Can a web service come back from the dead?

There's been a lot of talk about turning around Yahoo! this week with the hiring of Marissa Mayer. I'm excited to see what she can do, but my fear is that once web services start to decline, there's little anyone can do to stop them--they become the sharpest of falling knives.

I'm writing this post because a) I'd like to be wrong, so people can point out lots of counter examples that we can learn from and b) to understand why it's so hard and whether it's something inherent about web services that makes turning this around particularly difficult. I'd like to think that a group of smart, motivated people can do just about anything and that nothing is impossible. Plus, I'm not trying to offend anyone by the mention of companies that don't seem to be doing that well. If I have a misperception of performance and success there, please do let me know. I'm just trying to be exploratory about causes and effects to help some of these web properties that I was once a passionate user of and still have some affinity to.

Yet, I'm racking my brain and I can't think of a single failing web property that has successfully completed a true turnaround--snatched back from the jaws of death. There are some properties that are prettier and seem to have more life in them than they used to, like Seamless, but I never thought it was failing.

Think about all the once high fliers that just seemed to spiral straight down without looking back--Digg, Dailybooth, Tribe, Delicious, Flickr, Friendster, MySpace, Last.fm, Turntable, Six Apart, Formspring...the list goes on and on. These companies had some of the best product minds in the business, smartest investors, etc. What happened and why couldn't anyone stop the bleeding?

Some of those were clearly the result of acquisitions--whether the founders lost their hunger or whether the acquiring company smothered the baby is up for debate, but Digg, Dailybooth and Turntable stayed on their own. In Turntable's case, I loved the site and would be more than willing to come back, but a social listening service without listeners just isn't as fun anymore. I hope it comes back because I had high hopes there and really enjoyed the time I spend in the site when my friends were there. It's still early in the grand scheme of things there and they're well resourced to find their way.

Are users of social networking sites just inherently fickle and unlikely to stick, meaning that as soon as they start heading for the door, the site is toast? Will Instagram and Pinterest necessarily suffer the same fate? That might be the case with the earliest of early adopters, but I can't imagine that everyone else actually likes switching out key parts of their digital lives every few years.

There are a few things I've noticed about these sites and their potential for a turnaround that might be worth noting.

In order to become a part of my routine, there seems to be a requirement of completeness. If I can't use it for most of what I want to use it for, I'm going to start looking elsewhere. That's what happened with Turntable for me. I don't always want to listen to Dubstep and electronica--so when I went to use it for other types of listening experiences, the community wasn't diverse enough, so I went over to Spotify. Plus, more and more of my listening was mobile, and the TT.fm apps came out after Spotify. Plus, on mobile, I wasn't as interested in being social. I just wanted to hear songs on my bike ride or at the gym. In contrast, I'm still hooked on Instagram perhaps because there isn't much more that I seek to do with my photos, so there isn't a lot of room for another app to creep in.

Sometimes, the failure of a service is a function of technology. Friendster and MySpace got so slow and broken that they became unusable. That's not just a matter of throwing server bandwidth at the problem. That demands reinventing a whole product quality culture. That's nearly impossible to do and it's why Twitter's acquisition of Summize may go down among one of the best tech acquisitions of all time. Twitter seemed likely to suffer a MySpace/Friendster-like tech failure until that purchase seemed to right the ship.

Financial timing seemed to work in Twitter's favor as well--as it was still a VC darling when they decided to heavily invest in infrastructure. It would have been hard to stave off inevitable failure had the site already peaked and they were out pitching a rebuild.

Another reason we may not have seen many turnarounds may be the simple fact that there just aren't the kind of career turnaround specialists you see in more old school industries. There's no web equivalent of those "seen it all before" Bob and Bob types. These are the grey haired white dudes that show up as Operating Partners on Private Equity fund pitch books. Maybe its because the environment changes too quickly. You can turn around three cement manufacturing companies in a decade and nothing much will have changed about the game plan in each. Try pulling in someone to turnaround a web property now whose last experience wasn't just Pre-Facebook, but Pre-Friendster!

What would a turnaround specialist look like for the web? Would they focus on building great products? I think they'd have to be a data expert to be able to reverse engineer why people left and what's going on at the places they went to in order to get them back--a kind of Bill James for Moneyball for Websites.

Hiring in general is a problem in a turnaround situation. In more old school industries, turnarounds are where you get a lot of the upside. You can buy an asset based business on the cheap and make a bundle when you right the ship. This is basically your only shot to make a bundle from equity in certain areas because you're not going to do it on growth. Cement companies just don't really grow that much. Your value is purely based on financials--as opposed to the strategic tech acquisition of some revenue-less photosharing app.

In tech, the money isn't just in growth--but it's in hyper growth that doesn't stop from day one. People don't really think about goosing their own personal return by getting in at Yahoo! as an employee when the stock is cheap and helping it in a turnaround. They'd rather be a part of the next big thing--even though statistically they're probably more likely to make money on that Yahoo! turnaround then on actually stumbling upon the next big thing.

What about passion? Is passion a missing ingredient in web turnaround situations? Do you need to be passionately involved in the product to understand what would get the users coming back? Does Marissa Mayer need to have been brought up as a huge fan of Flickr and Yahoo! Messenger to understand how to get people back?

Maybe the one thing that Yahoo! has going for it is its traffic. Even if you rebuilt a lot of these web properties, it would be tough to get a critical mass of people back to them--but if you could direct some traffic to a revamped product, it might act like CPR. It could get air flowing through the lungs of a site artificially just to get the system kickstarted. Maybe Yahoo! should be a buyer of a lot of these sites--a kind of bizarro Betaworks (although Betaworks is now in the turnaround game with Digg)--where teams are heavily incentivized, properly resourced and get all the traffic they need to turn around web services that people were once passionate about. Call it "Revenge of the Land of Misfit Toys".

I hope I'm generally wrong and that web services can come back--because Marissa's career is riding on that possibility big time. I met her once at Foo Camp and found her to be terrifically smart and I of all people appreciated her direct, no bullshit style.

But if someone does come up with an instructive story of a web turnaround, please post it in the comments.

Turns out Erin Griffith of PandoDaily was thinking the same thing: http://pandodaily.com/2012/07/12/can-betaworks-make-digg-into-the-webs-first-ever-turnaround/