How Much Did Meebo Get?

33 Comments

Update: The Meebo funding and the likely exit strategy has sparked off a great debate. Dare Obasanjo has penned, Flipping Your Start-Up 101. “If you are building a Web startup with the intention of flipping it to one of the majors, only three things matter; technology/IP, users and
the quality of your technical team,” he writes. Don Dodge extends the argument. “If the company has market leadership in a new product space or market segment than the valuation goes up significantly,” he writes. Will Hsu takes a different take and says I lack imagination, and writes, “Meebo has essentially created a persistent connection/relationship with their users.” Greg Yardley, another one of new favs says, “why go with a zero-revenue model that’s going to be sold for $50 million tops when you could pick a business model with the potential to generate some really, really serious cash?” Example, Price Grabber. Paul Kedrosky splashes ice-cold water on the whole conversation and adds, “If you are building a startup solely with the intent of flipping it to one of the majors then you are playing Russian roulette using a gun with five full cylinders, and one cylinder containing a bullet that flits in and out with 50% probability.”

(The original Meebo report in the extended entry!)

For a while, the word on the street has been that Meebo, barely 13 weeks old has been out raising some cash. But did they? Apparently yes! The amount of money they have raised is $3.5 million, at about $9 million pre-money valuation from Sequoia Capital, and Roelof Botha has joined the company’s board. The company has been growing pretty rapidly, about 250,000 logins and 7 million messages as of yesterday, and the Meebo Musketeers have built a good platform.

Now for the tough part…There are a lot of questions about the business model here, and well, it remains to be seen how it pans out. Paul Kedrosky, who is a little cranky today because of a cold does post a good question:

You’re not going to charge, so it has to be ads, does it not? Among other issues, how is running ads alongside someone else’s IM service any more acceptable that Google running ads alongside someone else’s news content? Or is Sequoia just funding them — assuming they’re funding Meebo at all, which I still find doubtful — as a pure flip to acquisition exit?

Here is the rub: Since the company basically aggregates all four major IM networks in a browser, all the four major IM owners – AMYG are out of the acquisition game. One of them buys the company, the others shut down access to their respective networks. The very quality that makes Meebo attractive to end-users will make it difficult for them to be acquired. But there is one option: eBay. When all fails, you know who to call. Skype did. Interactive Corp is another long shot, but they are bargain hunters not premium payers.

33 Comments

Meble

Venkatash, i think you finally got the picture. What about Myspace too, if it’s good enough, there wwill be plenty of buyers.

tatatutu

my university has blocked all the ways to this website. is there any new IP address for Meebo?

Allen

Hi guys,

Switch on to Kool IM. The great thing about this Kool IM is that it works with 6 IM clients and of course I no longer need to have any of those IM clients like MSN, Yahoo, ICQ, Google Talk, AOL, Jabber installed in my machine or while on the road to still be in touch, real-time, with those who would need to reach me for whatever the reason. This is just a terrific idea as it will help people consolidate their efforts and clients into a single approach, that is, a single web site where you can connect to any of them and no further hassle. Pretty amazing, eh?

Well, it gets better. If you have got a user id or a screen name for the various IM protocols you can actually log into all of them at the same time and they will be integrated into a single contact list all of them separated accordingly.

Ktoh

Try setting meebo on your active desktop, and you will see the truth. ;) How about adding other web-based widgets and notice how meebo becauses the platform for your desktop widgets? How about launching writely within your meebo active desktop?

Juergen

Sure, Om Malik you poined out with references the success factors of Meebo. I understand and I approve. But can Meebo meet those factors?

However, here are my questions and doubts for each of these:

> “If you are building a Web startup with the intention of flipping it
> to one of the majors, only three things matter;
> – technology/IP,
> – users
> – the quality of your technical team,”

1 what IP do they have? can someone just own an IP on something so simple? a
webbased IM is so easy to make…
2 users? how many real users do they have? people are addicted to MSN,
AIM, etc.
If meebo dies one day to another, how many people will actually look for a replacement of that one instead of going back to MSN?

3 technical team? 2 people? does that convince everyone…? It’s fine with me, I’ve seen many coders, but I am not sure that can convince easily
against the power of big groups.

> “If the company has market leadership in a new product space or market segment than the valuation goes up significantly,”

4. market leadership? talk to me more about it. What type of leadership do they have? They’re not replacing the IM, they don’t have the technology of the IM, they can be stopped anytime by a server that wouldn’t allow them to connect,
then can be sued anytime by people who don’t understand they’re sending their
password to meebo server… (it’s not written is it?)

5.how much of the market do they “own” really?

> “Meebo has essentially created a persistent connection/relationship
> with their users.”

6. who said that?

> “why go with a zero-revenue model that’s going to be sold for $50 million tops when you could pick a business model with the potential to generate some really, really serious cash?”

sure, it could generate cash. If it does, MSN, AIM, etc, have no difficuly in matching this offer, or to prevent meebo from making any money. Remember that meebo revenues depend on the good will of MSN AIM, etc who still haven’t
prevented meebo from connecting onto their server.

7. What is their plan B if MSN/AIM block all connections?

Thus, my bet that meebo cannot succeed!

Juergen

My bet: meebo should fail.

They might be bought or whatever. However they will not exist for long. I bet until 2007 they disappear. Tell me your bet: http://www.jeikei.com

Why should one start a business when it does not have any sustainable competitive advantage? Look at meebo from a strategic point… I don’t see anything great or particularly profitable.

The technology talent itself is not worth more than a few hundred thousand dollars.

I am interested in people who have ideas, but want to learn more how to execute them and talents who are looking for ideas. Drop me a line if you are one of them.

Jonas

Who would want to use that? Jabber is here already, gateways to all the big IM networks, gives you several(!) web clients to choose from, with mobile phone and desktop clients as well. And it’s free (in the GNU sense). How could they possibly compete with that? That would be an severely flawed business idea.

Don Dodge

It is interesting to note that VCs invest in startups for the same reasons that the major companies acquire startups; 1)Great team of extraordinary people, 2)innovative technology, 3)growing user base, 4)a hot new market with huge growth potential. These are pretty much in rank order of importance.

I agree Dare and Om Malik that Meebo is probably not now a good candidate for acquisition by the big guys, but perhaps for different reasons. The fact that they took venture capital raises the price expectations, perhaps beyond what they are worth as pure engineering talent, and their product competes with the other major players.

However, an acquisition by one of the majors is still a small possibility. It is not uncommon for big companies to acquire small companies with talented engineers and then redeploy them onto other strategic projects in the company. In other words, they are acquiring the people and their potential. The product is of secondary importance.

I wrote a blog on the logic big companies use in deciding to acquire start-ups. You can find it here http://dondodge.typepad.com/the_next_big_thing/2005/12/selling_your_st.html

SutroStyle

Sequoia is a smart VC, they probably understand well that this company cannot be flipped. So they were pitched something which is not in the current Meebo product.

Their plan likely relies on leaching off Yahoo/AOL/Google userbase, and diverting those users to a new set of services/products developed by Meebo.

There are two huge risks here however:

1. Those products do not yet exist. Just because they can demonstrate a good growth extending somebody else’s service does not mean they can build their own.

2. If the drain of users becomes noticable for Yahoo/AOL, shutting down meebo is the easiest thing: unlike Trillian which connects directly from individual computers, meebo proxies all connections through their servers, thus connecting to major IM networks from less than 20 unique IPs.
Blocking them will not even require changing IM protocols, they can just block a list of 20 IPs- I am sure AIM has done this already in the cases of abuse.

So I think this is one of the riskier investments of web 2.0.

As a counterexample, I could point to http://piczo.com
nobody has heard of it, they are almost as big as delicious and meebo combined, and they have not raised any venture funding. This is much more “real” on my opinion.

paul jardine

Venkatash, i think you finally got the picture. What about Myspace too, if it’s good enough, there wwill be plenty of buyers.

Venkatesh

Jake,
I don’t see much value of Meebo on its own. Just move meebo to say Google personalised home page or start.com page, that gives it a whole new meaning.
-V

Jake Crandall

“Its different from AIM express or others. For one everything is served over single browser window and its works like a desktop IM would. It has some rough edges but the idea is very good.”

Venkatesh – are you saying AIM Express and others should open a big wide browser window so the IMs forms can fit? That is certainly not the IM experience I want.

Nik Cubrilovic

There is one reason why meebo is working well right now, and that is because all of the people in schools, offices who are behind a blocking proxy cant get their IM fix without meebo because it has all been blocked (inluding the web editions of MSN and AIM (yes they exist, thus they don’t need meebo).

This will all fall apart when the proxy server catchup and start blocking meebo the same way they block the other online IM providers and meebo will lose the 50%+ of people who use it because they have no other method of access.

Ted

For those who question the business model, if they have users, and can serve ads, they can find a payment for AOL, Yahoo, and MSN that will work for everyone. Furthermore, by capturing that audience, they will be able to develop other add-ons, products, and services that would allow them to serve lots of ads, not even on the meebo page but on ancilliary apps and pages.

Cortland Coleman

I read an article (over 4-5 months ago) that stated many of the soldiers overseas use meebo on their GI computers. Extraneous software downloads (IM clients) are not allowed on their machines, so a service like meebo allows the troops to stay in touch with friends and family back home.

Venkates

Jake,
Its different from AIM express or others. For one everything is served over single browser window and its works like a desktop IM would. It has some rough edges but the idea is very good.
Rgds,
Venkatesh

Jake Crandall

Maybe someone can help me because I just don’t see what is so great about Meebo. Sure they are the first web IM to offer all major services. Is that a big deal? What else is there? AIM and ICQ both have much much better web clients. Check out AIM Express. I’d bet Yahoo and MS do as well.

Toni

Meebo is more than “barely 13 weeks old”. They launched their product 13 weeks ago, but worked on it for many months before that and on a previous version of it as far back as 2 years I believe. They’ve earned their current success, and I think that they’ll build an interesting business.

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