The Web Is Rewarding Greed and Bad Behavior (Business As Usual)

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Weekly Wrist Watch Round Up

Editor’s note: Contributor Ashkan Karbasfrooshan is the founder and CEO of WatchMojo.  Follow him @ashkan.

The world wide web prospered and is what it is today because its inventor Tim Berners-Lee didn’t give into temptation and greed and chose not to patent his invention.  But 20 years later, it’s evident that the only thing that most online leaders lead in is plain bad behavior and greed.

Business as Usual

Right off the bat, I’ll admit that this means that the web is no different than business in general, where corporations aren’t exactly boy scouts.  But given the openness of the web, rise of social media, and the expectation of the democratization of society and economy through the web, it’s surprising that we find ourselves in the situation that we do.

The Web has Always Spawned Evil

We’ve seen nasty operators before: WhenU and Gator Corp. (then GAIN, subsequently Claria Corporation) were the poster children for bad behavior.  Critics of these companies accused them of peddling adware and spyware, allegedly hijacking computers and serving ads to unsuspecting and unwilling viewers.  Worse even, oftentimes the adware would “take over” a publisher’s own ads and cover them with ads being served – and enriching – WhenU and Gator.

I recall having one exchange with a WhenU executive when I ran sales for an online publisher and wondering how on earth their practice was allowed.  But the fact that the practice was allowed made it inevitable that someone would seek to profit from it.

Meanwhile, despite their unpopular reputation, Claria Corporation actually received backing from major Venture Capital firms such as Greylock, Technology Crossover Ventures, and U.S. Venture Partners. Claria even filed for a $150 million IPO in April 2004 but withdrew the filing in August 2004.  It shut down in 2008 after exiting the adware business at the end of the second quarter of 2006.  Good riddance.  For what it’s worth, many of Claria’s executives have gone on to other companies including DemandMedia, Dotomi, eHarmony, LifeStreet, and Turn according to the company’s Wikipedia page.

WhenU seems to be around to this day, with the totally disingenuous tagline: “Advertising You Want”.  Really?

I’m actually not attacking either Claria or WhenU, though. As they say: “Don’t hate the player, hate the game”, and the game is obvious:

Build something fast and sell it to a greater fool, and then let them worry about cleaning up the mess once they realize the insane lengths the previous management went to boost revenues that were probably not all that sustainable.

The Web’s downward spiral

It’s easy to cast Claria and WhenU as vestiges of an era when online advertising was rising from the ashes of the dotcom meltdown and forced companies to push the limits for survival.

Bull-effin-shit.  We are seeing more questionable practices today than ever before, but I would argue that users are largely desensitized or don’t care, apart from a vocal minority that makes a big deal out of everything. Most web companies today aren’t as evil as WhenU or Claria, but some of the same greed propels them.

And the Award for poster child for bad behavior goes to…

These days, the poster child for aggressive tactics is Zynga CEO Mark Pincus.  Yes, what he said in front of an audience regarding Zynga’s early sales practices is dubious, and his effort to get early employees to give up unvested stock is questionable (to put it mildly), the fact is, with an expected  valuation of $10 billion in the upcoming IPO, and backers including Fred Wilson, John Doerr and Bing Gordon, it’s kinda hard to knock Pincus.  In fact, while I certainly don’t want to make any excuses for him, even simply reading his LinkedIn profile (read his description of his experience at FreeLoader) suggests a certain naiveté and idealism that was crushed by earlier episodes at Tribe and lord-knows-where-else that pushed him to basically use the rules of “the game” to his advantage.

At the end of the day, Zynga is a company that makes products that millions love and willingly pay (how many consumer web companies can say that?) and no one is forced to actually work there.

Facebook: All of Your Privacy Are Belong To Us

In fact, everywhere you look it seems that it’s easier to “ask for forgiveness than permission”.  The master at that, is none other than Facebook founder Mark Zuckerberg.

Facebook is being rewarded by investors, who have pushed the company’s private stock to roughly $70 billion.  With a rumored IPO set for April 2012 valuing the company at $100 billion, that would be a revenue-to-sales multiple far larger than what Google got in 2003.  Google was generating $6 billion in revenues and went public at approximately $25 billion; Facebook boasts the same $6 billion but is fetching $100 billion.

Google’s Do No Evil (?)

And speaking of Google, I will admit that the company does plenty of good.  Its products have made life simpler for billions, but cynics accuse Google of being the 21st century equivalent of Standard Oil and Microsoft.  With 45% of the online advertising pie, that is not an unfair accusation considering that its strength in search, mobile and video will only amplify in years to come.

Nothing Ventured, Nothing Gained

When someone like Max Levchin says that there are “too many incubators” and implies that investors are shunning risk and chasing me-too companies, I agree.  But the problem is: his previous company Slide exemplified what I consider to be half of the largest problem facing the community: smart and driven entrepreneurs who chase small trivial markets and products instead of tackling the large problems that previous generations did.

Of course, the other half of the problem is that the bulk of today’s generation of VCs, by and large, lack the testicular fortitude and vision that the previous generation did.  With the new mindset of “failing fast” and focus on “the art of the pivot”, the reality is that many would-be promising companies are being sacrificed and prematurely killed in order to chase the latest fad that could be flipped to the next sucker.

When it’s said and done, the web isn’t all that different from the rest of the business world, but I guess I expected more.

Image: Shutterstock/docent