By late 2004, Bloglines was the leading online RSS aggregator. “We were getting an incredible amount of great press. Our users were very happy. The problem was, we just didn’t have all that many of them,” says Mark Fletcher, then CEO of Bloglines. “There’s nothing viral about an RSS aggregator, and we had no idea how to make Bloglines appealing to non-power users (i.e. the majority of the Internet). Even with the great press, we just couldn’t juice our user growth curve. Huge exposure, small user base. That left me feeling very vulnerable.”
Fletcher (right, in a photo by VicKuP) feared Google and Yahoo would enter the RSS aggregator space and use their considerable marketing power to take over the market. Around the same time, Ask Jeeves expressed an interest in acquiring Bloglines. Fletcher says, “I decided to sell to them in the hopes that they’d be able to send some of their traffic to Bloglines and drive our user numbers up. We began negotiations in December of 2004 and the deal closed February 4th, 2005.” The deal was reported to be around $10 million.
Jim Lanzone, Ask Jeeves’ Senior Vice President of Search Properties at the time, said in a press release, “Bloglines is truly one of the most useful and addictive services on the entire Web. We are excited about providing Bloglines with the resources to grow its service and help it reach a broader audience.”
When asked now about the purchase, Lanzone explains that he loved Bloglines when the deal was made. “Bloglines was the original reader and the best. And I was personally addicted to it,” he says. “It almost immediately became the most useful site on the web to me. So we looked at buying it as an investment. If RSS readers blew up and became the leading gateway to information, we’d be in position A. And remember, it was really early days for blogs and Web 2.0. We would have the best blog search out there.
“We acquired it pretty cheaply – much lower than any reported figures at the time – and we budgeted to more than triple Mark’s resource base. As a former entrepreneur myself, I loved the idea of giving Mark a wide berth and seeing what he could do.”
In the release, Fletcher added, “By joining forces with Ask Jeeves, we will be able to accelerate our growth with access to the millions of unique visitors to Ask Jeeves’ properties. And we are eager to take advantage of Ask Jeeves’ support, extensive resources, operational scale and innovative technologies to expand and improve the services we deliver to users.”
Second time around
Despite the lofty words, Fletcher knew that acquisitions didn’t always go smoothly. In 2000, he sold another startup, eGroups, to Yahoo. “When eGroups was acquired by Yahoo in 2000, we had about 150 employees running the service,” he explains. “Within two years of being acquired and renamed Yahoo Groups, that number was down to 3 people running a service that has a staggering amount of email traffic and a huge user base. The development and evolution of Y! Groups stagnated for a very long time after the acquisition. Of course, Yahoo can do whatever they want with the service; they bought it. That was an object lesson in what can happen to a startup after an acquisition.”
So he knew a negative outcome was a possibility with the Bloglines deal. He says, “I went into the Bloglines acquisition with my eyes open. Once you sell your company, it really isn’t yours anymore. This may seem obvious, but until you go through it, you don’t know the emotions you’ll go through as other people start making decisions about how to run ‘your baby’.
The acquirer gets acquired
It didn’t take long for things to take a turn after the Bloglines deal. Less than a month later, Ask Jeeves itself was acquired – by Barry Diller’s IAC. Fletcher was unaware of this until it was announced. “It was a bit of musical chairs all around,” he says.
As part of the executive team at Ask Jeeves, Lanzone (left) was “very involved” with the sale to IAC. “M&A information isn’t something you would share widely internally, let alone with Mark outside the company. My firm belief at the time was that IAC meant more resources for Ask anyway. Reality turned out to be a bit different, but only over time.”
Fletcher pushed ahead with Bloglines, spending much of his time dealing with scaling issues. “It was important to me to try to make the acquisition a success for Ask as well as for Bloglines’ users. I built up a team within Ask to run Bloglines and oversaw the transition of the service to the Ask data center as well as the scaling up of the backend to support growth,” says Fletcher.
“The infrastructure of Bloglines was paper thin, and needed to be almost completely rebuilt,” Lanzone says. “That’s why it had so many outages. The Bloglines Plumber was the predecessor to the Fail Whale. It drove me nuts and drove Mark to exhaustion because he was going down to the datacenter at all hours of the night. Only after we fixed it could Mark and his team focus on new features.”
The Bloglines Plumber became a familiar site.
After a year and a half, Fletcher was ready to check out. “Burned out from my second startup in less than eight years, I had to take a break,” he says. “I got a life. I reconnected with friends, I travelled, and in general worked on my much neglected personal life. Maybe it’s a function of getting older. I’m not sure. But my priorities have changed such that the personal side of my life is much more important than it used to be.”
Lanzone was disappointed with Fletcher’s departure. “I actually never expected or wanted Mark to leave,” he says. “One day he came in and said he was an entrepreneur, that Bloglines needed to scale, and he thought someone else would be a better fit for that. I tried to talk him out of it, but he wasn’t having it. He stayed around until blogsearch finally launched, to his credit.”
After Fletcher left, Bloglines development stalled. “The team running Bloglines continued to maintain the service, and rolled out an improved interface,” Fletcher points out. “But after that, work stagnated as corporate resources were moved elsewhere.”
Customers were disappointed. One wrote, “Bloglines isn’t what it once was – I stopped using it a couple of years ago and moved across to Google RSS Reader which was better, smoother, faster, less bug ridden and all told just a superior product.” Another voiced frustration at frequent downtimes with this sarcastic message from the Bloglines Plumber. ReadWriteWeb asked, “When oh when will we see an upgrade to Blogline’s UI?!”
Meanwhile, Google Reader began to take off. “Google doused resources on it that we couldn’t reasonably match,” says Lanzone. “Google Reader had five to ten times the engineers on it than we had and had become the darling of the space. Bloglines still made zero revenue so IAC didn’t look favorably on putting more resources into it at that point. If we’d executed faster at the very beginning, we might have had a shot. That’s the fault of everyone who was involved, including Mark and me.”
What if Fletcher had stayed at Bloglines longer? “I don’t think the outcome would have been different,” Fletcher answers. “I left Bloglines in very capable hands. It would have been great if the various IAC companies would have promoted Bloglines to drive more exposure. But we were a very small cog in a very large organization, and I’m not sure anyone at our level in the organization could have gotten that done. And no one has been able to solve the problem of making RSS readers appealing to non-power users.”
The fade out
In 2010, Ask.com decided to shut down Bloglines. The announcement said, “RSS is a means to an end, not a consumer experience in and of itself. As a result, RSS aggregator usage has slowed significantly, and Bloglines isn’t the only service to feel the impact. The writing is on the wall. ”
After customers complained, Ask.com agreed to turn over control of the site to MerchantCircle instead of shutting it down.
Looking back, Fletcher has mixed reactions. “I was correct about a few things,” he says. “Google did enter the market soon after with Google Reader and they were able to eventually become the dominant online RSS aggregator. Nobody has been able to figure out how to make RSS aggregators viral or particularly social, and they are still considered a tool only for power users. I was wrong in that Ask Jeeves was not able to juice our user numbers. I don’t blame the people at Ask for this.
“I need to be clear here. My overriding emotions about the acquisitions of my startups were (and still are) elation, relief, and stunned amazement. I mean, I’m just a guy who likes to sling code. Clearly I’ve been playing above the rim,” he says. “That said, I think it’s natural to have other emotions. Frustration, for one. At least for me, my relationships with the companies I’ve started have been very personal. They’re not just jobs, they’re not just companies. When building a company, I’m not my normal cynical self, I’m a True Believer. I have to be, otherwise I wouldn’t be able to work as hard as I believe I must in order to make a startup successful. As the founder, it’s my vision that drives the company, and I have no other focus. To have someone else come in and start calling the shots is jarring.”
As for the timing of the sale, Fletcher says, “I have wondered if I could have waited a little longer before selling. Did I jump the gun? Everything else being equal, and assuming you don’t have investors breathing down your neck, you want to wait as long as possible to sell, to create as much value as possible. Build up your user base, get as much publicity as possible, increase functionality. I was very worried about competition from Google and Yahoo, but that didn’t start to happen for six months after Bloglines was acquired. Funding wasn’t a problem; we weren’t running out of money. But we had someone who wanted to acquire us immediately. And if I had waited, the IAC acquisition of Ask would have either complicated things, or, more likely, scuttled the Bloglines deal completely.”
Did the money change his life? “I suppose it gives you a certain freedom to pursue your passions,” he says. “But I think most people can already do that, regardless of tax bracket.”
Despite the eventual fate of Bloglines, Fletcher still thinks selling was the right move. He says, “Many acquisitions don’t work out. But, in hindsight, being acquired was definitely the right course of action for Bloglines.”
The Ask perspective
Lanzone mostly agrees with Fletcher’s assessment. “Ultimately, it may not have made a ton of difference. Ask became the default search engine for many of those properties, but that didn’t didn’t drive much traffic at all. The point may be moot anyway because I think one thing that history bore out is that RSS readers remained fairly niche. Social networks and Twitter have replaced readers for most consumers. Lastly, you could have advertised it for branding purposes, but Bloglines would have looked odd on Match.com, Service Magic or Evite regardless. And explaining an RSS reader in a banner ad is still hard in 2011, let alone 2006.”
In retrospect, Lanzone’s biggest wish is that the merger moved faster out of the gate. “Everyone involved had the right intentions,” he explains. “But really, that first year was the death of it. No one executed fast enough. That’s odd because Ask was otherwise a scrappy, innovative group who usually stayed one step ahead of our larger competitors from a product development point of view. This one should have been in our wheelhouse. For some reason it just didn’t happen.”
Lessons from the decline?
So are acquisitions like this one inevitably doomed? Lanzone doesn’t think so. “It takes two to tango,” he says. “I think it takes an acquiring company that is committed to doing the right thing by the business it’s buying and an entrepreneur who is committed to fulfilling the vision behind the product and capable of executing it. Amazon is an example of a company that seems to do this well, and it’s no wonder since they get total alignment between Jeff Bezos and Jeff Blackburn, his head of M&A. Bezos is also willing to invest and take risks. Not every CEO is like that.
“On the other hand, I can’t tell you how often I see entrepreneurs sell hard during the M&A process and then flail or bail after they’ve been acquired, especially after they’ve cashed out some money. All of a sudden they’re hanging out at the Roxbury with their head nodding sideways, wearing purple suits and drinking vodka tonics. Mark was not that way at all. He was committed. It just didn’t come off, despite best efforts and intentions. That happens too.”
Where they are now
Lanzone eventually left Ask and launched Clicker, an online guide to where you can watch TV shows. Last week, CBS bought Clicker and named Lanzone President of CBS Interactive (in familiar language, the press release announcing the deal lauds the “unlimited potential” of the merger’s “strategic value”).
He’s considering starting another company too. “Yes, they’re a lot of work and they do tend to consume your life. But they’re also amazingly fun. It’s kind of like an addiction. Perhaps there should be a spinoff of a certain show on A&E. Call it ‘Intervention: Startup Founder.’ Or maybe ‘Dr Drew’s Founder Rehab.’”
Exit Interview is a Signal vs. Noise series that examines what happens after companies get acquired.