Before too much more time slips away, I thought I would briefly comment on this year’s SXSW, since things seem to have gone from the sublime to the ridiculous. It is starting to seem as if nearly any idea for an app, website, plug-in or social feature that somebody brings to SXSW can find funding, even if it is a horrible idea with no imaginable way to monetize it.
I read somewhere that one of this year’s breakout success stories is an app that lets everybody at a party play the same song out of their iPhones at the same time, in the event the person throwing the party doesn’t have a stereo. Really??? Leaving aside the fact that Bluetooth speakers which produce much better sound than a cacophony of iPhones can be had for 40 bucks on Amazon and that this new “high tech” solution sounds suspiciously like a room full of transistor radios tuned into the same station, there appears to be no earthly way to turn this parlor trick into a profitable business. If this was a “winner,” I can’t even imagine what the losers must look like.
Meanwhile, there was the cautionary tale of Foursquare, the star of SXSW just three years ago. Led by shaggy haired phenom Dennis Crowley and backed by the likes of Marc Andreessen, Foursquare has managed to raise over $70 million with a simple location app that doesn’t actually DO anything (other than hemorrhage money) except for declare barflies “Mayor” of their local watering holes (not to be confused, of course, with Mayor McCheese of McDonaldland). Foursquare, which like every other social platform, gives away its service for free and seems to have very little idea how it can ever earn enough from advertising to support its hefty operating costs. In spite of the heavy losses and flagging user interest, Forsquare’s last $50-million round was based on a $600 million valuation. One can only assume the Hamburglar came up with that number.
Meanwhile, after squandering all his investors’ money awarding virtual badges to college kids for the number of times they make a beer run to the local 7-Eleven, Crowley was reduced to public mea culpas for his past arrogance and strategic blunders (never a good combination), which were glaringly obvious to anyone with an ounce of common sense from the outset. His performance was a transparent (and cringe inducing) attempt to lure in another round of suckers, er, investors to help him “pivot” Foursquare toward being a poor man’s Yelp. As they say, caveat emptor.
I remain incredulous at these continuing developments. Exactly when did companies that have never earned a penny become worth hundreds of millions (in some cases, billions) of dollars? When did giving something away for free ever become a business model? How does driving inflated traffic and user numbers (at a huge cost) for a free service prove anything, especially when the underlying technology is easy to replicate by bigger and more sophisticated companies that can easily absorb the costs with their other profitable operations? Didn’t anyone learn anything from the Groupon debacle?
In any event, Dave Grohl’s speech was entertaining.