Facebook vs. HotU: Web 2.0 in action

HotU was a Hawaii VC-funded startup that tried to build a Web application targeted to college students. I never really completely understood what they were trying to do. They followed the classic bubble model: millions in cash, no real revenue, followed by a crash and burn. Today it looks like someone’s demo site.

Fast forward to Facebook, a college-focused social networking site. It was started in a “dorm room” by a Harvard student Mark Zuckerberg with essentially no money and was cash-flow positive almost from the start. They got funded by Accel Partners and now have some amazing statistics that I found on Jeff Clavier’s blog:

  • 5M+ registered users
  • coverage of 45% of US colleges
  • 80% penetration among students of colleges that are on the platform
  • 10th most visited Internet site in the US
  • 5.5B page/views a month (230M page/views a day)
  • signing 20,000 new users a day
  • repeat usage: daily 70%, weekly 85%, monthly 93% – can you think of another site that sees 93% of its registered users coming back every month ?

I dug around to find out what all the fuss was about and this article “Students Taken with Facebook Frenzy” pretty much spelled out the compelling reason:

“Facebook is taking over the world. Facebook is a way to keep in touch with friends, a gossiper, a dating service and a way to find out about the boy in your History class,” University of North Texas sophomore Ashley Wright said. “What is this world coming to?”

ASU students can form a study group by looking up other people who are taking the same classes. They then have the option of writing on someone’s “wall” or sending a message to their Facebook inbox.

Now, besides this being a very cool success story, I believe it underscores some elements of a Web 2.0 startup, which is definitely doable here in Hawaii:

  • Super low startup costs, near zero.
  • Initial site built by the founder.
  • Early profitability.
  • Built-in viral self-marketing.

Web 2.0 startups are a whole new breed, mainly because they essentially don’t need any money and they have positive cash flow early in the game. Think about developing something like this and you might have a hit.