Back in April Viddy, a social video sharing app, was the number one service in the iPhone App Store and had just raised $30 million. It seemed like the company was poised to be a breakout star, the Instagram of video. According to PandoDaily, Twitter was apparently made an offer to acquire the company, but CEO Brett O'Brien turned it down. Now Vine has become Twitter's golden child, and O'Brien has been canned.
How did Viddy go from the #1 download to not even cracking the top 50? It didn't have to end like this. Viddy had a chance to sell to Twitter, which was looking to make up for its botched purchase of Instagram by diving into video. SocialCam, who's rise mirrored that of Viddy, decided to get out at the top, selling to Autodesk for $60 million. Viddy made the call not to sell, though — a seemingly wise choice after Instagram resisted early suitors and ended up being worth $1 billion. Viddy raised $30 million in April of 2012 at a $370 million valuation.
Viddy had a chance to sell to Twitter
The problem for Viddy was that Instagram had built its own network, its own social graph, separate from Facebook or Twitter. Viddy was part of a group of apps that rocketed to popularity thanks to viral distribution on Facebook. When Open Graph debuted, Facebook wanted to prove its worth to app developers, and opened the floodgates, allowing apps to artificially inflate their numbers. "This stuff will shrivel your nuts and give you zits all over," Lawrence Lenihan, managing director at FirstMark Capital told me at the time. "It doesn’t help with building a sustainable, long term business. It’s about getting big fast so you can flip the company for a nice profit."
Having seen the success of Instagram, Zuckerberg was not about to let another competitor grow to scale on his network. After letting these apps balloon, Facebook turned off the juice, deprecating the way apps like Viddy could push content across Open Graph, and the number of active users started to plummet. Twitter, meanwhile, was still searching for that video app. It found it in Vine, which is now the talk of the town.
"It’s about getting big fast so you can flip the company."
Viddy's mistake wasn't resisting the urge the sell early. Facebook and Google had to turn down buyout offers many times on their road to glory. The mistake was not recognizing the extent to which the company relied on another platform for its success. As the veteran venture capitalist Fred Wilson wrote, startups can't lean on Google, Facebook, or any other platform for their long term success.
Update: Viddy responded by email:
Viddy is conducting a search for a new CEO. As the company moves into the next phase of the business, the need for more experienced leadership arose. Brett has been a huge asset getting Viddy to where it is today and we’re excited to have him remain on the board to help the company go after the large and still unconquered market of mobile video. -- JJ Aguhob, president and co-founder, Viddy