Startups Should Team Up to Grow

Om Malik, Wednesday, October 17, 2007 at 4:22 PM PT Comments (23)

Earlier this week, MeeVee, an online television guide, decided to acquire Top Ten Sources, a Boston-based social news and information site. Last night, Next New Networks bought BarelyPolitical.com, the production company responsible for Obama Girl, for an undisclosed amount of money. And there is news that Automattic has acquired Gravatar, a small project that gives WordPress users the ability to add avatars to their profiles.

In isolation, these three deals are so marginal and unimportant that you might gloss over them. When taken together, however, they point to a trend that is starting to gather momentum. I have been hearing from many small startups that are looking to either acquire or merge with others in order to bulk up and stay competitive in a very crowded market.

“Time to market,” a phrase typically found in the vernacular of large companies, is making its way down the food chain as well. Acquiring users and boosting page views is a challenge, especially with hundreds of startups vying for attention (and usage). The low barriers to entry for building and deploying consumer web products has resulted in an abundance of companies, many of marginal utility.

Many are mere features makers that need to find a safer cocoon or else face a bleak future. Sure there are some buyers, including Google (GOOG), Yahoo (YHOO, Microsoft (MSFT), eBay (EBAY) and newly proliferate media companies from the East Coast. But they can’t buy everything — and that is why startups should start developing strategies to what is essentially the web equivalent of “marrying up.”

But the clock is ticking. Eternal optimist Tim O’Reilly, in an interview with The New York Times, today expressed concerns about the me-too, copycat startups and the generous amount of dollars they are snagging from venture capital funders. He said that when the bubble inevitably pops, “there are going to be a lot of people out of work again.”

And our good friend Scott Rafer, who has been on both the winning and losing side of the equation, is worried that we haven’t learned from our mistakes.

“Every single one of these [technology] cycles lasted between eight and 11 years. The eight-year anniversary of the last collapse is in March 2008. Now, if someone wants to stand up and tell me why this cycle is somehow going to be a longer one — I’m all ears,” he says. If Rafer is right, then it is prudent for startups to start coming up with Plan B. And maybe Plan B should stand for “buying or merging.”

Disclosure: GigaOM and Automattic share a common investor, True Ventures. Matt Mullenweg, founder of the company, is one of my close friends.

Rating: 30% Thumbs Up Thumbs Down
Print

11 trackbacks so far

October 18th, 2007
4:13 AM PT

[...] So Matt Mullenweg has announced on his blog not too long ago that his company Automattic(The company that runs wordpress.com) has bought Gravatar. I think this is fairly big and if not big, important news and so does Om Malik. [...]

October 18th, 2007
2:09 PM PT

[...] October 18th, 2007 Matt Mullenweg posted yesterday on the Gravatar blog about the acquisition of Gravatar by Automattic. The post isn’t there now. It wasn’t just my imagination: Om Malik linked to the post. [...]

October 18th, 2007
5:07 PM PT

[...] of the nonsense being written about the new “bubble”. And related discussions about the need for startups to “bulk up” (from Om Malik no less, a man full of good sense usually) and palpitations about being five months [...]

October 18th, 2007
5:41 PM PT

[...] Startups Should Team Up to Grow - Om Malik dice que en un sector en el que todo ocurre tan rápido y con cada vez menos barreras de entrada, los startups deben considerar muy seriamente la opción de aliarse con otras empresas o competidores para crecer más rápido [...]

October 18th, 2007
10:47 PM PT

[...] Read more at Gravatar and GigaOM [...]

October 18th, 2007
11:36 PM PT

[...] Startups Should Team Up to Grow « GigaOM  Annotated The low barriers to entry for building and deploying consumer web products has resulted in an abundance of companies, many of marginal utility. “Every single one of these [technology] cycles lasted between eight and 11 years. The eight-year anniversary of the last collapse is in March 2008. Now, if someone wants to stand up and tell me why this cycle is somehow going to be a longer one — I’m all ears,” he says. If Rafer is right, then it is prudent for startups to start coming up with Plan B. And maybe Plan B should stand for “buying or merging.” [...]

October 19th, 2007
12:35 PM PT

[...] Malik authored a column earlier this week describing the need for small startups to work together to achieve results. What better way for this type of collaboration than in a incubator space where [...]

October 20th, 2007
5:31 AM PT

[...] kaže Om Malik, komentirajući ovo, ako ovakve dealove gledamo izolirano, ispadaju gotovo marginalni, ali stvar je [...]

October 20th, 2007
7:35 AM PT

[...] look of television, Valleywag’s post, which was fine with me (thanks for the link!), and Om Malik’s smart observation that startups are beginning to band together in the space. The only way we can answer them is to [...]

October 21st, 2007
10:54 AM PT
NotasD said:

Automattic compra Gravatar

Automattic compra Gravatar, el servicio que te permite poner avatares en WordPress, y algunos otros servicios, es ahora parte de la empresa que hace WordPress, Akismet y otros. Es MUY interesante el análisis que hace Om Malik sobre la compra de este star

October 24th, 2007
2:28 PM PT

[...] is what Om Malik thinks about this acquisition, as for myself I could see how to use it for tracking comments I put on [...]

12 comments so far

October 17th, 2007
7:05 PM PT
allen stern said:

Teaming up is so critical these days - people fear it because they believe that a merger might be the end result but the truth is that both companies can walk away smarter than going it alone.

This is one of the benefits of co-working.

October 17th, 2007
8:10 PM PT
Srini said:

Widget makers CAN make a lot of money - look at shareware. There is no willingness-to-pay for Web 2.0, that’s the problem. I have said enough already, the solution is obvious.

October 18th, 2007
2:01 AM PT
Jack said:

think how amazing what blogs can influence in this world scale business.

October 18th, 2007
3:39 AM PT
buckpost said:

Om,
I think you’ll start to see more teaming up as start-ups look for creative ways to operate more efficiently. I would argue that a more pragmatic approach to spending is the biggest difference between the last tech boom and the current one - something lost amid all the talk about a bust.

October 18th, 2007
5:54 AM PT
Biplab said:

In a way, this entire bubble is a product of the acquisition spree of the companies like Yahoo, Google, Microsoft etc. Taking the case of Google, just because they want to be omnipresent in the internet world, and now in the mobile world, they keep on acquiring companies irrespective of their profitability. Their process allures all these start-ups for the dream of quick money. I guess, when the bubble breaks, these big companies also will get their share of regret.

October 18th, 2007
1:51 PM PT
Andrew said:

You linked to Matt’s post on the Gravatar blog. That post seems to have vanished.

October 18th, 2007
2:22 PM PT
Symbian said:

What if rich startup with funding is searching for real technological basis for its proposals? Looks like bubble 2.0 is coming…

October 18th, 2007
5:24 PM PT
till said:

Whenever I hear of synergies (because I guess that is what “teaming up” is all about), I try to leave the room.

I found that very rarely it works out for both parties. I can totally see why people are sceptical.

October 19th, 2007
8:34 AM PT
Vin Turk said:

“Every single one of these [technology] cycles lasted between eight and 11 years. The eight-year anniversary of the last collapse is in March 2008. Now, if someone wants to stand up and tell me why this cycle is somehow going to be a longer one — I’m all ears,” he says.

Here’s why…
Broadband penetration
Speed to market
Development costs
Millions (if not tens of) more computers all around the world connected (more potential consumers/customers)
Mobile

October 19th, 2007
9:39 AM PT

Do smaller companies have the resources needed to merge differing platforms without damaging customer loyalty? Just look at AuctionAds.

October 22nd, 2007
8:52 AM PT
Scott Rafer said:

@Vin Turk Every cycle included improvements in bandwidth, software tools (both productivity and cost), and an increase in IT’s fraction of the world economy. Tech is now a huge fraction of the world’s production. How does that remove or delay business cycles? Given how quick we all operate, it might speed them up.

October 28th, 2007
9:49 PM PT
cyclepromo said:

I think in this situation Gravatar wins out because of the huge WordPress userbase. Gravatar realized that they needed to make a move and I think the made the right one.

Leave a Comment

Get the comments RSS feed, instant notification of new comments

Most Comments

Is There Money in Voice APIs?
Dameon Welch-Abernathy, July 15, 39 comments
What Getting Buzzed Says About Yahoo
Om Malik, July 16, 30 comments
GigaOM Network Content to be Featured on BusinessWeek.com
Om Malik, July 14, 28 comments
New iPhone Will Jumpstart Demand for Wireless Broadband
Om Malik, July 13, 26 comments
Is Gphone For Real? Or Not?
Om Malik, July 12, 25 comments
Close
E-mail It