Couchsurfing, the troubled nonprofit-turned-startup that I wrote about earlier this year, has now shed almost half of its employees, including the CEO:
The startup, backed by General Catalyst, Benchmark, Menlo Ventures, Point Nine and Omidyar Network, is now going to focus on mobile — and we have heard that this is where all new hires will happen. The company up to now had raised some $22.6 million, with the last $15 million in August 2012.
As for the layoffs … a spokesperson tells us that the full number is about 40% of staff, with now no more than 20 people working at the company…
A little more unconfirmed detail: part of the layoffs, apparently, have resulted in deep cuts to its engineering team, with the entire engineering team let go “except for a 3 person skeleton support crew,” according to a tipster.
Our tipster — again, this is unconfirmed — says that the reason for the layoffs and other changes is because the company has seen an $800,000 monthly burn rate. But we understand the company has a long cash runway at the moment to figure out ways to turn that around (staff cuts help, too).
This is sad news, and I don’t take any pleasure in having predicted it. I still hope there’s a going concern to be salvaged here. But it’s very difficult to imagine a business model that will provide a material return on that much investment, or even enough cash flow to keep the lights on when the existing money runs out.
Early on, in an attempt to quell user anger at the for-profit conversion, the company seems to have ruled out advertising, selling member data in any form, or charging any kind of fee for existing site functionality. That didn’t leave many options. One that they floated was to solicit donations to charity every time a “surfer” was hosted, and take a small cut of these donations. Cute but a little pushy, and it likely wouldn’t amount to more than pocket change. They also considered a “freemium” model, but there wasn’t much you could add to the basic services that would really be worth paying for:
Freemium models work best when the premium features are relatively independent of the basic features. If someone else pays for more space on Dropbox, you don’t get less space in your free account. In the case of CS, the main thing they can offer a premium member is various types of priority over non-premium members. You can dress that up however you want, but in the end you’re not really adding a new service, just pitting your existing users against each other: the premium service degrades the free one. If frequent flyers board the plane first, the rest of the passengers have to wait a bit longer. If premium CS members show up higher in searches, then free members show up lower.
In the meantime, they’ve brought back this “verification” gimmick — a way of aggressively hitting you up for a voluntary $25 donation when you join by arbitrarily attaching it to this “trust” marker whereby they send you a postcard to verify that you have a mailing address, and then you get a little check mark icon on your profile. I don’t know how much money that’s bringing in, but it can’t be very much. (And just think about it: if this process actually does have a material impact on member safety and trust, shouldn’t it be mandatory? Isn’t that the last thing you’d want to charge for if you have any regard for your members’ safety?)
So now they’re going to “focus on mobile”? To be honest, I’m not sure what that even means. They’ve already got mobile apps, which could certainly be better, but this is a network that relies on huge amounts of text-heavy user-generated content — forms, member-to-member references, discussion boards — exactly the kind of content that’s difficult to enter and consume on a tiny touchscreen. It’s about the farthest thing possible from apps like Instagram or Shazam that play to the strengths of a mobile platform. It seems more like OKCupid or Quora: it needs a good app, no question, but it also needs a fully-featured, well-functioning website — not the kind that can be run by a “skeleton support crew” while they redirect most of their budget to mobile development.
Anyway, maybe this “mobile” thing is just the latest round of buzzword bingo at a company that’s out of ideas, but I hope there’s something more substantive behind it. And it does suggest the glimmer of a revenue model, which is to simply charge for a mobile app while keeping the website free. That way they’re not technically charging for any functionality, just charging to make it easier from a phone.
I can imagine a lot of travellers setting up an account on the website, sending out some hosting requests, and somewhere in transit, frustrated with trying to load the full site on their crappy mobile browser just to find a host’s phone number or something, being willing to pony up $5 for the app.
(I can’t imagine many new members joining through an app and filling out a decent profile, because that’s just too much data entry for a small-screen environment. So again, they still need a usable website.)
Anyway, this paid mobile app strategy would be kind of sneaky, I guess, but at least it would bring in some additional revenue, and it’s the only thing I can think of that really would. What else is there?