Can somebody please help me out? I'm confused here. I thought Posterous (before being acquired by Twitter) was doing quite well and was seen as the biggest competitor to Tumbler. It would seem that Posterous had a ton of users (would love to know details) and that they could monetize those users fairly simply through display ads. So, with a ton of users creating content and even more viewing that content, I would imagine it to be a pretty good business model.
What confuses me is that rumor has it that Posterous was sold for $10m. I really don't understand that. That basically is treating all of posterous.com users/content as worthless, and just buying the team. And it appears that Twitter did think like that (considering that posterous.com is shutting down).
But my question is how many users did posterous have? What was their traffic like? Were they doing well, or were they a sinking ship and thus they sold? Or did Twitter offer much more than $10m (maybe stock options worth 30-40m more?)?
I'd like to know because I think it would be helpful for startups to understand this space (blogging, content creation) and what kind of business models work and what kind of traffic is needed to make a successful business.
So, if there is anybody with inside knowledge on this stuff, please speak up. I'd also love to hear directly from the Posterous co-founders. Please share your experiences.
I think the issue here is simply Money In < Money Out.
As an outside observer, it's easy enough to realize that Posterous could have monetized but that doesn't really answer the question of whether they could have monetized _enough_ to pay their ongoing costs.
Most likely they were bleeding money at an extremely fast rate and probably running out, fast, which is why they sold for $10 million and over time under Twitter's wing weren't able to figure out a monetization strategy that would be worth the ongoing costs of running the business. The case is even more convincing once you consider the opportunity cost of keeping high-quality talent away from Twitter.
From where I'm sitting, you hit the nail on the head.
They COULD have monetized, theoretically, but not once the die was cast.
Yes, lots of people have built CMS platform businesses where they charged money. But Posterous was probably, as you say, bleeding money, because they were not designed from day 1 to subsist on $12-49/mo subscriptions.
The choice of the "grow big or go home" model of startup results in a catch-22 when you cannot grow big, nor do you want to go home. The only thing you can fall back on is (if you're lucky) a 7 or very low 8 digit acquihire. Which is what this always has appeared to be:
I don't think I have ever viewed any content on Posterous. I didn't even know what it does until I started reading these comments. On the other hand, I get sent Tumblr links daily. Multiple times a day.
If Posterous is the biggest competitor to Tumblr, it seems that says Tumblr has no real competition.
That's why I'd love to hear from the founders of Posterous themselves and why they sold, and they state of their company/users when they sold. I'm interested in this field of blogging/self-publishing and want to know what business model can work.
Sure, but if they were able to get into the top 500 shouldn't that be a business worth more than $10m? Especially since it's user created content, and if they do it right they could keep rising in the ranks of top sites.
I'm curious if they were experiencing a growth stall or even negative growth before selling. Because if they were growing, I don't understand why they would sell and abandon their product unless the offer was ridiculously high.
Posterous could have been growing but if the users were never going to generate any revenue it was inevitable they would have to shut down or be acquired later on. The sale could have been as much for the team (who wants to work on a product that isn't really going anywhere?) as it was for the investors. Keeping Posterous open could have just been delaying the inevitable.
As an aside, Tumblr is apparently having financial troubles (this seems to be speculation based on supposed leaked investor feelings) and Tumblr is huge compared to what Posterous is (especially when you look at how Tumblr cornered the social side of micro blogging and Posterous hadn't).
Having 10 million users is appealing to investors because there's the chance that they might turn into revenue in the future but for a company like Twitter that already has most of those users using their service they're probably not worth very much at all.
Posterous could have been stuck in the stage before becoming a proper business, it could be a fantastic service that tens of millions of users loved but if there's no way to move those users into revenue generating users their most valuable asset could have been the team.
When adding a single user add more costs than revenue, all growth is negative growth. That's part of the problem with many companies. Page views, traffic, and especially "users" do not necessarily translate into money.