Phil Sim

Web, media, PR and… footy

Writely’s another Web 2.0 nail in the coffin

If Google’s acquisition of Writely has any of you Web 2.0 folk jumping up and down thinking the heavens are about to open up and rain gold, then sit down, put away your umbrella and take another Squash reality check.

Over the past week, I’ve read any number of blogs congratulating the Writely folk for selling out. But every indicator points to the fact that this was a dirt cheap deal and perhaps even a salvage mission.

Firstly, has it struck no-one as surprising that there has been almost no speculation as to how much Google paid for Writely?

That’s the first indicator that this was a teeny-weeny deal. When people sell-out in a big-money acquisitions, they usually can’t help but tell that trusted someone, who tells another trusted someone, who passes the word onto another trusted someone and so on until a pretty reasonable picture emerges as to roughly what was paid.

The fact that no-one’s bragging on this one, suggests that, well, there ain’t much to brag about.

More telling though is that I’ve been chatting to a company who is a significant player in this whole web-office space and they swears blind they’ve not even had a nibble from Google. Not a single call, e-mail or overture. Nada.

If this was a strategic acquisition from Google they would have scouted the playing field and this company would have been a part of that. So based on this information, Google ain’t out there looking.

First thing to take out of that fact is you shouldn’t expect a GoogleOffice any time soon. If Google is doing an office, they’re doing it in-house and that’s going to take some time. However, more so, this indicates that GoogleOffice isn’t a priority for the big G. Sure, the Writely buyout is an admission that they’ve got something going on in this space, but as I’ve speculated before I think it’s very much tied to the GDrive/Lighthouse projects and I don’t think anyone is expecting those to be rushed out to market anytime soon.

Salvage?

The second assumption you might draw from the fact that Google aren’t casting a net around is that it’s far more likely that the Writely crew approached Google, than the other way round.

I think there’s ample secondary evidence to corroborate this theory, too.

Google wrote on their blog that Writely had “many thousands of users”. Not tens of thousands of users. Not hundreds of thousands of users. But thousands.

Anyone who knows marketers know that if there are 10,001 users you start talking about tens of thousands. So lets be kind and assume Writely had 9,999 beta users. Other people in this market have told me that’s likely being generous.

The Writely business model appeared to be trying to tempt a portion of its users to pay a “reasonable subscription fee” for advanced features.

Our hope is to always have the basic service be free, with some extra features requiring a reasonable subscription fee.”

There wasn’t too much holding Writely in beta. According to its Beta Meter, 60 per cent of users felt it was time for Writely to rip off the beta label.

Now it’s all well and good to pretend that there’s a big, whopping market out there when you’re in beta but when you take a service like this live, you need to start walking the talk.

So let’s run some numbers. Let’s assume that Writely did a really, really good job of converting users to paid subscriptions and they managed to get 10 per cent of users to cough up some coin, which would be an impressive feat when you consider there are free alternatives out there in the market and there’s not a heap of value-add you can add over and above the primary product. Anyway, that gives us about 1,000 paying users.

How much is a “reasonable subscription feed”. If you look at paid services like Trumba or BackPack we’re probably talking about $50 per year. So best case, we’re looking at revenues around the $50,000 per year mark. We’re not even close to covering the four Writely salaries at those levels.

So if Writely was going to go it alone, it needed to raise VC dollars fast to fund a marketing campaign. You tell me any VC, even one who’s drunk a REAL lot of Kool Aid, who’s going to look at those numbers and see a great investment opportunity.

Best case option then for the Writely folk was to approach a company that they wanted to work for and hope for a HR-driven buyout. That looks to be exactly what has happened.

All this, and we should remember that as far as Web 2.0 consumer plays, Writely looked pretty good. The product was almost perfectly executed; it was good for generating a lot of natural buzz, such is the fascination with a possible MS Office killer; and it was an easy to use, easy to understand product that should have been relatively well-place to break through the wall of Web 2.0 freakazoid early adopters.

Yet, in the end, it almost certainly sold for peanuts. So go on and tell me again, how revenues models don’t matter in the Web 2.0 economy. Go on, please, it just gets funnier every time I hear it.

Filed under: Online Applications, Web 2.0

21 Responses

  1. Hal says:

    Interesting article. However, I must take issue with the concern for the business model somehow resembling (in any way, shape or form) the model that Google will use to monetize (I hate that word) this purchase.

    My initial thoughts turn to the Urchin and Deja purchases in which the business model was completely scapped and simply folded into the over all G model.

    Imagine a Writely interface wrapped in adsense so that you are able to contextually target the user based on what they are actually writing/reading (more importantly writing) about.

    As for the user base, it wouldn’t really concern me if Writely had only 100 users – Google makes the user base, not vice versa. I wonder how many thousands of people had absolutely no idea what Writely was prior to the Google purchase?

    I do find it interesting that we don’t have a price on the Writely purchase, but anticipate that we will in the next few days. Isn’t that manditory for GOOG?

    Just my .02.

    Thanks,

    Hal
    http://hal.lco.net

  2. Kris says:

    This acquisition may also be attractive as a “spoiler” offering. For a small amount of money Google can offer this to millions of users for free. If even a small % decide to use it instead of MS Office they destroy a chunk of MS revenue.

    If the offering does catch on for some reason and gets well integrated Google could have something more but even if they don’t they have the fun of being a little disruptive to MSFT.

    Another company I saw at ETech, http://www.thinkfree.com appears to be doing this kind of thing to MSFT.

  3. writemedown says:

    Now that we know about Google’s almighty cache and other search engine horror stories, who in their right mind would want to create and/or store their documents online (for all the world to peruse)?? Not your average business user. Not me either. How about you?

  4. Tony Wright says:

    A small check makes sense.

    I don’t know much about the Writely team, but I do know that one of the much-ballyhooed things about web 2.0 is a couple of guys can build great things (sometimes in their spare times).

    The companies that sold out for the big checks in times past had big investments. Big infrastructure, big teams, and big risks.

    If a great web 2.0 app is created by a couple of college kids running on a little server at serverbeach and they get a few months of traction, it’s ridiculous for them to expect a monster check.

    The earlier a business is in their evolution, the bigger the risk in the acquisition.

    Cool article, though! Anything that tries to bring Web 2.0 down to earth a bit is a good thing!

    Regards,
    -Tony Wright
    http://www.day2.org

  5. farlane says:

    Interesting point, Kris. I think that more likely is that it provides a deterrence for other companies looking to move into the open desktop space: “Well, Google’s there. No point in even trying now.”

  6. Kelly Smith says:

    Wait a second. The crew at Writely set out to make money. I guarantee they made more money with this acquisition than most people writing blogs. And, all that in less than a year. Think about it. Let’s say the three of them walked with $250-$500k in cash plus got high paying jobs at Google plus got some stock. I’d venture to guess all three of them made a million bucks each. Anybody else typing on this page care to top that for 10 months work?

  7. I guarantee they made more money with this acquisition than most people writing blogs.

    You have low standards🙂.

    It’s an actual *product*. Of course they did.

    The question is, how much?

  8. dan says:

    I really really think your estimate for the number of users is low. I had an account and new many other people that had tried it out as well, it was on slashdot a number of times and made front page on digg (not the buy out, just about using the product). also, I am sure there are some competitors out thier, but the only one i had heard of was writely, so it must have been doing the best job of getting its name out there.

  9. Got here from Reddit, and have to say…after having read about a dozen blog posts and articles about this buy, this is one of the only fresh takes I’ve seen on the subject.

    I think everyone else is readying from the same press release. In any case, I still think Writely is a killer tool (I got an account before they closed it) and I think Google made a wise move. Even just as an opensource converter between .doc, .pdf, .rtf, and .odt I think it’s a good solid toolset.

    Writely needed a little cash and good stable jobs, and Google can and did give that to them. Now they can throw some staff and money at an already good set of technologies and we’re likely to have a pretty useful tool on our hands and see it pretty widely adopted.

    In any case, I subscribed to your feed.

  10. Caitlin says:

    It’s not that revenue models don’t matter in Web 2.0 plays (we’ve all heard that before) but they don’t matter for venture capitalists. I am commenting here partly in response to your post the other day about your friend’s company and the VCs saying it wasn’t their sweetspot. The thing is that VCs are there to speculate rather than invest and they generally won’t put money into something that is going to be funded through other means. If it’s a rock-solid business plan that’s virtually guaranteed to make money, they don’t need VC money as it will be funded anyway. Hell, they can probably get a bank loan!

  11. Simen says:

    This was probably as much about the people behind it as the application. Maybe with Google they get the opportunity to actually _make some money_…

  12. thomask says:

    I agree with every point that Daniel Talsky made–that pretty much sums up exactly where I’m coming from as well. I would add that I’m as interested from a general user’s point of view as I am from the view of VC’s, companies, etc. By spreading Writely so much faster through Google, it may not exactly be GoogleOffice (perpetual beta), but it’ll send ripples in any case, especially now that Excel-style web-based spreadsheets like iRows have appeared.

    I recall hearing either Bill Gates or Steve Ballmer saying they were not too concerned about web-based apps along these lines because they simply do not have the capabilities that Microsoft’s desktop client has. They may not worry publicly, but if lots of people end up managing pretty well with the reduced capabilities of web-based versions, it could cause a dent in Microsoft’s revenues and affect the pricing for MS Office. If a large culture of GoogleWritely users begins to develop, I would expect Microsoft to follow with its own version of a customizable web-based desktop with a pared down Word and Excel program—of course, belatedly.

    Incidentally, one of the good jobs Microsoft has done lately has been its web-based demo of Office, with its own Goowy-style, flash-based desktop. If the company can manage to turn that demo into an actual web-based product, it could have a nice product to work in conjunction with its upcoming search engine and compete with Google in this area.

    Of course, none of this bears on the question of how much or how little Writely was acquired for, which is generally what folks seem to be discussing. Sorry for the long comment.

    BTW, I seem to recall they already have six different editions of MS Office upcoming. If that’s correct, I suppose they’ll need to come up with a seventh: an online, “MS AntiGoogleWritely Edition.”🙂

  13. Alejandro says:

    Well done dude! I like it.

  14. Phil Sim says:

    I once got Steve Ballmer very angry in about 1998 at a media roundtable by pressing him on whether network computing could kill Microsoft. He scouted round the issue time and time again and then eventually just blew us ‘Yes, if the network becomes the computer, we’re dead. But it ain’t going to happen’ or words to that effect. Doubt he’d make that admission today (apologies if I’ve told that story before it’s about my favourite all-time journo tale).

    Hey, great comments guys. These have been more interesting than my original post I reckon!

  15. Tony says:

    Wonderful article – have subscribed.

    I think as Writemedown noted, how many businesses want their information stored on someone elses databanks.

    How long will it be for Govts around the world, start to limit how much information about and from their people is stored on US servers. How long before the US Govt really tests Googles resolve about not passing over information.

    Googles achilles heel is it’s very ‘success’. Trying to expand that success, ie more and more information on file, may very well acheive just the opposite.

  16. Chris says:

    Its the old build vs buy attitude. For all its smarts and wealth, Google has the same decision to face. They obviously have web-services Word Processing in their future, and they had a chance to buy something cheap rather than waste their own time on it.

  17. […] Все вокруг рады за команду Writely всвязи с его поглощением Гуглом. Строится куча предположений кто же будет следующим из ниши онлайн офисных сервисов. Однако сегодня попался пост с совершенно противоположной точкой зрения на сделку. Точка зрения мне очень понравилась. Предлагаю вам сокращенно-свободный перевод поста “Еще один Web2.0 гвоздь в гробу Writely“: […]

  18. Grant says:

    It’s difficult to see how Writely was sustainable as an independent business; I’d wager that their initial business plan contained “Get bought by Google or Yahoo!” as an exit strategy (another nail in the coffin for some potential investors, I’m sure).

    And yet this seems to be a defining characteristic of at least half the hot “Web 2.0” properties I see on a weekly basis – if we build something cool enough, we’ll get bought. It doesn’t matter if the product’s utility lasts beyond the initial “beta” period for their users; they have no intention of making a real go of it. The application is, in effect, the startup team’s portfolio.

    The big ideas in this wave of innovation aren’t about making web-based versions of the same apps we’ve been using for fifteen years. The people that get the important concepts won’t be building to flip.

  19. BillyG says:

    You must be reading the same people I’ve been reading IRT LightHouse etc.

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