How to Kill a Great Idea!
Published June 2007
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COMMENT ON THIS ARTICLEMeanwhile, scant attention was paid to Friendster's users. Lunt remembers marveling sometime in early 2004 at how Friendster's traffic would mysteriously spike at 2 a.m. Intrigued, he started looking at the site's log. Oh, my God, he thought, everyone is from the Philippines. He worked backwards, looking for "patient zero"--the first American to "Friendster" a Filipino. He found Carmen Leilani De Jesus, a 32-year-old marketing consultant and part-time hypnotherapist from San Francisco, the 91st person to join Friendster. She was directly connected to Abrams as well as to dozens of Filipinos, who'd in turn connected to thousands more. In fact, more than half the site's traffic was coming from Southeast Asia.
From a business standpoint, the revelation was devastating. Friendster, it turned out, was paying millions of dollars a year to attract eyeballs that were effectively worthless to its advertisers. Says Abrams: "We needed to make a tough decision"--either spin off the Asian business or become the No. 1 Filipino social network. But because the Filipino users had come by way of their American friends, there was no easy answer. If Friendster cut the cord to Asia--either by drastically cutting back on engineering resources or by kicking the Asian users off the site altogether--it risked damaging its American user base. The Carmens of the world might look for a less restrictive site.
Of course, that's what happened anyway. Unbeknownst to Abrams, Sassa, and Friendster's investors, demand for social networking was changing. The lure of Friendster--and, to a much greater extent, MySpace--was not the elegant web of connections but rather the opportunity to gawk at strangers. Rather than using Friendster to make dates, most of its users were simply cruising around and looking at the weird interests, pictures, and blog-droppings of strangers (including so-called "fakester" profiles of Jesus and Burt Reynolds). Real-life connections, the core of Abrams's vision, were not quite as relevant as he'd imagined. Thus, the free-spirited MySpace, which allowed anyone to look at anyone else's profile and didn't bother to calculate connections, took off. The site surpassed Friendster by the end of 2004 after only a year in business. A mere nine months later, it would be clocking 22 million unique users per month in the U.S., compared with 1.1 million for Friendster.
As MySpace pulled away, morale at Friendster plummeted. This was especially true among the engineering ranks--normally the workaholics in any tech start-up. "Week after week nobody was getting anything done," Abrams recalls. "You just felt like, what are we all doing?" (Sassa, who recently founded Uber.com, a social networking site, did not respond to repeated requests for comment. Friendster board members Tim Koogle, Roger Lee, Bob Kagle, and John Doerr also demurred.) That summer, with four months of operating capital left in the bank, Sassa resigned. Kleiner Perkins promptly hired him as "CEO in residence," a position he would hold for just under a year. Without Abrams's knowledge, the board then offered the CEO job to Taek Kwon, a 31-year-old whom Sassa had approached as a candidate for a VP-level position. With the understanding that the VCs would inject more money into the company, Kwon agreed to become Friendster's fourth CEO in two years. Given his age and resumé--he had previously been an executive vice president at IAC's (NASDAQ:IACI) Citysearch--he was also the least qualified.
When Abrams was told of the hiring at a board meeting, he was irate. Several weeks later, he met Kwon for dinner at a South Bay restaurant. As they ate, Kwon grilled Abrams about missed opportunities: Why hadn't Friendster incorporated music or videos? What about a functionality that would allow users, and even companies, to invite people to parties? "I started laughing," Abrams recalls. They were all suggestions, he says, he'd been making for years. "That's when I decided to start a new company."
For his part, Kwon was heartened by the conversation, hoping that he'd have more success wrangling the board and controlling the engineers. The optimism did not last long. Shortly after the dinner, Kleiner's John Doerr called to inform Kwon that he was resigning from the board. A new round of VC funding was not discussed. By February 2006, Kwon had resigned and Siegelman had declined to participate in Kleiner's next fund. Abrams was off the board, and Friendster was on the auction block. No serious bids were made.
Following the dinner with Kwon, Abrams disappeared from a public life that had been packed with speaking engagements, television appearances, and magazine photo shoots with beautiful women. He traded those for the solitude of programming, spending 12 hours a day attempting to build a new company out of the event functionality he'd wanted to include in Friendster. He also threw himself into the opening of his bar, Slide. He told few people what he was doing. Auren Hoffman, a friend and now an angel investor in Socializr, says that in mid-2006 he mentioned in passing that he disliked Evite, the IAC-owned website that dominates the market for party invitations. "I don't know if I told you this," Abrams responded. "But for the last six months I've been working on something to kill Evite."
