Is it a good thing? Depends.
Apple’s own acquisitions with Siri and Lala ultimately became part of new Apple products and services. In many cases, acquisitions are talent and technology transfers for products being hatched by larger fish. In some terrible cases, nothing ever happens. In the case of Google’s acquisition of YouTube, it only seemed natural and has proven to be a success.
However, a lot has been said about the Sparrow acquisition by Google over the last few days. I actually “discovered” Sparrow through an AppSumo deal. The product itself, a less messier “skin” to GMAIL, IS (and now, WAS) amazing. It’s fantastic on MacOSX and my iPhone — however, the iPad never got its wish.
But do these acquisitions benefit all parties - including consumers? Hard to tell. In the case of Sparrow, I did actually make an investment (purchase) in the product and based on the email received from Dom Leca, it’s pretty certain the product is end-of-life for MacOSX and iPhone users. In many cases, the startup team moves into larger environs to help make things radically better — perhaps, in the case of Sparrow, the acquisition is really for the 5-person team who hopefully will improve GMAIL because IMHO, the new GMAIL U/X is worse than before.
Did Sparrow sell out?
If you look at what they designed, they do not appear to have been in the game for an acquisition. They passionately wanted to create something people would love. So it is doubtful, they planned for a “sell-out” to Google. More likely, as many have also postulated, it was simply a reality-check. While MacOSX and iOS app stores are new pipelines to revenue for developers, productivity applications rarely serve a “mass market consumer” and are generally niche market. Think about it? It’s a native email app client on MacOSX where Apple Mail (does well enough on MacOSX and iOS) and Mac Office rule the roost. That’s a tough market to make money in considering Gmail’s own native iOS app is now available. Then there’s the news about Mozilla slowing development for Thunderbird (an open source e-mail client available for PC and Mac) and then you soon realize that The Saints Have Come Marching In.
The new startup ethos is one of lean operations and scale. In Toronto, there are far too many startups with 3-to-5 person development teams trying to monetize a niche activity on smartphones in a sea of mobile apps— too many apps, too many me-too’s and a very difficult roadmap to differentiation. So when you don’t have a viable business model (does Instagram have one? Sure, they have many users, 12 or so employees and a $1B price tag from Facebook) and are then poached for IP/technology and staff talent, you weigh your options. No one (we hope) gets into it for the large buyout but that is becoming the viable business model for many niche players in the startup ecosystem.
Most of the startup founders go to these larger organizations with great hopes to infuse their wisdom, ingenuity and passion into new products. But they end up leaving shortly thereafter. When Apple lost to Google in trying to acquire Admob, it rushed to Quattro (not their first choice). Parts of the Quattro team have since left Apple. As well, parts of the AdMob team have also left since the Google acquisition. In March 2011, Facebook acquired Beluga (chat app) in a talent and technology deal and then killed Beluga in October 2011 as part of its broader Facebook messenger strategy.
These acquisitions are always filled with excitement by the startup founders that get acquired. They believe they’ll be able to do great things. Sometimes, the motives are well-intentioned but in many other cases, the acquisitions simply occur to kill competition. Facebook
IS was the most popular photo-sharing network until Instagram came along. Photos are sticky, viral and draw people in. Instagram was a threat to Facebook. So they bought it. Lala and Siri had talent/IP which complemented Apple’s long-term strategies and so far, appear to have worked out well. Better than Quattro has for Apple iAds.
Do you remember other acquisitions that went no where?
- Google buys reMail
- Google buys BumpTop
- Google buys SageTV
- Google buys Apture
- Google buys Katango
- Facebook buys Beluga
- Facebook buys Gowalla
- Facebooks buys Glancee
Why did they happen in the first place?
- The big, like Google and Facebook (competing ferociously), don’t want the competition if they’re already in the market space with similar or planned products.
- Acquired startups have smart talent and thus, skilled talent is hard to come by. This is a factand is quite true as there’s definitely been a large leap in demand for top technical talent today.
- Larger players like Google, Facebook are afraid of smaller startups — they’re agile, smart, passionate and could come out with the next big thing to destroy their current business, platform, or products. Instagram anyone? As a top photo-sharing app, it was displacing viral, sticky activity within the Facebook platform around photo sharing.
- Startups build niche products or services as a business strategy only to be acquired because they know their current innovation isn’t large enough to scale into a proper business model.
- Startup founders truly believe they could do better in larger organizations with their skill-sets. Most find out that the grass isn’t greener in larger pastures.
What does this say for consumer who has to put up with all of this? If you’re paying for products, be prepared to accept this as a new fact of life. You may invest in something that eventually is sold/acquired and placed on end-of-life status. For the free stuff, be prepare for the carnage on your smartphone desktop as it becomes littered with shells of HALF-LIFED products that never get to see the larger light of day.
- Google acquires Mac, iOS email client Sparrow (macworld.com)
- What Google Is (techcrunch.com)
- Acquisitions (samsoff.es)
- Why Facebook Is Still The Perfect Startup (Slides) (techcrunch.com)
- Good Deal: Sparrow for Mac now $4.99, half-price for 3 days (theverge.com)
- Sparrow For iPhone Now Just $0.99 For 48 Hours (cultofmac.com)