Startups and the ‘Blurred’ line of Ethics – Where do you draw the line?

As a startup, do you really need to be ethical in beating your competition or gaining adoption? The obvious and ethical answer is “Yes”, but the not so obvious answer…

As a startup, do you really need to be ethical in beating your competition or gaining adoption?

The obvious and ethical answer is “Yes”, but the not so obvious answer is..”It Depends”.

Lets look at some of the highly successful startup stories in the last few years and the history behind them.

YouTube  – Lazy Sunday Did the Trick

If you thought YouTube’s initial success was purely a result of UGC – get ready for a shock.

The tipping point actually came from Lazy Sunday, a hilarious Saturday Night Live skit (from NBC Univeral) which exploded on the Web in January 2006, generating over 5 million views for Youtube.

Lazy Sunday @YouTube
Lazy Sunday @YouTube

Even though lazy Sunday was available on iTunes (on subscription basis), people hopped to YouTube for free videos. And that set the viral growth for the product.

Was it legal to put up a subscription-only video for free on the Internet? Did YouTube ever tried track down the piracy? Not actively.

They essentially followed the “wait-till-we-get-DMCA” approach, and it worked. It did set the traffic numbers and adoption right.

Orkut – Whose Code is it Anyway?

Way back in 2004, Affinity Engines, based in Palo Alto, California, said engineer Orkut Buyukkokten illegally took the code that he had written for the company (Affinity Engines) with him when he joined Google.

“In its initial investigation, AEI (Affinity Engines) uncovered a total of nine unique software bugs … in AEI’s inCircle product that were also present in,” according to the lawsuit. “The presence of these bugs in both products is highly indicative of a common source code…. contains software and source code copied, developed or derived from AEI’s inCircle software or source code.” – more

Facebook’s $65mn settlement to classmates

Facebook’s $65mn lawsuit settlement is one of the well known goofups by lawyers. The legal firm which helped Facebook settle the case went ahead and boasted about the services they rendered to Facebook

The story is that Mark Zuckerberg, a second year student, took ConnectU’s code, their core idea and launched Facebook in February of 2004, (according to ConnectU’s lawsuit). Facebook and ConnectU founders, finally negotiated a deal that includes Facebook buying ConnectU for an “undisclosed” amount of cash and stock, according to court documents.

So essentially, Zuckerberg did copy the idea as well as code and used that to launch Facebook.

There are countless other stories where line of ethics have been crossed – for instance, Yelp paying people for writing reviews (in the name of content seeding) etc.

While each case has it’s own history (as well as future) and context, the commonality is the very fact that many of successful startups have been formed on the ‘blurred’ lines of ethics.

One can always argue that these cases have been filed once companies made it big and people wanted to milk the moment, all I can say is that there is no smoke without fire.

Having said that, one can’t undermine the beauty of these products, but it’s important to note that they weren’t the first one in their field. There was something about these products that worked, and maybe, the ‘easy’ ethical standard played it’s role as well.

So tell me –  how good is it to be 100% ethical vs. somewhat practical?

Writing on the wall says ‘It Depends’


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