Launching Qloud (Part 10 of 14)

This is post #10 about the Qloud experience.  The previous post was about about how we used got into the Facebook Platform program.  You can read that here

We decided to pivot the product to become a full-fledged music service.  We also decided to launch our new music service on Facebook before we took it to the main public.

Both decisions were correct and produced great results.  Continue reading “Launching Qloud (Part 10 of 14)”

Selling to Buzznet (Qloud story 12 of 14)

This is post #12 about the Qloud experience.  The previous post was about about the launch of Qloud.  You can read that here

Towards the end of 2007, we knew we had great growth but an unsustainable business model. We also knew that we were running out of cash. Both Toby and I felt that we had to exit this company or raise a big round of funding. We didn’t think the big round was possible, so we started looking for an exit.

One company that we thought would be interesting was Buzznet. This was a new music-oriented social network that was part social network and part blog network. It was growing quickly and had Universal Music as a main investor. They seemed like a good candidate. Our board member, Jim Bankoff, knew their CEO well and made an introduction. Nothing happened.

Then a fellow named Happy Walters came into Revolution’s offices (where we worked). We met him and he said he also knew Tyler and could make a connection. Nothing really happened.

A few weeks later we were in Los Angeles for some reason and we were talking about Buzznet and Toby and I decided to do a tactic that is unconventional but always works. We stopped by unannounced in person. We just went to their office and asked if Tyler Goldman was available. If you show up, you at least will have them come say hi and tell you in person that they aren’t available. That’s what happened, but that got us on his radar and started the conversation.

When we talked to we flat out told him that we would amenable to an acquisition. He thought that sounded interesting and followed up a week or two later that he had talked with the board and they would like to pursue what it looks like also. A few meetings later (including a trip I took to Happy’s ranch in Montana) and we had an offer from them to get acquired for $10 million. We were also going back and forth with MTV/Viacom about an acquisition so we had some competition that kept it interesting.

This would be a good outcome for us as we had raised only $3 million and would land us in a place where we could really grow the business.

We also had to convince Steve Case and Revolution about the deal. I’ll never forget a meeting we had in his office once the offer came. He sat Toby and I down and said something like,

“I started America Online in the 80’s. It took us years to get traction. We built little by little and it was hard but steady. During that time I had many offers to get acquired. I turned down all of them and built AOL up to be worth over a hundred billion dollars. You guys get your first offer and you want to sell?”

Toby’s response was classic. He replied, “Steve, I sincerely appreciate your success at AOL. But, I’m poor. I’ve been building a startup with no salary for two years. I have 3 kids. This deal changes my life. I understand what you’re saying, but we want to sell.”

To Steve’s credit he immediately said, “Okay, then let’s do it.” And that was that.

The story doesn’t end there. Tyler Goldman is killer and he’ll squeeze blood anyway he can. Through the diligence he saw our bank account and knew that we were running out of cash. He then went silent. He refused to return emails and phone calls from anyone. He waited weeks for us to burn through cash. Then when he finally re-emerged, knowing we had no cash in the bank, he said there’s a new deal on the table for $9 million. Take it or leave it. It was a dick move but we had no other options so we took it. I truly think he would have kept bleeding us if he didn’t have to work with us afterwards.

Of course the deal was all cash, which is what we wanted because we were doubtful of Buzznet’s success. But Case wanted “some skin in the game” in case it did great so we switched the deal to be have stock and half equity. Of course, Tyler ran Buzznet into the ground just 3 years later and its stock became worthless. So, that “skin in the game” decision was really painful.

The sale happened in Spring of 2008. We all moved out to Los Angeles except one of us. I was now SVP of Product for all of Buzznet. Qloud now had a home and licensed music. But, when the financial crisis hit later that year, Tyler shut Qloud down and the service was killed. We went on to work on the rest of the Buzznet business. All in all, the actual service that had 10’s of millions of users only existed for maybe 9 months.

Achieving Massive Growth (Qloud story 11 of 14)

This is post #11 about the Qloud experience.  The previous post was about about the launch of Qloud.  You can read that here

Once we launched, we grew extremely fast. I have to say that being part of a company that is blowing up is really really fun. Everyone is constantly happy. As a product person, this is what you work for and when it happens, it feels great.

We did some things that were shady and other things were legit and very smart. Some things we did:

  1. We wouldn’t let you use the application unless you invited 25 friends. We had a nice UI that let you quickly select 25 faces and then it would open. While extremely annoying, it worked really well.
  2. We integrated deeply into the new feed. We knew all of our users play history, including from iTunes and we’d launch really interesting news feed items to friends that read, “Of all the songs played last week by your friends, here are the 3 not in your library. Click here to play.” This is great music discovery, right in your news feed.
  3. We started understanding and using the link sharing networks. Lots of other apps were selling the ability to recommend users download other apps. You could buy space there and buy installs. We experimented a lot with all of them.  Some were pretty cheap and effective.  Interestingly, Steve Case really dug into this too. For someone with his success, we was not afraid to get into the weeds. I also give a lot of credit to our lawyer and BD guy here, Jim Delorenzo (now head of Sports at Amazon), for this success as he really figured it out.

I give Noah R-S (now Chief Product Officer at DailyMail) a lot of credit for hacking Facebook. He understood it at a level that probably only a few dozen in the world did.

We also started exploring a business model by selling links to ringtones.

Our growth was so fast that we’d get lots of calls from record labels and lawyers asking to shut us down. They saw the streams happening on Qloud and wanted it to stop. It took them a while to realize that we had co-opted YouTube for the streams.

—————————–

The next post is about how we sold to Buzznet. Read it here.

Qloud and Facebook’s Platform (9 of 14)

This is post #9 about the Qloud experience.  The previous post was about about how we used YouTube as a music engine. Read that post here

The year is 2007 and we’re building as fast as we can our new music service.  It’s going to be a full-powered music streaming service on top of a collaborative music search engine and it’s going to be sweet.

Before we launched I went out to lunch with Sean Parker (known by many of you as Justin Timberlake in the movie The Social Network).  At the time he had left Facebook and was about a year into his new VC gig at Founders Fund.  We sat down to lunch and the subject immediately turned to our upcoming launch. He asked, “Hey, do you know about Facebook’s platform?”  I didn’t and he went to explain it to me.  Basically FB needed a way to expand and what better way than have companies build their product in to Facebook.  While the 3rd party companies would provide the development, Facebook would allow you to message and add their users as your users.  It sounded cool.

I went back to the team and explained this upcoming launch.  I got in touch with Dave Morin (yep, the Path founder used to be head of Facebook platform) and he gave us access to the platform.  Our plan was to build a subset of our service on Facebook and gain some early users.  Then, when we launched our new website we could make a claim that says, “We already have 10,000 users on Facebook.”

It did not go that way at all.

Launching on Facebook right when the Platform was launching was probably one of the best things we did. Because it was new, it had a bunch of early adopters.  It also had a bunch of loopholes that allowed us to market and message millions of users.  If you remember getting a ton of requests to join some stupid game, that was the platform.  We used to do things like “You can’t install our app unless you invite 30 friends.” and people did it.

Of course Facebook wasn’t happy about this, but we weren’t going to stop.  Kudos goes to our colleague Noah who really figured out how to growth hack the crap out of it.

Lessons learned: at both Kapost and Qloud, we grew because we attached ourselves to a tidal wave in the industry. In Qloud it was the Facebook platform and Kapost it was Content Marketing.  Facebook eventually would shut down the platform but not until much later.  Heck, even Zynga used it to become a billion dollar company leveraging Facebook’s platform. Sometimes the bright and shiny new thing in the industry is worth going after.


The next post is about the actual launch. Check that out here.

Music Technology in 2007 and Our Use of YouTube (8 of 14)

This is post #8 about the Qloud experience.  The previous post was about about running out of money and pivoting.  

The year is 2007 and Toby and I have a great idea to build a comprehensive music service.  There were no web streaming services at the time.  Some of the players were:

  • eMusic – a service for indie artists where you could download mp3’s. 
  • PressPlay – a Sony sponsored music service that has only 2 labels and also required a download
  • Rhapsody – a pretty good  service that required a player download and costs $20 a month

We started building the service and went around to all the music labels and providers we could find to license the actual tracks so we could serve up the songs to our users.  Turns out that’s not easily done in 2007.  To get music you have to strike individual deals with each individual label.  Those deals require time (which we didn’t have) and money for upfront payments (which we didn’t have).  Hmmm.

Luckily we figured out a nice loophole.  Google bought YouTube in 2006.  Right before that acquisition YouTube gave equity to the music labels.  In exchange for this equity, they struck a deal that forbid the labels from suing YouTube for 2-3 years (I’m not sure of the length).  This was a little-known fact, but it was true.  

It is also true that almost every music track in existence is available on YouTube.  This was pre-Vevo.  So, we decided that our backend streaming service will actually be powered by YouTube.  Nobody had every tried this, but it allowed us to (a) serve all our music for free; (b) be legal; (c) embed our music right into a browser without asking uses to download a player. 

We did one other smart thing. Turns out there are many many videos for each song. Some are correct and some aren’t. We didn’t have time to go through millions of tracks, so we build into the service the ability for users to mark which YouTube video is correct for that track.  They could play up to 10 different videos and vote for their favorite.  By default, we play the video with the most votes.  This tuned out to work really well.  Once we launched our users would spend hours voting on videos and helping us curate our library. 

We build the service in 4-5 months.  Now we just needed to launch.  Read about how that went in the next post…

 

In the Abyss: Running out of money (Qloud 7 of 14)

This is post #7 about the Qloud experience.  The previous post was about about our massive product pivot.  

We launched our initial product and the public reaction was terrible.  The usage was low.  See what happened and how we felt in the bog post: Launching the World’s First Real Music Search Engine

It’s now the Spring of 2007.  We’ve been doing the company for a little over a year and we were running out of money.  We had rounds of funding spelled out in our deal with Revolution, but for the next round they could fund us or not at their discretion.  When we brought up the subject to them, they decided to not fund us.

Continue reading “In the Abyss: Running out of money (Qloud 7 of 14)”

Inspiration Strikes: Pivoting (Qloud 6 of 14)

This is post #6 about the Qloud experience.  The previous post was about Developing our service in Romania.  

We had launched the world’s first music search service that searched on tags and usage.  It was revolutionary.  The problem was that nobody cared.  The amount of use we had was small.  Granted, we didn’t iterate on it much and maybe over time usage would have increased, but out of the gates it was DOA. 

The few thousand customers we had we talked to and grabbed feedback from.  They wanted more.  Just a list of songs wasn’t enough.   They wanted everything.  Specifically:

  1. On-demand music.  They see a track, they want to click and play it right then and right there (in the browser)
  2. Major label music – all the popular stuff for the 4 major music labels
  3. Indie label music – all the niche stuff from the dozens of indie labels
  4. Unlimited music – they wanted no limit to what they could do (unlike radio stations)
  5. Free.  They didn’t want to pay because the alternative at the time (Kazaa, Bit Torrent, etc.) were all free

So, we decided to focus on delivering a full-featured music streaming service instead of a music search service.  It was a bold move, but desperate times call for desperate measures. 

It turns out we were right.  This was the right direction as you’ll see in a later post.  However, it created different problems such as: 

  1. How do you build a business around free music?  (answer: you can’t)
  2. How do you make the record labels happy if you’re not charging?   (answer: you can’t)
  3. Technically, how do you get the music to serve to the users?  We’ll address in a later post.  

I learned a valuable lesson here in that you shouldn’t be afraid to drastically change your service if your usage is low.  Don’t hang on to past work just because of the sunk costs.  I’ll credit Toby for being super bold.  Toby is not one to do things half-assed.  He likes to pick a direction and go full steam in that direction. It’s tough to make a decision to throw away a year’s worth of work. 

This would come in handy later when we did something similar at Kapost. 

 

Developing in Romania (Qloud 5 of 12)

This is post #5 about the Qloud experience.  The previous post was about launching our first product – a music search engine.  

When we started building Qloud we found some developers in Romania.  This wasn’t just Bucharest, this was a town 8 hours NW of Bucharest in the mountains of Transylvania.  We started with 3 or 4 developers and they fit our budget nicely ($15/hr back then).  The early guys were Luci (team lead), Sergiu, Mitza, Dragos and Szaby.  The owner of the company was Dan Masca.

Dan is a fatastic guy.  He also sort of runs the town.  It seems that he employs about 1.5x more people than he needs to just because he wants them to have jobs.  He also buys computers for many of the local business and schools.  Walking the streets with Dan, you get the idea that he’s something of a saint in that town.

The developers were also great.  We talked with them every morning at 8am EST for about 2-4 hours about what we were building. There was no language barrier.  In fact, when we started Kapost in 2009 we started it with Szaby and Mitza.  Those two are studs.  Mitza left Kapost after 4 years to start his own company and Szaby is still with us and one of our most trusted and senior developers.

In 2006, once we raised money, we thought it’d be good for the team if we all met in person and got to know each other.  Thus, Toby and I flew to Romania to see them.  We flew into Bucharest and then took a train to Targu Mures.

Continue reading “Developing in Romania (Qloud 5 of 12)”

Launching the world’s first real music search engine (Qloud 4 of 14)

This is post #4 about the Qloud experience.  The previous post was about our getting funding from Steve Case.  

Qloud’s initial product was a music search engine.  It was based on a few assumptions.  

  1. Consumers have unlimited music at their fingertips
  2. With this amount of supply, they are overwhelmed and not sure what to listen to
  3. There is no way to easily find music.  Almost all discovery is social and person-to-person

Our solutions was to provide a music search engine.  All existing music search engines then (and today) are based on song title and artist name.  So, if you search for “dance” you’ll get Steve Miller’s “Dance Dance Dance” which isn’t actually a dance song. 

So, how were we going to do this?  We were going to capture demographic, play counts, and tag data from users from an iTunes plugin.  Then with that data, we’d allow people to search for music.  You do a search like “What is the most played song tagged ‘dance’ by 24 year olds?” and we’d display the results.  It was pretty damn cool.  You could find lots of good music and really see the different music being played by different groups. 

We launch in the fall of 2006 and we were excited to see what happened.  Ultimately, like many startups, we thought it was cooler than everyone else.  We got thousands of users but none of them stuck or were passionate about it.  Why?  There was one problem – the users wanted to play the songs that we delivered.  We just listed the songs and provided a 30-second preview.  That wasn’t even close to being enough. 

You could search for Music, Tags or People using a variety of parameters

Back in 2006, you couldn’t easily license full tracks of music to be played in the browser.  There were a few companies (like Muse) who had 30-sec clips but nobody had full tracks.  That’s what people wanted.  Eventually we gave it to them, but that’s a later post.

Ultimately, it was a disappointing launch and our investors started to lose faith in us and our vision.  I think we were victims of not thinking large enough.  We set out to solve a problem, but that problem wasn’t big enough.  Providing a good music search was cool, but what people wanted was a more complete solution.  We were a bit naive. 

On the Case: Getting Investment from Steve Case (Qloud 3 of 14)

This is post #3 about the Qloud experience.  The previous post was about our initial fundraising experience in Silicon Valley and DC

Seven months into the Qloud process we secured financing from Steve Case’s fund called Revolution.  We were psyched and pushed ahead on the product.

A couple of cool things happened with this such as we got to work in Revolution’s office.  The office was right in Dupont Circle (walkable for me) and was really beautiful. Super pimped out.  We worked on the same floor as Case and the Revolution team.  Other people on that floor were folks running Club Med, Fannie Mae, and Carly Fiorina who had just left HP.

We had one big office in Revolution

I thought at the time that signing on a big name like Steve Case would help in our product adoption and marketing (“New Music Service from Steve Case!”), but it didn’t work that way at all.  We weren’t allowed to use his name as PR.   Similar to how VC’s don’t want to invest/help until you show traction and growth, Revolution didn’t want to associate themselves with us until we had some success.  It’s funny how that works.  Only once you’re loved will others express their love of you.  Continue reading “On the Case: Getting Investment from Steve Case (Qloud 3 of 14)”