Greg Tseng

How A Startup Pivots: The Tagged Story (So Far)

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Editor’s Note: This a guest post by Greg Tseng, who co-founded Tagged in October 2004 and has served as Chief Executive Officer since its inception. He has been a driving force in creating Tagged.com with his partner, co-founder and long-time friend, Johann Schleier-Smith.

In September, I gave a candid update on Tagged in a video interview with Michael Arrington, discussing how we’d launched one of the original social networks in 2004 and competed for three years but did not win. How in 2007 we made the decision to differentiate by pivoting to social discovery, and how since then we’ve built a great product for meeting new people, become a profitable business and now operate a leading site for discovering new relationships.

Since September, many people have asked for a more detailed insider’s look at how a company like ours was able to pivot. Here it is.

First, some context. We’re not at all unique. Many successful startups go through some form of pivot, changing their direction when their first idea was not successful. PayPal was beaming money between Palm Pilots. YouTube was a video dating site. Twitter was group SMS, which came out of a struggling Odeo. Pandora started as a B2B music recommendation service. Groupon started as The Point, serving collective political action. The list goes on.

Of course, there are some notable exceptions, such as Amazon, eBay, LinkedIn, Facebook and Yelp, which brings up an important distinction between pivots and merely expanding a core business: Amazon going from books to other categories and Facebook going from college students to open registration. Tagged also first attempted an expansion and then a pivot.

The Tagged Story

I have always been interested in how people connect online—BBS’s, USENET, SixDegrees, eGroups, chat rooms, forums, and other methods—so I was extremely compelled when I first saw Friendster in January 2003. My best friend, Johann Schleier-Smith and I were running a different company at the time. However, we were so drawn that we decided to help start hi5.com as an international social networking site and co-found Tagged for U.S. teens. Facebook had started in February 2004 just for Harvard (I have user id 3607) and U.S. colleges, and MySpace had launched in September 2003. We started Tagged in October 2004 and used word of mouth and viral marketing to quickly attract about 10 percent of the 25 million U.S. teens.

But we were late. By July 2005, nine months after our launch, MySpace had already been sold to News Corp. and kept growing. Facebook had entered the market with its own high school product. By 2006, we were not winning the U.S. teen market, and in October we decided to expand globally and to ages 13 and up—just as Facebook made a similar move. This expanded our market from about 25 million to 1 billion people online—and launched us into the social networking battle with Facebook, MySpace, Bebo, hi5, Friendster, Orkut and others.

We got lift in 2007, registering more users than any other site at one point, but the engagement wasn’t strong. A battle for new features was waged, and Facebook launched the brilliant News Feed. Bebo and hi5 followed with their own feeds, and all three sites saw strong engagement gains. Our feed, called What’s New, produced no gain whatsoever.

By late 2007, our traffic was flat while others were growing. We weren’t in the top 5 social networks and faced being pushed out of the top 10. We had to acknowledge we’d lost the particular social networking battle we were fighting. We had to rethink and find a different path.

We took a step back and conducted a series of user polls and surveys. We also dug deep into our own stats to find answers to fundamental questions: Who were our users? What were they doing on Tagged? What was Tagged to them? The results were astounding:

  • What is your main social site?
    • 49.2% Tagged
    • 36.8% MySpace
    • 4.7% Facebook
    • 2.3% Black Planet
    • 1.6% Bebo
    • 1.2% hi5
    • 4.3% Other
  • Why do you use Tagged?
    • 51.2% to meet new people online
    • 24.5% to have something to do
    • 11.4% to keep up with online friends
    • 8.2% to keep up with real-life friends
    • 4.7% to express myself
  • Who are your friends on Tagged?
    • 75.2% people I met on Tagged
    • 24.8% people I know in real life

This was an “ah ha” moment for us! People weren’t using our site to stay in touch with their friends. They were using it to meet new people. Tagged isn’t social networking, it is social discovery.

How did this happen? Perhaps because our Browse and Online Now features were easier to use than searching the site, and we didn’t have an established “network” concept. Perhaps because we had display names, not real names, and we showed ages by default. On Facebook, real names are used but not ages, and you only search for people you may already know. Facebook also goes to great lengths to prevent online-formed relationships that may “pollute” the social graph. So it may just be that one set of features encouraged staying in touch with existing friends, while the other encouraged meeting new friends.

In late 2007, with Facebook having been set at a $15 billion valuation, and with MySpace, hi5 and Bebo all continuing to grow, we executed our pivot, and we’ve spent the last three years building a clearly differentiated business.

We improved the UI and performance of our Browse and Search. We built and optimized a dating feature called Meet Me. We built a Groups feature for common interests. We built social games, the most popular is Pets, which is all about meeting people. We even re-architected our What’s New feed to focus on meeting people by adding an “Everyone” tab, where you can see the updates and photos from anyone on Tagged, subject to your filters. All these features are backed by powerful recommendation algorithms. On Facebook you just search an address book or otherwise find people you already know. On Tagged, we have to decide which 100 of 100 million users to recommend to you—it’s a different and much harder problem.

This pivot to social discovery has led to tremendous growth. Today we have over 100 million registered users with more than 20 million monthly unique visitors. Collectively, they form over 100 million new connections and consume over 5 billion pageviews per month. We achieved full-year profitability in 2008, did over $30 million in 2010 revenue, and we are targeting over $50 million for 2011. Even though we’re in a different space, Hitwise ranked us as the third largest social network in the U.S. behind Facebook and MySpace. In Q1 of 2010, comScore ranked us as a top 10 display advertising publisher in the U.S. And in October 2010, we made the Inc. 500 list of fastest growing companies.

This growth was only possible by the pivot and thank goodness we did it. Back in 2007 social networking was still up for grabs but today Facebook is the undisputed king, and most others that kept fighting have suffered declines or have died off. Meanwhile, meeting and socializing with new people remains a core human need that’s been sorely neglected online so I’m very excited by our new direction. Our mission is “to enable anyone to meet and socialize with new people” and our team works hard every day towards achieving it. Want to join us? :)

Postscript

People have asked me how I feel about not winning social networking now that Facebook is serving over 500 million active users and is the largest site in the world by usage. My reply is this:

I first met Zuck, Dustin, and Parker in 2004, and it has been awesome watching a Harvard dorm room business (hey I once started one) become a “once in a decade” company up there with Microsoft and Google. I have read about those, but this one I actually got to watch. Facebook never had to pivot, and while there is always some element of luck, from what I can tell, Facebook’s success is almost all due to superior execution, not resting on laurels, and the willingness to continually push the envelope toward achieving their mission. Their success is 100 percent deserved.

I certainly wish Tagged had become the king of social networking, but at least we played a hand (or two, if you include hi5). And only by playing did we find the winning direction for Tagged that I’m very passionate about. Still, if we ever see a pivot that could lead to the next “once in a decade” company, then guess what? We’ll pivot again.

 

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