“Watching a hot young Internet company run itself into the ground is the technology world’s version of rubbernecking at a traffic accident – it’s impossible to look away.”
Who said it: Zoran Basich, contributor to Venture Capital Dispatch blog
In Context: Flameouts of hot young Internet companies happen often and dramatically. The latest example is news-sharing site Digg which was reportedly sold for USD 500,000, writes Basich. The social media startup’s founder, Kevin Rose, was once on the cover of business and tech magazines, as well as much in demand speaker at industry events. Now he’s an executive at Google. Basich lists five others startups that were once highly valued only to fizzle out with little fanfare. One was Friendster, which was once a serious competitor to Facebook, also MySpace which was valued in a strategic sale at USD 580 million in 2005 but was sold on in early 2011 for just USD 35 million. Another example is BEBO, a UK startup that made its VC backers and founders quite wealthy when it was acquired for USD 850 million. According to Basich, it was sold for just USD 10 million a few years later. Another was Napster, which ended in bankruptcy, under a barrage of lawsuits by music companies. And there was Tribe.net, backed by prominent media investors such as the Washington Post Co. and KnightRidder, neither of which halted its demise and its technology assets being acquired by Cisco. These stories may serve as cautionary tales in the social media segment. An article in The Street suggests as much in a discussion and analysis this week of Facebook, Zynga, and Groupon’s stock market performance and earnings potential.
Where we found it : Five Social Media Companies That Went From Fabulous To Flameout