5 Online Companies that Failed to Monetize

by John Dilley

May 1, 2014 | Share
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There have been many Internet startups over the years that have started off with a boom, only to fade into oblivion. While Evan Williams, the co-founder of Twitter, said “having a large number of users and the inability to monetize them is a non-existent problem,” many online companies would disagree with him. We found five companies that had an overwhelming number of users, but they couldn’t figure out a way to capitalize on and profit from their following. 1. AOL Instant Messenger AOL never could draw in any profit from AOL Instant Messenger (AIM). AIM emerged in the late ‘90s as a key messaging chat interface. At the height of its glory, AIM had over 18 million users; even the folks on Wall Street were using it to communicate. The engineering team for AIM was in a constant power struggle with top AOL Executives about AIM’s role in the marketplace. The corporate team at AOL just could not accept a service being offered for free as the way of the future, when their profits were from a subscription service model. One of AIM’s attempts at monetizing their product was through advertising links. They never specialized their advertising based on the individual user much like Facebook and Twitter does now. AIM never had success at selling ad space, advertisers showed no interest in buying up spots. No key advertising, no monetization. In 2011, it was reported that AIM only held 0.7 percent of the messenger market worldwide when it used to be the dominant player. Even though AIM still operates, most of their clientele was lost to social media sites offering their own chat services. 2. Alta Vista Back in the late ‘90s, before Google, there was Alta Vista. At one point in time, Alta Vista had a Web index of 20 million pages, while its competitors were hardly able to index millions. The Internet was still fairly new to consumers, and no tech company seemed to be able to figure out how to make money off a Web search engine, including Alta Vista. Alta Vista was a pioneer in the Web search field, and they were one of the first companies to offer free email. Eventually, Google came along and figured out the market share and how to profit and started taking over the Web search marketplace. Alta Vista became a defunct site over time. Yahoo! picked it up through a merger in the early 2000s and eventually shut it down and absorbed the technology into their search platform. 3. Napster Napster, a music file sharing service, changed the music industry forever, but it did not make any money while doing it. At the top of their game, they had 80 million users enjoying sharing music files, all downloaded at no charge. The music industry caught on, and the copyright lawsuits came in from musicians and bands that didn’t want their music downloaded at no cost (meaning no royalties for the artists). At the end of the journey, Napster tried to switch over to a paid subscription service and monetize, but they were unsuccessful and shut down in 2001, later merging with Rhapsody. 4. Webvan Webvan launched a business based on grocery delivery in 1999. The CEO had a “hunch” that at least 35 percent of the marketplace would be purchasing groceries online by 2003. At the end of 2000, they reached several thousand homes, but the order dollar amounts were low and the company was losing money. By 2001, the company had to call it quits. Webvan invested too much of their capital funding into warehouses, trucks and offices for customers who never came. Instead of slowly implementing their service and building a customer base, the grocery service blew 1.2 billion in funding. Webvan failed due to expanding too quickly, budget conscious consumers, low sales volumes, overspending, weak profit margins and no firm customer base. Amazon Fresh has since resurrected Webvan, including some of its corporate teams, and they are slowly expanding into markets nationwide. 5. Friendster By 2003, Friendster had millions of users worldwide and was considered one of the hottest startups in Silicon Valley, receiving endless technology awards and garnering a lot of attention. The downfall of Friendster was riddled by its inability to adapt to the user’s needs and by technical problems, including a slow loading website. The social network also tried to monetize through advertising too early on, instead of focusing on building their customer base. Friendster did not have newsfeeds and the personalization that Facebook and MySpace offered early on. MySpace lured away a lot of Friendster users by learning from Friendster’s mistakes and implementing a different social media strategy. Facebook came along, and the rest is history. Friendster is now a social entertainment and gaming site operated out of Malaysia. It seems online trends change every day, and the audience is fickle. One day you can have a winning online business model, and the next day your time has passed. It is best to strike while the iron is hot, and figure out a way to monetize your popularity. [zipfinder] Photo: Jason Persse Find John on Google+