Farhad Manjoo (who wrote a cover story on 37signals for Salon.com a few years back) is now writing for Slate. This time he wonders about the Google Black Hole.
Farhad plays “Where Are They Now?” with some of Google’s recent higher-profile tech acquisitions. He focuses on mojo-heavy companies and products like Jaiku, Jotspot (Sites), Dodgeball, Measure Map, and Grand Central. Some of these died, some of these slowed down, some of them were still not open for new customers a year after the acquisition. Some people are wondering if Feedburner (Google), Upcoming (Yahoo), and Delicious (Yahoo) might belong on this list.
The astute Dare Obasanjo wrote about this phenomenon in detail a few days ago. His Application Rewrites after Acquisitions: How Large Software Companies Destroy Startup Value article is well worth a read.
Of course there have been success stories. Innovation at big companies often comes from the small companies and teams they swallow whole.
But with the odds of a big-co buyout nearing lottery proportions, a good chance of neglect awaiting your product on the other side, and a “I can’t wait until my employment contract is up,” feeling lingering your every work day, I hope entrepreneurs think twice about building to flip.
Related: David’s The secret to making money online talk at Y Combinator’s Startup School 2008.
condor
on 14 Aug 08I think this is inline with what happens to a lot of ‘regular’ companies that get acquired, not just start-ups; once acquired its very hard to make a company that was once independent and special mold to being simply one of many groups in larger organization. Its funny to think that ‘start-ups’ may not be that different than any of the hundreds of thousands of ‘regular’ businesses that are started in the US every year.
Anson
on 14 Aug 08I think the issue is that there is often a disconnect between the start-up’s strategy and Google reason for acquisition.
You can’t just assume that Google’s role in acquiring these start-ups is to help them fulfill their original business plan.
Google’s massively improved Google Analytics tool is a direct result of their Measure Map acquisition. They got a talented team who had thought long and hard about web analytics and were able to quickly get to work improving Google’s own product.
I’m not saying every acquisition has been a success, just that the scope of the article (defining success through metrics like traffic and sign-ups) is far too limited.
Eli!
on 14 Aug 08Didn’t Delicious just release a major update very recently?
J
on 14 Aug 08Google’s massively improved Google Analytics tool is a direct result of their Measure Map acquisition. They got a talented team who had thought long and hard about web analytics and were able to quickly get to work improving Google’s own product.
Yeah, and Jeff Veen, the leader of that team, left Google along with a few other people from the Measure Map team. So Google basically spend a few million dollars on a few designers who have moved on. Google Analytics got its redesign, but for what ROI? Killing one product - Measure Map - and losing the minds and design talent behind it after a short stint.
J
on 14 Aug 08Didn’t Delicious just release a major update very recently?
Yes, 3 years later.
David Andersen
on 14 Aug 08SketchUp is doing fine. I still have no idea why Google acquired them.
Tim Jahn
on 14 Aug 08I just wrote a post a few days ago about Google and it’s (seemingly inevitable) approach to evil.
Makes ya wonder how many start ups/smaller companies actually want to be acquired by Google (or a similar large corporation) these days.
Zach
on 14 Aug 08Jaiku is a bad example to use. Google bought it for the technology, not the community tool which is merely a showcase.
Wait until Android is released, then ask what happened to Jaiku.
Other examples above are in similar situations. Google doesn’t buy companies to shut them down…
Eric
on 14 Aug 08The fact of the matter is that most “startups” are loss-leaders. Sure they can bring innovation and value to millions, but only by burning through cash. Google, Yahoo, MS, ... they want value for their purchase and must convert the loss-leader to a profitable existence eventually and this transition is almost always a rocky one.
A startup that is already profitable does not need to be bought out or can demand much better treatment by a parent company.
Kevin Milden
on 14 Aug 08It is sad and so true. I have seen it so many times and 99% of acquired brands just disappear. Why do companies buy brands they end up doing nothing with is beyond me. In my case we would of been much better off going it alone in the the long run. Don’t sell your company and consider short term financing over long term investment unless you actually need it to capture more revenue. You’ll be happier in the end and you’ll have control over your own destiny.
Jon
on 14 Aug 08As far as physical products go, it’s getting easier everyday to get innovation to market by licensing your product to big companies.
Edison Nation is an excellent resource that is succeeding today getting innovators’ products on the store shelves.
They have an article on computerworld now.
Peter Cooper
on 14 Aug 08Some people are wondering if Feedburner (Google), Upcoming (Yahoo), and Delicious (Yahoo) might belong on this list.
I don’t think anyone should worry about FeedBurner. It has almost 100% market share in its niche and its user numbers have skyrocketed since the acquisition (going from a few hundred thousand to over a million).
Jake Rutter
on 14 Aug 08Good Article, I have been following this in Yahoo. It seems some recent acquisitions such as Flickr and Delicious have turned sour. I say that, because the people who started these companies, who poured their hearts and long man hours into these products – have been leaving after being bought. That can’t be a good thing for the better of the product, can it?
It seems the exit strategy of a lot of small startups is to sell to a bigger company, to get out. But is that the best scenario for the good of the company? Only time will tell.
Jeff Crof
on 14 Aug 08This is a good post on a very interesting topic, but I can’t help being hung up on this one statement:
Who are those people? And what in the world could possibly be their justification for suggesting those apps are “dead”? To me, it seems like all three have thrived since their sale.
But in general, yes—there’s no doubt that Google tends to buy these startups for their people, not for their products.
J
on 14 Aug 08Jeff: For example: Delicious traffic trends.
“Delicious grew nicely for a while under Yahoo!’s ownership but recently the user base has fallen off pretty dramatically. I double checked this chart in compete and alexa and they all show the dropoff.”
This is what happens when nothing happens with an app for 3 years. All the energy is spent on transition, not on improvement.
Patrick Hall
on 15 Aug 08I think delicious has come through with a damn good revamp. It’s true that it’s taken a long time for them to get it out the door, but I think they’ve managed to stay true to their original vision, and to improve usability and aesthetics. Maybe that graph will start ticking back up now. I hope so. I for one think it’s a great site.
Dan Grossman
on 15 Aug 08According to Compete.com, Delicious now has more unique visitors than the peak of that chart you’re linking…
http://siteanalytics.compete.com/delicious.com+del.icio.us/?metric=uv
Anonymous Coward
on 15 Aug 08Ironic
given that David’s related video on http://www.omnisio.com/
given omisino has been acquired by google (and is no longer accepting new videos)
N
on 15 Aug 08@David Andresen: I suspect some tie up between Google Earth and SketchUp – you can already draw landmarks in SketchUp and place them in Google Earth.
Ian
on 15 Aug 08Big organisations are very good at what they are good at, but they become constrained by these competences and innovation (particularly radical or disruptive innovation) often has to come from acquisitions. Good ‘big companies’ will make integrating small companies one of their competences.
But it worth remembering that just because a small company gets bought by a big company it doesn’t mean it would have been successful anyway. Many more small companies fail every year.
And small companies can get bought not necessarily because they want them to be successful but to remove a potential competitor or prevent a competitor from acquiring them – perhaps more so if they have intellectual property.
Geoff
on 15 Aug 08@ Jake Rutter: “I say that, because the people who started these companies, who poured their hearts and long man hours into these products – have been leaving after being bought.”
I suspect that entrepreneurs leave big companies because they want to explore new ideas and be in control of their destinies. That is their nature, and they are not likely to stay happy in an environment where that is difficult. If a large company has that culture, they’ll likely keep that talent.
But which large companies have it? Cultivating that kind of culture in any organization is difficult, and it’s probably a Herculean challenge in a big company.
Don Schenck
on 15 Aug 08One word: Winamp.
‘nuff said.
David Andersen
on 15 Aug 08@N:
Yeah, I’ve seen that, but it’s a tiny, tiny niche application for the product which is an excellent sketching and modeling tool for 3D design. It appears that Google is letting it continue to be just that. I think Google has a very big checkbook and likes to spend somewhat indiscriminately. They will either end up a major force in the software world or fade away, spread too thin.
GeeIWonder
on 15 Aug 08I see Sketchup as one (of many) stepping stones towards image search based on the image itself.
Jack
on 16 Aug 08How do you explain YouTube then? If YouTube didn’t get 1 billion from Google to fend off publishers. I doubt YouTube will enjoy the traffics it have today.
Yes, some small companies do die but not all.
Jeff Croft
on 17 Aug 08I wonder what happened to the comments on this piece? When I was here before, there was 15 or so. Now, there’s one. Strange.
JF
on 18 Aug 08Jeff: Your comment is the 26th comment.
J
on 18 Aug 08How do you explain YouTube then? If YouTube didn’t get 1 billion from Google to fend off publishers. I doubt YouTube will enjoy the traffics it have today.
Did you read the original post?
“Of course there have been success stories. Innovation at big companies often comes from the small companies and teams they swallow whole.”
He acknowledged there have been some success stories.
Jeff Croft
on 18 Aug 08Weird. For some reason I was only seeing one comment when I hit this page yesterday. Now I see ‘em all. Not sure what happened. Oh well, sorry to bother ya’ll. :)
Eric
on 19 Aug 08Jeff: It’s not just you. When I posted and come back there was 1 comment on the page. Reload as I might it took clearing my cahce for the newer comments to appear ( ff3/osx ).
This discussion is closed.