Failure Story

How Zilingo Crumbled: A Tale of an E-commerce Giant

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Zilingo, founded in 2015 by Ankiti Bose and Dhruv Kapoor, began as an ambitious e-commerce platform aiming to connect small South-East Asian businesses with a global audience. Ankiti Bose, an ex-McKinsey and ex-Sequoia employee, envisioned leveraging technology to empower local businesses to reach beyond their market stalls. Zilingo started as an online marketplace for Southeast Asian shops, offering a range of products from clothing to artwork.

Over the years, Zilingo evolved its business model to address two critical challenges faced by small businesses: expanding customer reach and improving operational efficiency. In addition to being an e-commerce platform, Zilingo ventured into B2B services, providing operational, sourcing, and financial solutions for merchants. The platform offered capital loans, insurance, stock management tools, and supply chain solutions.

The company gained substantial traction and investor interest, securing significant funding in various rounds. By 2019, Zilingo reached a valuation of $970 million and was on the verge of becoming a unicorn. The expansion involved onboarding thousands of merchants and brands and creating a vast network of suppliers and factories.

Worth Reading: QuizUp Story: From Million-Dollar Funding to Shutdown

However, the success on paper concealed the underlying challenges that ultimately led to Zilingo’s downfall:

  1. E-commerce Cash-Burn: Zilingo’s core, despite the B2B aspirations, remained rooted in B2C e-commerce. The company adopted aggressive cash-burn strategies, discounts, and heavy marketing spending to compete with e-commerce giants like Lazada and Shopee. The e-commerce wing became a financial sinkhole with low margins, draining resources from the B2B side.
  2. Buggy Tech and Operational Inefficiency: Zilingo lacked internal software to efficiently manage its diverse e-commerce marketplace and B2B solutions. The absence of adequate technology resulted in operational inefficiencies, with manual processes and a lack of essential features for client onboarding during the early years.
  3. US Expansion and Pandemic Impact: Zilingo’s move to expand into the US market in 2019 faced setbacks, and the subsequent global lockdowns due to the COVID-19 pandemic further disrupted the company’s growth plans.
  4. Scandal and Leadership Crisis: In 2022, Zilingo faced a severe blow when accusations of financial irregularities led to the suspension of CEO Ankiti Bose. Ankiti, in turn, accused the company of sexual harassment. The leadership crisis, coupled with the departure of key figures, intensified Zilingo’s challenges.

The cumulative effect of these factors plunged Zilingo into a dire financial situation, with losses surpassing revenue. In a surprising turn of events, the board suspended Ankiti Bose, and the investors pushed for the liquidation of Zilingo’s assets. Ankiti and Dhruv, despite the tumultuous situation, expressed faith in Zilingo’s B2B vertical and offered to buy the company at half its previous valuation.

Ultimately, Zilingo’s journey serves as a cautionary tale about the perils of e-commerce cash-burn, the importance of robust technology, the impact of external crises, and the significance of leadership in navigating challenges.

Despite having a promising B2B vertical, Zilingo’s financial troubles and leadership crisis led to its untimely demise in 2022

Failure Story

QuizUp Story: From Million-Dollar Funding to Shutdown

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QuizUp, a mobile trivia app, was developed by Plain Vanilla Games and later acquired by Glu Mobile. Founded by Thor Fridriksson in 2013, the app allowed users to compete in timed multiplayer, multiple-choice trivia matches. With over 1200 topics, players could challenge friends or random opponents.

Gameplay and Rise:

Users signed in via social media accounts and answered questions for scores. Each match consisted of seven rounds, including a bonus round, scoring points based on accuracy and time. QuizUp quickly gained popularity, launching on iOS in 2013 and Android in 2014. Within weeks, it amassed millions of users, securing venture capital investments and reaching 20 million users by May 2014.

Business Model and Growth Hacks:

Rather than active advertising, QuizUp adopted native advertising. Partnerships with companies led to questions related to their offerings. For example, Google collaborated on geography-related questions to promote Google Maps. The app’s growth hacks included socializing the application, encouraging users to share achievements on social media, and allowing volunteers to submit questions, fostering user engagement.

Worth Reading: Rise and Fall of Myspace: A Pioneering Social Media Platform

Challenges and Monetization Struggles:

Monetization was a persistent challenge. While QuizUp focused on word-of-mouth publicity, the absence of active advertising, premium memberships, or in-game purchases impacted revenue generation. The inability to monetize led to difficulties in maintaining the game’s user experience.

Downfall and Acquisition:

After NBC canceled the planned television game show in 2016, Plain Vanilla Games sought buyers for QuizUp. Glu Mobile acquired Plain Vanilla Games in 2016 for $7.5M. Despite various attempts to make the game profitable, maintaining a user base of 80 million proved unprofitable. In January 2021, QuizUp was removed from app stores, and its servers were shut down on March 24, 2021.

Lessons Learned:

  1. Monetization is Crucial: QuizUp’s failure emphasizes the importance of finding viable revenue streams to sustain user experience. Relying solely on word-of-mouth without effective monetization can lead to downfall.
  2. Balancing Growth and Revenue: Growth without a parallel focus on revenue can be unsustainable. Burning through venture capital funds to scale must be accompanied by efforts to establish profitable models.
  3. Adaptation is Key: QuizUp’s reluctance to adopt active advertising limited revenue opportunities. Startups should remain adaptable and explore various monetization strategies.
  4. Customer Acquisition vs. Retention: While QuizUp excelled in customer acquisition, maintaining profitability with a large user base proved challenging. Balancing acquisition and retention strategies is essential for sustained success.
  5. Experimentation and Innovation: QuizUp struggled to innovate ways to monetize its product effectively. Experimentation with different revenue models is crucial for startups to find what works best for their audience.
  6. Initial Revenue Generation: Closing the first sale and establishing initial revenue sources can be vital for startups. It provides a foundation for sustained growth and operations.

The QuizUp story serves as a reminder for startups to prioritize sustainable monetization, adapt to changing circumstances, and strike a balance between user growth and financial viability.

Failure Story

Rise and Fall of Myspace: A Pioneering Social Media Platform

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Myspace, a pioneering social media platform, allowed users to create personalized pages, and blogs, share content, and connect with others. Born in 2003, it became a hub for music lovers, offering legal music streaming through contracts with record labels. Myspace’s success was built on the ashes of Friendster, with eUniverse employees crafting it in just 10 days.

Acquisition and Peak Era:

Acquired by News Corporation (Fox) in 2005 for $580M, Myspace quickly became a revenue giant. By 2007, it had a valuation of $12B, boasting $800M in revenue and 22M users. Myspace’s unique selling points were its no-cost content generation, self-propagating user acquisition, and endless advertising potential.

Facebook vs. Myspace:

In 2007, Myspace held an 80% market share, with Facebook trailing far behind. Facebook’s Mark Zuckerberg offered to sell Facebook to Myspace for $75M, but Myspace declined. However, by 2008, Facebook surpassed Myspace in users, signaling a turning point.

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Reasons for Myspace’s Decline:

  1. Excessive Advertising: Myspace flooded the platform with ads, even entering a $900 million advertising deal with Google. Ad-heavy UI and intrusive ad strategies alienated users.
  2. Feature Overload: Myspace’s attempt to encompass numerous features (books, forums, movies, etc.) led to a cluttered and confusing platform. It aimed to be Spotify, Netflix, and LinkedIn simultaneously, spreading itself thin.
  3. Poor Website Design and UI/UX: Customizable but chaotic, Myspace pages lacked a standardized look. The user interface suffered from sensory overload, contributing to a subpar user experience.
  4. Technological Challenges: Originally built on Adobe ColdFusion, Myspace struggled to scale. Its move to a new platform resulted in a buggy product, undermining user trust.
  5. Offshoring Development: Myspace opted for in-house feature development instead of opening up to external developers like Facebook did. This decision drained resources and hindered user engagement.
  6. Bad Reputation: Cases of inappropriate content exposure, cyberbullying, and harassment tarnished Myspace’s image. The absence of effective regulations exacerbated these issues.
  7. Prioritizing Website Over Core Service: Losing sight of its core service (socialization), Myspace focused on adding website features without understanding user needs, leading to a disjointed platform.
  8. Founders Leaving: As News Corporation imposed corporate guidelines, Myspace’s founders, disillusioned by the decline, left. The shift from a startup mindset to corporate decision-making impacted Myspace’s agility.

Aftermath and Lessons Learned:

Myspace’s rapid decline saw it lose $40M in unique visitors monthly. In 2011, it was sold to a media group and Justin Timberlake for $35M. Subsequent sales and transfers occurred, but Myspace lost its cultural relevance.

💡 Key Lessons:

  1. Not All Acquisitions Are Beneficial: Million-dollar acquisitions don’t guarantee success. Myspace’s core monetization strategy contributed to its downfall.
  2. Success Takes Time: Startups don’t need to fail fast; they can succeed slowly. Persistence often outpaces speed in startup battles.
  3. Learning and Unlearning: Successful startups require unlearning popular media myths about building them. Continuous learning and adaptation are crucial.
  4. Problem Prioritization: Solve critical problems first; iterate and solve others in later versions. Don’t try to solve all problems simultaneously.
  5. Software’s Finite Lifespan: Software doesn’t last forever; expect upgrades, feature deprecation, and maintenance issues.
  6. Avoid Feature Bloat: Unless a feature directly impacts business outcomes, consider it unnecessary. Start simple and iterate.
  7. Consistency Wins: Startups are built through consistent, “boring” actions over extended periods. Simplicity and consistency are keys to success in the startup world.

Myspace’s story serves as a cautionary tale for social media platforms, emphasizing the importance of user experience, adaptability, and understanding core business objectives.

Failure Story

Adobe Flash: Birth, Rise, Problems, and Demise

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Adobe Flash was a popular animation tool in the 2000s, enabling users to create and view multimedia content, animations, and games. Its vector-based graphics facilitated quick downloads, crucial in an era of slow internet speeds. Flash supported various formats like GIF, PNG, and FLV, becoming a favorite for web developers.

The Birth of Adobe Flash:

In 1996, FutureSplash Animator, launched by Jonathan Gay and Charlie Jackson, evolved into Macromedia Flash 1.0 after Macromedia’s acquisition. Later, Adobe Flash Player emerged post-Adobe’s acquisition of Macromedia in 2005.

The Peak Era of Adobe Flash:

Flash gained immense popularity in the 1990s and early 2000s, becoming an essential tool for web developers. Its multimedia content and interactivity capabilities made it a versatile choice, notably in the gaming realm. Platforms like NewGrounds, hosting Flash games, flourished, highlighting the impact of Flash on online entertainment.

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The Problems with Adobe Flash:

Despite its success, Flash faced critical issues:

  1. Accessibility: Installing new Flash versions was cumbersome, and HTML integration was problematic.
  2. Privacy Concerns: Flash’s use of local data storage raised privacy issues, containing sensitive information.
  3. Security Problems: Flash had persistent security issues, leading users to disable it due to potential risks.
  4. Performance Criticisms: Flash was criticized for being slow and resource-intensive.
  5. Lack of Mobile Support: Flash wasn’t supported on most mobile devices, limiting its usage.

Did Steve Jobs Kill Flash?

Steve Jobs, Apple’s co-founder, openly criticized Flash in 2010, citing concerns about its closed nature, proprietary design, separate browser plugins, and poor performance. Jobs’ disapproval and Apple’s refusal to support Flash on iOS devices contributed to its decline.

The Downfall of Adobe Flash:

Post-2010, Flash faced increasing backlash due to performance, security, and privacy issues. Rising competitors like HTML5 and CSS3 also played a role. Google reported a significant drop in Flash website visits. Adobe officially announced the discontinuation of Flash in 2017, and it was shut down on December 31, 2020.

Google reported that the number of people visiting Flash websites fell from 80% to 17%. In 2017, Adobe announced that it would be shutting down Flash, and it was officially discontinued on December 31, 2020.

Flash’s Legacy:

Flash Player, the browser plugin, is defunct, but the Flash authoring tool still sees use in specialized business settings and among animators. Notably, platforms like NewGrounds continue to support Flash content through open-source, in-browser emulation. While Flash, as we knew it, has ended, its impact on the digital landscape remains part of internet history.

Failure Story

The Rise and Fall of Friendster: A Social Networking Startup

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Background:

Friendster, founded by Jonathan Abrams in 2003, was an early social networking site with a unique blend of social interaction, gaming, and events. With a peak user base of 115 million, it dominated Asian markets like the Philippines, Malaysia, and Singapore.

How Friendster Worked:

Friendster aimed to facilitate social interactions, gaming, and content sharing. It embraced Asian languages early on and even ventured into the payment platform space with “Friendster Wallet.” The company introduced offline cybercafes and free wifi infrastructure, showcasing innovation beyond its core features.

Worth Reading: Pebble (Formerly T2): The Rise and Fall of a Twitter Challenger

Business Model:

Advertisements were Friendster’s primary revenue source, along with selling access to APIs for developers. The in-app purchase model using Friendster Wallet added another stream. It was a pioneer in creating an open, non-proprietary platform with an open revenue model for developers.

Rise of Friendster:

Launching in 2003, Friendster quickly reached 3 million users, facing early competition from Facebook, Yahoo!, and Microsoft 360. Despite a $30 million offer from Google, Friendster pressed on, gaining backing from renowned venture firms. By 2008, it had over 115 million registered users.

What Happened:

In 2011, Friendster pivoted to a social gaming site, discontinuing its social network accounts. The move aimed to complement Facebook rather than compete. However, due to user experience issues, CEO changes, and a delayed fix for loading speed, users migrated to Myspace and, ultimately, Facebook. Friendster officially shut down in June 2018.

Lessons Learned:

  1. Timing Matters: Friendster faced challenges despite being an early mover. It’s not about being the first but learning from predecessors and avoiding their mistakes.
  2. Venture Capital Pitfalls: Raising funds can be detrimental if not managed properly. Too many board members can limit flexibility and prioritize growth over everything else.
  3. Customer-Centric Growth: Pursuing growth at any cost, especially at the expense of current customers, can lead to failure. Friendster failed to capitalize on its early success.

Key Takeaway:

Friendster’s downfall teaches us that success is not guaranteed by being a pioneer; it requires continuous adaptation, customer focus, and strategic decisions that prioritize long-term sustainability over rapid growth.

Failure Story

Pebble (Formerly T2): The Rise and Fall of a Twitter Challenger

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The echoes of Twitter, now rebranded as X, resound louder than expected, claiming its first casualty in the realm of Twitter alternatives. Pebble, previously known as T2, is calling it quits. Despite growing a small, engaged community on its microblogging service, Pebble faced an uphill battle against its mighty competitor. The startup aimed to emulate Twitter’s features, including verification systems and DM functionality.

Unfortunately, Pebble ran out of time to realize its vision. With a maximum of 3,000 daily active users out of 20,000 registered users, the platform struggled to gain significant traction. Even following a rebranding from T2, daily user figures plummeted to 1,000 users.

Gabor Cselle, Pebble’s Co-founder and CEO, pointed to the swift evolution of the competitive landscape as a primary factor in their demise. The market for Twitter alternatives is now saturated with platforms like Mastodon, Bluesky, Spill, Spoutible, Post, and even Meta’s Instagram Threads.

Despite initial positive signs, such as decent retention and a successful invite system, Pebble faced challenges standing out in a crowded market. The founders believed in prioritizing trust, safety, and moderation, even if these values didn’t translate into substantial growth.

However, Pebble’s commitment to creating a safer space may have inadvertently positioned it too far into the “kindness” territory. The founders acknowledge that perhaps allowing more space for disagreement while maintaining a strong stance on moderation could have been a better approach.

Several factors, including the absence of a native mobile app, the rebranding from T2 to Pebble, and competition from Twitter’s enduring network effect, contributed to Pebble’s struggle. Reflecting on their experience, the founders express gratitude for the journey, despite its unexpected end.

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They hint at the possibility of staying together to work on something new, armed with valuable lessons from the Pebble experience. As Pebble winds down, early adopters can export their archives, showcasing the platform’s journey before it officially shuts down on November 1st. The founders, while facing uncertainty about their next move, don’t regret attempting to carve a new path in the evolving landscape of social media.

Failure Story

How Convoy’s Ambitious Journey Hit the Brakes

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Convoy, the once-promising disruptor of the trucking industry, is now navigating a different kind of journey — one marked by unexpected hurdles and a screeching halt.

In a candid admission from CEO Dan Lewis, Convoy’s plan to revolutionize freight logistics crumbled under the weight of an “unprecedented freight market collapse” and “dramatic monetary tightening.” The unexpected shutdown of operations sent shockwaves through both the Seattle tech scene and the broader trucking sector. The memo to employees painted a vivid picture of Convoy’s struggle, stating that the company spent the past four months exploring strategic options, but none proved substantial enough to keep the ship afloat. What went wrong? Convoy, once valued at $3.8 billion after raising an impressive $260 million just 18 months ago, faced challenges reflective of a turbulent industry. With freight demand dropping, revenue per truckload shrinking, and an oversupply of trucking companies, the odds were stacked against the startup.

As the company grappled with layoffs and a shrinking workforce, reports suggest that laid-off employees didn’t receive severance, adding a bitter note to the already somber situation. What’s clear is that Convoy’s ambitious vision, backed by industry giants like Bill Gates and Jeff Bezos, stumbled in execution. The company’s focus on creating an Uber-like system for truckers and shippers failed to establish the expected technological edge. Internal tensions regarding Convoy’s identity — a tech or logistics company — added complexity to its challenges.

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While Convoy’s closure might have seemed imminent with reports of a potential sale, the abrupt end still caught many off guard. The tale of Convoy’s rise and fall serves as a cautionary note in an industry undergoing seismic shifts, where even well-funded and high-profile startups face the unpredictable terrain of the market.

Failure Story

Transtura’s Journey: Learning and Growing from Failure

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Hey founders! Today, let’s chat about Transtura, a ride-hailing startup that had its ups, downs, and lots of lessons for all of us.

Vincent Adeoba, who went from PwC Nigeria to leading Transtura, dreamed of fixing transportation in Lagos. Exciting, right? But, reality hit hard.

Transtura faced unexpected challenges with rules from NURTW, LASTMA, and the Lagos State Ministry. Dealing with them was tougher than expected. The real shocker? NURTW took a big chunk of the money ( over 20% of our daily revenue ), causing constant problems like bus impoundments and attacks on drivers.

Worth Reading: Worth Reading: How Convoy’s Ambitious Journey Hit the Brakes

Vincent rightly points out that for Nigeria to prosper, leaders need to support young people trying to make a difference.

Nigerian leaders need to understand that Nigeria cannot become a prosperous country by making it impossible for young people who want to contribute to succeed.

Transtura faced tough times, but the story isn’t about blame. It’s about embracing failure and learning from it. Vincent admits, “Those who said we’d fail were right, but I’m glad we gave it a shot.”

Those who said we’d fail were right, but I’m glad we gave it a shot.

After Transtura, Vincent bounced back. He applied for roles in the U.S. and landed a spot at PwC New York.

In this new year, remember Transtura’s journey. Learn from failures, turn them into stepping stones, and keep growing. Failure isn’t the end; it’s just one chapter in every founder’s story.