Product Ideas Newsletter #10

avoiding product-market fit risk, Gum Spy, and API Arbitrage

🚀Product of the Week

Gum Spy. I just launched a new project called Gum Spy. It’s a tool that makes it easy to analyze bestselling Gumroad products.

You can use it, for example, if you’re not sure what type of product you should create or if you have a product idea but are unsure of its market potential.

📈 Opportunity of the Week

API Arbitrage. It’s certainly no secret that “API products are a good fit for technical founders”.

  • Thanks to the marketing efforts by Google and Amazon lots of people are interested in using APIs.

  • There is low friction as users can use the API in any context they want.

  • You don’t have to care about UX.

  • You can use a marketplace like Rapid API to find customers.

  • Churn is low for API products. Once customers have implemented your API, they’re unlikely to switch.

One way to profit from this opportunity is to look at popular APIs and then build a niche alternative. A bit boring but certainly viable.

But here’s a more exciting idea:

  • Find popular APIs that only offer expensive plans for power users. For example, SEM Rush API plans start at $399.5 per month. This is far too expensive for casual users.

  • Unbundle it (if multiple API endpoints are included) and resell the monthly volume in smaller chunks. For example, the “entry level” SEM Rush plan includes 10,000 Keyword reports per day. $399.5 divided by 10,000 yields 0.03995, about four cents. Hence, if you charge, say, 10 cents per query, you can make nice profit.

  • This is exactly what, for example, DataForSEO.com is doing.

  • Another way to frame this business model is group buying for APIs where you play the middleman that brings people together and charges a fee for your services.

  • To minimize your risk of making a loss, you could take pre-orders and only grant access once enough people have expressed their interest in a specific API endpoint.

💭 Thought of the Week

“A mistake a lot of entrepreneurs make is to only focus on ideas that are definitely possible but have questionable product-market fit. These ideas have low technical risk but high product-market fit risk. I think more people should be doing the opposite: focus on ideas that are definitely valuable and questionably possible. In many ways, market risk is worse because you’re gonna do all the hard work of building the thing and no one wants it.” - Kyle Vogt as quoted by Shaan Puri

Examples:

  • A robot that cleans bathrooms in hotels. If a company can build such a robot that works better and cheaper than a human, there is zero doubt that companies will buy it.

  • A self-driving car. If someone can pull it off, people and companies will buy it.

  • Rockefeller was 100% certain that if he’s able to bring kerosene (a cheaper and safer alternative to whale oil) successfully to the marketplace, people will buy it.

  • If you can build a website traffic estimate API that’s cheaper and better than what SEM Rush is offering, there is zero product-market risk.

Importantly: this only works if the product is cheaper and better. Only better might not necessarily work.

🤔 Prompt of the Week

  • What is something where there is zero doubt that people would buy it if you could build it?

👋 End Notes

I hope it was valuable for you. If it was, consider sharing it with a friend:

Share

If you’re the friend who got this shared with you, you can sign up here: