When news of Gowalla’s sale to Facebook came through over the weekend, the site’s future was immediately under scrutiny. It didn’t take long for an answer to come through: while Gowalla co-founder Josh Williams might have prevaricated over the details of the deal, he certainly didn’t mince his words about what would happen next.
“Gowalla as a service will be winding down at the end of January,” he wrote in the announcement. “As we move forward, we hope some of the inspiration behind Gowalla — a fun and beautiful way to share your journey on the go — will live on at Facebook.”
It is, of course, a situation that we seen time and time again: startup gets bought, closes down. The best case scenario might be that the service lives on as a sort of zombie — unloved, undeveloped — while the concepts behind it get integrated elsewhere. In many cases, however, it simply disappears completely.
This time some immediately jumped to try and fill the Gowalla void. Path’s recent relaunch, for example, makes it a natural place for users to jump. Meanwhile Danish startup Everplaces — which allows people to keep a diary of places they love but is still in limited, private beta — even went as far as promising Gowalla users that they would be able to import their data.
The “sell up, shut down” pattern also prompted Pinboard.in’s Maciej Ceglowski to write a short post blasting free services:
Whether or not this is done in good faith, in practice this kind of ‘exit event’ is a pump-and-dump scheme. The very popularity that attracts a buyer also makes the project financially unsustainable. The owners cash out, the acquirer gets some good engineers, and the users get screwed.
Pinboard is a paid bookmarking service, so you can understand his frustration — and he’s right about the skewed, paradoxical economic logic that free services can fall foul of.
What he misses, though, is that many free services are venture funded with the idea that they can scale first and monetize later. On the surface this seems dumb, and in a lot of cases it is. But the whole dream of venture is that in a handful of cases it works fantastically: Facebook is, of course, still a venture-funded startup with a free product which has gone from no revenue to an estimated $4 billion this year.
Even Twitter, which has come in for plenty of criticism over the years for having no revenue, is now estimated to be making $150 million a year. (And Ceglowski, despite his own warnings, runs at least two Twitter accounts).
But this isn’t just about winners and losers, free versus paid-for. It’s about the fact that acquhires are Facebook’s kiss of death.
Including Gowalla, Facebook has acquired some 16 companies in the last five years. Most of them have been acquhires — purchases that are intended to buy talent rather than technology. Often, Facebook doesn’t even take ownership of the technology or user data as part of the deal (this is the case with Gowalla).
Of those 16 purchases, one was ConnectU — an acquisition that came as a result of the court case between Mark Zuckerberg and the Winklevoss twins. Most of the rest have met the same fate, with the services consigned straight into the dustbin. In many cases, the company website doesn’t even exist anymore: it’s as if the service has simply been wiped from the web.
In fact, of the 15 services genuinely acquired by Facebook in recent years, only a handful still have any sort of active presence. Snaptu has stopped supporting some of its products. Friendfeed and Daytum, meanwhile, are still alive but development has ceased. Dutch design firm Sofa probably did best by passing its apps along to another company.
Aside from Snaptu, in no case does the acquired service exist as an actively-developed service inside Facebook.The rest have their ideas pumped into Facebook’s main platform, often in ways that are barely recognizable to users of the previous services (NextStop’s travel guides, for example, have not really emerged inside Facebook in any way one of the site’s users would spot immediately).
It’s a move that leaves ordinary web users high and dry.
While this may not seem like a bad record compared with, say, Google (which has made more than 100 acquisitions over the past decade, many of them shut down) the difference is that most of Google’s purchases are of technology companies rather than consumer-facing services.
Many of the ones that are remain very much alive: I’m thinking of things like YouTube, Blogger and Picasa, which retain their name and identity, or others that have been carefully ported over in recognizable ways into Google products (Maps, Docs, Voice, Postini, Feedburner and so on). Facebook generally seems to buy consumer-facing services and then get rid of them entirely.
There’s a complex picture here, and Facebook isn’t the only problem. But it is a growing one for anyone who is considering using an interesting new web service or committing their data to some fresh site. Perhaps Ceglowski is right by saying that not having a good revenue model makes you more vulnerable to these approaches.
But perhaps it’s more simple than your base intentions, or whether users pay or not: it’s whether your company is actually providing a service — or just building neat feature that’s pretending to be a service. If you’re not really adding much to the world, your users are never going to end up happy — because you’re always going to die, or get eaten.