Why Bloglines sold: It’s not a business.

Bloglines was bought this past week by Ask Jeeves out of desperation. It’s a horrible business and it will never make money.

Strong words? Nope, not at all.

Congratulations and respect to Mark for having the sense to dump the business now when it has some perceived value. However, I can tell you clearly there is no business model for web-based news readers, and in two years 95-99% of the RSS reader market will be consolidated into three of the following players: My Yahoo, Microsoft Outlook/Outlook Express, Google’s RSS reader (if and when it comes out I have no inside information here), and maybe an Open Source version integrated into Firefox and/or Thunderbird.

RSS readers are the Newsgroup and Email readers of 1996: they have no value and are commodity businesses. The worst two students at MIT could build a decent web-based RSS reader in a weekend or two. If you want confirmation of this look at the social software space which grew from two or three players to two or three thousand players in 18 months.

Ask Jeeves bought two things: 1. publicity and 2. a user base. The latter has some value, but I’ll wait to to pass judgement on this when we divide the number of users into the price that was paid (I’ve heard $5M to $40M so far). If Ask Jeeves paid more then $5 per activice (as in logged in over the past 30 days) a user they are never going to make that money back and they should have just built the software themselves and sent their significant traffic to their own reader.

There are three ways these companies can make money:

1. Sell their software/service to users.
2. Sell their software/services to enterprises.
3. Sell advertising.

You don’t have to be a genius to realize that My Yahoo is giving the software away for free, and they are 3-6 months away from having all the features of Bloglines and more (i.e. Bloglines doesn’t have an Instant messenger, finance channel, and email client to integrate into).

Also, Microsoft will take 50% marketshare of this market six to 12 months after they get into it. You think when people can subscribe to RSS feeds in Outlook and Outlook Express they for free they are going to pay for a reader? They probably won’t even bother with the limitations of a web-based reader! There is no paid model here, or if there it is as big as the paid web-based email market after GMAIL came out (in other words tiny).

In terms of number two, enterprise sales, I think companies are going to have to deal with a bunch of RSS issues and folks like Newsgator will make money solving those problemslike Outlook does. This is a decent business.

Now, in regards to point number three Bloglines and other RSS readers are toast.

Mark from Bloglines said something really dumb on a Jupiter blog a little while back about selling ads against Engadget and Gizmodo. Uhhh you’re going to sell ads to my advertisers against my readers?!?!? Are you nuts?!?!!? Why don’t you scrape the New York Times website, email it to people and put ads around? People did that back in 1996 and they got smacked down real quick.

Now, Mark wouldn’t talk to me on the phone about this (he was busy for the past three months selling the company I guess), but after a half dozen emails he finally got back to me to promise he wouldn’t sell ads against our blogs. He claimed he was just speculating about possibilities. OK, sure.

Of course, he did have to promise me because Iand the other blog publishers out therewould never let him sell ads against our full-feeds, let alone target our users.

If Bloglines started selling ads against our full-feeds (not the headlines of course anyone can run the headlines and link back to us like My Yahoo’s reader does, that’s a non-issue because it bring us traffic) I would do two things:

  1. We would sue them for breaking our terms of service which say you can’t use our feeds for commercial purposes.

  2. I would replace the full-feeds that Bloglines loads and replace them with a special feed that shows users the headline and in the body of the blog post says “Weblogs, Inc. feeds do not support Bloglines, for a full-featured blog reader that allows you to read the full-feed of INSERT BLOG NAME HERE please consider using Newsgator, My Yahoo, and Google Feedreader.

Now, here comes the interesting thing. Mark told me he would never do anything like this on the same day as he told a reporter from WIRED the EXACT OPPOSITE!

When I got called by the reporter who had just finished writing a Bloglines piece for WIRED (print) I was very clear with them that if Bloglines did what Mark said he would do on the Jupiter blog that I would take the steps above immediately. I added that it was a dead issue because Mark assured me that this would not happen and that Bloglines would be “good web citizens.”

WIRED’s reporter was shocked!!! He said Mark told him they had all the advertising plans that Mark told me he wouldn’t doon the same day! The reporter had filed the piece, so there was no changing it, so when you read about Bloglines in WIRED next month it’s an unfinished piece, or 50% of the story.

We looked at doing an RSS Reader when we started Weblogs, Inc., but Brian and I debated it over and over again. When we saw Kinja’s unimpressive launch our decision was finalized: there is no business in RSS readers.

That being said, we like working with all the readers, and if the folks at Ask Jeeves want to work together we are open to it, as we were with Bloglines pre-acquisition (although we could never close a deal with them).

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