successful online-only blogs, and hope for the best.

Adapt or Die

The way in which people access media is rapidly changing, and traditional media companies can either take the risk and adapt, or keep fighting a losing battle. At this point, traditional media companies still have time to proactively adapt to the evolving marketplace. The actions taken by traditional media companies in the next couple years will determine their fate. It is survival of the fittest at its best.

Unspoken Rivalry: What Motivates Our Daily Lives

Thu, 29 Oct 2009 00:00:00 -0400

People spend an exorbitant amount of resources improving themselves in every conceivable way. What does this accomplish? Within humankind lurks an unspoken rivalry that motivates us to great lengths. This rivalry has always existed, but has become increasingly evident as the world becomes exponentially interdependent. This is the Age of Unspoken Rivalry.

We perfect our physical appearance, attend ivy-league universities and boast our material wealth to gain an edge on our rivals. But who might those rivals be and what are we rivaling over? Our rivals are everyone around us. They are everyone in the United States. As the global community takes shape, they are everyone in the world. We are rivaling for college admission to increase our education, jobs to maximize our wealth and spouses to reproduce.

Modern civilization has become so interconnected that our success is based primarily on the performance of those around us. The performance of individuals competing for rewards (such as a cash prize in a running race, or a job at McDonalds) is influenced by two fundamental elements. The first is endowment, which is one’s ability or wealth. The second is effort, which is how extensively one utilizes their endowment to compete for a reward. With this simple equation, we see that one’s endowment plus their level of effort is equivalent to performance. Thus, those with greater endowments are able to put forth a lower level of effort to perform equally to their lesser endowed counterpart.

In the example of college admissions, endowment is the competitors’ intellectual abilities, performance is demonstrated in their test grades, and the rewards are given as acceptances into desired universities. The rewards are generally given to the competitors with the highest level of performance. For this reason, high performing high school students are more apt to apply to high ranking universities, such as ivy-league schools. Degrees from high ranking universities are generally favored in the job market because the holders of such degrees have already been labeled as high performers during the admission process and throughout their collegian career. This is, in effect, why it’s more likely that an ivy-league educated individual will earn substantially more money in his or her life as compared to a high school dropout, who is labeled as an extremely low performer. If a high school dropout had the same earning potential as a college graduate, there would be littlereason to attend college at all.

Within the last 100 years the college degree has become nearly a pre-requisite for entering the work force. Years ago, when a lower percentage of high school graduates decided to attend college, it was plausible that one may become very successful without attending college. However, as higher percentages of students decided to attend college, the high school graduates were left at a disadvantage, lacking a college degree.

The model of progression outlined above can be used to explain the need society feels to increase our physical attractiveness. Over a number of decades, women have went from wearing no makeup and showing no skin to covering up the majority of their natural face and exposing much of their body (and a parallel can also be drawn for men). A women’s endowment, in this example, could be considered her unaltered body, her effort is the steps she took to increase attractiveness, and the reward is the increased attention and interest from individuals.

As individuals within society collectively attempt to gain advantages over one another, the level of effort necessary to achieve adequate rewards will continues to rise. The demonstration of progressing effort will become increasingly radical. Plastic surgery will prevail, college will become a necessity for even low salary jobs, and greed will take precedence. Humankind would be better off if everyone agreed to decrease the effort required to achieve certain rewards. Unfortunately, the opportunistic nature of humans will prevent such an agreement from ever occurring.

16 Year Old CEOs

Wed, 28 Jan 2009 18:13:00 -0500

My name is Brandon Paton and I am 17 years old. I am the CEO and President of stealth mode startup College Credential, Inc. I have founded four successful internet startups (one of which was acquired), and currently serve on the board of advisors of a rapidly growing startup. And don’t forget I’m only 17. Sound impressive? Wel, most of what I just told you is not true.

In reality, I am not a CEO and have never been one. College Credential is not incorporated and it is barely in stealth mode. I’ve really only founded one other website that was mildly successful (sold for $10k), and even that struggles to be called a startup. My other three “startups” never made me money (but definitely taught me a lot).

Truth is easily manipulated. It happens pretty often when it comes to teenage entrepreneurs. They call themselves CEOs of their unincorporated companies. They announce a strategic partnership with a “company” their friend owns. They say their company was acquired, when it was really only purchased from someone on SitePoint for a few thousand dollars.

Don’t get me wrong, the teens I speak of are impressive individuals. They have the inborn entrepreneurial spirit that will take them places. However, I cringe when I hear the title “CEO” used lightly. To me, it conveys a lack of humility and a desperate call for attention. The majority of people that judge you will do so based on your experience, what you know and what you have done. Inflated titles and fictitiously incorporated companies will not score you points with people who matter. It may gain you some praise from people who don’t know any better, but what good does that do?

Truth is, in a few years we won’t be teens anymore. We will no longer have our foot in the door just because our age is impressive. Calling ourselves CEO of an unincorporated company with no substance will make us look like fools even more so than before. In my opinion, entrepreneurs who start young have one primary advantage. We get to make mistakes early and learn from them. What impresses me about young entrepreneurs is not their titles as “CEO,” but what they’re doing to gain that entrepreneurial edge at such a young age.

Back in September, I attended the TechCrunch50 conference in San Francisco. One thing I noticed was that everyone I talked to was very enthusiastic and supportive of my interest in Internet startups. On my nametag was “College Credential,” so when I met people for the first time, the company names on our nametags were usually the first things we talked about. I explained that College Credential was a side project (with school being primary) and that over the summer I had been meeting with college admission counselors at local universities to gain their insight on the concept of the website. I could have presented myself as the CEO of College Credential, but they wouldn’t have been any more impressed.

So if you don’t want to call yourself a CEO, what’s a good alternative? On my business card, I didn’t include any title at all. If I reprinted them I’d probably use “Founder of”.

The bottom line is that people are impressed by what you’ve done and how you conduct yourself. Inflated titles and exaggerations, while they help in the short-term, will always work against you in the end.