ChaCha Business Model Breakdown: Why ChaCha failed?

ChaCha was an American human-guided search engine that provided free, real-time answers to the questions asked by people, either through its website or by using one of the company’s mobile apps.

The company was founded on September 1, 2006, in Carmel, Indiana, U.S. by Scott A. Jones and Brad Bostic. The name of the company ChaCha came from the Mandarin Chinese word cha which means “to search”. ChaCha seized its operation on December 12, 2016.

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How does ChaCha work?

So, if you don’t have any idea how the famous search engine of that time ChaCha worked, so let me tell you ChaCha search engine came before Siri, google now, Cortana, or Google searching. ChaCha is the text message search service. You would text a question to the toll-free number 242-242 or “ChaCha” and within a little bit, you got your answer to the asked question.

And that’s it, that is how it worked but people felt so tense as to hit keys multiple times to get to the letter they want. The service used real people to answer the questions people just like a guide.

Business Model:

Key Partners:

ChaCha was partnered with so many big firms and people such as Bezos Expeditions, Jack Gill, Jeff Bezos, Morton Meyerson, Rod Canion, Scott Jones, and many more.

Key Activities:

ChaCha was a human-guided search engine whose key activity was to provide free and real-time answers to any of the questions asked, through its website by just texting them the question or by using one of the company’s mobile apps.

Key Resources:

To find the services of ChaCha people used to either text them on the website or just ask them by messaging them on the company’s app. These key resources of ChaCha had been beneficial for the company’s achievement. And people also found it fun and knowledgeable.

Value propositions:

ChaCha’s most unique value proposition has been its launch. ChaCha was used by almost all the people around the world. ChaCha was a masterpiece of that time because of the crazy and innovative idea and a company claimed that ChaCha has 18 patents that have been filed in the very first year. There were many investors who wanted to invest their money in ChaCha.

Customer Relationship:

ChaCha search engine always tries to make things work for their customers. They always wanted that what their customers ask, they will be able to answer that query or question. ChaCha provided 24×7 services for the customers with 0 charges.

ChaCha was free, and give its customers real-time answers to any question. ChaCha also tried to make the questioning part easy as users can either use their website to find the answer or just use the mobile app and ask by texting on the given number.

Customer Segments:

Scott A. Jones firstly before launching ChaCha has three primary pools, they are college students, retirees, and stay/work-at-home mothers. ChaCha thought that their target markets will be going to be college students but what surprised them was the group that was using ChaCha the most was the stay/work-at-home mothers.


ChaCha always got connected with their customers from their website and mobile app. They always try to resolve the problems of their users and stay connected with them in every possible manner.

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Cost Structure:

ChaCha doesn’t charge any fees from the users. ChaCha usually makes money from advertising. The questions asked by the users got a store in ChaCha’s knowledge base, and that base knowledge available on the website showed advertising, which generated revenues. And then there were quite some investors who had put their money on the venture.

Revenue Streams:

ChaCha the search engine company started it very well the revenue generated was full of profits but from time to time ChaCha’s revenue was deteriorating and there was no other option but to defunct the company.

On November 23, 2016, ChaCha discontinued the guide program because of insufficient funds available, and on December 12, 2016, ChaCha shut down operations due to declining advertising revenue, which left it unable to service its debt.

Investor’s Details and funding:

The total funding of ChaCha was $96 million and had 9 funding rounds. Some of the investors were Rho Capital Partners, Vantage Point Capital Partners, Qualcomm Ventures, Morton Meyerson, Jeff Bezos, Scott Jones, Jack Gill, Bezos Expeditions, and Rod Canion. Now, let us see a graph of 5 series funding rounds,

Now, you must be wondering that if everything was going well with ChaCha then what led it to defunct in the end? So, now let’s just have a look at the reason

Why does ChaCha fail?

  • If we compare today’s Google with ChaCha then we can understand how complex was ChaCha to operate. In the early days of the search engines, you really had to deep delve to find exactly what you were looking for. It was so slow that before you had found a decent result of your question (and then also not up to the mark).
  • ChaCha suffered from competition because of the tech landscape. When smartphones began to gain popularity in the late 2000s, users could easily use search engines on their phones instead of having to text ChaCha and facing all the complexities again. In addition, when Google launched its algorithm named Panda, in early 2011, results from sites like ChaCha,, and were pushed further down. This was one of the major reasons why ChaCha failed.
  • In 2012 Google started to work on ways to understand human language, Google wanted to be able to provide accurate answers to complex queries. This question led to innovations, such as the knowledge graph in 2012 and Hummingbird in 2013, and RankBrain in 2015. Those search algorithm changes made Google way more powerful than before. Those also allowed it to consolidate Google’s growth and ChaCha’s failure.
  • One more reason for ChaCha to failed was scaling problems. When at its peak, ChaCha employed 55,000 part-time answer guides to answer the query of millions of users. And these part-time employees proved hard to manage, especially when asked theoretical questions. Lack of knowledge, lack of cost all led to one more reason for ChaCha’s shutdown.


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Also, don’t forget to download our Android app which contains startup and business book learnings, verified business knowledge and concepts, and no bullshit!!

Related Articles:

What is ChaCha?

ChaCha was an American human-guided search engine that provided free, real-time answers to the questions asked by people.

Who founded ChaCha?

ChaCha was founded on September 1, 2006, in Carmel, Indiana, U.S. by Scott A. Jones and Brad Bostic.

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