Zero to sixty

James Hong and his buddy Jim Young threw together Hot or Not in 2000 as a joke to see what would happen. Their site went viral in a day and traffic shot through the roof crippling their server. From then on it was a furious game of hurry-up offense to scale the site and keep it one step ahead from going down due to the massive traffic growth. James had just graduated business school and his buddy Jim was burned out from working on his PhD - the two took a go at making their HotOrNot.com into a business. James says, “We weren’t trying to figure out what kind of boat we needed to build, we were trying to keep from drowning.”

Given the rates they were seeing at the beginning, James calculated that the site would cost them $150k/yr in bandwidth. They were serving the pictures from their own server and load times were already pushing 30sec/pg. James had an epiphany that first night of launching the site that they could use Yahoo Geocities to serve the images and offload that bandwidth cost to them. They did a mad scramble that night and by 3am had done the necessary programming to push all the image hosting over to Yahoo. That fixed the image hosting issue but they were serving the site itself from their employer’s server (Xmethods). They had a Salon.com interview article coming out the next morning and knew that it would monopolize the Xmethod server and they would take flak for it. They grabbed a 400Mhz Celeron box, drove to Berkeley and plugged it into a corner in Jim’s office concealing it under a pile of books. By 5am they had the site being served from this machine and just in time to withstand the traffic from the Salon article.

Those two desperation moves helped them weather that storm but the site was prohibitively slow given the load. They researched their options for running it on a managed server and were able to talk Rackspace into a deal three days later where they would host it for free and use HotOrNot as a poster child to prove their ability to scale and handle load. They were evaluating the options for monetizing the traffic and sent a note to the founder of DoubleClick to see about running ads. As luck would have it, the first image that the DoubleClick guy saw was a naked woman. This raised the next big issue they would confront which was porn and spammers. They were forced out of necessity to develop a moderation system.

Once they got the site cleaned up they were looking at ad rates and doing the math and seeing that it was looking grim. They needed to be able to charge for something. The system they developed to combat the spammers was the “Meet me” system and was a double-match verification way of linking two people. They decided to charge $6/mo for using the “Meet Me” and found that people would pay for that as a dating service. James ran into a guy later that worked at Ofoto and related the story of how they were using Geocities to host the images. They were able to do an affiliate deal with Ofoto and convert a situation that was simply preventing them from losing money on bandwidth into a revenue generating opportunity. James says, “Again, all of this wasn’t planned or brilliant, we were just tying to survive. At this point we thought, ‘OK this deal buys us more time.”

Complementary roles

The division of labor between the two founders was interesting. It was essentially James trying to break it by increasing their traffic, and Jim trying to make it by scaling things to handle the load. “We were working like madmen, only getting 3 or 4 hour of sleep a night for a long time. It became a race between Jim and me; could I bring in people faster than he could keep up with? It was a good challenge for both of us. My job was to make a bottleneck and his job was to clear the bottleneck, technically.”

Advice to entrepreneurs: live lean and jump in front of a problem

James says, “The biggest roadblock to the entrepreneur are liabilities in your life. It’s not whether or not you can be a good entrepreneur, it’s whether you have to make a mortgage payment or support other people. Experience will come when you face certain problems and live through them. And the best way to do that is to put yourself squarely in the path of those problems.”

I would agree with both these pieces of advice. An important precondition to us being able to take the leap with starting JumpBox was the ability of both Kimbro and I to get our personal burn rates down to sub-$2k/mo. When you’re funding a company yourself in the beginning, it’s all coming from one wallet anyways so whether you reduce personal burn or reduce company burn, it has the same effect on your money pool. And certainly “putting yourself squarely in the path of those problems” as James recommends forces you adapt and find a way to make it work. Had Cortez not burned his ships upon his discovery of the new world, his men would have mutinied and retreated given the conditions. We burned our ships early on and set an irreversible course by dropping all client consulting work and committing to office space and a full-time hire for JumpBox.

James says, “And nothing ever goes according to plan. You can’t dwell on the fact that your plan didn’t work. In our case, we didn’t even have a plan, but it would have been worthless to have one anyway, since we just kept moving as fast as we could. You have to hustle; you can’t just have a plan and cakewalk it. You just have to know what direction you’re going in and run around like a rat in a maze trying to get out.”

Hot or Not continues to be privately-held and recently they ditched their entire revenue model to make the site free and attempt to grow the user base. So far they’ve already seen huge growth due to that move.

This entry was posted by Sean Tierney on Sunday, May 27th, 2007 at 1:23 pm and is filed under Blog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.