Newsvine announced the acquisition and answered this question: “Why would a young, efficient independent news startup become part of a large organization?”
It’s all about growing the community and spreading the idea of participatory news as far and wide as possible. Although going from zero to over a million users a month in less than two years is heartening, msnbc.com operates on another scale entirely. While Newsvine may be well known in early adopter circles, we want every college student, every farmer, every weekend journalist, and every household to have their own branch on the ‘Vine. In order to spread this idea further, we could have gone out and raised a lot of money, quadrupled our staff, and gone it alone, but when one of the finest news organizations in the world is headquartered right across Lake Washington, the potential of partnering with such a great team is dramatic.
Meanwhile, Charlie Tillinghast, president of MSNBC Interactive News, offered this take on the deal:
Tillinghast said msnbc.com was racing to foster a community among its readers and to exploit the power of unmoderated user commentary and ranking of the news. Ideally, he said in an interview, the site would design and build its own tools, but Newsvine, a small, lean company headquartered in downtown Seattle a few minutes from msnbc.com’s newsroom, “is just a great fit.”
“Newsvine is local, small, nimble — they don’t come with a lot of things you don’t want,” he said, such as complicated partnerships and contracts. “There isn’t a lot to rearrange.”
Do you still work with the product?
Most of the Newsvine team (including myself) is still here. In addition to maintaining Newsvine.com, our team’s technology runs all MSNBC, TodayShow, and other brand family blogs (about 25 of them and counting) as well as many of the interactive features within the company’s core sites (global registration, live votes, inline comment threads, Facebook/Twitter integration, etc.).
Because our team does not have end-to-end creative control over these other projects, they are generally less satisfying than working on our own product. But at the same time, they are more satisfying from a financial standpoint. A 10% increase in Newsvine’s traffic doesn’t move the needle much for the company’s bottom line, but a 5% increase in overall msnbc.com traffic means millions of dollars, and since we’re a private company with profit sharing, that’s real money for all ~275 employees every year.
What impact did the sale have on customers?
When we were acquired, the growth wave that ensued — about 450% over the next few years — brought criticisms. Not only had the user base become much bigger, we were now associated with a mainstream media company; a development that some users appreciated and others felt uncomfortable with.
On the bright side, we’ve been able to get some of our best users on TV and send them to political events like the RNC and DNC, but on the down side, some users wrote on Newsvine specifically because they didn’t see eye-to-eye with mainstream media.
How is Newsvine doing now?
Traffic-wise, the product is about 400% more popular than it was, but feature-wise, it unfortunately hasn’t changed much in the last few years. A lot of this is due to the fact that our team has remained small (8 people now) and we’ve been working on many other projects within msnbc.com alongside our Newsvine duties. Currently, over 25 million uniques a month are hosted on Newsvine technology via the various projects we power around the company, and we’d like to think we’re a contributor to the extremely profitable business our parent operates.
As for things we wish went differently, it’s tough to say because we were acquired literally the week the market peaked in 2007, and things went downhill for the economy directly after that. Because of the downturn, many media companies (including msnbc.com) cut back their budgets and dug in a bit for a long winter. We stayed at 6 people for a very long time, and as our responsibilities expanded outside of the Newsvine brand, our attention to Newsvine.com itself diminished. Thankfully the nature of the site has always been for users to essentially run it, so this worked out ok, but it’s definitely the reason you don’t read as much about Newsvine in the tech press as you did a few years ago. When you don’t reinvent yourself every year or two, there just isn’t much of a tech story to tell.
It’s tough to tell what things would be like if we hadn’t sold. It’s really, really hard to make a living in the general online news business without massive scale. Even at 4 or 5 million users, that’s not massive scale. Msnbc.com is highly profitable at 40 or 50 million uniques, but if you cut that in half, they probably wouldn’t be profitable at all. So for a startup in a low margin business, you have to decide eventually whether you want to go it alone or have a partner.
Digg built a great product, grew a really nice sized audience, but a few of the people over there (not everybody) decided to continue going at it alone, and now it looks like they may have missed their window. That story is not over yet though, and I’m rooting for them, so you never know. Then you have companies like Gather.com who were mentioned as our competitors back when we started, and all they’ve done is keep raising more financing (first 3m, then 6.75m, then 10m, then 5.3m, and then 2.4m… a total of 27.5m!) without really showing any sort of success metrics anywhere along the way. I mean, those employees and founders are more diluted than a Coors Light right now. What’s the exit there? I don’t know.
What’s been the best and worst things about selling?
I’m a reasonably thrifty guy and until now, I’ve never had more than about twenty thousand dollars to my name, so I didn’t go out and buy a Ferrari or an Armani suit, but I was able to extend my love of design to home-building and build a nice house on a cliff to live in. From a personal standpoint, having an early success under your belt makes you a lot more confident for future endeavors as well. I was already pretty confident when I started Newsvine, but if I ever do another startup, I will be even more so.
[Ed. Note: At Quora, Davidson commented on the money question: “If you’re a jerk, you’re likely to be even more of a jerk after you have money. If you’re a giver, you’re likely to give more.”]
The worst thing about selling is just wondering how big we could have gotten had we stayed independent. It could be smaller, or it could be bigger. It’s tough to tell. When Newsvine launched, we were a pretty original offering in the marketplace: an environment where individual citizens could practice acts of journalism alongside mainstream entities like the Associated Press, the New York Times, and CNN, as well as discuss every angle of the news in an open, well-behaved environment. But several years later now, Twitter and Facebook have completely changed the ecosystem by filling the world with so much signal that finding a place to discuss the news is no longer a problem for people.
What advice would you give to a startup considering selling?
Never sell unless you have at least two bids (if you can help it) and know your acquirer. We ended up accepting msnbc.com’s offer not because of the dollar value of it but because we really liked the people we would end up working with. Management at msnbc.com was also very clear from the start that they wouldn’t be planting the corporate flag all over Newsvine or putting us in suspended animation for 2 years while we move onto their platform. They’ve been hands-on when they need to, and hands-off at all other times.
This is clearly the opposite of what acquirers like Yahoo seemed to have done. When you sell your company — unless you have some very non-standard rules in the agreement — you are almost always putting its future in the hands of the acquirer. When you make the decision to sell at a certain dollar amount, you need to ask yourself “Will I be happy with this transaction whether my product’s future turns out positive or negative?” If the answer is yes or no, then it’s an easy decision. If the answer is “only if the product’s future turns out positive” then you have a tough decision to make.
I think it’s hard to overstate the benefit and importance of a smart acquirer. We were msnbc.com’s first ever acquisition so there weren’t a bunch of people waiting to get their hands on us in order to put us through some sort of startup integration machine. One of the first things we did post-acquisition is sit down with people on the other side and decide what made sense to change and what didn’t.
The things we changed were things like corporate email, host co-location, accounting, HR, and legal (basically things that had little to do with our core product and technologies). The things we didn’t change were things like our chosen web server technology and scripting language (still Apache/PHP, running in MSFT data centers!), our own product design, and our release management procedures.
I think msnbc.com’s opinion when they acquired us was that they actually liked the way we did things, and therefore, they didn’t want much of it to change. When I read things in your previous article above about how Yahoo thought Flickr’s API was poorly designed or how the new head of Delicious didn’t get along with Josh, I think to myself “why did you even acquire these people if you didn’t like them or their work?” The people that created Flickr, Delicious, and Upcoming are smart people, and in my experience, very easy people to get along with. That they were acquired by a company who, optimistically, just put the wrong people in charge, and pessimistically, are in an unrecoverable death spiral, is somewhat unfortunate.
It also, however, illustrates the importance of a final bit of advice: do everything you can to avoid performance-based earnouts. They were never even proposed as part of our deal, but I had been warned about them from the beginning, and it’s easy to understand why: an acquirer’s ability to scuttle your potential for success is even more powerful than their ability to help it. Because our team has no financial agenda that is separate from the rest of the company’s, we are able to service requests from across the organization without ever having to ask “does this help or hurt our earnout?” As one of our lawyers said during an unrelated part of our acquisition negotiation: “You’re not buying an option on the company. You’re buying the company.” Don’t accept earnouts if you can at all avoid it.
Exit Interview is a Signal vs. Noise series that talks to founders to see what happens after companies get acquired. This interview was condensed and edited.