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26 Jan Why we shut down a product that was $75,000/year profitable ← Go back

Posted by Natalie Nagele on January 26, 2012 — 17 Comments

Shutting down our first product

You may have heard or read about Wildbit shutting down Newsberry, our first product on January 2nd. Chris wrote about a few reasons behind it, but I felt like we needed to be totally honest about how we got to this decision. This was a tough time for us, personally, as this was our first endeavor at a product company many years ago. When we shut it down, it was profitable and little effort, yet we still did it. This is why.

Some backstory

Seven years ago our consulting company built it’s first product, Newsberry. An email marketing service when there were very few (at least good ones) out there. We built it as a solution for some of our own customers and then saw a potential market. All the while, we continued concentrating on consulting. Newsberry was always an afterthought, as it couldn’t support the entire team. We would work on it, add features, but not full-time.

Fast forward to 2007 when we had a new itch, and built Beanstalk. We instantly felt closer to the product since we used it every day. We were excited about it and the momentum from customers was much stronger than Newsberry ever had. Newsberry was still there, growing, but mostly just maintaining year after year.

In 2009 Chris asked me to leave my short stint in corporate America to come back to Wildbit to try to revive Newsberry. We had reached a point: we had to do something with it, or shut it down. There was stagnant growth, we couldn’t keep up with the fantastic new services around us and we needed some time to concentrate on it. So that’s what I did, or at least tried to do. We had a developer working full-time on Newsberry at this point and we shifted gears and came up with what we thought was a really innovative approach. We wanted to open email delivery to the customer, give them a dedicated IP and let them see exactly how their sending practices affected them. We partnered with ReturnPath and designed an incredible interface and system to track reputation using ReturnPath’s Sender Score. I wrote a post on email delivery for an industry blog. And then we waited. And nothing happened. We missed so many opportunities because we didn’t market it loudly. Or maybe it just wasn’t something people wanted or looked for. We really had no pulse on the industry and market. I have a hundred theories, and only one with some certainty: it failed.

It was difficult in the team to push a project nobody was interested in. Our team was so focused on Beanstalk, Newsberry became the stepchild. We barely used Newsberry monthly, let alone daily. We were a team of designers and developers, and to us marketing was like a foreign language. I personally had very little motivation as I watched other companies kill it with beautiful design and extraordinary features. It was a gloomy time, but we kept at it.

In 2010 we launched another email service, Postmark. We scratched our own itch again. Beanstalk was sending a ton of transactional email, but we had no clue what it was, where it was going, whether it reached the Inbox, etc. We wanted a Newsberry but for triggered application emails. And we figured if we needed it, so did others. Postmark was a huge hit right out of the door. Our existing developer audience contributed to that of course, but it also helped push Newsberry even further away.

Our last ditch effort

We decided that since Newsberry wasn’t growing, it could not support a full-time developer on the project. Then, we dropped our rates in half. We just couldn’t justify charging people the same rate as other products that provided a richer service. There will always be an audience for a cheaper, simpler alternative so that’s what we became. The first month our revenues cut in half (obviously) but within 3 months we were back at the same rate. That meant we doubled our customer base and we got excited a bit. At that same time we noticed that a lot of these customers weren’t using the best sending practices. Our bounces and spam complaints started going up. The customers who wanted cheap were also using cheap methods to grow their lists, and we started kicking people out. As people started signing up we’d refuse their accounts. So the growth basically stopped.

Why we made the decision to shut it down

Whenever Chris and I would see his parents, his dad would ask about Newsberry. He called it the “CEO’s pet project.” The one that doesn’t really do anything for the company but you keep around because it has both sentimental value and it’s too difficult to part with. When we announced shutting Newsberry down it was a profitable product, making approximated $75,000 a year, in profits. A lot of people will look at that and think we’re crazy. We had similar thought for the last year. The problem is that that profit came at a hidden cost.

Newsberry was not a product we were proud of, and that’s a huge problem for our team. Wildbit prides itself in design, detail and quality. Newsberry just wasn’t fitting the bill. I once logged into Campaign Monitor after not seeing it for a long time. I was blown away by how beautiful and smart it is. It was so much of what we always dreamed Newsberry would be. How could we keep going along if we knew that it wasn’t our best work? The team ignored it. Nobody used it or even knew how to use it. And yet we were charging people money. Sure, it did exactly what it was meant to do, and really well. We still had phenomenal email delivery, and the list-based method really resonated with a lot of people. But it just felt wrong.

Postmark was demanding a lot of attention as a growing product and Beanstalk was continuing to grow as well. They needed all of our concentration, and we just didn’t have the energy or mindset to keep that going with Newsberry. Concentrating on what you are good at is so important. Working on what you feel passionate about is critical. Newsberry was neither of those things for us.

When we sent out the announcement about closing to our customers, I cried a little. This was our first baby. We felt so defeated and at the same time relieved. We setup a partnership with Campaign Monitor to help make the transition smoother. We felt our customers deserved a better service. A lot of these customers had been with us for years, many since the beginning. I felt like we let them down. The relief came like ripping a bandaid. We could shut it down and concentrate all of our efforts on the products we think about when we get up in the morning. We could be intensely proud of our entire portfolio of products again.

Why we didn’t’ sell

Yes we got offers to sell. People asked to buy our code, the IPs, the lists (ha!). We didn’t sell. We would only consider selling to a company we could be confident would do do right by our customers and the industry. We talked with a few large companies that reached out to us about an acquisition but it never panned out. We didn’t go looking and we’re ok with that. Selling would have involved a lot of effort and time, and we just needed to focus on our products that were growing.

What we learned

If we could go back, I think we would have closed it down a lot sooner. The honest truth is we haven’t loved it in many years. That said, Newsberry solidified some core beliefs we have as a team and a company. Working on what you love, what you use, and are proud of is the key to being successful. Everyone says it, but this has been a real reality check for us. Sometimes we kick ourselves thinking about how open the market was when we started. But we’re quickly remind that it’s just not who we are as a company. We don’t feel a pulse on that industry and that’s ok. What a great experiment we had. Three products, one that we didn’t use ourselves and two that we use every day and love.

And as expected, one had to go.

UPDATE: addressing some comments below, there’s a follow up post about why we didn’t sell Newsberry.

17 Comments

Shutting down a project is one of those things you just can’t do. It’s like deciding it’s time to give up on trying to learn French, after giving it so many hours during your life. You keep telling yourself that “just a little more and…”. If there’s money at stake, even more. The product was making money, so, why shut it down? Of course, this is a rhetoric question, your arguments for why you shut it down are good ones. And even better you didn’t sell just for the sake of selling.

I hope your new endeavours work much better and you don’t need to shut them down in time.

Ruben

Ruben Berenguel — January 26, 2012, 10:32 am

I admire your ability to come to the decision you did. The intangible costs you describe of having a product (even if it’s profitable) that you’re not passionate about, can effect the company much more than many realize. Not enough companies concentrate on what they do best, instead try to be everything to everyone. Great post.

Matt Toto — January 26, 2012, 12:09 pm

Is it too late? I’ll take the product over for free… I need the income… I’ll do right by the customers.

Tony Shepps — January 26, 2012, 12:20 pm

I’d like to see something along the lines of how 37signals got rid of Sortfolio. They were in the same boat, but just asking publicly, they were able to find someone to buy it whom they thought would do a good job. It’s better than just shutting something down simply because you don’t like it anymore.

Chris Oliver — January 26, 2012, 12:35 pm

Chris, good question. Selling an email delivery service is a bit more complicated than a portfolio hosting site, and we’ll elaborate on that point in a separate post. Thanks for the push, stay tuned.

Alex Hillman — January 26, 2012, 12:59 pm

Thanks for sharing this. It is very honest and insightful. My current project is born out of love and regardless of whether or not it turns a profit, I am having a blast working on it.
Like you, if I stop loving it, I will probably pull the plug on it rather than let it flounder.

Mr. Cut-Rate — January 26, 2012, 1:05 pm

The open source developer part of me is howling about locking all of that code (and the effort and time it took to produce it) away to moulder.

On the business level — I think you made the right choice to pull the plug, and part of doing that must include either a ton of due diligence to sell it (even to give it away… and that’s a lot of work) or wiping clean all of the data once your customers have backups.

Rob Whelan — January 26, 2012, 6:04 pm

It’s a tough decision to “let go” of a project, but takes a great leader to make the decision. Well done.

Ben Duncan — January 27, 2012, 9:24 am

Kudos on making a tough decision and thanks for sharing the rationale.To be clear – when you say the product is generating $75k a year in profits, is that gross or net revenue?

Ariel — January 27, 2012, 1:52 pm

I can appreciate the need to do the right thing in terms of being a developer when working on a project or owning a product.

What I can’t appreciate is how that work ended up. It’s not a piece of art, FFS. It’s an asset, pure and simple. Business at it’s core is about money. If you can sell it, DO SO.

If you had a {your favourite car here}, didn’t drive it for a long time and disliked it or didn’t care about it anymore would you just take it to the scrap heap? Would you light a bale of 20′s on fire?

Johnson — January 28, 2012, 12:20 am

I can understand your reasons for pulling the plug on it. But why didn’t you just “donate” it to the open source community?

Gemma — January 30, 2012, 5:37 pm

Discontinuing your profitable Newsberry product must have been a tough decision, especially given that it was your initial product and $75K/yr profit is a nice addition to anyone’s bottom line. I applaud your success and focus to follow your strengths and passion. There is no doubt that Beanstalk and Postmark will benefit as a result. Thanks for sharing.

Rick Noel — February 4, 2012, 3:11 pm

I’ve used Mailchimp, Aweber (currently), Newsberry, Campaign monitor and I loved Newsberry the most out of them all. I started using campaign monitor a little after Newsberry was no longer there. Didn’t like it much, won’t use it again. Newsberry was better. I wish you would have been more proud of it and invested a little bit more time & money marketing it. Maybe I’d still have my favorite email marketing platform. Disappointing.

Chris — January 8, 2013, 7:58 am

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