While looking for a job in 2000, James Hong launched a website with his friend
Jim Young just for fun. HOT or NOT lets users submit photos of themselves and
have others vote on their "hotness" on a scale of 1 to 10.
The site spread virally, and within hours their server was swamped. Hong
and Young sensed there was a business in it, and worked frantically to scale the
site to handle the load.
A few months after launching, they found the way to generate revenue from
the site: they added dating for a monthly fee. Despite many acquisition offers,
HOT or NOT continues to thrive as a stand-alone company. As of July 2006, HOT
or NOT had counted about 13 billion votes.
Livingston: Take me back to when you had the idea.
Hong: Jim, my brother and I were hanging out drinking, and Jim mentioned
that he thought a girl he met at a party was hot, and that she was a perfect 10.
My brother and I were working on a website at the time called XMethods,
which was the first directory of publicly available web services, so we were talking
a lot about what would be a cool consumer web service. In 1999, everyone
was talking about web services in the context of B2B, and I remember thinking,
"What about consumers? Aren't consumers going to do this stuff too?"
When Jim said that he thought he found a 10, an idea popped into my head:
what if you had a service where people could post their pictures into the system,
and then other people could rate them from 1 to 10? The original vision
was that your client would call the web services, get a picture, and have it randomly
float across your screen or pop up on your screen at random times
during the day. The idea was that all our friends that were working in cubicles
could have a window: a random girl walking by you that they could rate from 1
to 10 on if you thought she was hot.
Livingston: It was just for fun, not an idea for a startup?
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James Hong
Cofounder, HOT or NOT
27
CHAPTER
Hong: Jim was burned out from working on his PhD, and I had just graduated
from business school and was unemployed, so I figured what the hell, let's build
it. It wasn't that hard to build in the beginning--it was hard to build later
because we had to scale it--but just putting up something that looked like it
worked was easy. It was not something we focused on. We had the idea one
Monday, and it was coded by Wednesday or Thursday in spare time, really, and
then Jim sent it to me on the weekend. There was no hurry; this was not something
we were thinking about.
The weekend before it launched, I was visiting my parents and my dad
walked into the room and saw me playing with the site and he asked what I was
doing. I didn't want to admit that I was spending time on this thing since I
was unemployed and should have been looking for a job, so I told him it was
something Jim was doing. My dad was the first person that ever saw HOT or
NOT besides Jim and me, and he got addicted to it! Here's my dad, a 60-yearold
retired Chinese guy who, as my father, is supposed to be asexual, and he's
saying, "She's hot. This one's not hot at all." We knew then that the idea had
some legs, but we didn't know how much.
So we launched it on Monday with our own pictures, and at around 2 p.m. I
emailed it to 40 friends and wrote, "Here's a website that Jim and I made--be
nice." And I put a link to my picture on the site so they could rate me. I think
we got 40,000 hits that day.
Livingston: Forty thousand hits on your first day when only a handful of people
knew it existed?
Hong: I don't think I've ever told anyone this, but after I sent out that first
email, I went rollerblading around a big office park where Tellme was based. I
went up to a random guy and said, "Hey man, have you checked out
hotornot.com yet?" He said, "No, what's that?" I said, "Dude, just go check it
out!" Then I went home and watched our logs for Tellme and saw a hit come in
10 minutes later, and then more hits kept coming from different people within
Tellme.
Three days later I went back to that parking lot and found someone else and
asked, "Have you seen some site where you rate people from 1 to 10?" And he
said, "Yeah, dude, HOT or NOT!" So that was cool; it totally spread on its own.
Livingston: You had people coming to your site from the very beginning. At
what point did you decide that it could be a business? What were the next
steps?
Hong: That question implies planning. We were more concerned with fear and
survival at the time. I was interviewed by Salon.com the day we launched the
site, and that started a string of near disasters.
Livingston: You were "not ready for prime time"?
Hong: Not at all. The site was on the XMethods server and we really needed to
get it off because the traffic was shutting it down. The bandwidth was crazy; we
were hosting the pictures at the time. After you voted, it took 30 seconds to get
the next page--and at the end of the first day I calculated that this thing was
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going to cost at least $150,000 in bandwidth per year at the current run rate,
and it was growing fast.
We realized quickly that the momentum would make us broke. I was
already $60,000 in debt from grad school. I had turned down a consulting job
paying around $170,000. I did it to roll the dice, but I was poor. I knew we
couldn't afford this and thought seriously about shutting it down.
Livingston: So what did you do?
Hong: We were panicking at this point. There was no plan for a business, it was
just, "How the fuck do we keep this thing going?" We weren't trying to figure
out what kind of boat we needed to build, we were trying to keep from drowning.
But we did know a few things: we had to reduce our costs, we had to make
it make money somehow, and we needed more machines. And because the idea
could be so easily copied, we had to get as much press as possible to lock out
anyone else from getting publicity.
So it was panic. The whole point was just to keep going, keep going, don't
stop. I got 8 hours of sleep in the first 8 days, and finally they made me sleep
because I was literally shaking.
Livingston: Take me through the turning points of the first 8 days.
Hong: Basically, the feeling was: do whatever you have to do, just scrape on by.
So we first addressed the biggest problem, which was getting rid of the huge
bandwidth driven by the pictures. That was why we almost shut down the site.
It was 12:30 a.m. after the day we launched, and I was sitting in the drive-thru
at In-N-Out when I had an idea.
Three days earlier, my brother and I had launched something on XMethods,
which was a web service-based file system, basically a network drive, and I
showed it to Dave Winer. Though he subsequently copied it, at that time he
said, "Why the hell would I need that? That's called FTP. I have a Yahoo
GeoCities account that lets me FTP to it." I owe Dave a lot for his cynicism.
So sitting in line, I remembered what Dave had said, and I thought, "Holy
shit, we don't need to host the pictures, we'll let Yahoo do it!
"We'll just FTP all the pictures we have now up to a Yahoo GeoCities
account, and we'll change the database records so that it will point to the files
on Yahoo, and then from that point on, we'll just make instructions telling
people to go to Yahoo GeoCities and then submit URLs of their pictures."
We lost some users from submitting it this way, obviously, but it solved the
problem. And the way I figured it, I said to Jim, "Dude, how many page views,
especially at the speed of the site, will anyone have each day, maybe 25? All we
need is 25 new pictures a day and we're done. We don't have to have a billion
pictures, we just need 25 new pictures a day. So that's what we did. And this
wasn't planning, it was survival mode. I can't tell you enough how much it was
survival. Desperation is a good word to describe it.
So between 12:30 and 3 a.m. on the day we launched, we moved all the pictures
to Yahoo and solved the image problem.
James Hong 379
But the Salon.com article was coming out the next morning. I called the
writer and asked her if she could push the story back, but she said it was a slow
news day and she couldn't. So the article came out and the server got slammed.
My brother needed the server for XMethods, so we did the quickest thing we
could think of, which was that night at 3:00 a.m., we took the site down,
grabbed an extra PC--a 400 megahertz Celeron, no-memory-in-it machine
that I got for free when I opened an eTrade account--and drove to Berkeley
where Jim had a shared office.
I remember taking the top off a case for pushpins and mounting it on top of
the power switch of the machine so no one could turn it off. Then we put it in
the corner under his desk and surrounded it with books, so it just looked like a
bunch of stuff under his desk with a little Ethernet cable coming out.
And as soon as we turned the site back on, the access logs started flying. It
was 5 in the morning!
Livingston: So what next?
Hong: We now had solved the two most immediate problems to keep the site
running, so we were breathing a little easier, but the site was still slow. On day
three, I started looking into managed hosts, and Rackspace came up as the clear
Linux leader. Though we had no money, we were getting a lot of press, so after
a failed attempt to pitch my idea to the Rackspace salesperson, I called the
head of business development and said, "I know you guys want to go public and
it's great to get your name out. Your whole value proposition is that you can help
companies scale fast by outsourcing. If you can help us, I have all these upcoming
interviews, and we can be a poster child for you."
He said, "OK, don't worry, just tell us what you need right now to scale, and
we'll figure it out later." So every day that week, I would call them and say that
we needed more machines. We owe Rackspace big.
At the same time, a friend suggested that we sign up for an ad network, and
we were trying to get into 24/7. But we were having a lot of problems with porn
and naked picture submissions to the site. And I knew that no one would advertise
if this was dirty. So we came up with the motto "Fun, clean, and real" and
created a system where people could click a link under an inappropriate picture
and, based on an algorithm, we would kill any picture that got clicked on too
much. So it was community-regulated and that worked pretty well.
I sent an email to the founder of DoubleClick telling him about us and
requesting his help getting into 24/7. He responded saying that unfortunately
the first picture he got when he went to our site was a naked woman. He said
that right now we were innocent until proven guilty, but we needed to move to
a guilty until proven innocent model in order to get advertising.
So we decided to build a moderation system. I originally had my parents
moderating since they were retired, and after a few days I asked my dad how it
was going. He said, "Oh, it's really interesting. Mom saw a picture of a guy and
a girl and another girl and they were doing..." So I told Jim, "Dude, my parents
can't do this any more. They're looking at porn all day." We decided to
open up the community of moderators to the public. You had to apply and write
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an essay to get in. It was basically built on the BBSs of the old days that had different
levels with different skills.
We told the moderators to reject any pictures that were inappropriate,
looked like an ad, or had contact info. (Pornographers were including fake
email addresses to get people to email them so they would spam them later.)
And then we got a bunch of emails from people saying, "Hey, I was meeting
people."
We quickly realized that we needed to make something to allow people to
meet each other without letting all these porn people in. So we came up with
the "Meet" system, which required a little more work than most dating sites,
because it requires both people to be active. You can't just post an ad and wait
for emails to come in, so it's harder for porn people to come in and take advantage
of it.
As we were solving the problem of keeping the site clean so that we could
get advertisers, ad rates were dropping. We had to come up with something
that we had more control over, and that's when I thought, "Can we charge for
anything?" We started charging $6 per month to belong to the Meet Me system.
We chose the pricing based on what we thought would be an impulse buy.
In retrospect, it's easy to see that we had this dating system that was slapping
us in the face, but it took us a while to think that we could charge for it,
because the Meet Me system was never built to make money. It was only built
in response to the porn issue. It's ironic that I have an MBA and also started a
company before that had raised venture capital, but the one idea that worked
was all an accident.
Another thread of what happened was that I was trying to reduce our costs.
Though we weren't being charged yet by Rackspace, I now knew how much we
needed to cover those hosting costs, plus enough to hire someone to manage
the site. After running into a guy who worked at Ofoto at an office-warming
party, I talked to Ofoto about how we were sending people to GeoCities, and
since many of our users have digital cameras, maybe I should send them to
Ofoto instead of Yahoo to host them, and now Ofoto would have a lead. So I did
an affiliate deal with Ofoto.
It's funny to think that we took something that was originally costing a lot of
money, to making them free, to actually making money on some of them. Again,
all of this wasn't planned or brilliant, we were just trying to survive. At this point
we thought, "OK this deal buys us more time."
On top of all this, we were constantly fixing the site to scale. We were working
like madmen, only getting 3 to 4 hours 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. So we didn't
really get to breathe until we had the Meet Me system and it was making
money. I think it made about half a million a year when we started, and we now
had a scalable business model.
But we still didn't think it was going to be a business at that point; we didn't
think it was going to continue growing. We thought it was just going to be there
James Hong 381
and we would hire someone to run it, and then I would go back to working on
XMethods and Jim would go back to his PhD.
Livingston: At one point did you think you were really in it, you would have this
startup and be the CEO?
Hong: To be honest, I never considered myself the CEO, even up until the
point I quit. It was really a partnership between Jim and I. I carried the CEO
title because I was the one running around talking to people. What is the
CEO of a two-person company where the two people are equal shareholders?
What does that mean? It just means that we had to call someone a CEO.
Livingston: So you never took any money from the outside?
Hong: It was just me, Jim, and my brother.
Livingston: What were some other hair-raising things that happened?
Hong: When we first started, we were called Am I Hot or Not? and I had been
sure to check if anyone owned any similar domains. One day Howard Stern
mentioned the site on his show and called it "Am I Hot?" Next thing we knew,
we got a cease-and-desist letter from a site called Am I Hot that claimed they
predated us. We couldn't believe it! Because we thought we might try to sell,
we knew we had to keep this thing clean, so I went down to LA and tried to
work it out with them. I let them keep the "Am I Hot" name, and they agreed
to let us redirect our traffic to hotornot.com for at least 3 months.
So now I had to rebrand the company, too. Luckily, at that point we were
getting a lot of press, so I worked hard to get the new name out there. We
wound up buying Am I Hot's assets--their domain and the rights--for what I
considered a paltry sum. We only really bought it to close the chapter and feel
vindicated. Later I found out from someone who worked there that they
thought they totally screwed us when we agreed to change our name. I guess
they thought "Am I Hot" was a better name.
By the way, this was in December, in the first 4 months. We also had
talked briefly to Lycos about selling. They were offering something like $3 to
$5 million--this was after 2 months of work--but we didn't want to sell because
we thought they would destroy it. We thought they'd stick pop-up ads everywhere
and make it corporate and lame, and then it would die. Our reputation
was worth more to us. I thought the company was worth more, too.
Livingston: What else kept you up at night?
Hong: The scaling issues were pretty bad. It seemed like Jim and I were nonstop
everyday, trying to figure out how we could make the site better or faster.
That first half-year seemed like a day. There was a lot of manic behavior going
on. I was on an adrenaline rush, which felt good, but it was exhausting and
sometimes I felt like I was going crazy. So much, so fast, all at once.
It was fun, too, though. We got in People magazine, Time, and Newsweek.
By the end of the year, we got on Entertainment Weekly's It List.
Livingston: Why was HOT or NOT instantly so popular?
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Hong: Looking at hot chicks is fun. It's voyeurism. The concept at the time was
so new and edgy. No one had ever seen it before or thought about it. It was just
so funny--and painful too. Like voting for people who were so ugly that you
wondered why they were voluntarily doing it.
Livingston: Did you ever catch any shit from your technology friends?
Hong: Why would I catch shit? What would they be mad at me about?
Livingston: That you were squandering your education and talent on creating a
site for ranking people's attractiveness?
Hong: Most techies would dream of that, are you kidding? People in Silicon
Valley are entrepreneurs, they're not the risk-averse types that would think I
was wasting my education. I was the first among my MBA classmates that made
it into the Wall Street Journal.
Livingston: Can you remember a really funny moment?
Hong: We were on the Entertainment Weekly It List, and we got invited to a
celebrity party in New York. By chance, the New Yorker found out about it and
got one of their writers to chronicle us for the weekend. I think the title of the
article was something to the effect of "The Dorks Come to the Big City."
One of the sweetest moments happened when we went to some hip new
club that had just opened and tried to get in. You know how New York is a very
velvet rope culture. Well, the bouncer took one look at us and wouldn't let us in.
So the writer had been passive for a while watching us trying to get in, and then
he stepped up finally and said to the bouncer, "Hey, you want to let these guys
in. You are a new club, I'm a writer for the New Yorker, I'm following these
guys around, and it would probably be nice if you were mentioned."
The bouncer responded, "I've never heard of the New Yorker." Finally he
went inside and came back out with the manager, who begged us to come
inside. At that point, Jim and I were like, "This place is lame and we don't want
it to be mentioned, so we really don't want to go in there." And we all walked off
and had drinks at some little pub. It was definitely a nerds-strike-back moment.
Livingston: What would you tell someone who was in your shoes before you
started HOT or NOT?
Hong: I'd say do it. There's kind of a backwards logic that says: when you are
young, you should learn from people who are experienced, so later on, if you
want to do a startup, you can take the risk. And that's a myth that was created
from school. You need to learn to get to the next level.
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.
Livingston: What drives entrepreneurs?
James Hong 383
Hong: I think entrepreneurs want to make money. It's not that they do it for the
money, but they want to make money. Because money is the measuring stick;
it's how they know if they've won or not. And I think a lot of what drives entrepreneurs
is the kind of legacy they are going to leave. They want to make a mark
in the world and feel like their life mattered. Entrepreneurs are the kind of
people who love ideas and want to build things, and add value to the world.
Part of that is to quench their ego's thirst and say, "I matter." That's why
people like Bill Gates and Vinod Khosla spend a lot of time doing nonprofit
things. It was never about the money. Carnegie dedicated the latter part of his
life to giving all his money away. He was trying to convince people to give your
money away once you make it. Because that's when it can start doing real
good, too.
Livingston: What else do entrepreneurs have in common?
Hong: The hardest decision you make as an entrepreneur is not one that you
make while you're building the company. For me, the hardest decision was not
about solving the hosting issues and all that. It was the one I made years before
HOT or NOT even existed. When I said, "I'm going to be an entrepreneur,"
what I was really saying was, "I'm going to forgo the normal, safe route, where
there's a clear path. I'm going to take a higher risk and go for a higher reward."
It's like Hewlett-Packard. Do you know what their first product was? A
bowling foul line indicator. The point is, they decided that they were going to
be entrepreneurs before they knew exactly what they were going to do, and
that's very common.
All these things come out of new ideas. If you're not in school and you're
not an entrepreneur, you're not working on new ideas. You are just a cog in
someone else's wheel, and you'll never make anything new. So the hardest thing
is to say, "I'm going to put myself in the position of being an entrepreneur by
having ideas and trying things, and not giving up when I fail."
You never know unless you try, and we live in a world where building websites
and other small things doesn't take that much time and effort to try, so why
not just try different things?
Livingston: What other advice would you give to someone starting a startup?
Hong: You need the early team to be savvy in everything. And you have to have
people who understand the users and the product. If you do, then you'll
have users.
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.
Livingston: Now that you're out of the maze, do you get asked out on a lot
dates through HOT or NOT?
384 Founders at Work
Hong: Yeah. I actually stopped using my dating service a long time ago as a way
to find my own dates, because everyone on there knows who Jim and I are, and
many of the ones who seek us out are crazy. I would often get random emails
from women sending me naked pictures and all sorts of weird stuff. A lot of
them want to date us because they have low self-esteem and they think dating
us will suddenly make them hot and cool. Crazy, psycho girls can be fun to date
for a while, but I'm a little older now and I'm looking for something a little
more serious.
The ironic thing is that from running HOT or NOT, I care less about looks
now. When I was a dork, I never really dated anyone who was hot. The models--
they weren't going to date me. So you always aspire to it, they're like the
untouchables. All of a sudden, HOT or NOT happened, and I was starting to
date all these attractive women. I got a taste of it and I realized that looks don't
make up for a good personality. Many of these girls were annoying. They were
fun to hang out with, but I couldn't have a conversation with them. I'm sure
there are smart and hot girls, but if you look at the hot ones first, it's harder to
figure out if they are smart too. That takes time.
Livingston: Any other advice about startups?
Hong: One, do it while you're young.
Two, there's no right path. There is no one plan that fits every business; you
have to figure it out yourself. There is no magic formula.
Three, even if you raise money, spend it as if it's your own and you have
none. Your organization has got to remain smart and lean. Be cheap. There's no
shame in being cheap. I still fly coach.
Four, there's no such thing as easy entrepreneurship. It's going to be
painful, it's going to be emotionally unstable, you're going to feel insecure. If
you're not already bipolar, you will feel like you are.
Livingston: How has your life had changed since HOT or NOT?
Hong: Money hasn't changed anything--well, that's not entirely true. I have a
Porsche and I have a nice apartment. But I'm living within the same means as if
I had gone the risk-averse route.
I don't spend that much money because once you get used to spending
money, it's very hard to get unused to. Happiness is reality compared to expectations.
If I have low expectations for material things in my life, then I'll be
happy. If I get used to fancy meals all the time, not only will it ruin McDonald's
for me, but even the fancy food would become normal, and then it's not meaningful.
So I've been careful not to change my lifestyle too much.
I'm not in debt anymore, and I have financial freedom, but the first whatever
million is all you really need to get that. If you had the opportunity to cash
something out for x million, but you thought with some hard work you might be
able to make it worth more, for some people that's the right decision to go for it;
but for other people, take that money, put it in the bank, and now you can do
whatever you want for the rest of your life. It depends how tied you are to that
one concept as being your legacy for your entire life.
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James Currier came