It would be interesting to know if this happened 3 months, 6 months, or several years after TACODA was working on their product.
According to this Rho ventures article, TACODA was founded in 2001. http://www.rhoventures.com/new-media-Tacoda-case-sudy.htm They raised 12M from Union Square in 2006. Fred Wilson states he was an early angel investor, and that this conversation occurred early.
My question is - Did they pivot because they raised a lot of money and were under pressure from investors? Or was it the right thing to do?
They certainly had a successful exit by selling to AOL a year later for a good chunk. Hard to argue with that.
But, then AOL shuttered it, and there's not much data on why (other than the "AOL are incompetent" trope)
So, did they sell AOL a time bomb? Or did AOL screw it up?
As for post-AOL ... a lot was going on at that time that makes it hard to analyze without the advantage of hindsight. While most of the team didn't end up staying with AOL very long, the technology still powers most of Aol's targeted ad business, I believe, and the team has spread out and populate dozens of adtech start=-ups today.
This is the 3rd time I've heard a variant of this in the past couple of days. Most of the time when I think of a pivot I imagine changing the product pretty substantially, but I think this seems more true to the analogy. I've seen some success in changing my business model as I started pitching again recently. People are responding much better to our new approach than the one we had a year ago. (Not that successful pitches are the same thing as real success)
In other words, because TACODA was selling services, by changing accounting practices their customers saw a radically different product - one which made the person recommending it to their boss look clever.
The pivot more fully leveraged TACODA's expertise. Because their they understood the how and why and when of the data's value so much better than their customers, the fraction of their monetization sent to their customers was more money than their customers were ever likely to extract.
"How can I send someone a check?" is a counter-intuitive business model for most people. Even though it is used all the time.
Great Point. This was the sole reason for Groupon's success even though were a lot of coupon companies before. Imagine what would have happened if Groupon charged small business to distribute their coupons instead of paying them?
I doubt you change from publisher saas model to be an ad network just changing your Billing contracts (like the little anecdote makes you believe), now they have to go after they agency and sell to them, and manage impression mismatch claims and what-not
Their model reminds me of payroll services like ADP which are ridiculously cheap. They make their money on short term float and the larger the payroll they handle, the more money they make.
Instead of taking money from their customers, they gave money to their customers.
Now if I could only make Lamborghini do the same ...
They didn't so much target greed as they did reduce the initial investment risk.
Well... if you are an advocate of the @sgblank "Customer Development" approach, then changing the product is the last thing you do. The goal of Customer Discovery is to find a market for "the thing you are building" and you only change to a different "thing" if you can't find a market.
Of course, there are cases where the line between the "thing" and the "business model" can be a bit fuzzy. In the case of TFA, switching the business model essentially was a change in the "product" that was being offered. But the important thing is that they found product/market fit - even if they didn't follow the letter of some process in doing so.
I personally know of a similar story on a smaller scale, where a consulting team was developing custom web solutions for client after client (in the CRM space), and one day decided to turn their product into a SAAS offering instead.
They went from selling 3-4 sites a year to having several hundred clients in about 3 years, and even spinning the SAAS business out into it's own separate company that is now 10x the size of the consulting company (which they still run for other types of custom work).
So it's definitely true that sometimes the pivot is in the approach and not the product.
And isn't that basically the 37 Signals success story also? They took their custom products and turned them into SAAS offerings..
Not quite; they spun out their internal tools into SaaS offerings while doing custom dev.
To my eyes, even the more traditional enterprise-to-SaaS model shifts that are happening reflect the same trend - trading the (customer) risks of big $$$ up-front, long implementation etc for the (startup) risks of needing to attract more customers to make the same amount of $$$.
But If you are in good job but feel bored. here is my version
You may have the right job but the wrong working model.
Fixing the working model can fix ur work life.