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Joost’s B2C strategy failed due to lack of focus

Om Malik has a great post up today on GigaOM reporting on Joost’s announcement that it will now offer a white-label video hosting platform whilst at the same time letting some people go and closing its Netherlands office.  The reason for this shift in strategy is clear in the chart below – they haven’t got enough traction.

image

As well as covering the change in strategy (which he describes as a strategy of last resort) OM does a bit of post mortem analysis on the the consumer play.  He lists the many things they had going for them at the start (many of us were very excited by their prospects at the time) and then the reasons they went awry.

According to OM these are the top three reasons things went wrong at Joost:

  • Too Big, Too Fast: Joost hired too many people, too quickly. It never behaved like a startup but instead always felt like a grown-up company with too many bureaucratic layers.
  • Too Geographically Spread Out: The company was based in multiple geographic locations — New York, London and The Netherlands — and as a result, each location became somewhat of a silo.
  • Not Enough Focus: Remember what your mom used to say when you took too big of a bite? If you’re not careful, you’re going to choke. Startups are just like that. Unless you focus, you’re going to choke. Joost couldn’t focus on one single market — and startups need to focus on one market at a time in order to win.

The reason I am bringing these out is that I think they apply to just about all startups anywhere.  I actually think they all boil down to the same thing, which is focus. 

In my experience companies which think of themselves as big companies from day one rarely succeed because they start doing too much.  Instead the great ones focus obsessively on doing one thing brilliantly.  That can be a single product that works globally (Skype, Google) or it can be a service that you perfect in a single country before going international – and most media and advertising businesses fall into this second category.  Just look at Hulu, which has made itself successful by focusing on the US (much to my irritation as I’d love to be able to use it here..).

Once you have success in one area it becomes much easier to grow either geographically (which is where Hulu is going) or by adding new products.

The other great virtue of this approach of course is capital efficiency.

I think these arguments have much more weight than the opposing one of wanting to get everything done super-quickly for fear of ‘missing the window’.

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July 1st, 2009 | Category: Google, Startup general interest, TV, Venice Project
  • Ryan Gallagher
    I disagree, VCs often tell people to focus and use Google as an example. In fact, Google did the opposite. When their competition was focusing on search, they spread out and made a layer of financial stability based on a clever ad based business model which harnessed the core products they offered to deliver a stable revenue stream. Had Google focused on one thing, they would have been toast when the bubble burst. Microsoft is another example of a company that did not focus yet is often used as an example of focus. By using Windows as a platform and tying users into the apps which sat on top of it, such as office and Messenger, they trapped people into continuing to use Windows, even when they may not have been 100% satisfied with it.

    In my opinion start ups have to remain flexible and responsive to the market and try a few things before something takes off and if you have the ability to cover your costs and perhaps become cash flow positive doing something which dilutes your focus then you should chase it. Cash is King, the most distracting thing a start up can do is chase funding and pay too much attention to those around them who do not have their heads in the business. Remaining blindly focused on a path which is not working is not a solution if that path is the wrong one. Being ready to evaluate the environment and take advantage of opportunities when they arise is they key.
  • Hi Ryan,

    I'm in total agreement that before a startup decides where to focus there is often a need to try out a few different ideas. There is absolutely no point in putting all your energies behind one idea until you are pretty sure it is going to fly. What I was trying to say is that once you get to that point laser like focus increases the chance of success. Google and Microsoft were both similar - they had other products and ideas for a while and once they hit on search and DOS they went after them exclusively until they were demonstrably successful, after which they expanded their product range again.

    Cheers,
    Nic
  • Is compete really the best tool for measuring Joost's performance given their (Joost's) European focus and Compete's admission that they focus only on the US market?
  • Not perfect, no, but I think the story it tells is the right one.
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