Raja Jasti’s Blog - Renaissance Thinking

Joost, a high flier in professional online video space, is changing course. GigaOm thinks Joost is history and offers some interesting perspective on why it failed.

Joost, a much-vaunted online video startup, today announced that it will offer a white-label video hosting platform, thus entering a crowded market littered with the carcasses of other failed video hosts. The company is also losing its famous chief executive, Mike Volpi, whom it’s replacing with Matt Zelesko, the current vice president of engineering. And it plans to cut a portion of its workforce – between 70 to 90 according to Advertising Age.It also shut down its office in the Netherlands.

When I read about all the planned changes at the company earlier today, the first thought that crossed my mind was: Stick a fork in it; Joost is done. After all, this whole white-label video strategy is like a leaky lifeboat in the middle of the Pacific Ocean. The NewTeeVee crew sums up the situation very succinctly: “Becoming a white-label video provider was what a business did when all other strategies failed.”

As someone who has followed Joost from its very inception, when it was known as The Venice Project, I’m amazed at how badly it’s stumbled. It shouldn’t have.

It had everything going for it, including:

• Successful, Celebrity Founders: Niklas Zennstrom and Janus Friis started the company in 2006 after palming off Skype to eBay for billions of dollars.
• Proven Technology: Joltid formed the basis for music- and file-sharing service Kazaa and later Skype.
• Substantial Funding: It raised $45 million in funding from the who’s who of the tech world: Sequoia Capital, Index Ventures, Viacom, CBS and Chinese tycoon Li Ka-shing.
• Incredible Buzz: The company had incredible pre-launch buzz that helped it to convince thousands of users to download its P2P video client — something that doesn’t happen all that often on today’s web.
• Big, Famous Partners: It managed to gain early traction with content providers such as Viacom and CBS, which were also investors in the company.

So what went wrong? Quite a few things, actually. Other startups should learn from the mistakes of Joost and avoid repeating them, such as:

• Too Big, Too Fast: Joost hired too many people, too quickly. It never behaved like a startup but instead always felt like a grown-up company with too many bureaucratic layers.
• Too Geographically Spread Out: The company was based in multiple geographic locations — New York, London and The Netherlands — and as a result, each location became somewhat of a silo.
• Not Enough Focus: Remember what your mom used to say when you took too big of a bite? If you’re not careful, you’re going to choke. Startups are just like that. Unless you focus, you’re going to choke. Joost couldn’t focus on one single market — and startups need to focus on one market at a time in order to win.
• Too Much Hype Too Soon: Like many, we were one of the early fans of this start-up. Its founder pedigree generated in a lot of pre-release interest. Nearly 250,000 folks signed-up for the beta version of the software. But when technology problems hit, the pre-release buzz turned into buzz kill.
• Slow to Fix Its Technology Problems : Joost’s P2P network had technical problems early on that resulted in user defection. The company didn’t move to address those concerns fast enough. These technology problems have continued to nag the company through all its life even when it switched to a browser-based focus.
• Client vs. Browser: The company took too long to realize that the client-based strategy was going to lose out to browser-based video services. Its legacy of building clients became its Achilles’ heel.
• Didn’t Press Its Early-Mover Advantage: Joost had correctly identified that it needed the blessing of the content owners, but it failed to move aggressively enough to convince them to work with its platform. The client and technology problems didn’t help matters, either.
• Big Media Dis-Connect: Its big media investors were never willing to give Joost a content edge over the competition, prompting users to tune it out in favor of other services.
• Too Many Internal Problems: The company had some serious management problems, some of which led to the firing of its CTO in January 2008.
• Hulu: It started with a simple, easy-to-use interface for its browser-based video service, offered higher-quality video and used content from its backers, NBC and Fox, to become a household name, which in turn allowed Hulu to convince other content owners to sign up for its platform. Now it owns 10 percent of online video traffic.
• Chasing Its Own Tail: Joost also made some basic mistakes, such as not having a good SEO strategy. It never quite figured out a social media strategy in order to garner viral growth, either. It was like a tech company from the 1990s — out of sync with today’s web environment.

There are some interesting lessons to be learnt from this saga. I would summarize the reasons for Joost’s failure as getting too big while making a strategy mistake of not supporting web based version of the service. If you are small it gives you a chance to fail fast and iterate. If you get too big fast then you don’t have that luxury. That’s what happened in the case of Joost.

Techcrunch reports:

Just when it appeared that Web 2.0 may be abandoning the UGC ship for premium content, Break.com, a social video site for guys, is upping its budget to add more user generated content to the site. Through Break’s “stimulus package,” the site is increasing its investment in content purchased from its users and other amateur filmmakers by 50%.

Break.com, which had 3.8 million unique visitors worldwide in March according to Comscore, buys original user generated content from its audience. Break says that it spends between $200 and $1000 per video. Additionally, Break.com licenses professional content from a number of sources, including the NBA, for a higher amount. Break.com also produces content internally. In total, Break has acquired over 2,000 clips. This year, Break says it has purchased more than 140 user-submitted videos that have been seen published on the site.

Break.com is surviving in a space where many of its competitors are dropping out. 60Frames, another video entertainment site, recently shut its doors, because of lack of funding. And Metacafe just eliminated its Producer Rewards program, which paid producers for content. Break.com hasn’t been immune to layoffs but it seems to be surviving, and maybe even growing despite the shakeup at other online video entertainment sites. In early April, Break Media, parent company of Break, acquired HBOLabs, HBO’s digital content studio.