Category: Qloud

Stories about founding and building the music service Qloud.com

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

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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)

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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)” →

Qloud Fundraising: Striking out in Silicon Valley (Part 2 of 14)

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This is post #2 about the Qloud experience.  The previous post was about jumping ship and starting the company. 

Once we started Qloud, we started building the product and also started fundraising.  From day one, looking at our finances, we knew that we had 6 months to get the company to a place where we could raise outside capital.  Not only did we need to get the product built and working but we needed to hone our pitch.  We came up with what we thought was a compelling vision and set out to talk to investors.

Our pitch was that what we learned at Ruckus was that music discovery was a huge problem.  Talking to students it was clear that all discovery was word-of-mouth.  Qloud was going to be a way to allow people to find new music without having to ask your friend down the hall.  We were going to do that in 2 ways:

  1. we would offer a music search engine where you could search by tags and by demographic.  For instance, i want all the music tagged “happy” that is being listened to the most by men age 18-20 who live in Los Angeles.  This would return a list of songs that you could then sample.
  2. we would allow people to tag music inside their iTunes.  By creating a tag cloud, we would enable on-demand playlists for “happy” or “summer” or “breakup” inside the player.  This tagging and information from the iTunes would power the search capability provided in step 1.

Continue reading “Qloud Fundraising: Striking out in Silicon Valley (Part 2 of 14)” →

From VP to the Futon: Living in the Basement (Qloud 1 of 14)

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This is the first of some posts about the story of Qloud.  It’s now been over 8 years so I should start sharing the stories.  This first post is about how Toby and I made the leap to quick our jobs and start Qloud. 

Leaving Ruckus

Ruckus, a music startup, was failing as a startup.  Mostly because music subscriptions weren’t something that University students wanted.  They wanted music for their iPod.  We were giving them free music that didn’t work with their iPod.  So, it was time for a pivot as a business.  Toby and I did some research and found that music discovery was a big missing element in these student’s lives.  With unlimited music, they didn’t know what to download.  They couldn’t think of anything.  So, we wanted to give that to them.  And we wanted to do it on our own.  The fact that we came up with this idea while at Ruckus led to them trying to sue us later, but that’s another blog post.

I had started a company in college (HanoverDelivers.com) but i was a student then and starting it carried no risk.  I was now a 29-years old and leaving Ruckus meant leaving a good salary and a good job in a VC-backed startup.  I debated it for a while.  Ultimately, I ended jumping because it was a challenge that I wanted to take on.  Naively, it seemed like fun. 

The Basement

So, I jumped.  Toby and I started Qloud on Jan 1, 2006.   We had no office, no revenue and no product.  I had to reduce my expenses so I sub-letted my apartment and moved into Toby’s basement.  

Qloud office
Here's our basement office

Toby lived in the ‘burbs and had two young kids (age 3 and 5).  Every day, I would wake up early, work all day in the basement with Toby, come up for dinner with the entire family, play around for a little while and then retire to the basement to read, work more or just sleep.  I quickly became uncle Mike to the girls.  It was a really enjoyable time even though I was single and lacked any good dating prospects. 

Evie and Lucy in May 2006

We started right away.  We built some wireframes, did a deck (that’s what AOL taught us to do) and hired a few Romanian developers (Luci, Sergiu and Mitza).  One thing I noticed right away once we were focused on our new company is that I never, ever, thought that I should have stayed at Ruckus longer.  If you ask anyone who has quit their job and started a company they never will say that they left too early.  

I also am grateful that I was single and in my twenties. I had no expenses.  I had no expectations of money. I could take major risks in my life. I could focus all my energy on the company.  I think about my life now – with wife, kids, house, etc. – and while I’m much better at the startup game, I’m less likely to take risks like that.  My advice to anyone who is thinking of starting a company is to do it as soon as you can.  You won’t learn what it’s like without doing it.  You just won’t.  So start as soon as you can. 

We often worked outside

 

The Story of Qloud

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The 2 years from 2006 to 2008 Toby and I built a company called Qloud from nothing to over 20 million monthly users.  Those years were some of the craziest years I’ve ever had both professionally and personally.  I’ve broken the time into these stories.

I’ll be posting one every now and again. Enjoy….

  1. From VP to the Futon: Living in the basement
  2. Fundraising: Striking out in Silicon Valley
  3. On the Case: Getting Investment from Steve Case 
  4. Launching the worlds first real music search engine
  5. Developing with Romanians
  6. Inspiration Strikes: Pivoting
  7. In the Abyss: Running out of money
  8. Music Technology in 2007 and Our Use of YouTube
  9. Sean Parker and Facebook’s Platform
  10. Launching
  11. Blowing Up
  12. Happy Walters
  13. Selling to Buzznet
  14. What Success Feels Like

 

 

You’ll Never Make Money with a Music App

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I’ve said this a million times and i’ll say it again for the record.  If you’re a music internet application and you have full music streams, you’re not making any money.

I was reminded about this again today when i read this article about Spotify:

Spotify’s 2012 results are out today, with Reuters reporting that the private company had revenue of 435 million euros, and a 58.7 million euro net loss.

The revenue figure is impressive, more than doubling 2011′s 190 million euro tally. However, the company’s net loss widened in the year, even as it saw a dramatic expansion of its top line from 45.4 million euros to the aforementioned 58.7 million figure.

For some background, Toby and I founded the music company Qloud back in 2006.  We had 20 million monthly users, did over a million streams a day, and were acquired by SpinMedia.  But, given that kind of traffic, there was still no way we could make money.  Let me explain why:

  • If you need music for your product, you need to sign contracts with the major music labels. There are 4 of them. These labels require upfront payments of around a million dollars a one or two year deal (at least at the time they did). Your payments to them are then debited out of those upfront payments.   So, you need a good amount of capital to even get started.
  • The major labels have seen big tech companies receive big payouts (such as Last.fm’s $200 million exit) and are upset that tech companies are making money while their business erodes.  As a result, they want equity in any company they do a deal with so they can share in the upside.
  • The major labels do not think the success of your company is due to your product chops or your ability to market well.  No, they believe your success is due to the quality of their content.
  • This is the most important one: Your contract with them is for one or two years.  If you report a profit at the end of the term, they will interpret that fact as their cut is too small and you can expect to pay more in your next deal.

That last point is the key point. You’ll never make a profit.  They will never allow for it.  You’ve signed a deal with the devil and unless you can have a product that doesn’t rely on a mainstream back catalog of music (i.e. eMusic), you’re screwed.

So, while i love Spotify and Rdio and use them all the time, don’t expect them to IPO any time soon, or ever.