A little less than three years ago Theo Burry and I began working together to create a new business in online news. It's been a furiously productive three years, and we're proud of it, but we have not been able to build Faneuil Media into a sustainable, growing business. Over the next few weeks we're going to be closing Faneuil Media.
Theo and I are both landing in great places (I joined HubSpot this past week), but I'll write about that in a separate post. Here I want to explain why Faneuil Media didn't work and what we've learned.
On a high level, Faneuil Media did not work because it aimed to be an advertising-supported content business. Today forces are aligned against these businesses. Content producers face unlimited competition for attention, while their ability to monetize that attention with interruptive advertising is diminishing.
More specifically, Faneuil Media went through three phases:
(1) Google Maps Consulting -- We started Faneuil Media in the fall of 2005, building Google Maps projects for Forbes.com, NYTimes.com, Boston.com and other big news sites. Our work was groundbreaking and well-received. (Our projects on NYTimes.com in 2005 and 2006 are now in Google Maps case studies.) But this was consulting work, and Theo and I both wanted to create a business with more potential for scale and growth.
(2) Atlas Mapping Product -- In the summer of 2006 we launched the Atlas mapping tool, a super-simple platform designed for publishers who want to add maps to their content. This was the logical way to scale our map consulting work, and the tool was very successful. We now have thousands of registered users including many large metro news sites like those of The Boston Globe, The Dallas Morning News, The New Orleans Times-Picayune, The Orlando Sentinel, and The Baltimore Sun.
While the product was a success, the business was not. Google pay-per-click ads ran with most of the high-traffic maps, but our click-through rates were very low, and despite great traffic, we didn't make enough money to grow.
We didn't think seriously about creating a paid version of the site, because we felt the Google terms precluded that option. In retrospect, we probably could have gotten away with it, but I'm still not sure this would have been a great assumption to build a business on. Open sourcing the platform might have worked, although that wouldn't have been a trivial process, and it wouldn't have accomplished our goal: creating a business in online news.
So, a year ago we stopped development of Atlas, and began working on 9Neighbors, a local content filtering project. (Atlas is still live, and will continue to be after we close Faneuil Media. 9Neighbors will be going offline within the next few weeks.)
(3) 9Neighbors -- As we struggled to create a business with Atlas, we grew excited about the possibility of creating a business in local content filtering. We saw enormous growth in independent production of local content, but very few tools for filtering it and providing meaning for users. We also saw tens of billions of dollars being spent on local television and newspaper advertising, and assumed that this would eventually move online.
So, based on Atlas' product success, we raised a small pool of angle funding to build our local content filtering site, 9Neighbors. The first iteration of 9Neighbors, launched last fall, was a local version of Digg. We populated it with local content and tried to create a community to supplement editorial and algorithmic filtering. We assumed that if we created a big enough audience we'd be able to sell advertising on the site.
We ran into two problems with this model. First, we weren't able to build a community. People weren't that interested in local news, and to the extent they were, they were already finding it other places -- not at a single competing filter, but all over the web. They didn't need a news filter because their web of online services and relationships was already filtering local content for them.
Beyond the traffic problem, we began to see that even with traffic, we wouldn't be able to sell much advertising. Local businesses aren't spending much money on traditional online advertising. They're moving to the web, but not with advertising -- they're creating blogs, reaching out to bloggers, and building their own identities the same way individuals do.
These facts crystallized this spring. We scrambled to realign 9Neighbors as a marketing analytics service for local businesses, but we didn't have much time, and we ran out of money before we could structure our product the right way.
What Have We Learned?
When I think about learning, I think of one my favorite lines from Umair Haque, one of my favorite bloggers:
Another way of putting this: It's not what Google knows, but how Google has structured itself to learn.
This is true of individuals as much as for companies. People will always know more than you, but you'll be at a distinct advantage if you can structure your life around learning. In this regard, Faneuil Media was an utter success.
I can't spell out everything I've learned over the past three years, but I can point out the two changes in my intuition that I'm most conscious of:
(1) Always ask "Who's paying who for what, and why?" -- A good friend and Faneuil Media adviser asked this question a few months ago as we were struggling to find a new business model. It clarified a lot of muddled thinking. We came from the content end of the news business, and we started Faneuil Media during a bubbly phase of Internet growth where product was put before business. Our answer to this question was not always clear or well thought-out. If your aim is to create a business, it must be.
(2) Cycle Quickly -- The emphasis in a business should be less on doing things right, and more on figuring out how to do things right. We did a good job of this at Faneuil Media, but I didn't realize how central to your thinking it must be. Nobody knows what's going to work, so you have to cycle quickly and learn. You have to plan and analyze, but you can't get stuck at roadblocks or indecision. Time you're not gathering data and learning is time lost.
Now, on to the next project.
Good luck!!!!
Good post.
Looking forward to seeing what happens next.
Posted by: Digidave | August 06, 2008 at 12:23 PM