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After having started up a company, I realized a couple of core values to watch out for in able to minimize the failure of starting up your company.
One must keep in mind that it’s not the positive features that your product has that will make it successful. It’s really about avoiding the things that’ll make it fail. Of course, we’re talking about the basic big picture/direction here.

1. Do not try to invent something

Inventing a new way to solve an existing problem is fine, but just don’t try to create a brand new product. The reason is because it’s not very easy to educate people, and unless if you have a few million dollars lying around to market and to educate your customers, do NOT try to create a novel product. Breakthrough and popular innovations must come from baby steps, kind of like our evolution of Motorola Startac to Apple iPhone now. I’m not saying that it’s impossible to invent something as relatively novel as Twitter or Foursquare, but I’m just saying you need to look at it this way: Try to dramatically enhance or “reinvent” an existing product or platform such that you fix the problems that the existing products don’t. Whether or not something is an invention is very trivial. I think the iPhone is an improvement, but not an invention, though many people may argue that it IS an invention. I think it just changed the way we interact with our phones, and it’s quite awesome at that.

Oh, and of course, you can invent the Time Machine or a website that miraculously cures diabetes, then I’ll totally take back what I just said.

2. Does your product fix existing problems (or is it super fun?: solves boredom) and is it worthy of being solved?

This is very trivial because almost all products solve some sort of problem. The question is if your product fixes problems that are big enough for people to want them to be fixed. Google fixes the problem of inefficiency in the past search engines (more like directories). Some people might think, okay, Swagly is going to solve the problem of people not being able to identify products they see in pictures or something. However, the problem itself isn’t a big problem. Being able to identify those products won’t necessarily make anyone’s life easier. Many people might wonder, but they can visually take down the style and maybe find it somewhere else with very little trouble.

3. Build on established platforms

Try to create your product on establishes platforms so it makes it easier to spread your product. What I am literally saying is: Build your product on Facebook, Apple App Store, Twitter, and other platforms where your product can be spread around socially.

4. Not making money as the first objective

This is a hard one. I have heard many people say: “Next time I start my business I will need to have a revenue structure.” This statement itself is right AND wrong. It’s right, your product must have a product structure, but it’s wrong in the sense that you must not have revenue in mind when you’re developing your product. The only thing you should be thinking in your head is: How to make users come to use it, love it, and keep coming back. I have seen too many companies try to figure out ways to make money even before they have any users. Look at current successful companies out there. Google, Facebook, Twitter, Craigslist, Foursquare, etc. Of course, there are other services where it’s subscription based and you can get a revenue structure going immediately. Sure, but I think that’s just a very small percentage of them. Therefore, I think cash flow must come, but just the matter of when.

5. Start with a very small and fast prototype first

This has been repeated over and over again, but try to develop your product in the shortest time possible, acquire the early adopters, and slowly tune your product. I made the mistake in trying to squeeze too many features at once into the product, and I lost time, money, and users. You just want your product to do 1 or 2 things at once, and you have to minimize the procedures and understanding as much as you can, since people are slowly losing more and more concentration as the internet is getting more and more distracting.

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product-tagging affiliate networking picture example

So recently there’s been a lot of contenders in this segment. Pixazza, Udorse, Gumgum’s Shopthislook, Shopstyle’s Shopsense and of course, us, Swagly. This niche segment probably isn’t as glamorous as Fourquare/Gowalla, or Twitter, but it’s been looked upon as a multi-billion dollar industry. Since there’s not much coverage on this topic, this industry hasn’t really been put under a microscope to see what’s really happening.

Do you think there’s a market with this kind of technology? I think there is. However, are all of the contenders doing the right thing to make themselves relevant? I think the answer is no. Pixazza puts its affiliate offers inside pictures, where the ads are represented by little blue dots that trigger pop-up windows when mouse-overs occur. This is pretty obtrusive and very often the tagged products aren’t even related, since sometimes you can’t find merchants that carry anything similar. Gumgum’s Shopthislook also does something very similar where they overlay a relatively big tag on the picture that triggers a pop-up after a click. Needless to say, products are also often out of sync, and the big tag takes up quite some real estate in the picture. Shopstyle’s Shopsense fashion product recommendation widget is probably the prettiest looking of them all with fluid scrolling, and I think they win in the way that they don’t force themselves in a corner in the way that they don’t set users’ expectation to think that affiliate offers are supposed to be directly corresponding to the products present in the pictures. Udorse on the other hand is pretty irrelevant. I do see them having a small following where there are just people who want to make money and just go in there and tag like there’s no tomorrow. I mean, they download all of the pictures from facebook, so their assumption is that people wouldn’t mind checking out the same picture twice, just for kicks, or just to tag the products and make some gold. Swagly on the other hand is kind of like Shopstyle, but we have the feature where everyone can tag. We want to make it truly a “social” product-tagging service. And since we have an unobtrusive and independent widget, it also works with videos. However, our downfall is that our widget is pretty ugly, and I’m not afraid to say it.

There are other players Clikthrough and Hyperspots, but they focus on the video segment.

Now that I’ve summarized the competitors, lets talk about the industry in general. I think to sum it up, the performance of such ads won’t as as good as that of say…Google Adsense. The reason is the same reason why advertising on Facebook isn’t optimal. It’s because when people are visiting Google, they are actively looking for something. You actually look at the ads and read them to see if it’ll help you with your search. When people are on facebook they know what they’re looking for, and the side distractions aren’t really that attractive.

So, the same goes with this in-picture affiliate networking thing. When people are going through celebrity blogs or social networks that enable this kind of affiliate marketing, people aren’t out to check out what they are wearing. They are curious, but not many people are going to pick up styles from Lady Gaga or Madonna. I mean, at the same time there more normal and casual celebs that make their looks more relevant. Sure, the affiliate offers are interesting, but are they actually “relevant”? They are contextually-relevant, but they are not “relevant”.

What I’m trying to say is that, there are ad networks likes Pudding Media that originally wanted to download Skype conversations LIVE, convert the voice to text, and send out contextual ads. Just like what Google Adsense does for text, they do it for voice. Did it turn out well? No. They can never get pass the privacy issue, and customer education is too time consuming and expensive – probably impossible to overcome.

Products with this industry:
1. Users not in a shopping mode when they are browsing product-tagged websites. (Google has the highest conversion rate because people are looking for something when they use it)
http://www.businessinsider.com/charts-of-the-week-heres-how-much-a-unique-visitor-is-worth-2010-3#heres-how-much-a-unique-visitor-is-worthheres-how-much-a-unique-visitor-is-worth-4
2. The product selection is usually not complete enough to the point where you can always tag the right products that spark interest or relevance. Difficult to achieve high accuracy.
3. Affiliate offers usually have little shelf time and are discontinued very quickly. Therefore, affiliate offer links become obsolete and the link is unable to fetch the images or descriptions of the products.
4. Too many steps required to complete a conversion, even if the interest rate and click rate are relatively high.
5. In-Picture tagging is very obtrusive to the users.
6. What is going to prevent the users to wander off to other websites to compare prices and look for cheaper alternatives? Just because you saw something somewhere doesn’t mean you’re going to buy it there. Especially when people are getting more and more cost aware. So far, only CPC or CPM are still the best (not for advertisers but for ad networks and publishers)…
7. An idea that takes off is one that’s fixing a big enough problem or is one that’s  just straight up fun.
8. You have to parasite onto another website, and depend on manual labor. This is also difficult because when products are taken off the shelf, you’ve left with no backup affiliate offer.

There is definitely a market for in-picture affiliate marketing / advertising, but only the company that can fix the problems can be king.