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What Went Wrong With Joost?

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3030100306_79d180583b_m.jpgJoost, a much-vaunted online video startup, today announced that it will offer a white-label video hosting platform, thus entering a crowded market littered with the carcasses of other failed video hosts. The company is also losing its famous chief executive, Mike Volpi, whom it’s replacing with Matt Zelesko, the current vice president of engineering. And it plans to cut a portion of its workforce — between about 70 of its remaining 90 employees, according to Advertising Age. It also shut down its office in the Netherlands.

When I read about all the planned changes at the company earlier today, the first thought that crossed my mind was: Stick a fork in it; Joost is done. After all, this whole white-label video strategy is like a leaky lifeboat in the middle of the Pacific Ocean. The NewTeeVee crew sums up the situation very succinctly: “Becoming a white-label video provider was what a business did when all other strategies failed.”

As someone who has followed Joost from its very inception, when it was known as The Venice Project, I’m amazed at how badly it’s stumbled. It shouldn’t have.

It had everything going for it, including:

  • Successful, Celebrity Founders: Niklas Zennstrom and Janus Friis started the company in 2006 after palming off Skype to eBay (s ebay) for billions of dollars.
  • Proven Technology: Joltid formed the basis for music- and file-sharing service Kazaa and later Skype.
  • Substantial Funding: It raised $45 million in funding from the who’s who of the tech world: Sequoia Capital, Index Ventures, Viacom, CBS and Chinese tycoon Li Ka-shing.
  • Incredible Buzz: The company had incredible pre-launch buzz that helped it to convince thousands of users to download its P2P video client — something that doesn’t happen all that often on today’s web.
  • Big, Famous Partners: It managed to gain early traction with content providers such as Viacom and CBS, which were also investors in the company.

So what went wrong? Quite a few things, actually. Other startups should learn from the mistakes of Joost and avoid repeating them, such as:

  • Too Big, Too Fast: Joost hired too many people, too quickly. It never behaved like a startup but instead always felt like a grown-up company with too many bureaucratic layers.
  • Too Geographically Spread Out: The company was based in multiple geographic locations — New York, London and The Netherlands — and as a result, each location became somewhat of a silo.
  • Not Enough Focus: Remember what your mom used to say when you took too big of a bite? If you’re not careful, you’re going to choke. Startups are just like that. Unless you focus, you’re going to choke. Joost couldn’t focus on one single market — and startups need to focus on one market at a time in order to win.
  • Too Much Hype Too Soon: Like many, we were one of the early fans of this startup. Its founder pedigree generated a lot of pre-release interest. Nearly 250,000 folks signed up for the beta version of the software. But when technology problems hit, the pre-release buzz turned into buzzkill.
  • Slow to Fix Its Technology Problems : Joost’s P2P network had technical problems early on that resulted in user defection. The company didn’t move to address those concerns fast enough. These technology problems have continued to nag the company throughout its life, even when it switched to a browser-based focus.
  • Client vs. Browser: The company took too long to realize that the client-based strategy was going to lose out to browser-based video services. Its legacy of building clients became its Achilles’ heel.
  • Didn’t Press Its Early-Mover Advantage: Joost had correctly identified that it needed the blessing of the content owners, but it failed to move aggressively enough to convince them to work with its platform. The client and technology problems didn’t help matters, either.
  • Big Media Dis-Connect: Its big media investors were never willing to give Joost a content edge over the competition, prompting users to tune it out in favor of other services.
  • Too Many Internal Problems: The company had some serious management problems, some of which led to the firing of its CTO in January 2008.
  • Hulu: It started with a simple, easy-to-use interface for its browser-based video service, offered higher-quality video and used content from its backers, NBC and Fox, to become a household name, which in turn allowed Hulu to convince other content owners to sign up for its platform. Now it owns 10 percent of online video traffic.
  • Chasing Its Own Tail: Joost also made some basic mistakes, such as not having a good SEO strategy. It never quite figured out a social media strategy in order to garner viral growth, either. It was like a tech company from the 1990s — out of sync with today’s web environment.

The dark cloud of doom started to settle over the company last year, as the team at NewTeeVee noticed time and again. NewTeeVee writer Janko Roettgers offered a recipe to fix Joost last fall, but apparently it was too little, too late, even then. The company consistently failed to gain any traction, even after unveiling new APIs and a browser-based offering. In the end, however, it all boiled down to a lack of content.

Photo credit of Mike Volpi pic: Eirikso via Flickr.

71 Responses to “What Went Wrong With Joost?”

  1. oo yes tahnk The company took too long to realize that the client-based strategy was going to lose out to browser-based video services. Its legacy of building clients became its Achilles’ heel

  2. Guest

    I was on the beta from Venice on… and for me the number one problem was the UI. It was horrible and despite numerous complaints, they never fixed it good enough and fast enough. For eg. if you scrolled through your channels it looped! FAIL: people like to know when lists start and stop, not go on a hamster wheel of seemingly endless options. It’s a great study in how to NOT build a UI. It assumed way too much from the user. Joost took me five minutes to figure out the UI. Hulu took me about :10 That is why it failed IMHO. Plus of course there was really no content that came close to what Hulu or Netflix on demand offers.

  3. I checked out joost when I scored an invite code, but the software was unresponsive and slowed down my comp. So I gave up. Seemed to create new friction rather than to solve existing friction.

  4. beyondnessofthings

    Good piece. It’s not just the content but how you deal with the people providing it. Joost lacked humility, a vital quality. It’s debatable whether the linear TV business is in decay – viewing figures suggest otherwise, the ad sales market implies certainly. But you don’t turn something that powerful on its head by marching into the offices of (still) big power players in the media and entertainment industry and giving a lame do or die presentation.

    Joost failed primarily for being a vanity business. Its founders should’ve (and do) know better. Shame they disconnected from their brains when they got issued with AmEx Centurions.

  5. Larry Flynt

    Guys –
    1) Content: Hulu had it by virtue of its pedigree to start, and its product and technology superiority to sustain. Joost never got it.
    2) Leadership: Jason Kilar, CEO of Hulu, like Mike Volpi, is also a big-company guy (Amazon), though he helped launch and grow businesses at AMZN for 10 years. He’s as solid as they come, and had enough experience in running tech projects from their inception and bringing them to consumers, not enterprises. Volpi was actually the ‘safe’ choice, since he is a deal maker. Joost knew that they would need to get content deals done, but they just couldn’t get them done in time. Kilar, with Amazon training knows how to bring products to consumers and determine what is working and what is not. He ran worldwide platforms for Amazon. If a mouse cursor moves on their property at Amazon, they know it and can figure out what you will do next!
    3) Viral features: That’s a load of crap for this. Hulu is NOT successful because of its viral success. YouTube is POPULAR (though not making much money) from its viral, social nature. Buzzword whoring.
    4) SEO: More buzzword whoring. Google, I bet, is not a big driver of traffic here. There are going to be enough links in, no matter what. It is true, though, that Joost made it hardER for allowing a ton of sites to link directly to their content.

    The ironic part is Volpi is probably better suited for doing white-label sales now. Networks are starting to deliver their own destination properties and getting in now is going to be critical. However, Brightcove is right in there and others have squandered a lot of cash. Looks like Joost is in the downward spiral now…

  6. 1stboybandfan

    I would say it’s obvious. It has already happened with Hannah Montana. When a company like Disney has to steal through a boy band to over a pay an excutive producer Millions of dollars for a show that teachs bad cultural values, even by American Standards. Then it’s a problem, also I hate the fact they did the same thing as Joost with their stocks last year too. Hey, it’s just what BSB told me.

  7. zell_101

    Ah, hindsight.

    For those of us old enough to remember, it’s interesting going back to 2007 and the general tone/feel that the trade-blogs (such as this one) were projecting on HULU and JOOST.

    Let’s face it, there was that geeky-tech-newmedia thing going for JOOST. Everyone was enamored with them, even if they were having fairly poor User Experiences (even cutting them slack for their initial lack of Content, that was claimed to have been “fixed” within months)…

    But, HULU, it was the ugly stepchild of “oldteevee” and people were not really very kind to it (the name was the first bit of mockery); there were all sorts of reservations expressed and not much fanfare (except, well, it was watchable compared to everything else; but, it just didn’t have that tech/geek thing going for it)…

    It really felt like people wanted JOOST to succeed and HULU to fail. Really, in your heart of hearts, wasn’t that the feeling here (and most tech/media blog trades)?

  8. P Cause

    All good points, but the real issue with Joost was content. Joost went to the media guys and were arrogant and didn’t udnerstand what they needed. it would up without the deals it needed for premium content. The thing we’ve all learned is that premium content is the only place to get revenue and profits in the online video space. Without content they didn’t get users or revenue.

    Look at Google and YouTube. They’ve gone back and are cutting deals for premium content because that is the only way to make money. Look at Hulu. ALl premium content and they get revenue.

    To paraphrase a campiagn slogan: it is all about the content stupid!

  9. Grandma

    “simple, easy-to-use interface”

    Hulu won because of this statement.
    If you want general users to mass, it needs to be easy to work. Hulu is. Joost wasn’t.

  10. Agree with Om: stick a fork in it, Joost is done.

    While it’s taken Joost much longer to make this supposed strategy shift from consumer to business, they share a similar history to my company, SesameVault. Like Joost, we started out in 2005 believing that client-side software that enabled computers, video game consoles, and other devices to function as media centers was going to be a huge opportunity. However, it quickly became apparent to us that capturing this opportunity was going to require us to do a whole lot more than simply develop some cool software. In addition to developing a server-side platform (later to become SesameVault) to store, manage, and stream content to the devices that were running our software, we were also going to have to go out there and secure licensing deals from the content owners.

    So, fast forward to July 1, 2009: Joost announces they are totally ditching consumer to focus on business services. All things being equal this seems like a good shift for Joost: business-focused web video services is a high-growth market, albeit an increasingly crowded and competitive one. However, all things are never equal, especially when it comes to Internet startups. Having spent $45M on the development of consumer software and ad-supported services, and replaced the high-profile CEO with the SVP of Engineering, this looks like a last ditch effort to mitigate an otherwise colossal failure.

    My complete take on the Joost wind-down and the parallels with our company can be found on our blog:

    • Streaming costs are sufficiently low now that P2P hardly helps. On the other hand, the technological complications of running a stable P2P platform are very substantial. No one starting out today would really consider P2P for this kind of service.

    • Its what you do when your consumer facing company fails but has some intellectual property, some servers and a handful of MBAs and hire your services out to other companies who cant afford to buy you .