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Sometimes I hate being right

20 May 2008

As an entrepreneur who has to survive on his wits and long hours of hard work, I always like to see other entrepreneurs succeed.

The more "good news stories" we have, the more likely it is that others will chance their arm and, if enough do it right, pretty soon you've got a buoyant economy and enviable rates of growth within the business sector.

However, as an entrepreneur who's had his fair share of successes and failures, I find it pretty easy to spot an idea that simply won't fly.

And that's what I suggested was the case with the ambitious plans of NZ social networking site iyomu when they announced they were going to play "me too" and try to compete with the really big players in this already congested market space.

Indeed, as far back as July last year I wrote a column in which I criticised The "Me Too" strategy that iyomu was taking and suggested that "the odds were stacked against them".

Obviously the creators of iyomu also quickly became aware that there's no mileage in "me too" so they came up with a new strategy -- offer a huge prize!

In August of 2007, I suggested that You might as well buy a lotto ticket as enter such a competition and that any traffic generated by such lolly-scrambles tends to be worthless and fleeting in nature.

Indeed, this kind of promotion showed a total lack of imagination and innovation on the part of those behind the site and of iyomu's future, I said at the time "I'm even more skeptical than ever".

As the saga unwound, I could sadly see my predictions coming true.

Traffic to the iyomu site never did reach the levels that the organisers had expected when a prize of one million dollars was involved.

What's more, the bulk of that traffic was clearly (as I predicted) incredibly fickle and of no value as far as the site or advertisers might be concerned.

These people weren't interested in spending money, they just wanted the prize or to support a friend vying for the prizemoney.

When a winner of the $1m was finally announced, I again voiced my skepticism about iyomu and its viability.

I also repeated my claim from august 2007: "Will the winner actually get all their 12 installments? I don't know but I wouldn't bet even money on it".

Well it gives me no pleasure to say "I told you so".

In a story published on the Stuff website yesterday, it seems that the founders of iyomu are calling in the liquidators.

What's more, it very much appears as if the "winner" of the $1m prize (as I predicted) won't be getting his 12 instalments.

My goodness... is this the real calibre of our venture capitalists and cyber-entrepreneurs?

David Wolf-Rooney, creator of the concept and the site is quoted as saying "To successfully market a project like iYomu you're talking tens of millions of dollars to get to the next level".

Well that may be true - but you've also got to have a little creativity, a little imagination, an understanding of people and the ability to innovate.

Iyomu had *NONE* of this.

As I pointed out, it was a "me too" pitch for a market that didn't exist that relied on a very crude (and proven ineffective) marketing technique that even a little consulting with people who've been playing this game for a while would have pointed out.

That iyomu was able to gather up so much investment capital from seemingly "smart" folk and draw in well-known business people such as Michelle Boag worries me a lot.

What I (and a myriad of other people) could have done with that money.

Give that capital to someone with the necessary imagination, creativity, experience, knowledge and entrepreneurial savvy and the investors may well have made a huge return by now.

What a shame.

I have no doubt that iyomu will have left some investors with a bad taste in their mouths. They'll now be saying "no more internet ventures for me, too risky -- I'm better off with bricks and mortar"

If only they'd been regular Aardvark readers eh? :-)

What do you think?

Although it's easy to have 20/20 hindsight, what odds did you give iyomu of succeeding in the highly competitive and crowded social-networking market?

What would *you* have done with all that venture capital if it were given to you?

Are you frustrated that such lame, unimaginative, poorly designed and unresearched ideas get funding while so many other very good ideas (like all mine for instance ;-) languish for lack of venture capital?

And for anyone else contemplating investing in a hi-tech venture it's important to remember that it *alway* pays to get an independent, objective opinion on what you're about to do. If you're really stuck, drop me an email.

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