The partners behind a one-time "next big thing" go to South by Southwest to win back the adoration of the tech world--and figure out how to make their partnership work.
THE ARTIST AND THE BUSINESS GUY: Billy Chasen (left) and Seth Goldstein at a SXSW party hosted by their company, Turntable.fm. The blue bear represents an avatar from the site.
PARTY AT OUR PLACE! A-Trak plays a turntable event. Some conferencegoers joked about Turntable being last year's news, but 1,500 people danced to electronica at this party.
Last summer, Turntable.fm set techie hearts pounding: Billy Chasen and Seth Goldstein, co-founders of a struggling start-up called Stickybits, had pulled an audacious pivot, scrapping their service and betting everything on online music, the most treacherous business on the Internet—and it worked.
The whimsical site they released, where users posed as cats and bears and spacemen playing songs together in a chat room that resembled a rock club, attracted more than 360,000 users in three months, then $7 million in funding at a $37 million valuation. Even celebrities backed it: Jimmy Fallon, Ashton Kutcher, and both Lady Gaga's and Madonna's managers invested. Turntable "has upended how I listen to music," blogged New York Times editor Sam Grobart in a post titled "Spotify is great, but Turntable.fm is Amazing."
Then traffic started falling. By autumn, it dwindled to less than half its peak, and the very same tech watchers started wondering whether it was all over. Goldstein says he can hear the doubt in the voices of his Silicon Valley friends. "I can tell now when people say, 'How's it going?' they mean, 'You're flattening, aren't you?' "
Chasen and Goldstein agree the music fans are still out there (music site Pandora has 49 million active users, Spotify 17 million). Their disagreement over the answer to the obvious question—how to get them back—has created a rift between them that has influenced both their partnership and the direction of the company. In some ways, it's a classic split between product and marketing. But their predicament highlights what's so weird about the social-media business: Nobody understands why certain sites grow, exactly. Yet whether or not Turntable takes off again will determine whether it is worth billions or practically nothing. And with no causal data, all that remains is buzz, conjecture, and gossip—the How's it going?
And nowhere is that chatter louder than at the annual geek migration to South by Southwest in Austin. Every consumer Internet start-up is here, beating its chest in the form of boozy parties, free food, and goofily dressed hucksters with fliers. Every year there are hot companies. Sometimes they go on to become great successes, as Twitter and Foursquare did. Other times, they just become the butt of a joke at the next year's conference. This year, an app called Highlight became hot and a joke at the very same conference, when its location-based app enthralled the crowd until its hefty power needs collectively drained everybody's iPhone battery on the first day—maybe SXSW's only unforgivable sin.
Chasen and Goldstein arrived in Texas with big news: They had just signed licensing deals with the four major record labels. By hosting two parties, a dinner, and a barbecue brunch, and speaking on two panels, they were here to stake their claim.
I find them finishing up dessert at an upscale American Nouveau place before their Saturday-night fete, a 400-person party featuring DJs AraabMuzik and Flying Lotus. They look tired. Typically, each remains on his own coast, running the 14-person company in two mini silos. (Chasen still hadn't met the lawyer who negotiated their label deals; Goldstein recently stopped calling in to the Monday staff meeting after Chasen called it distracting.) In person, they trade gibes like a married couple, and sometimes it's funny. Other times, everybody around just feels uncomfortable.
Goldstein downs a double espresso, Chasen settles the tab, and at 7 p.m., it's time to wade through the tipsy crowds to the venue, 12 blocks away. The walk reveals how both men feel about nightlife and parties: Goldstein, 41, gets a bounce in his step, excitedly commenting on stores and bars we pass. Chasen, 31, is stoic. When we stop at a crosswalk before a highway overpass, the crowds dissipate, but we still have three blocks to go. I overhear a young SXSWer ask another if she's headed in the right direction. He replies that she probably isn't, unless the party she's trying to get to is "really low rent." Chasen sighs.
When I first met Goldstein in January in California, he was dressed much as he is now—in a plaid shirt that, with his scruffy beard, made it look as if he woke up in a cluttered loft somewhere and not in the $3.75 million, 4,500-square-foot Mill Valley home he shares with his two children and wife, Tina Sharkey, chairman of the website BabyCenter. They moved to California in 2006 from New York City, where he founded a financial services company called Majestic Research, which he sold in 2010 for $56 million. He's tan now and has taken up healthy hobbies like cycling—but he is as intense about that as he is about everything else.
Goldstein has made a career out of playing the tech zeitgeist. He founded a CD-ROM company after graduating from Columbia, then an interactive ad agency, then a concierge service aimed at PalmPilot users. In 2002, with hedge funds ascendant, he packaged Internet data for financiers (that was Majestic Research). More recently, he started SocialMedia.com and Root Markets, a website that ginned up home mortgage leads. Some were successful; others, like the mortgage business, went south. But the strategy was the same: You go where the money is.
Goldstein's latest read is simple: Coders are the new rock stars. Twitter's Jack Dorsey and Facebook's Mark Zuckerberg built sites that attract crowds of millions, but they don't completely understand how they did it—and neither does the money backing them. It's not as if they do market research. So venture funds now bet on hackers the way record labels bet on rising pop stars, hoping that someday soon, they will make something wild, new, and insanely lucrative.
Chasen is Goldstein's rock star. They met in 2006. Goldstein had read a Wall Street Journal article about a Chasen art project called Swarm, in which users downloaded a piece of software that sent miniature screen shots of each webpage they visited back to a server. As people surfed, it assembled all the little images into a blossoming mosaic—a visual representation of how crowds swarmed around the Internet. Goldstein liked what he saw: Here was a coder who had an artistic bent, who was fascinated by the online crowds in much the same way Goldstein was fascinated by figuring out how to profit from them.
For Chasen, their first meeting, held in Goldstein's lush office overlooking the Hudson River, was eye-opening. Since graduating from the University of Michigan, he had worked a corporate job, then freelanced as a Web developer in New York, then moved in with his parents on Long Island for a year to make art. He painted parodies of Dali and turned a computer monitor into a fish tank. When an idea outpaced his technical ability—like when he wanted to encase an exploded iPod in resin—he taught himself the necessary skills. But after a year, he lost motivation. He found he never wanted to sell the works, which would mean parting with them. Developing websites was easier, because he never had to say goodbye. It paid better, too.
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