The Demise of SplashCast – Many Lessons Learned

August 10, 2009
SplashCast old school logo

SplashCast has shut its doors. To say the least, I’m very disappointed. In no particular order, here are a few observations from my third (and least successful) startup effort.

1. Money. This is the first time that I’ve worked at a company that literally ran out of cash. My first startup raised close to $70MM (although failed for other reasons) and my second went public (NASDAQ: INET). I’m still sorting it out, but I’m not going to play the Portland Card. Our lack of funding was a result of numerous factors (yes, including our location). If I had to give a single reason, I would point to the economy. (See good discussion at the SiliconFlorist blog on SplashCast and funding in Portland.)

2. We were nimble. Although we were cash starved, we were able to try lots of things. We had several distinct chapters during our run. I’m very proud of our ability to experiment and adjust. (Kudos to the great team at SplashCast!)  While I don’t truly believe that we had found the Promised Land, I do believe that we would have been able to create a profitable business with more time.

3. We left no stone unturned. We pitched scores of venture capital firms from Boston to LA. When we later entered M&A mode, we directly pitched 63 potential buyers (I love stats). I can very confidently say that we did everything possible to extract value for our investors.

4. The music business is REALLY messed up. I would buy newspaper stocks before investing in music. We benefited in many ways by partnering with music labels, especially Sony/BMG. We generated traffic and attention, which helped us. If I had it to do over again, however, I would have moved beyond music applications much sooner. Advertisers don’t want music and consumers (generally) won’t pay for it. I have no idea how to make money in music (Note: Pandora has potential). I can confidently say that that the music chapter of my career is over…

5. Do not build a business focused solely on Facebook applications. The social networks, especially Facebook, have become customer relationship management platforms (i.e., a venue to manage brands versus build them). Applications have been demoted. Fan Pages (for now, at least) are the focus. We seriously struggled with generating and maintaining traffic to our applications (a universal issue with app developers). We were starting to work on a more holistic approach to how we packaged and marketed our TV applications, but ran out of time.

6. I’m guessing that watching TV on a computer will ultimately prove to be a niche.
For all of the hype about Hulu.com, its traffic has essentially been flat since February (after a huge marketing campaign). Watching TV online is convenient, but ultimately an inferior experience. It makes sense at work, at the airport or as a way to catch up on a missed show. However, it can’t compete with a “real” TV. I’m very interested in the following the efforts of Boxee and others working to combine elements of the Internet (e.g., recommendations) with the home television experience.

7. Branded applications were a short lived marketing fad. When the Facebook application platform opened up, brands rushed to create their own applications. We developed more than a few such applications for brands such as Nike and Red Bull. The bottom line, however, is that these applications aren’t viral. Marketers have to spend the lion’s share of their budget to achieve distribution. Related to point #5 above, marketers have quickly figured this out and have moved away from stand-alone branded applications. (Applications need to be part of a broader marketing program to work.)

8. Our failure to create a business around user generated content broke my heart. The original SplashCast product was designed to allow small scale web publishers to create their own TV channels online. This was the concept that got me excited. We developed a strong core (thousands) of users of this product. However, we could never scale it. We very quickly concluded that the market for more advanced user generated publication was very small. Furthermore, there was no meaningful way to generate revenue through either subscription fees or advertising. A little more pre-launch market validation would have been useful…

This all seems obvious now (e.g., relatively few users of Twitter actually contribute). It was a bit much to expect hundreds of thousands of users to create and curate online channels of multimedia content.

9. Portland is the wilderness. As stated in point #1, I’m not going to play the Portland Card when it comes to funding. That said, I would advise a Portland based startup to shy away from efforts dependent on the entertainment industry. Although we were successful in forming partnerships with some of the largest media companies in the world, I’m confident that we would have been far more successful if we were based in NYC or LA. I would advise a Portland startup to focus its efforts in areas that are more intuitively “Portland” (e.g., sports/outdoor, sustainability).

10. I’m still fired up. I very much believe that Portland can produce successful startups. They need to pick the appropriate markets and consider less traditional fundraising approaches (can you say “bootstrap”?).

Note (8/24/09): I enjoyed reading Scott Rafer’s open and honest blog post about shutting down Lookery.  The comparison to SplashCast is interesting given Lookery’s focus on generating revenue via advertising in Facebook applications.  He points out three major strategic errors: (1) reliance on a single platform (i.e., Facebook); (2) continuing to push forward in Facebook after changes disfavoring applications were made in summer 2008; and (3) building product before the market was ready for it (“early = wrong”).  SplashCast similarly relied far too heavily on Facebook’s application platform (a huge understatement) and launched numerous products before testing market readiness (both consumers and advertisers).  Regarding the sin of launching too quickly, the product driven culture of internet media is perhaps a bit arrogant in the sense that entrepreneurs, over and over again, believe that they can divine what consumers and advertisers want before actually asking them.  Hey, I’m quite certain that I know what others want 🙂

Note (12/21/09):

A couple of additional thoughts:

Focus on business model as much as product.  I’ve been talking to a lot of entrepreneurs lately, and most discussions focus on the product.  Simple point, but apparently not obvious.  Looking back, we suffered from a bit of this too.

On the topic of product, it must be simple.  When I look at the apparent audience success of Posterous.com versus what we were doing, I’m struck by the power of simplicity.  Our original user publishing product looked like an airplane cockpit (too many controls, options, etc.).  Not good.

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7 Responses to “The Demise of SplashCast – Many Lessons Learned”

  1. Tony Zito Says:

    Hi Tom, thanks for this. Some really good nuggets of wisdom here, and I’m not just saying that because I like you ;). (Do smileys imply closing punctuation? Adding a period afterwards always seems awkward.) With regard to #4 — I think there are still opportunities to be had in music; you just have to embrace the rampant disintermediation the internet has engendered. Nothing needs to stand between artists and fans, and that’s a good thing. The music industry might be dying, but the passion for music is as strong as ever. (The same could be said about the distinction between newspapers and news — they need to realize they’re in the news business not the newspaper business.) And in response to #6 — I think the line between “computer” and “tv” is disappearing, so it’s kind of a moot point. Every “real” TV has a computer of some sort attached to it, enabling all sorts of interactions (EPGs, time-shifting, on-demand viewing, etc.) which have become must-haves. I don’t think it’s long before big-screen sets are communicating wirelessly with home computers, and allowing frictionless viewing of internet-delivered programming. Besides, the best viewing experiences are shared experiences, which was something the last iteration of Splashcast was doing quite well; I think there is a future in enabling community viewing experiences across geographical divides, but it might take a few more years for someone to figure out how to bring it to the living room in a mass-market way.

    Anyway, thanks for giving me something to think about, and best of luck with the next thing!

  2. Tom Turnbull Says:

    Tony, I couldn’t agree with you more on your music point. I was referring more to the four major label structure. I’m listening to more music than ever with Pandora and iTunes. I only wonder who will play the role of star maker? Is it iLike? American Idol? Live Nation? Maybe the age of arena filling acts is on the way out. Is a Madona or Justin Timberlake possible in the age of disintermediation?

    Regarding the TV/computer divide I wonder whether Hulu will be as embraced if/when the average consumer can stream The Office in the living room without paying Comcast. The politics in this industry are very tricky. From a purely technological perspective, I absolutely agree with you.

  3. Rex Dixon Says:

    Tom – I know that I’ll be hearing your name as well as Mike’s name again in the startup world. Whether it be Portland or in my case stuck in the middle of nowhere – St. Louis – it can be done. Harder maybe, but stick to your guns if you love Portland as much as you guys do. Nothing wrong with it, and I know the SplashCast story is only like a preview to motion picture experience. Keep in touch man, and it’s been awhile since we shared a good #geocities laugh on twitter! – Rex

  4. Tom Turnbull Says:

    Thanks Rex. We folk from the Tech Wilderness need to stick together 🙂 It’s like you can read my mind. I’m bringing GeoCities back. Let the Web 1.0 nostalgia tour begin. I still have a Pets.com sock puppet (no joke!)

  5. David Alpern Says:

    Echoing Tony’s comments: Music inspires a passion that will always be open for mining for profit. Look at how many of Michael Jackson’s songs rocketed back onto the British charts since his passing a month ago. Similarly with the news business – it’s cool to say newspapers are hurtin’, but the WSJ has been making many shekels from their online product for a decade and counting.

    Similar with SplashCast: TV and PC are gonna merge sooner rather than later. Will it be via an app like your team attempted, perhaps not. Probably because the visual experience via an app typically is within a tiny modulated window. Yet, the time-shifting, on-demand viewing, complementary content elements that become possible from the PC linkage with TV are not going away.

    • Tom Turnbull Says:

      David, regarding music, I’m referring more to the big four stucture. Is a Michael Jackson level star possible without the marketing support of a label? (Not good or bad to me; just wondering what the star system of the future is).

      Regarding newspapers (or, perhaps news), I still see a lot of potential (hey, we both worked at the LA Times). However, the WSJ can’t be used as the industry example. The metro dailies are really the issue.

      As far as the TV/computer merger, I think that the bigger market is the bigger screen. The underlying technology is the same. However, check out the stories around the “TV Everywhere” effort and Boxee’s content acquisition issues. There are a lot of politics around who delivers the content.

      Interesting stuff!

  6. Carri Bugbee Says:

    Tom, I watched SpashCast from afar and tried it early on FB. It’s a sad day when another Portland startup bites the dust — especially one that is related to the entertainment biz (near and dear to my heart) and the primary reason may be because it’s nearly impossible to get funding for startups in that category.

    Thanks for sharing your story.

    @CarriBugbee


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