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Summary:

[qi:110] Over the past few years we’ve seen the rise of cute ideas, ones we love using on a daily basis, but are hard to turn into real, long-term businesses. Most were hoping that a sugar daddy would buy their cuteness for bags full of money. […]

[qi:110] Over the past few years we’ve seen the rise of cute ideas, ones we love using on a daily basis, but are hard to turn into real, long-term businesses. Most were hoping that a sugar daddy would buy their cuteness for bags full of money. Scribd, a San Francisco-based company, is a perfect example. It has developed a way to embed documents (in various formats such as PDF and Docs) into web pages, but has struggled to come up with a way to make money.

That hasn’t stopped venture capitalists from pumping more cash into the company, which today raised $9 million in Series B financing led by Charles River Ventures, with re-investment from Redpoint Ventures and Kinsey Hills Group. It had previously raised $5.3 million in funding, much of which was spent on building its iPaper technology. That technology is actually pretty cool, and is a worthy rival to Adobe’s embedded online document reader, Flashpaper.  Adobe has killed that effort, making the development of iPaper look like a smart move. Scribd was previously valued at $10 million, so I wonder at how much they are being valued now?

It’s not alone in this business; it has a bunch of frisky little rivals, including Docstoc, which is fighting tooth and nail to get attention and market share. According to Compete.com, Scribd’s got about 5 million unique visitors and the company claims it has 50 million viewers a month.

The new money buys them a whole lot of time, but they will still face challenges. In today’s economy, buyers are as rare as well-adjusted former childhood stars, which means companies needs to build businesses that make money. The way I see it, the real money for this company will be in going after corporations and becoming an enterprise solution, but that may not be cool enough for Scribd. They have added George Consagra, most recently COO of Bebo, as president. Hopefully he will help them see the difference between cute and company!

By Om Malik

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  1. i have visited scribd so 4 or 5 times and never again… no stickyness to documents

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  2. Enterprise solution? Scribd would make a nice feature for our enterprise application. It would help me sell more seats, but I could not charge more for it. I can not see any way they can make money. Enterprise sales requires a sales force, long sales cycles and lots of support. Not in their DNA.

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  3. “…It’s not alone in this business; it has a bunch of frisky little rivals..”

    Google Doc’s “Save as PDF”, “Publish publicly” and new PDF viewer is a “little rival”?

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  4. [...] společnosti se nově stává George Consagra, který byl naposled COO social sítě Bebo. Om Malik na GigaOM do Consagry vkládá naděje: “Snad jim pomůže vidět rozdíl mezi tím být pěkný a [...]

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  5. @Dan Cornish

    I think you have to think in terms of law firms and accounting firms as well who have mounds of paper that could be archived etc. If they were enterprise focused they could have sell out to EMC easily because it helps with digitization of the enterprise and increase the demand for storage. Just my two cents.

    @Todd…. just because it is Google doesn’t mean it is big. Google has more mediocre products than any VCs portfolio.

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  6. Om – have you been back to nyc recently – this post has a good bit of ny’er in you! :)

    On a serious tip, these services are seo-plays (along with docstoc) – I would bet they have people setup just to find docs online and stick them in and slap a good bit of set on the doc/page.

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  7. Raghu Kulkarni Friday, December 19, 2008

    Om,

    Document viewer by itself would have little value to businesses. The best bet for such services would be to combine a whole lot of them from email to document storage to viewer to editors etc, sort of google approach as a broad strategy to monetize.

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  8. Scribd’s a joke. All their content is stolen from other companies. Do a search for well known books there… you’ll see what I mean.

    They need to get sued into oblivion!

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  9. @Allen

    I have not but am planning to next week to get a good dose of reality. SEO plays would be an understatement if you looked at all the keywords they have been getting traffic from — redheads, army pinups and what not. Seriously, I wonder if anyone actually spent time on this service.

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  10. @Raghu

    Things like this would be plain add-ons for what you offer.

    @Mike, Amen to that. You know any links you want to share with us :-)

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  11. @mike re “Scribd’s a joke…”

    search & replace “Scribd” with “YouTube”, then re-read & consider your stance. (and yes i know Viacom et al *are* suing YouTube, but i think you’d argue even if they’re still figuring out monetization YouTube has built a pretty valuable business).

    @Om: your pessimism is misplaced.

    there are plenty of reasons to be skeptical of startups that haven’t figured out their business model, but at the same time it’s not irrational to provide funding for businesses that show demonstrated growth & user engagement, and in particular have strong SEO customer acquisition. there is plenty of opportunity for future monetization of traffic that is well-qualified based on keywords & usage.

    for the same reasons that search engines monetize well, document hosting services should also monetize well.

    (disclosure: i’m an investor / advisor in similar presentation-hosting startup http://SlideShare.net)

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  12. @Dave McClure

    My pessimism on this particular start up is not misplaced as I outlined earlier. I like what they have built from a technology standpoint, but I think it is this belief in the advertising model that is misplaced. the keywords etc you talk about are going to be much less effective on this service than most of you think.

    I time it will be proven who is right – me or you.

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  13. fair enough, let’s check in end of 2010 or so.

    gentleman’s bet: if they get sold for more than the rumored ~$30-40M post-money, then you owe me dinner at your favorite healthy restaurant in SF. if they run out of cash / get sold for less, then i’m buying.

    (and btw, there are prob better ways to monetize than just advertising model…)

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  14. [...] Kauffman Foundation, angel capital investments returned 2.6 times the initial investment over 3.5 Scribd Raises $9 Million. Still Working on Business? – gigaom.com 12/19/2008 Over the past few years we’ve seen the rise of cute ideas, ones we love [...]

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  15. They should build a fax gateway methinks, I’d like to fax customers from out of Scribd. or just license ipaper to myfax and/or efax (do away with the lousy efax reader for instance). Maybe a model so publishers could *sell* ipaper pdfs, which would be protected against pass-alongs etc – take over the whole pdf-ebook industry (“Seduction Secrets For Geeks * 215pages * only $259.00!”) because you could authenticate who was reading it (although they could always print out multiple copies – unless they can manage to lock that down too). basically they should look to substitution effects to figure out how to sell this cool tool. I’m not really buying the YouTube play so much as the document repository model – the trick is to get it so people en masse want & need a secure document lockbox as much as they want, say, an online photo album. That said let’s face it, SaaS is a tough business, and Adobe has a lot of the low-hanging fruit. They have to position as “PDF ? that’s so 90’s” or something.

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  16. [...] such as scribd.com, and StockTwits are useful and interesting, but even they don’t know how to make money off of it. Heck, even Google is having a tough time in making money off [...]

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  17. [...] společnosti se nově stává George Consagra, který byl naposled COO social sítě Bebo. Om Malik na GigaOM do Consagry vkládá naděje: “Snad jim pomůže vidět rozdíl mezi tím být pěkný a [...]

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