Farewell Ferrit

How do you feel about the demise of Ferrit?

In the days immediately following the announcement there was a lot written about this, and a number of reasons suggested for where they went wrong.

The tone of many of these posts and tweets, as Dylan pointed out, seemed to delight in their failure, which is unfortunate.

To be fair many of the people commenting had previously pointed out faults in both the site itself and the approach those running it had taken in trying to build an audience.  So, I suppose, when the plug was pulled perhaps that was a vindication of sorts?

One thing that got very little coverage was the size of the challenge.

What they were attempting to do is extremely difficult.  There are not many examples of this sort of venture turning out successfully, here or anywhere.  If they had pulled it off it would have been remarkable.

So, why do you think they failed?

Here are some popular reasons to choose from:

And, of course, some that are even more fundamental:

So, here’s an interesting question:

Let’s say they had instead done all of these things right – i.e. spent nothing, launched quietly and iterated quickly based on customer feedback, relied entirely on word of mouth and focussed relentlessly on usability, carefully crafted an authentic and likeable reputation … all the time thinking small, just like a good start-up, plus somehow finding a way to provide some sort of value to customers without screwing their suppliers and leaving enough for themselves in the middle.

Would that have been enough?

Would they have then been successful?

Maybe not.

Build it and they won’t necessarily come, no matter how good you think it is and how much you try and tell them about it.

Looking at a high profile failure, and thinking that you just need to do to the opposite to be successful can be quite misleading.

If you will, let me try and make the same point from the complete opposite direction…

Trade Me, for example

I meet a lot of people who see Trade Me as a role model for their own ventures.

I struggle with this a little, for a number of reasons.

Firstly, the success that Trade Me has achieved was not nearly as premeditated as people assume.

As Paul Graham says in his essay about wealth:

“There is a large random factor in the success of any company. So the guys you end up reading about in the papers are the ones who are very smart, totally dedicated, and win the lottery.”

That’s true.

The “win the lottery” part of that equation is not widely acknowledged.

Very few column inches are dedicated to all of the other companies started around the same time as Trade Me by people who were just as smart and dedicated, but who didn’t have things fall their way.

Secondly, evidence would suggest that few people were able to imagine, let alone predict, the success that was ahead.

During 2000 and 2001, Trade Me was not yet at break-even and was quickly running out of cash.  A lot of time was spent chasing potential investors.  Nobody was interested.

Thank goodness – or things could have worked out quite differently.

Necessity is the mother of invention: we didn’t spend much on advertising because we never had much to spend, we were a small team because there was no other option, and we were pretty much forced to start charging success fees (a model which ultimately proved to be massively lucrative), probably sooner than we would have otherwise chosen to, just to stay alive.

Looking back, and knowing the outcome, it’s easy to identify those things that sign-posted what was to come.  This is what Nassim Nicholas Taleb calls “retrospective determinism” in The Black Swan.

But at the time, looking forward, the phenomenal growth which was literally just around the corner was actually far from obvious.

Which surely begs the question: how good is our collective judgement, when we look at early-stage ventures today and try todetermine whether they will be successful or not?

This is especially interesting given that many of those who cashed out when Trade Me was sold, myself included, are now involved in funding early-stage businesses, and trying to pick new winners (is there any evidence that we’re better at it than anybody else?)

Last, but definitely not least, the the environment has changed.

It’s not 1999 any more, Dr. Ropata.  Nor 2008 for that matter.

The things we did right back then are not necessarily the things you’d need to do today, even in exactly the same situation.

Trade Me was, and is, an exception.

Yes, we made the most of the opportunity, but let’s not discount the impact of being in the right place at the right time and a not insignificant dollop of luck.

The next Trade Me (almost by definition) will be an exception too, but probably won’t look anything like Trade Me did or does.

Looking at a high profile success and thinking that you just need to do the same to be successful can be quite misleading.

16 thoughts on “Because”

  1. Good post Rowan. It’s unfashionable to suggest that luck or fortuitous timing are significant factors in success of failure, but I’ve seen several situations where that’s been so; idiots who hit the jackpot, geniuses who lost everything,and both falsely praised or blamed.

  2. Well I agree it may have looked like we delighting in Ferrit’s downfall I personally was more sickened by the waste of money. Your point about following in Trade Me’s footsteps is a good one. Not all companies will succeed by doing exactly the same as TM but any business whether it is a big box retailer or a stall at the Avondale markets needs to follow some basic business principles. That was why people made so much of Ferrit’s demise.

    The good news is that we can put that behind us and focus on the new kids coming through. I’m super excited about which I have been working on (shameless plug) but also a lot of other start-ups that seem t be gaining momentum. Maybe we need to set up a group pool where we can ‘bet’ on the success of companies as they launch and see how accurate we are 2 years down the track!

  3. Great post- I was thinking along the same lines the other day re Trade Me. Giving credit where credit is due, TM probably had countless opportunities to make the wrong decisions, but stayed very focused and made the right ones to get to where it is today. While you are bang on about there being a degree of right time, right people, and right place, I think the focus TM demonstrated by delivering a compelling core proposition is a key ingredient that many failing business have missed.

  4. @Glen

    “Maybe we need to set up a group pool where we can ‘bet’ on the success of companies as they launch and see how accurate we are 2 years down the track!”

    Isn’t that the definition of angel investing? Or are you talking about doing this for fun rather than profit? In that case I would just bet against every venture and would probably win on average.


    “TM probably had countless opportunities to make the wrong decisions…”

    That’s a nice way to put it. You are right, although most people probably don’t realise how often TM took the wrong choice. Luckily most of those mistakes were small and we were able to quickly correct.

  5. Great post.

    The Ferrit thing seemed to kick a whole new round of ‘I reckon’ and ‘They shoulda’ – often from people I would’ve thought (one would have hoped) knew better.

    There is something just yucky going on at the moment around the scene with opinionating and hucksterism and hype.

    Nice to have you nail what’s wrong with where people are thinking on this one. A fresh breeze into a stuffy room.

  6. Rowan

    I think Leonie nailed this one. I for one was most impressed by just how often Trade Me made the right decisions. That simply doesn’t happen in normal organisations. Normally it is a fight just to save the important ones, let alone the relatively small ones.

    The incorrect decisions existed, sure (Smaps), but they were almost always changed very quickly when the anticipated response was not forthcoming. Smaps is a good example – when the traffic results after launch were not as good as expected the development and management focus simply shifted to more lucrative areas. Most corporates would have thrown more money and resources to try to make the “great idea” work. Trade Me was small and smart enough to move on.

    The poor decisions I did see were overwhelmed by the great ones. Some of those were big, like launching motors then property then jobs, but most were little, like the very flexible internal internet policy and the choice to let Ferrit advertise.

  7. @Lance:

    I think we’re in furious agreement.

    Let me quote a tweet I got from nikz

    “i think the idea of not being able to succeed JUST by working hard depresses me more than your Brian Eno quote”

    My response:

    “Yup, not JUST but still ONLY”

  8. @rowan

    “Isn’t that the definition of angel investing? Or are you talking about doing this for fun rather than profit? In that case I would just bet against every venture and would probably win on average.”

    No that would be just for fun. I guess it would be more like a “Do you think the idea is sound and do you think the team could pull if off?” I would have bet for the idea of Ferrit but against the execution. Another example would be Any Circle, an idea that I don’t personally think has merit but a bunch of people might. A smart start-up would then look at this and ask why people thought that way. Sometimes we get to caught up in the project and can’t stand back and take a critical view of what we might be doing wrong or could improve.

  9. When Trade Me is referred to I think it is largely in the manner in which the business was executed. Sure it’s fashionable and easy to say “be like trade me, be like google”, but there’s a reason why this is said. Ferrit and Trade Me are different businesses so there is little for Ferrit to gain by pulling apart the way Trade Me operates, but there’s plenty to learn about the way Trade Me executes. Just like the way there’s plenty to learn about Google, even though it’s a different ballpark.

    Ask most people on the street if they Google, they will say yes. Ask them how many times and they wouldn’t have a clue, thousands they might say. How many times has it let them down or given them wrong information? THey probably couldn’t come up with an isolated event. How many times have they gone to google and it’s been down? Or slow? Don’t underestimate these small points. The amount of trust and faith that Google has built up over the last 10 years with the public is what makes them impossible to compete with. Same with Trade Me. It has always been fast, forms dont break, users dont have to think. Go to a competitor site and you’ll see a page take a few more seconds to load up.. fail, go to register and get some buggy error handling that wipes your data.. fail.

    People want less pain in their lives. Going to a site A that takes a touch longer to load than Site B is painful, searching on Site A that returns crappy results is painful. If, as a user, I find a site that rewards me by letting me switch my brain off and doing things FOR ME and doing it FAST then that is where I will go. Why wouldn’t I? For instance when that new search engine Cuil launched.. I went there… immediately it was slower, did a search for Cuil itself and it didn’t even come up with their own result. Never went there again. You usually only get one shot with a user, even more so when there are other options available (especially ones you regularly use and have built up 10 years of trust with!).

    These are basics and while it seems obvious, it’s amazing how few companies actually make this a core part of their business. Trade Me did, from day one, as did Google. Ferrit did not and they badly needed to. They made small improvements but never got anywhere near there and the damage was too great.

  10. @Chris:

    I would argue that the basics, while obvious in hindsight, are not always so clear in advance.

    And, when you’re working on a start-up you need to make decisions in advance.

    For example…

    Trade Me: the idea of charging success fees on auctions wasn’t obvious. The original by-line for Trade Me was: “Buy, Sell, Auctions, FREE”.

    Google: choosing a bland home page, with just a search box and a submit button, in order to be fast wasn’t obvious. I wouldn’t be surprised to discover that one of the reasons that they “chose” that design was because the guys building it sucked at Photoshop. And, if it were obvious then surely their competitors would have done the same – and at the time they generally did the exact opposite.

    Today: is it obvious that a start-up should have a blog (and maybe a twitter account)?

    Before you answer, consider that Trade Me has neither.

  11. Interesting points, but that’s more about the business itself than the execution of those ideas. I am a little skeptical that charging success fees wasn’t obvious. That started happening in 2000/2001 and eBay had been around a full 3 years (possibly 4) so the idea was not an epiphany. The simplicity and ease with which it was executed though? Brilliant.

    When I refer to Google I’m not talking about their sparse design approach. While that was a talking point at the time and against the norm, it is their execution on their core promise which has propelled them from where they were to where they are today. Everyone has tried the sparse approach (MSN live etc), but simply copying an aesthetic will get you nowhere. Google delivers you the results you want at lightning speed, that’s the company mission and that’s what they execute the best. Ferrit’s mission was to provide consumers new products from a large selection of known retailers from the one spot and clip the ticket. A useful idea, potentially big revenue earner, no stock, fairly simple business – did they execute it though? No. Big fat no.

    Absolutely is it not obvious that every start-up should have a blog and twitter account. Those things are not useful for every business out there. The world isn’t made up of 20 something iPhone owners and for most websites, especially small players, converting goals is everything – whether they be purchases, signups etc. Sometimes a blog and a twitter account are noise and distract the user reaching the goal. On the flipside just because a website (Trademe) has survived for 10 years without a blog, twitter or API does it mean it shouldn’t have one? That’s like looking in the rear view mirror all the time and just looking at the analytics and saying “yep everything is a well oiled machine let’s not disturb the ecosystem!”. Trademe has a vocal, active community that would love to get involved more and there are people beating down at the door trying to build apps but the doors have been closed and that community has never been allowed to foster or grow. All they have is a seriously outdated message board). Again, maybe giving the users a better community area would detract from what they should be doing (bidding and selling), but maybe not – maybe they would spend more time on the site in general and attract more people to it. The problem is I haven’t seen anything being tested, so no one knows.

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