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Search - Thursday, September 27, 2007

Lessons From The RSS Reader Bust For Their Decedents The Start Pages

We ran into former SAP VC/blogger Jeff Nolan at an SF party recently where he handed us his new biz card. He's now with VC-backed RSS outfit Newsgator. Nolan is discrete but we expect he was brought on to try to sell the company. This had us thinking about the RSS reader market and what a disappointment it has been for investors.

+ Bloglines. The biggest success in the RSS reader market is probably Bloglines, which was bought by Ask. Although the rumor price for Bloglines was $50M, we understand Ask only paid about $25M.

+ Rojo. 6Apart bought RSS reader Rojo for an undisclosed amount. Rojo had raised over $3.5M in funding from TPG Ventures, BV Capital, Marc Andreessen, and Ron Conway, and the conventional wisdom is that investors took a loss. Rojo got solid reviews but never had more than 100K uniques per month.

+ Pluck raised $8.5M in a 2nd round led by Mayfield. The company smartly transitioned out of the RSS reader market about a year ago and now positions itself as a social media tool.

+ Newsgator/FeedDemon saw the writing on the wall and headed for the safety of the enterprise market. Time will tell if Nolan and company will succeed at getting the return that investor might hope for.

The problem for these and other RSS readers is that there were so many free RSS readers out there, including offerings from MyYahoo, Google, Mozilla and Microsoft. IE so that without grabbing a niche, general RSS readers couldn't get enough users to amount to much.

Interestingly, the first wave of lackluster results in the RSS market has not deterred new-comers led by netvibes, Pageflakes, Yourminis, Webwag, Eskeboo, Fuser, and others that are positioning themselves as personalized start pages (driven behind the scenes largely by RSS feeds) rather than as RSS readers. In fact, we imagine that many users of these services are not even familiar with RSS even though they are using it.

It remains to be seen if the 2nd coming of RSS readers, led by Netvibes, will also be a bust. Investors have been putting cash back in. And certainly these startups have learned from the first wave.

Our best guess is that Netvibes and Pageflakes will be able to exit well, but it won't be easy. Both companies have impressive management that we can see larger companies coveting and both have been able to add more users than their RSS reader predecessors could have dreamed of. For the others in the new wave of RSS, we think it would be smart to think about what niche you can grab on to.