[Munjal Shah, CEO of Like.com Photo by Miss Rogue (Tara Hunt)]
[NOTE: I have been retained by SAP to conduct a survey of people all over the world on the issues of social media and it's impact on culture and business. This is the 52nd interview in the ongoing series since it began last June.You can review earlier reports here, by going to the SAP Research Report category]
Munjal Shah was my first client after Naked Conversations was completed. My job was to help him get ready to launch his company Riya at the Feb 2006 DEMO conference, where the company would receive a DEMOGod Award. Riya, at the time would become among the most blog-covered startups of all times. In July 2006, it had a TechCrunch coming out party in Michael Arrington's backyard. This would all sound like an incredible success story, except that it did not turn out that way. Within a year, Riya would be renamed Like.com and it's entire business model and market strategy would be changed. Anther significant shift was that the new company started with a large tech team in Bangalore. Subsequently, the company disengaged in India and built up its team in the SF Bay Area.
I was interested in two issues: (1) Why is social media less relevant for this former Blogger darling company. Had blogging as a strategy failed? and (2) Had the costs changed so much, that it no longer made sense to build a Bangalore tech team.
I'll let Munjal pick up from here.
1. Munjal, you were my biggest success story. You were the darling of the Blogosphere. Virtually every prominent blogger was writing about you in late 2005 and early 2006. What happened?
Bloggers were not writing about Riya because it was a cool social
media company. Almost every post on Riya was about the technology's ability to search inside photos. That was the true blogworthy news. Our core focus has always been on the technology of search. Frankly, Riya was just not how people wanted to use this technology. So we tried again with Like and now we are on to something.
Like.com is approaching a $10MM revenue run rate after just 1 year of being live, so yes, it is probably working. Our core focus was on using the technology in a way that people would like and in a way that had a business model. Like.com has both of these. Riya had neither.
There are many ways to build a good business. Like.com has a higher click-through rate than any other soft goods shopping engines. What that means is that our search technology is connecting people with the item they are looking for better than others. This is what we do better than anyone else. This is all we care to do better. We work everyday to improve this. Visual search is the core of how we achieve this.
Social shopping doesn't work. Shopping is largely an isolated activity for soft good items (clothing, shoes, handbags, etc). Everybody thinks that women will chat with their friend about this dress or that shoe, but frankly, most online soft goods shopping is conducted by women at work in between meetings or late at night when the kids are asleep (our log files and data show this in spades). Our customers just want to get in and get out.
I would be careful in thinking that social media is the next generation of all types of sites. In the case of commerce sites like thisnext.com and even Kaboodle have only gotten a fraction of the revenues that a non-social site like ours has.
4. What advice do you have for startups regarding social media?
Blog about the process of building a company and about your company,
there are many people who are interested in this story and they will
help you build momentum, but in terms of your customers, use it only
if truly appropriate. There are many businesses on the web that are
about deep relationships, but not all sites fit that profile. Think
of a weather site, are you really going to create a profile deeply
invest in that site no matter how many social features they have.
Think about a stock picking social networks. I recently heard that
people are reluctant to discuss their picks online since too many
others can trade on it. Even though stock picking groups and clubs
offline are very popular amongst day traders, online the speed of
information distribution makes folks want to share less.
In general, Internet usage is limited but growing fast. Mobile usage is much larger.
6. Another big change from Riya's early days is that at least half the team was in Bangalore. What were the advantages of setting up there at that time? How did they change?
Bangalore made sense when it was cheaper than Silicon Valley by enough of a margin to account for the costs of dealing with a remote office.
Like.com hit the inflation curve early. We were only hiring the top guys in India and the number of these guys is very limited. Hence no matter where you went the costs were rising or would rise in the near future.
Others in India will see the effect, but they will likely be a few years behind us on that curve. For many big companies cost is irrelevant. I recently heard an engineer in Silicon valley say he would never work for a certain big tech company. He would only work for a startup or for Google (the
current market darling). Microsoft is loosing a ton of people to Google. Company's like MSFT might not care if the cost in Bangalore is any lower, so long as they can get the volume of high quality engineers that they might have a hard time hiring here.
In terms of startups, I'm not sure about this. Facebook, Youtube, Myspace, Bebo, iLike, Hi5, Twitter, Digg, ... all are still companies that were started or really sprouted in the Bay Area.
Come to Silicon Valley if you are building for the US or global market. Stay were you are if you are building for the local market.
