The following article is a modified excerpt of my next/third book called Context is King, which increasingly is being published in bits and pieces on this blog.
We’re about to enter a new phase of the Web’s development, the writing is on the wall.
The 1994-2000 era was Phase 1 (and frankly, that could be broken down into sub-phases). The 2000-03 era was marked by sobriety and survival, 2003-05 marked the stabilizing period and 2006 was clearly the buoyant and wild Web 2.0 era, which some are seeing ushering a new era of pragmatic growth and revenue development as of 2007.
Clearly, while the Web is maturing and seeing growth stabilize, it is also ironically seeing a rapid shift in such phases.
With that in mind, we thought it might be fitting to look at a number of startups and established players who have made their mark in the Web’s first 13 years. While the Mosaic browser was developed by Marc Andreessen and Eric Bina and launched in 1993, we consider April 4, 1994, the day Mosaic Communications Corporation was founded by Andreessen and Jim Clark as the starting point of the commercial web, or world wide web.
This April 4th will mark Netscape’s 13th year anniversary, and as such, we bring you the 13 most thrilling startups of the past thirteen years.
The following websites are either content, community or commerce related, we view the 3 Cs are highly intertwined.
The one thing they have in common, mainly, is that they do not require a download. As such, Skype and Napster (for example) are excluded from the list, as is Alexa, whom love or hate has become omnipresent but does require a download. Also, a site like AOL.com does not make the cut, because it was part of a closed, walled community for much of its existence. Finally, sites like MSN.com and iTunes.com which are backed by major corporations are excluded because a well-funded backer with deep resources can overcome most market opportunities. Lastly, instant messaging plays like XFire or ICQ were also ommited from this list.
We are also certainly missing on some great ones, and trust me, this started off as a Top 10, which grew into a Top 15, and then when we realized 2007 marks the 13th year anniversary of the World Wide Web, we cut the list down to 13.
Most importantly, there are many companies that would get consideration at one point in the 13 years but who lost their lead or disappeared after an acquisition. Geocities, for example, did not make it despite their legacy as MySpace’s precursor, because longevity is a trait of companies that are built to last, be it these are in the offline or online worlds.
Without further ado, here are the top 13 most explosive startups, from a revenue, traffic and branding perspective.
Honorary Mention: Netscape - Portal
Technically, neither AOL.com nor Netscape.com should make the list, because the former was indeed initially a walled community and the latter was in fact the website of an accompanying browser. By the time AOL.com became a free site - on Live 8 weekend - it was owned by Time Warner. But the way that AOL.com managed to steal the thunder from MTV showed that AOL.com remained relevant for years to come. But, the honorable mention is not AOL.com, but its sister site Netscape, which was the portal that accompanied the eponymous browser. Because of that association, to most people, Netscape was the first site they saw when they bought and turned on a computer. Today Netscape the browser holds less than 1% market share, but Netscape.com remains a web site with resiliency. Mainly, ommitting it outright is, well, blasphemous.
Netcape makes the list, not because of its legacy as the first commercial browser, but almost despite it. Despite seeing its browser market share slide, AOL ultimately paid $3.4B for it. Of note, a full decade after it lost the lead to MSFT, when Netscape decided to reposition the site as a social news portal, it made ripple effects and almost gave Digg a challenge.
Today Netscape is part of the Time Warner empire, meaning that it is more relevant than ever, especially alongside its AOL.com cousin.
# 13. Digg - Social Bookmarking
Digg started in November 2004 by Kevin Rose, Owen Byrne, Ron Gorodetzky, and Jay Adelson (who serves as CEO), today the figurehead of the company is former Tech TV host Rose. In laymen’s terms, Digg revolutioned news by allowing readers to turn into editors and effectively vote for the most relevant, interesting and thus news-worthy stories. The stories that are “Dugg” creep up on Digg’s main page, whereas “buried” articles fall into the abyss of the Web.
Today Digg claims 1M registered users and over 20M unique users. The service has faced much criticism for its gaming weaknesses, but the fact remains: social bookmarking is today a part of all media companies’ strategies, and a lot of that has to do with Digg’s technology and ingenuity. Rose bought the Digg.com URL for $1200 and never looked back. The site has raised over $10M in venture financing and reportedly was shopping itself for $150M, a figure that News Corp. balked at, going in to launched MySpace News, leveraging its MySpace and NewRoo properties.
Digg has spawned many clones, and its competitor Reddit was acquired by CondeNet. In all honesty, Digg is a wildcard, it can stick to its guns and like Facebook grow in size, as it can fizzle, but at press time, it earns a spot on this list for turning news on its head.
# 12. Del.icio.us - Tagging - Social Bookmarks Manager
Founded in late 2003 by investment banker Joshua Schachter, Del.icio.us is a Social Bookmarks Manager that essentially leveraged good old fashion metadata, made them public and changed the way people surfed the Web. Schacter’s innovation was considered by some a potential challenger to the more conventional method of navigation: search. Yahoo! saw a good thing and acquired the company on December 9, 2005, with Schachter relocating from New York City to Yahoo!’s Sunnyvale campus.
Backers of the company included Fred Wilson’s Union Square Ventures, the company sold for an amount between $15-30M. Despite being a public company, Yahoo! never officially confirmed the final price tag.
Frankly, while Yahoo! did finally manage to leverage Del.icio.us’ tagging methodology, it must be stated that the company missed out on the greater opportunity, seeing upstart YouTube deploy tagging and apply to file sharing in the video space, fueling its growth. Regardless, today tagging has become de rigueur, rivaling hyperlinks and search recovery/discovery as a major navigation technique, which earns Del.icio.us a spot on this list, at #12.
# 11. Hotmail - Email
Founded by Sabeer Bhatia and Jack Smith on Independence Day 1996 as a symbolic expression of freedom from ISP-controlled email as a free email provider, Hotmail became synonymous with viral marketing, a term coined by venture capitalist Tom Draper, one of the early backers of the company.
Hotmail was acquired for $400M from Microsoft and became MSN’s pillar in its online strategy. Hotmail could easily place higher had MSFT avoided Hotmail’s fate as a spam cesspool, but that has a lot more to do with spammers targeting Hotmail due to its popularity and ubiquity. When the dust settles, Hotmail is synonymous with email, and it has allowed Microsoft to become and remain relevant online, despite their failed attempt to gain traction in search.
# 10. Facebook - Student Social Network
Facebook, or TheFacebook, as it was originally known, is a perfect example of the importance of speed on the Web. Legend has it that Mark Zuckerberg was hired by fellow Harvard students to develop a social directory for Harvard students. He liked the idea so much that he stalled on his mandate and turned around to create his own version, called Facebook. Regardless of what you think about that, the fact is that Zuckerberg put in the hours and the thinking and leveraged human psychology and student behavior to make Facebook the second largest social network after MySpace. Despite the second place ranking, Facebook remains the most successful site amongst 16-24 year olds, easily making it the MTV of its generation and the envy of old and new media companies.
Facebook signed a lucrative deal with MSFT who is powering their contextual ads, it also turned down buyout offers of $800M and $1B from Viacom and Yahoo! respectively. Our take is that on the one hand, the price tag in the short term has risen, and the long term threat of MSFT not renewing its deal means that Facebook will file for an IPO sometime in 2008. Mark our words.
# 9. Craigslist.org - Free Classifieds
Founded in 1994 by Craig Newmark as a mailing list, Craig’s list migrated to the Web and became a community that became the largest classifieds site online. In 2000 Jim Buckmaster joined the company as CEO, and Craigslist began an expansion that today allows it to generate $20M in revenue, be profitable and present in 450 communities and syphon billions from newspapers.
Craigslist.org is a wild card in the sense that it can easily be a much more powerful and potent force online, but Craig Newmark’s reluctance to fully monetize the site is both part of its charm and hindrance.
eBay bought 25% of the company when it bought the shares of a former employee. eBay does not have any operational control over the company, however.
See our valuation model for Craigslist here.
# 8. Paypal - Payments
Paypal was the last company we added to the list, and we hesitated to put it on. But not putting Paypal on this list is unfair. We’ll explain. Paypal was the product of a merger between X.com and Confinity. X.com was founded by Max Levchin, and Peter Thiel and Luke Nosek in December 1998 as a Palm Pilot cryptography and payment service; X.com was founded by Elon Musk in March of 1999 as an Internet financial services company. The companies merged in 2000.
The service was brilliant mainly due to the fact that all you need was a credit card/debit card… and an email account. Eventually Paypal forced users to confirm their legitimacy with entering numbers they were provided from a blurry picture, today this is known as Captcha, and while AltaVista was using the same tactic in 1997, the fact is that these simple introductions ensured a massive reduction in fraud charges. At the time, eCommerce was slated to be as large if not larger than online advertising, but fraud was the specter haunting it all. Paypal changed that and grew quite a bit, to the point where eBay bought it for $1.5B in October 2002, as more than 50% of eBay users used it on the site (more so that eBay’s Billpoint service).
Paypal makes the list because the service became synonymous with online payments and today leads eBay’s revenues and profits.
# 7. Amazon.com - eCommerce
Amazon.com is one of those funny stories. It’s funny, frankly, because while eBay and Yahoo! did not fully start off as businesses, Amazon.com did. Jeff Bezos was an investment banking analyst in New York City. Asked by his boss to run some numbers to look for opportunities, he noticed that the growth rates online were stratospheric, and that sales of music and books were pretty high.
He quit, flew to Dallas, then drove to Seattle (as to say he “drove across the country”), and set up Abracadabra. Thankfully, he changed the name to Amazon.com, raised plenty of money - both equity and debt financing and went on a money-losing binge that many questioned would work.
During the bubble era, some predicted that he would buy Walmart, its nemesis in the offline space. Of course, that never happened. Today Walmart is worth $200B in market cap while Amazon is worth $15B. But Amazon.com makes money (in a good quarter) and has one of the strongest brands in the world, in any industry, country, online or off.
The company has obviously moved to sell everything, and Bezos has recently ventured into far-flung things, like IT services and, well, space, what he was destined to do anyway as a child prodigy whose father worked at Nasa.
# 6. Yahoo! - Portal
Yahoo! needs no introduction. Founded as Jerry’s Guide to the Web, and then renamed Yahoo! for Yet Another Hierarchial Officious Oracle, Yahoo! began as a directory. The company got the attention of Sequoia’s Mike Moritz, and by the time the Web hit the mainstream, Yahoo! was a hit with users and advertisers alike. The bubble bursting affected Yahoo! fortunes but not its position atop the Web throne. The company was late to focus on the power of search, and even let Google power its search, effectively pushing Google to the top of the food chain in search, but the company’s appeal to users and advertisers remains unparalleled. In 2003, Terry Semel took over and helped bring Yahoo! back from its lows to stratospheric highs.
Today Yahoo! bears the symptoms of established media companies, and the blogosphere’s monday morning quarterbacks notwithstanding, that makes it the envy of most media firms, which Yahoo! strives to be…
# 5. MySpace - Social Networking
MySpace.com became one of the fastest growing websites even after a well-funded competitor had a sizeable lead in its space. Friendster was a venture-backed company that had all of the traits of a runaway success. The problem was that Friendster was focusing a tad too much on the big picture and letting technology and the user experience slip. Meanwhile, down in Los Angeles, MySpace came to be when Intermix (aka eUniverse) let two guys named Tom Anderson and Chris deWolfe run with their idea about a space where everyone knew your name, well, sort of. While Friendster was a rigid “prep school” that limited interaction, MySpace adopted an anything goes outlook and mainly, encouraged bands and music artists to use their space as a promotional tool.
The site was not all that different in premise that Geocities, bought by Yahoo! for $2B back in the 1990s. Regardless, or naturally, the site caught fire and ultimately Intermix sold to News Corp. for $580M. The site tripled in audience after the acquisition. News Corp. unloaded all non-MySpace assets back to Richard Rosenblatt’s Demand Media, who was Intermix’s Chairman at the time of the deal. In a twist that would make soap opera writers blush with envy, former Intermix founder Brad Greenspan sued News Corp. claiming that News Corp. underpaid. The case, we presume, is ongoing.
What is settled, frankly, is that News Corp.’s Rupert Murdoch made a shrewd move by outbidding his rival Sumner Redstone in the MySpace sweepstakes. While the company has had its fare of scandals and controversial happenings (which site of its size would not, frankly), it has also gone on to become the largest site on the Web when measured by page views. We called MySpace’s acquisition by News Corp. the greatest Web M&A ever on the strength of Google’s $900M ad deal with Fox Interactive Media, mainly for the coveted MySpace inventory.
# 4. eBay - Auctions
Created over Labor Day weekend by Iranian-Frenchman Pierre Omidyar, eBay is the world’s largest community matching buyers with sellers. Legend had it that Omidyar founded eBay because he moved from the East Coast to the West Coast and wanted to allow his girlfriend to continue trading her Pez dispensers. But that is PR spin. Omidyar, a programmer and consultant realized that the Web was perfect to create a global community matching buyers and sellers… and before he knew it, customers were sending money in the mail. Shortly afterwards, he sold 25% of his company for $5M in financing and the company with massive profit margins of over 75% was worth $40B, valuing Omidyar’s stake at well over $10B. How do you like them Pez dispensers?
# 3. Google - Search
Google was founded by two Stanford students as a school project. The project, dubbed Backrub, focused exclusively on search while the major search companies had taken the eye off search to focus on portaldom. After angel rounds, Google managed to bridge the chasm between Sequoia and Kleiner Perkins and got each to invest $12.5M for 10% of the company. When the dot com bubble burst, Google convinced Yahoo! to use its search technology on its site. A few years later, Google filed to go public, and before the world knew what hit them, Google had built a very profitable enterprise by leveraging GoTo.com’s pay per click model and applying Google’s trademarked automation. The result today? A company with a $150B market cap, $10B in cash, and enough worried competitors that make it the MSFT of the 21st century with the potential to be worth more than the Redmond-based software giant.
# 2. Wikipedia.org - Encyclopedia
Wikipedia.org epitomizes the Web: it’s global, it’s dynamic, it’s open, and it belongs to everyone. Wikipedia.org is all about scale: an army of unpaid and anonymous writers and editors creating the world’s largest free encyclopedia. The site was founded by Jimmy “Jimbo” Wales, a former commodities trader who had made enough money to retire many times over, who sought to leverage wikis and applied it to one of the most daunting challenges out there.
Over time, like anything else, Wikipedia.org became a battleground for all that comes along with online success: politics, gaming, spam and a loss of innocence. While it’s certainly true that Wikipedia.org is no longer open and editable by just anyone, the core principle remains true: it’s an encyclopedia that covers practically everything you can imagine, edited by people from all over the world. It’s also dynamic. And true to its premise, beneath the surface, you sort of realize that unlike a great piece of art, the work is indeed actually never complete and could go forever.
Today Jimbo has shifted focus and launched Wikia, to launch a for-profit version of Wikipedia and supposedly launch a search engine leveraging open source standards to rival Google, MSFT and Yahoo! oligopoly in search. While Wales maintains considerable power and influence over Wikipedia.org, the site is not his, not yours, but everyone’s.
# 1. YouTube - Video Sharing
Like eBay’s PR-spun Pez dispenser story, YouTube’s raison d’etre traces its root back to different stories: while YouTube’s legend suggests that the site started off after its founders dreamt of a way to share videos after an office party, YouTube was in fact thought of in February 2005 and launched in April 2005 as a very simple HotorNot.com site for video. Naturally, as broadband penetration rose and video consumption accounted for an increasing share for web traffic, YouTube was changed to the current concept in June 2005.
Whatever the need it was trying to serve, the site was founded by three former Paypal employees: Chad Hurley, Steven Chen, and Jawed Karim, whom left early on to return to school. YouTube raised $11.5M in financing from Sequoia and went on to get acquired by Google in a $1.65B sale in October 2006.
As late as 2004 - the year of the last American Presidential elections - YouTube did not exist. By 2008, it became a social force to be reckoned with.
YouTube is undoubtedly the single fastest growing website in the history of the world wide web:
This only lends further credence to the widely held notion that video is indeed the future of the Web and the killer app. YouTube was popularized mainly in large part to its adoption of flash technology, which loaded faster than other formats that required buffering. It also embraced tagging, which allowed users to seamlessly wander from video to video. Mainly, YouTube pioneered the famous “embed option,” fittingly, YouTube did not care to keep the content on their site since they never actually owned the copyright to the content, and thus, did not care to keep it closed.
These same variables never allowed YouTube to monetize the site, while in Q4 2006, YouTube had the inventory bandwidth to generate roughly $7.5M per month by our calculations, it turns out that the site made $15M in all of 2006, while running up bandwidth charges of $1-2M per month.
Ultimately, faced with the specter of copyright piracy lawsuits and rising bandwidth costs, YouTube sold to Google for $1.65B in an all stock deal. Incidentally, in the days leading up to the sale, Google’s tock rose by $10B. And, Google and YouTube being both backed by Sequoia, some, ourselves mainly, considered this a fait accompli the very same day Sequoia invested in Google. Read more here.
Thanks for reading. Feedback time: What do you think? What did we miss? Would you rank them differently?
Disclosures: At the time of this post, I own shares in Yahoo! We (WatchMojo.com) have working relationships with YouTube, Google. News Corp., mentioned above, was my one-time employer for three months, it was magical. I do not have a MySpace account, though I did sign up to a Facebook account to see what the fuss was all about. Hotmail was my first email account, then I used a Yahoo! account and now it’s all Gmail. I use Paypal on a few of our sites. Jimbo Wales initially showed some interest in using our MetaMojo.com vertical search engine, built on open source technology, in Wikia (though no clue if that will actually happen). Oh, I have never bought anything off Amazon.com. That’s about it, if I can think of anything else, I’ll add it.
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WatchMojo NewsletterThat’s what Piper Jaffray’s analyst Safa Rashtchy is saying, according to this:
Rashtchy recently published a report called “The User Revolution,” about the rise in what he’s calling “communitainment” as a mix of communication and entertainment, especially among the younger generations of Internet users. He’s also predicting $81 billion for global online ad spending by 2011.
We’ve had a lot of varying reports and figures, $81B comes somewhere in the middle. Other reports worth noting:
Online Advertising Market Growth:
- 2010: $28 Billion in US (eMarketer)
- 2010: $32 Billion in US (Morgan Stanley)
- 2010: $60 Billion in US (PriceWaterhouse)
- 2011: $60 Billion Global (Jeffrey Philipps)
- 2011: $80 Billion Global (Piper Jaffray)
- 2010: $110 Billion in Asia (PriceWaterhouse)
I have contacted PWC time and time again for clarification on the Asia figure, to no avail, but it’s there, in print.
The story also notes that Rashtchy will be taking a much deserved sabbatical, the man has become synonymous with the Web while boosters like Mary Meeker and Henry “Da Bull” Blodget came and went, and came back.
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