Web 2.0 Crashes: Another Startup Being Sold On eBay

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Web 2.0 Crashes: Another Startup Being Sold On eBay

 


First, there was Kiko (which was widely covered all over the blogosphere, including here at OnStartups.com).

Now, we have HuckABuck being offered on eBay:  http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&ih=008&item=180023313880 ..  This one looks like it’ll be quieter (current high bid is $9,100 and the reserve hasn’t been met).

I’m going to be that most of you have not even heard of HuckABuck.  So, why am I writing about it?  Because I found a number of things about this particular transaction interesting.

Here are the things that kind of piqued my interest (and that I filed away in my brain for future consideration):
  1. I was amused by the opening sentence of the eBay offering:  “We are proud to be offering HuckABuck.com, a Web 2.0 search interface for sale”.  They’re actually proud of having to auction off the company on eBay.  Now, if they had a ton of users that would be one thing.  But, they don’t.  See below.

  1. The product is what I would call a search engine aggregator (so it goes and searches for you on the primary search engines and customizes the results).  Relatively broad target market.

  1. Got some positive mention in the blogosphere, as they noted in the eBay listing.  If it hadn’t been the fact that they had been mentioned on LifeHacker and Seth Godin’s blog, I would have figured it was just a couple of guys that whipped out some Ruby On Rails code over a weekend.

  1. Despite the above two points their daily page views were still less than 3,000 on average. 

  1. Because of this, their average advertising revenue is only $1/day.  [Web entrepreneurs take note:  This is a company that had actually launched a product, had relatively broad appeal, got some positive press and that’s all they could manage to generate.  Traffic generating and advertising revenue by AdSense is not easy].

  1. Seems the team was at it for about a year (which seems to be about the time it takes for some Web 2.0 founding teams to get bored of their idea).  Why are they selling it?  “We have several projects that we are currently working on that are demanding more of our time, and we want to find HuckABuck a new home with owners who can take it to a new level.”  For some reason, this irks me.  If you’re running a startup, you shouldn’t have “other projects” that are demanding more of your time.  A startup is an all-consuming process.  If you start straddling multiple things, you’re almost predestined to fail.  It’s hard enough to get a startup off the ground when you’re totally focused on it.  It’s almost impossible if you’re juggling multiple projects.


I wasn’t a HuckABuck user, so I can’t attest to whether they actually created a cool product or not (just tried it out now while writing this article, and it didn’t really blow me away).

Moral of the story:  Clever Ruby On Rails code, some honorable mentions by A-list bloggers and a potentially sexy product are not enough to make a successful startup.  

It’ll be interesting to see how much this one goes for.  My guess is not that much.  Then again, I didn’t think Kiko would sell for over $250,000 either, so what do I know?

Posted by Dharmesh Shah on Thu, Sep 07, 2006

COMMENTS

My guess is that it's a publicity stunt.

Put on ebay, low starting price, enormous reserve.
The auction draws interest and they only sell if they're going to make big bucks.

posted on Thursday, September 07, 2006 at 5:47 AM by jazzle


Why are you so critical and--it would seem--angry about this?

No doubt they're not doing anything you haven't tried in your own career, and with this weblog.

Why the envy and resentment?

posted on Thursday, September 07, 2006 at 8:03 AM by Dropout


I met these guys at BarCampHouston and I've stayed in touch with them, because I really like the direction they were going with their parent company. I can tell you what they told me when I asked about this: Yes they were inspired by Kiko, and the reason for the sale is because they want to work on other projects. Instead of simply shelving the code and taking the site down like 99.9% of all projects that don't move forward, they are trying out something that may bring in more cash than they would have seen otherwise. Gimmicky? sure, but so was the original Kiko sale and to a certain extent every "new" business model on the Internet. I wish them luck and I would happy to work with them in the future.

posted on Thursday, September 07, 2006 at 8:29 AM by Marc Nathan


Droput: Apologies if I seem overly critical. Not my intent. I'm certainly not angry (no reason for me to be).

The thing that bothers me is when entrepreneurs give up a little too early without trying alternatives and other paths.

But, in any case, I really don't have any resentment (don't even know the guys) and certainly not envy. I like to see experimentation out there on the web.

posted on Thursday, September 07, 2006 at 9:02 AM by


What I'm suprised about it, how do you guys even notice these sales on ebay? There are about 4000+ listings in that category. Most of it useless stuff, so how do you filter these sales out soo quickly?
Have my own failed startup to sell too :-)

posted on Thursday, September 07, 2006 at 9:50 AM by Remy


Dharmesh, are you sticking to your "crash" hyperbole after Kiko sold for $250K? If no buyer could be found, then I think you'd have a point, but it looks more to me like a decent exit, considering how cheaply Kiko was built, and the enthusiasm the buyer (Tucows) has shown for the value they're getting.

posted on Thursday, September 07, 2006 at 10:41 AM by Brian Del Vecchio


Excellent Point! "A startup is an all-consuming process. If you start straddling multiple things, you’re almost predestined to fail. It’s hard enough to get a startup off the ground when you’re totally focused on it. It’s almost impossible if you’re juggling multiple projects."

Most of the startups that want to sell give the same reasons, its a common path.

posted on Thursday, September 07, 2006 at 12:46 PM by Rydal


Websites get sold all the time. It's nothing new. Ever hear of internet real estate? There is a marketplace for buying floundering sites and then flipping them once you take them from zero to hero.

Some of these sites can go for as much as Kiko sold for, but no one ever mentions that.

This by no means indicates a market crash.

posted on Thursday, September 07, 2006 at 2:18 PM by David


Hi Dharmesh,

Thanks for your thoughts on our auction on eBay for Huckabuck. As a company founder I'd like to respond to several of your points.

Regarding the use of the word 'proud' in the first sentence of the auction, you make a good point, we are very proud of what we have created with Huckabuck, however, naturally we'd prefer to be negotiating a deal with Yahoo to auctioning the site on eBay. The pride may be misplaced, it's less in the actual auction and more in the accomplishment of what we have created.

As an exit strategy, no doubt eBay is unconventional, although maybe getting less so. But as Marc mentions above, it is the most liquid market we can think of to handle the transfer of our technology and IP to new owners who we hope will be able to take Huckabuck to the next level. We did not make the decision to move on to other projects lightly. But as entrepreneurs must be willing to do, we surveyed our sunk costs and evaluated the opportunity costs of not moving on to the waiting projects and decided it was time to move on. And as a bootstrapped startup, we would much rather sell Huckabuck in this very naked and public way than shut it down or simply let it languish. Our sincere hope is to find it a home where it will flourish.

On the two other quick points:
Yes, we were aware of the Kiko auction, and hope to bring attention to the eBay as an exit strategy process through our follow up sale.
The reserve is 20k, so we fully intend to sell it, this is not simply a publicity stunt.

Thanks for your thoughts. Fingers crossed.
Chris Schultz,
Founder of Huckabuck.com

posted on Thursday, September 07, 2006 at 2:40 PM by Chris Schultz


Chris: Thanks for taking the time to respond and share your thoughts as a founder of HuckABuck.

Some quick thoughts from me:

1. I am in no position to judge the the quality of the actual accomplishment, but will have to give you credit for actually trying something new and getting a product out there. Many people fail to even launch a product (or for that matter start a company).

2. I'm actually a fan of efficient markets, and eBay looks like it is becoming one. I don't think there's any reason to be apologizing for auctioning off assets ifyou feel that is the way to maximize value. I stand corrected on that front.

3. On the opportunity assessment and sunk costs model, I'm still going to hold my position. The issue with early stage startups is that you rarely ever have the visibility on future opportunity (for the existing or new projects). As such, the tendency is to fall into the "grass is greener" trap. Part of startup success is often predicated on getting something out there, figuring out what the market is actually looking for and then iterating from there. If you switch paths prematurely, you never allow yourself to receive that market feedback. Great entrepreneurs *always* have lots of good (or great) ideas for projects. Probabilty of success if sometimes a function of being able to pick one and stick to one and see it through.

4. I recognize that this is not a publicity stunt (had I thought it was, would not have written the article in the first place).

In any case, good luck with the auction and wish you success with the new project you have waiting in the wings. Though I gave you a bit of a hard time (too easy to do in an anonymous blogger sense), I respect those that are able to take the leap and try something.

Regards,
Dharmesh

posted on Thursday, September 07, 2006 at 4:56 PM by


Brian,

I will concede that Kiko fetched a higher price than I expected. I'll also concede that the word "failure" is arguable, but I'd still say that without having generated any revenues or any profits, and a relatively modest purchase price, the Kiko outcome was by no means an unqualified success.

posted on Thursday, September 07, 2006 at 7:53 PM by


Huckabuck sounds like another Jux2, we all know how that sold.

posted on Monday, September 11, 2006 at 3:54 PM by hans


This is one of the hardest things for an entrepreneur to do. How do you tell if
you're being persistent vs banging your head against the wall. Some time you're
just going in the wrong direction and others you just need to keep at it. I've
seen people do both, and I've done both. Only in retrospect will you know which one it was.

posted on Tuesday, September 12, 2006 at 1:31 AM by Dror


Drog: I agree with you. I'd further posit that even in retrospect you can't really know what the right decision was at the time that you made it. Things change.

posted on Tuesday, September 12, 2006 at 1:34 AM by


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