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Why Did Friendster Shutdown? Here is the complete analysis!

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They were the brain of one of the biggest disappointments in Internet History. Even before Facebook, they were among the very first online social networking platform. Why couldn’t they emerge as a leading startup?

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

Founder Details:

Friendster was founded in 2003 by Jonathan Abrams, who was a Canadian computer programmer. It had its headquarters based in Mountain View, California.

He came up with the idea of wanting to integrate persons’ online and offline identities. He wanted to create an experience for users to present their interests and good looks by creating a network of connections. In 2004, Friendster was the top online social networking service. The company had a long history of changing ownership in the company:

  • In April 2004, Tim Koogle became the CEO. He previously served as president and CEO of Yahoo.
  • In June 2004, Koogle was replaced by Scott Sassa.
  • In May 2005, Sassa left the company and Taek Kwon became the CEO.
  • Followed by capitalization by Kleiner and Benchmark, Kent Lindstrom succeeded Taek.
  • In August 2008, Friendster had a new CEO Richard Kimber who was earlier an ex-Google executive.
  • In December 2009, MOL Global, one of Asia’s largest Internet Companies, acquired Friendster for $26.4 million.
Jonathan Abrams at TEDx Talks

Competitor Analysis

Soon many companies emerged with the same business model and most of them failed just like Friendster. The only well known which saw success is Facebook.

Facebook:

Facebook is the most widely used social media app developed by Mark Zuckerberg, a Harvard sophomore in 2004. It has become one of the most valuable companies in the world. Facebook has marked the history of social media.

Myspace:

It was an American social networking site, having significant influence from 2005 till 2008. It was originally designed to share music by bands and musicians but later grew into a social media app.  In 2008, it was acquired by Facebook. Myspace was the first social media platform that was used globally.

Hi5

Hi5 is a social networking service that had its headquarters in California in 2003. App redesigned featuring gaming and entertainment shifting from social media platforms. In 2011, it was classified as an online gaming site.

Funding and Investor Details

The company received huge funding besides being a private company. In 2002, they received $12 million and from Kleiner Perkins Caufield & Byers, Benchmark Capital, and other private investors. Next round of funding they got $3 million and in the same year, they received $10 million from DAG Ventures.

The last round of funding was led by IDG Venture in August 2008 and raised an additional $20 million.

Business Model

We can say that Friendster was 2003s Facebook. Users need to create an account by signing up on the website. All you need to input are the basic details like name, email address, gender and birth date, etc. Next you set up a password and put a profile picture. You are ready to connect to the online world.

Friendster was the very first global network to support the Asian language. This was a great feature in connecting people around the world. The website allowed users to share content online, videos, photos, and messages and maintain contacts. Discovering new events, brands and hobbies became so easy. The app was also used for finding dates. It was an original social networking platform.

Other Services:

  • After the global partnership with MOL in 2009, Friendster came up with a Wallet and payment platform known as Friendster Wallet. They supported a variety of payment methods like mobile payments, prepaid cards, online payments, and much more.
  • Friendster also launched “Friendster icafe”, which was a cybercafe management system especially for gamers and “Friendster Hotspot” for retailers, a free wifi infrastructure.

In 2015, the company became a social gaming and entertainment site after it was sold out. Further in the article, we will explain why such an early start and a great product had to shift from their initial Business model and become a gaming site. It was then based in Kuala Lumpur, Malaysia, and mainly operated in 3 Asian countries Philippines, Malaysia, and Singapore. Among all the users 90% were Asians. The company ceased its functions in July 2015 after they failed to gain momentum in the gaming network also.

Revenue Model

Like any other social networking or non-subscription sites, Friendster would sell advertisements to companies that want to reach users. Initially, this was the main source of income. Their sites had a massive user base and companies would provide huge sums of money to display advertisements. They had content partners which included game developers and publishers providing the company with monetization solutions.

The company also provided software developers access to APIs that utilized data within the Friendster network.

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Failure Analysis

Friendster was successful in coming up with revolutionary products and also had sufficient funding to have a big start. The site shut down its social media networking services on June 14, 2015, and sold off to become a gaming site.

Key areas in which the company lagged were Technology, user experience, and platform. This stopped them from becoming today’s Facebook.

  • Technology:

Bringing the site into the world is not enough, you need to continuously work on it to make it better. Servers of the company had database issues or coding that wasn’t optimized. This slowness in logging in, loading of contents, and even total site shutdowns created a lot of frustration among users. Users weren’t happy in using the site and looked for other alternatives.

  • User-experience:

Bad technology breeds bad user experience. The company didn’t think about working to improve the system. As the competitors grew, users lost interest and found more fun features elsewhere. Soon Facebook emerged and grew at a fast pace. Their product had everything that Friendster lagged like photos, sharing, app content, games, and privacy whatnot. Facebook picked up upon the shortcomings of Friendster and worked them out smoothly. Moreover bringing in dating features in networking by Friendster was not a good step, it only invited fake profiles to the sites. The idea totally backfired.

  • Platform:

Friendster couldn’t keep up with the fast-growing network world. It lost out to its competitors besides starting first. Competitors especially Facebook kept with the pace and needs of the people. They were so dynamic in creating interesting content that even users couldn’t think of. Facebook instead of generating early revenue thought just of improving and growing bit by bit. Facebook gave the full leverage to reach out to every kind of audience; they provided a platform for developers to create their own content.

Friendster failure can be summed up in whole isolated mismanagement and wrong decisions. The company is known for committing the biggest blunder in the history of Silicon Valley by rejecting Google’s offer in 2003. The company founders wanted it to remain a private company. The company was looking for stability and kept losing market shares. While all these competitors like Facebook and Myspace were taking actions by doing those things Friendster couldn’t do.

The company lost the war even before it started due to stability issues. The market already had various clone sites of Friendster. Even the Friendster investor built a site called Tribe.net. The company failed completely to poach back users in such an evolving landscape of this challenging industry.

Possible Fixes

Right decision-making is part of management. The company lacked the basic skills to work things out. They had a market-fit product, they had users for the product, and also revenue. The company was highly mismanaged and misbalanced. For the success of social networks first and foremost it is important to focus on being social. It’s necessary to keep updates of what’s going on, reaching out and putting yourself out there. This is only meant to create and bring in changes to fit in the market. You can’t stay isolated and ignore the flaws of your product.

Social networking wasn’t as easy as gaming. They didn’t realize users’ profile and no. of friends they had as a feature is only one element of the experience. Users eventually got bored out.

Here a very important lesson needs to be learned from Facebook. Facebook first lured the audience with profile building and then they stopped playing around. For a long-term success which is still clearly visible they brought up a feature of news feed. This feature had a great importance in their success, it brought everything together by putting the friends updates, shares and discussions to the front. People started getting interested as they could easily see the whereabouts of their connections.

The problem not only lied in bringing new features but also in their focus and timing. The company lost track soon after its launch for not being tactful in decision-making.

Do Share Your Thoughts

Do tell us all your thoughts in the comments section below, we look forward to reading all the comments in the section below.

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

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FAQs

What was Friendster?

They were the brain of one of the biggest disappointments in Internet History. Even before Facebook, they were among the very first online social networking platform.

Who founded Friendster?

Friendster was founded in 2013 by Jonathan Abrams, who was a Canadian computer programmer. It had its headquarters based in Mountain View, California.

  1. XMC Polska

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