I just got an email from Plaxo. I do not know if I had not gotten one in a while (yeah, right) or if I have grown immune to them.
Plaxo has grown to 15 million people in its network, which means that it must be sending out some 1,500 gazillion emails per day (actual estimates below). For those who have no email, just moved from Ethiopia (0.2% penetration rate there), are blind and/or just got their first Internet connection:
Plaxo is the creator of the “smart address book” service that helps millions of people around the world stay organized, up-to-date, and in touch with their friends, family, colleagues, and customers. Founded in 2001, Plaxo is a privately held company, funded by leading investment and technology firms – Sequoia Capital, Globespan Capital Platforms, Harbinger Venture Management, DAG Ventures and Cisco Systems – and by individual investors Ram Shriram and Tim Koogle. More information on the company is available at www.plaxo.com.
When you sign up for Plaxo, they “allegedly” spam your entire address book with your contact information and effectively, a Plaxo advertisement (over and over and over and over again). It’s viral all right but you sort of wish that the company get some kind of viral disease back (or is it venereal?).
WEB’S AXIS OF EVIL?
Plaxo was one of those companies that you disliked, then hated, but ultimately learned to accept as part of email management and contact book maintenance live with. The problem was that despite their pretense, the fact was that the only party that was being helped was Plaxo itself: I have never used Plaxo to update my information, ever. And anytime I get an email from Plaxo on behalf of someone I know, I ignore it. It gives me the creeps. I am probably not alone. I started writing this email when I got an email from Plaxo on behalf of someone changing jobs. See my reaction in this post: not good. Coincidentally, a friend of mine is changing jobs and he emails his entire address book. As a result, I am joining him for drinks and making note of his new contact info. The latter method is not optimal, sure, but it doesn’t piss me off either.
I always thought LinkedIn was fake and not authentic for its ambitions. But Plaxo is just wrong. The difference is that Plaxo’s idea is a great one, but they got just greedy and have made something with so much potential so hated. They’re both backed by some of the top backers in the game, but hey, we backed Saddam Hussein back in the day, so I am not sure what that says.
PLAXO INTOLERANT
No matter what the context, Plaxo shoots itself in the foot. I’ll clarify.
The day my former employer IGN put my belongings in a box and burned it in front of me, I got a number of the people (from IGN) who ensured that I would vanish from the company send me Plaxo requests for my personal contact information, since my work email and phone would no longer be operational shortly thereafter (did they think that a Plaxo request would make the removal of the knife easier?).
Whatever the case, Plaxo was not the best way to go about in such a scenario. In other words, even if I wanted to exchange contact info, I did not trust Plaxo. So while the thought was nice the approach was not.
A simple “hey Ash, let’s keep in touch” would have been a much better route to take. For the record, I am not calling anyone out with that statement, I am saying that “even when it makes sense to update your information for someone,” Plaxo is not the way to go. The software’s idea is great. The execution of the company was bad. And you will see how and why it has hurt investors, in my humble opinion. Then again, it might make them millions. We’re not talking strictly dollars and cents here, we’re talking common sense.
In the other, more usual scenario where you simply change contact info and want your entire address book to know (over and over and over again), then the principle is sound but the practice has led many - like myself - to simply ignore it. What happens then is that Plaxo does the exact opposite of what it is intended to do: it creates a barrier to keep contacts up-to-date. As far as I know, that is failure, not success.
It’s a shame that marquee investors like Sequoia and company do not see the inherent flaw of the method to the madness when they choose to invest.
THE “SMART MONEY”
I raise the point of investors, because one must expect those same VCs to want to get their money back in an exit strategy.
Co-founded by viral marketing wunderkind Sean Parker (co-founder of Napster), Minh Nguyen, and two Stanford engineering students, Todd Masonis and Cameron Ring, the company has grown rapidly but has twice as many denigrators as it does subscribers. Of note, Sean Parker was pushed out by his VCs, yet another reason why entrepreneurs should avoid VCs as long as they can or have no choice to (ie. Mark Zuckerberg type of contract in the former scenario, running out of money in the latter).
For a company with so much promise and strong viral component, the simple fact is that Plaxo is a mere shadow of what it could have been.
How many people use email? People use email more than they search. Do the math. Plaxo should be huge.
How many people should use something like Plaxo? Hundreds of millions. Yet only 15M do? It’s a damn shame and anyone who boasts about those numbers is kidding themselves.
DEAL OR NO DEAL?
Furthermore, it’s not all organic or viral growth either. Plaxo has had at least one major business development deal:
On July 7, 2005, Plaxo announced it had struck a deal with America Online to integrate its contact management service with its AOL and AOL Instant Messenger products. Having signed a business development deal with AOL in my former position and company myself, I can tell you that the impact thereof is significant, which means that without AOL then Plaxo’s lack of real traction for such a great idea shows how much the arrogance of the players involved has tarred its potential.
If you doubt me, consider this press release in October 2006 where Plaxo boasts about that its network grew 50% in six months. So in April, 2006 it was 10 million? Considering it takes months to integrate and launch a new deal with AOL, assume Plaxo was actually on AOL IM sometime in Q4 2005… meaning that AOL doubled Plaxo’s size.
More on AOL in a second…
GOBBLE…
While the company has grown to 15 million members, it has not exactly sat idle with corporate development: it acquired HipCal in May 2006. HipCal is an online calendar, to-list, and address book developed by fraternity brothers Garret Heaton, Pete Curley, Chris Rivers, Tawheed Kader and Glenn Dixon when they were undergraduates at Rensselaer Polytechnic Institute (RPI) in 2005 and were having difficulty finding their funnels, knowing which girl they had to take out that night and whose turn it was to clean the… we’re just kidding of course.
SHOW ME THE MONEY
One major problem, critics say, is that Plaxo can make money from a free service that collects personal contact and network information. That’s not the end of the world if it was clear how they made money. When Google runs ads in Gmail for example, I do not care and encourage because it tends to help with whatever it is that the email is addressing.
Plaxo? No freaking clue.
Does it make money? eerily, we don’t know and can’t even tell from their own website!
Transparency baby, all the way.
Anyway, since the company has all of these investors, it’s fair to assume that the company will have to one day undertake some kind of exit strategy. IPO? Forget about it. Risk factors would eat up all of the paper in the world. Use of proceeds? Piss off more people, perhaps. How about kill a great idea?
And I doubt their sales are that high to merit an IPO, anyway (of course, I think that $50M is the new $100M, but that’s another post). Of course, Lord knows what evil brews in their HQ and sales are rising, so maybe they’re printing money.
… OR BE GOBBLED
Let’s look at acquisitions.
Seeing Sequoia as their investor, I naturally think Google. For our conspiracy theory linking Sequoia, Google and YouTube, click here.
But Google’s motto of Don’t Be Evil would become a mockery if they bought Plaxo… then again, Google, who last year launched Gmail and is trying desperately to gather as much information on people would love to have all of that information that sits on Plaxo’s servers.
To a company like Google, 15M subscribers might not seem much - but having all of that intelligence on 15M very savvy online users is valuable…
ANALYZE THIS!
How much revenue can Plaxo make?
Slap some text ads in there and you can make quite a bit of money.
Of course, you cannot exactly send out as many emails as Plaxo does and pretent not to be evil (or a nuisance). So the value goes down quite a bit. In other words, at the very core of Plaxo is nuisance!
Anyway, note that if you are a company like Yahoo! and Google (and have your own text ads database) you can retain 100% of the revenue. A company like IAC, AOL that does not have its own ad clients would get 50% of that (or as high as 80% since depending on volume, GOOG or YHOO could take as low as 20%).
I am not saying that Plaxo could make that kind of revenue, the numbers could be huge. I have 2,000 contacts and have restarted my contact list about 4 times (don’t ask). I also see the 1% of members sending out emails on a given day being very low…
If Google totally sells out, I can see them buying Plaxo. But they can easily integrate something similar into Gmail without spam attack factor. Truth is, in Google’s version of the future, they have free search, free email, free productivity suite of applications (spreadsheets, word processors), a blogging platform, a calendar, etc… put all of those pieces together and a contact management tool is not that hard to create. Since we throw out 4 suggestions to Google a week, we’ll leave it at that. But writing this, I realize Google can have a - dare I say - Plaxo killer if it chose to. The mere fact that Google is trying to “not be evil” and Plaxy personifies it, they have a better shot at not acquiring it in this instance, but rather build it in-house.
The same logic applies to Yahoo!, really. Yahoo!’s former CEO Tim Koogle is an investor in Plaxo.
AOL Time Warner is going free and offering free email even to those who do not subscribe to Plaxo. AOL could technically acquire Plaxo, rebrand it to AOL and use the core software and avoid the spamming. It would give it a cool email edge in terms of functional tools that others like Gmail, Hotmail and Yahoo! don’t have. But, then again, the instant you spam someone with “You’ve Got Mail,” you’re back to square one. The major difference is that AOL knows it does not need to monetize the Plaxo application, whereas an independent Plaxo will, and the level of privacy violating practices is limitless. In fact, AOL probably has some kind of option (if they did not put that in the 2005 deal, I would be surprised).
Other suitors include wireless companies who are a natural fit with contact information. But guess what? Plaxo is one step ahead of us! Just this past month, Plaxo signed a deal with Verizon. Just imagine the incessant MSM spam. A major selling point I am sure.
The pain of entering phone numbers into your cell phone may soon become a thing of the past thanks to a new application being offered by Plaxo. The service will allow users of the address book network to have their information for contacts automatically updated.
Plaxo Mobile Plus will be initially offered through Verizon Wireless on 30 BREW-capable phones. The service will be expanded to additional models and two additional carriers, Alltel and US Cellular, over the coming weeks, the company said.
In addition, Plaxo Mobile Plus also will act as a way to backup contacts in cases of data or phone loss. In addition, users will be able to use interactive map features and pictures of contacts through the service. Users will be able to select which contacts they would like to synchronize.
Sounds great, but I will pick the headache of entering phone numbers in a cell phone over incessant spam any day. Hence the problem: had Plaxo not screwed its image (I guess like the folks over at Gator or Philip Morris, Plaxo will rebrand itself soon), it would scale much faster.
The problem is: buying a company like Plaxo engenders a lot of headaches.
BOTTOM LINE
The underlying conclusion, really, is that every company that thinks of acquiring Plaxo should realize the inherent risks of the acquisition, not just integration risk: product/brand risk.
Of course, the world we operate in is a funny place. The only way to pull it off would be to rebrand Plaxo cause no parent in their right mind would brag about owning Plaxo. You can include ads if you wish, but then don’t send out emails as if your life depended on it.
Like others who pretend to be the smartest in the room, Plaxo’s intellectual greed and arrogance has probably made it unsellable and untouchable - but not in a good way.
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WatchMojo NewsletterThe news from Google this week that it was shutting down Google Answers is all the more ironic because of this.
No comment. Yeah, right: it just goes to show once again that blindly letting technology integrate RSS feeds without having a human being sit there and determine what is running through the RSS feeds in Gmail is not wise.
Some stats from Mojo Supreme’s traffic growth (for my explanation of what this entails, click here):
1-month: 41% increase.
2-month: 141% increase.
5-month: 520% increase.
Booyah!
You have to give credit to Rupert Murdoch, sometimes.
Back in late September, 2006, Rupert Murdoch announced that his wife Wendi Deng woud be spearheading News Corporation’s efforts to penetrate the Chinese market with Fox Interactive Media’s popular social networking site MySpace.
After this news hit the media, some expected an acceleration of Murdoch’s plans given China’s booming market. The Asian ad industry is poised to grow to a whopping $110 billion by 2010. By comparison, the US market by then will soar to a “mere” $32 billion according to Merrill Lynch, or $25 billion according to eMarketer.
But it’s now been over two months and still: no joint venture for China. Of course, it’s not like Murdoch has been idle.
Murdoch knows that he needs to expand MySpace into Asia while Asian social network Cyworld targets America. Just last week, Murdoch announced that he had struck a 50/50 joint venture deal with Softbank Corp. to introduce MySpace in Japan.
Talk about deterrence: strike Cyworld in its backyard before it can hit you on your turf.
Today talk stirred up again about China. But it was more of a non-news item: “News Corp. to launch in China if we find the right partner.” Anything new there? Not really.
We could be merely speculating, but it’s no surprise that Murdoch is getting impatient with a lack of presence for in China for MySpace: there has been an uptick of VC activity in Chinese firms and just this week.
But something happened this week that lends credence to Murdoch working on something major as we speak.
Why the reminder today that China is also on his sights? Wendi Deng is a capable and experienced executive to tackle China. But in terms of operations? Well, enter Xie Wen.
Who’s Xie Wen? Now we move from deterrence to Darwin’s survival of the fittest.
Xie Wen was Yahoo!’s China President for 40 days. That’s right, days. It should be noted that Yahoo! China is part of Alibaba in a deal that saw Yahoo! integrate its Chinese operations in Alibaba, invest $1 billion in Alibaba and take 40% of the Chinese firm. Alibaba is led by Chinese visionary Jack Ma. It’s safe to say that Ma and Xie Wen did not see eye to eye, leading to the premature departure. According to Business Week:
In what seems to have been a hastily written press statement cluttered with grammatical errors, Alibaba.com CEO Jack Ma said that Xie had resigned “for personal reason [sic].” (Alibaba controls Yahoo! China and is 40% owned by Yahoo!) Added Ma, “Even though he worked for Yahoo! China for a short time, Xie Wen’s insights into China’s Internet industry and his honest character has [sic] left a deep impression on our team.”
What’s behind Xie’s sudden departure? Yahoo! China would not comment beyond a terse press statement. But many people who follow the industry believe that Xie left because he and Yang couldn’t see eye to eye about Yahoo! China’s future. Xie had proposed a change in focus for Yahoo! China, which has been struggling in the Chinese search market and is not a leader among the portals either.
Xie wanted to try a Web 2.0 strategy, addressing the exploding demand for user-generated content. Yang wanted to stick to the company’s portal model and, unimpressed by Xie’s strategy, forced him out.
We could be wrong, but is there a more Web 2.0 play than MySpace? Didn’t Murdoch say earlier this year that he would not be adopting a portal strategy? Hmm…
We’re not sure if there is any truth to our assertion, but if Murdoch has yet to reach out to Xie Web, someone might want to forward this to the Chairman. We can’t…
Interestingly, over the past years, there has been a musical chair game between executives of Yahoo!, MSFT and Google in China. Obviously, these firms usually think of protecting themselves in terms of non competition agreements against the other two since they are loosely or directly competitors.
But News Corp.’s FIM’s MySpace, not really? I’d be surprised if a judge viewed MySpace to be a competitor of Yahoo! - so unless the personal reasons are indeed health related (we wish of course that they are not), it is not an altogether implausible idea.
Star Wars indeed.
Disclaimer: Oddly enough, News Corp. is involved in an ongoing litigation matter against WatchMojo.com and yours truly pertaining to, ironically enough, non-competition matters…
A month ago, you would be hard pressed to find an author who dared criticize Google and say anything positive about Yahoo! The former was about to put [insert any company and industry here] out of business and the latter could not do anything right.
Today, a mere month later and with nothing material having taken place, people are starting to question Google’s Midas touch and praising Yahoo!
Earlier this week Google announced that it was shutting down its Answers product, and many were quick to point out that Google Answers was far less popular than Yahoo!’s answers. Of course, neither product had much impact to their respective company’s bottom line. The symbolic thereof was what wsa important: Yahoo! could beat Google at something, and Google was not invincible.
Today TheStreet.com’s Vinesh Kumar also points out that much like Google Answers, Google’s Finance product offering is getting beaten by Yahoo! by its Finance product:
But Google Finance has failed to make a dent so far. Yahoo! Finance had 13.7 million users in October, about 24 times more than Google’s 579,000, according to the research firm Nielsen Net Ratings. And users also tend to spend 28 minutes on Yahoo! Finance — nearly twice as much time as users of Google Finance.
Kumas goes out to correctly point out that when it comes to content plays, Google is an engineering powerhouse but fails to package content in a way that engages users: hence the problem with Answers and Finance. Although, Answers’ problem was that Google wanted answer-seekers to pay those doing the research and answering; since when do people pay for things online?
Meanwhile, Yahoo! simply allowed a platform for people to answer others’ questions. Yes, that comes with a double edged sword because there is no guarantee that the answers are accurate and reliable.
Nonetheless, this entire issue does shed a problem on Google and overall trend we are seeing of placing so much premium on automation, technology-alone strategies. Business has always, in the long run, rewarded solutions that integrate a human touch with technology’s benefits.
What we are seeing in the Google vs. Yahoo! is the latest manifestation of that. When there is a regression to the mean, Googlers will realize that bragging too much about automation is not necessarily beneficial. As everyone in the universe has pointed out, Google makes 99.9% of its revenue from Ad Sense text ads because its mustered an effective monetization strategy. It’s also highly profitable because its automation of services help it drive a lot of top line revenue to the bottom line.
But if it chooses to diversify away from a pure search income statement, then it needs to understand that a computer, no matter how smart and fast cannot possible package content the way a human being can.
I was speaking to a fellow Googler about some ideas for an initiative we are working together and it was clear that as much as each individual Googler has a desire to work with partners, they know that only ideas that have instant automation and maximum scaleability will fly. The problem is that most great ideas in media (and many in technology too) do not necessarily fit in those categories.
Mark my words: Google is passing up some of the best ideas and potential areas of growth and diversification because it fails to let go of its automation is king, technology is the sole solution to everything mantra. It might not hurt it per se, but the opportunities it lets slide will not help it maintain its lead over the long term.
Other nimbler, more flexible companies will continue to beat it in niche categories and Google will content itself to acquire those over time… but that in itself will only add to their long term problem, not solve it.
Disclosure: Long YHOO!
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