Crowdsourcing sounds good in theory—pull together a bunch of smart, motivated individuals from across the Web to create a new product or business—but in practice it is not so easy to pull off. One of the first major casualties of the crowdsourcing movement looks like it will be Cambrian House, the Calgary startup that tries to organize the crowd around creating new ideas for Websites and software products. After unsuccessfully trying to raise a new round of capital, it is our understanding that the startup has negotiated a fire sale of its intellectual property, assets, Website (and whatever community remains after the sale) to Spencer Trask Ventures, a New York venture firm inspired by the financier who originally backed Thomas Edison.

The deal is structured as an asset purchase, after devolving through various stages from initial talk of a new investment to a joint venture to a buyout. The more Spencer Trask looked, the less it offered. Spencer Trask is basically buying the Cambrian House platform and its community for a fraction of the $7.75 million that investors have already put into the company. We cannot yet confirm an exact figure, but one source speculates that it could be less than $1 million. Spencer Trask plans on taking the assets and rolling it into VenCorps, a Cambrian House project in development that wants to apply the crowdsourcing concept to venture capital. Sean Wise, a Canadian “venture consultant,” is heading up VenCorps and (presumably) whatever is left of Cambrian House. A Cambrian House spokesperson (VP of Communications Jasmine Antonick) contacted confirms that the sale has gone through and that the site will “dissolve” in three months. We are placing Cambrian House in the deadpool.

So far, 6935 ideas have been created on the Cambrian House site. Some of them must be worth pursuing, no? Perhaps. In addition to VenCorps, Cambrian House itself will be keeping some of its more successful projects alive, including desktop fighter game Gwabs, independent-film funding service FilmRiot, Digg-like charity Greedy or Needy, mobile app testing site Mob4Hire, and virtual gift-wrapping app Prezzle. It will also retain rights to its source code and try to license it to others through an application called Knottle and a platform called Chaordix, both yet to be released. Many of these ideas didn’t gain traction until they were invested in and championed by Cambrian House itself, which again makes you wonder whether any good ideas can actually grow into full-fledged products from an unaffiliated crowd.

To be charitable, maybe Cambrian House just suffered from poor execution and Spencer Trask thinks it can do better. But crowdsourced venture capital? If the crowd cannot even make a decent Web app, the chances of its being able to allocate millions of dollars more efficiently than seasoned pros does not seem terribly great.

The imminent demise of Cambrian House is a cautionary tale for other startups, such as Kluster, CrowdSpirit, CrowdSpring, and FellowForce, trying to cut their teeth in the nascent crowdsourcing industry. They all have their own approach, and experimentation is necessary to find the right one.

The fall of Cambrian House won’t deter them from trying. For instance, Kluster takes a more structured approach by breaking down projects into manageable stages and has thought through the incentives a little differently. And CrowdSPRING, which focuses on designs for Website and marketing materials, is formally launching tomorrow after picking a winner for the $5,000 contest to design its own Website.

Some of these will survive, and some won’t. The key is attracting the right community of active contributors and structuring the rewards in such a way that makes it easy to participate. Or is crowdsourcing simply a bad idea that should be put to rest?

Update: In a comment below, Cambrian House CEO Michael Sikorsky reflects (excerpt):

Indeed, our model failed. In short: we became a destination people loved to bookmark more than they loved to actively visit (our traffic pattern was scarily VC-ish). The limiting reagent in the startup equation is not ideas, but amazing founding teams.

A key assumption for us, which proved out NOT true: given a great idea with great community support and great market test data, we would be able to find (crowdsource) a team willing to execute it OR we could execute it ourselves. We needed amazing founding teams for each of the ideas – this is where our model fell short.

What we learned: it would have been better to back great teams with horrible ideas because most of the heavy lifting kept falling back on us, or a few select community members. A vicious cycle was created leading all of us to get more and more diffuse.

Hence: the wisdom of crowds worked well in the model, but it was our participation of crowds aspect which broke down. Trying to find people willing or capable to take on the offspring (our outputs) of the CH model was hard and/or incredibly time consuming.

It is not often you get such an honest assessment of why a business failed from a CEO in the midst of its demise. Sikorsky also disputes that it was a “fire sale,” but declines to give any specifics on the price. He also notes that Cambrian House as a company will continue, even if the site will die, and still owns its intellectual property.

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We introduced Spotplex in February 2007 as a potential Digg killer that served up popular stories by monitoring how many people read them. Somewhere along the way, it also turned into an Alexa-like analytics service. Unfortunately, neither market worked out for them and they’ve been forced to shut their doors.

The Digg-style service used JavaScript that was embedded on participating pages to track how often posts were read, and top-read posts were featured on Spotplex’s homepage. The service set itself apart from Digg by requiring no intervention on the reader’s part to promote a page. On the other hand, Spotplex only recorded hits on blogs that had embedded the Javascript snippets, which severely restricted its sources of content.

Spotplex’s JavaScript embeds were also used to offer an analytics service that was designed to contend with sites like Alexa and Compete. While the addition of this service marked a shift to a very different market, both of Spotplex’s services leveraged the same backend.

CEO Doyon Kim says that the company’s ultimate failure was due to a lack of adequate funding. The company underestimated the resources that were required to build and maintain its service, and it neglected to seek venture funding after its $450,000 seed round. This is surprising given Kim’s experience in the industry: he co-founded DialPad, which was acquired by Yahoo in 2005.

Spotplex is now in the TechCrunch Deadpool.

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RSS Reader News Alloy is to shut due to a lack of funding. Michael first reviewed the site in January 2006 and it was mentioned again in a round up of RSS Readers later that year.

The following email was sent to News Alloy users:

You received this email because you are registered user of News Alloy Project - Web2.0 based Feed Reader. (http://www.newsalloy.com/)

Bad times finally came, my contract with our hosting provider is over so i will shut down the site in a couple of days, please grab your OPML for your convenience.

Future plans:

If you are interested for project to stay alive and get it under your wing please contact me, we need new dedicated hosting (quite powerful).
In case you want to get full ownership of the domain and grab all sources feel free to ask. It will cost not that much as fat cats are asking.

Also i’ve developed new version about 6 months ago which is half ready - News Alloy 2.0.
It looks much brighter, faster, pure Javascript UI, rich featured and impressive look and feel. But to make it complete i need funding. Thats for sure.
If You want to have look - please let me know to get an invitation.

If none is interested i will put other project on the top of News Alloy domain.

Please keep in mind that News Alloy project was developed by one single person who was in charge of everything - coding, design, promo and PR.

Now I’m open for interesting contracts and custom jobs in the area of web development and system administration.

Thank you for staying with us,
Volodymyr Danylyuk,
Project Developer and Maintainer

I’ve never used News Alloy before so I’m not sure that it’s worth saving, but it might be a cheap entry into a ready made startup, or a decent value add for an existing company.

Until its saved, News Alloy joins the TechCrunch Deadpool.

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Google terminates advertising partnerships regularly based on fraud or consumer protection issues, or just because. They never comment publicly on any particular instance, but it’s usually pretty easy to guess.

The most recent example is EcoCho a new search engine that says they donate part of revenue to carbon offsets. I made fun of them last week when they launched, since the exact connection between their revenue and the carbon offsets was rather vague (they say “up to two trees” will be sponsored for every 1,000 searches on the site, which has exactly no meaning whatsoever).

Google has terminated them, the company says. That leaves EcoCho with only Yahoo to provide search and advertising to the site. You may want to go try out the service before it shuts down, because this thing is doing a belly flop into the deadpool.

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Sonific, an online music playing servuce similar to Pandora and Seeqpod, is to close May 1 as the company was unable to obtain licensed music rights in a way that made the service viable.

Gerd Leonhard, Co-Founder & CEO writes:

1) There are countless startups providing access to any and all music streams without any license whatsoever. However, when we approached the major record label decision makers in order to obtain licenses for some of the music in their catalogs we have routinely faced demands for very large cash advances and fixed per-stream minimum payments, pressure to give them ‘free’ company equity, and requirements of utterly bizarre usage restrictions. It seems that the industry’s major stakeholders still prefer this turf to remain unlicensed rather than to allow real-life, workable and market-based solutions to emerge by working with new companies such as Sonific. This is not the way forward.

2) We therefore had to realize that a company that wants to provide interactive streaming music services must either a) risk the constant complaints of their users, due to the lack of hit content b) proceed to use any and all music (this is routinely done by allowing users to upload their own MP3s) without the required licenses, and therefore be at the total mercy of the record labels at some point in time, and c) build a huge audience very quickly, based on having the content available - permission or not -, and then very quickly sell themselves to a large company that will take care of placating the labels while the money is plenty and the pockets are deep.

Unfortunately we don’t like any of these choices.

Sonific joins the TechCrunch Deadpool

thanks to Andrew Watson for the tip

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I can’t say we didn’t see this coming. Quirky online gift catalog site Red Envelope filed for bankruptcy on April 17, according to an SEC filing. Its assets will be purchased by Creative Catalogs in exchange for $5.7 million and the assumption of debt. Red Envelope is also getting a $4.5 million debtor-in-possession line of credit from Creative Catalogs and Granite Creek FlexCap.

Two weeks ago, Wells Fargo terminated Red Envelope’s last credit lifeline, and it started to lay off employees. This could be an early sign that other e-tailing sites may be hit hard by the economic slowdown. Or it could just mean that Red Envelope was poorly managed. Either way, Red Envelope will not emerge from the deadpool.

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AllYouCanUpload, the registration-free image hosting site with few restrictions, has quietly been taken down. The site was launched in May 2006 by CNET without much fanfare, but was praised for shedding the bandwidth limits seen on other photo sites like Photobucket and ImageShack. The site was part of the Webshots photo service, which was sold by CNET to American Greetings in October 2007.

The site has apparently been shut down for over a week. It offers no explanation for the departure, but it is likely tied to the change of ownership. It appears that images that have already been posted to the site will remain available for the time being.

AllYouCanUpload has been added to the Deadpool.

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The Mobile Web is dead, says entreprenuer Russell Beattie, and it’s time for him to deadpool Mowser. Read the details in Duncan’s post from earlier today.

Now I certainly think that the day of creating specialty stripped down version of web pages for mobile devices is coming to an end (and that’s what Mowser did). Small screens with poor bandwidth equals an unusable product. In the U.S. today almost all mobile browsing occurs on smart phones with big screens and full keyboards. The iPhone in particular is browsing friendly as users can simply move the screen around with their fingers, and zoom in or out on the extremely crisp screen.

In short, the gains in hardware have made a special markup language for phones redundant. More and more people will be getting true smart phones in their hards that can open and view normal webpages quickly. and see the entire screen. We no longer need middleman software to convert normal websites into stuff that lesser phones can understand. It will be much better to push prices down so that todays iPhone is available for next to nothing in the third world. The First world will have moved on to increasingly better devises.

So I disagree that The Mobile Web is dead. For many of us it is just coming alive. Given the speed at which these devices are evolving and price dropping, I don’t think it’s worth people’s time to build sofware that optimizes the experience. Rather, they should use their expertise to build exciting new applications that will run directly on these new platforms.

So don’t think of this as the death of your startuup, Russell. Think of it as an opportunity to let your creativity fly while you imagine how you can change the world. My guess is you’ll land somewhere very interesting, and start building software that will be used passionately by your users.

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Maybe it is just because it had a really bad name. Or maybe it is because nobody really likes their neighbors. Or, if they do, they actually prefer to talk to them in person. Whatever the reason, FatDoor, a social network for neighbors, is closing its doors. We are placing it in the deadpool. Visitors to the site, which sadly never even emerged out of private beta, can now see nothing but unintelligible gobbledy gook.

While the site is dead, the company behind it that raised $7 million in venture capital—$5.5 million of which it collected just last November from Keynote Ventures and Norwest Venture Partners—is not. It is rebooting as Center’d, an event planning and neighborhood search site that is still in stealth mode. But don’t worry, I snuck in and took pictures (see below).

Fatdoor’s CEO Jennifer Dulski (a former Yahoo exec) and CTO Chandu Thota (a former Microsoft engineer) are still running Center’d. In the “about” page, they acknowledge that “Center’d evolved from a concept (formerly called Fatdoor) that aimed to bring neighbors together in an online community environment.” They also lay out what they hope to accomplish with Center’d:

At Center’d, we’ve been thinking about how to solve the challenges that exist in making plans. From the smallest get together, where you just can’t decide on where to eat . . . to the large fundraisers and school activities that require signups and hundreds of emails and weeks of meticulous planning . . ..

Hear us out. We can give you the tools you need to easily organize people, places, and times. Using the latest space-age technology, we have concocted features such as:

• Polling tools: Enable your guests to take some of the burden of coming to consensus on the place and time to meet.
• Task Management and Volunteer Sign-up: Now you can easily get the team you need to do the stuff you need.
• Connection management and calendar sharing: Now that you are suddenly so organized, and ready to pull off the perfect girls’ night out/summer camp/grandparents day/birthday party/first date/last date, let’s make sure those who are important to you can view your calendars. But not everyone, and not every event. We can keep a secret.
• Explore neighborhoods: We’ll even help you out with finding other places and events. How would you like a view of your world filtered by the recommendations of people you trust? How would you like to be at the center, and have the people, places, and plans you care about revolve around you, just waiting to be experienced? We like that idea. In fact, we like it so much, we built it.

Center’d is both a local search engine and an event-planning application. You can search places for restaurants, hotels, schools, museums, stores, etc., and the results appear on a Google map. There is also a calendar view. Once you connect with friends on the system their events pop up in your searches. And you can also create your own events and get your friends to help decide the details. For instance, things like the location and date can be voted on. Want to have a party by the sea? Ask your invited guests if they’d rather go to Stimson Beach or Montaro Beach, and if next Sunday is better than this Saturday. You can also assign tasks for them to sign up for: bring lobsters, bring wine, bring volleyball.

The site is perfectly serviceable and looks like it will do a decent job with both event planning and local search. The interface is heavy on Ajax, with the screen telescoping open as you go through the options. It is very similar to Pingg in that regard, except it is much more limited in what it can do. But Center’d is also not doing anything appreciably different from many other startups on the event-planning side, including Pingg, Socializr, and MyPunchbowl. It does have the local search piece, but so does Yelp, Yahoo, and Google.

Still, when you are starting out with FatDoor, anything is an improvement.

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Google showcased HuddleChat, a real-time chat application, as one of many test applications (directory here) to show off their new Google App Engine platform last night.

Some bloggers noted that the application was a rip off of Campfire, a 37Signals product. And 37Signals CEO Jason Fried used HuddleChat as a PR opportunity, telling ReadWriteWeb “We’re flattered Google thinks Campfire is a great product, we’re just disappointed that they stooped so low to basically copy it feature for feature, layout for layout…We thought that would be beneath Google, but maybe its time to reevaluate what they stand for.”

Frankly, the reaction is fairly ridiculous. But this is apparently a fight that Google doesn’t want to be involved in. They pulled the application and replaced it with the above notice.

I wonder if Darren Delaye, Braden Kowitz, and Kyle Consalus, the Google developers who created HuddleChat, had much of a say in the decision. And why, since HuddleChat is not an official Google product, was it Google that made the decision to pull it down and not the developers who created it? Google was very careful to say that they were not affiliated with HuddleChat while it was up - that, apparently, wasn’t the case.

As far as I’m concerned, this is the first case of censorship on the new Google App Engine platform, and a bad precedent.

Our test application for Google App Engine is here.

Update: If you are as outraged as I am over this :-), join this Facebook group demanding that Google bring back HuddleChat.

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