Mobile Marketplace EggDrop Shuts Down Following Craigslist C&D, But Says Slow Growth To Blame

EggDrop, a mobile marketplace application with over half a million downloads, is shutting down. The company will inform its current user base via email on Friday. According to CEO Dan Zheng, EggDrop was the recipient of a Cease & Desist letter from Craigslist a few months ago, but that’s not the primary factor in his decision to close up shop – instead, it was slower than expected growth that is to blame.

First launched in June 2011 with a different sort of business model – falling price auctions – EggDrop switched to more traditional marketplace-style listings in November, and began to pick up steam. By March, EggDrop had hit half a million downloads on iOS and Android, with $8 million in listings across the U.S. and U.K., its two primary markets.

Unfortunately, says Zheng, the company (EggCartel) was not able to secure a Series A round in Q1, which it needed in order to take things to the next level. Investors were looking for “hyper growth,” he explains, and, despite having some traction in several metropolitan areas, EggDrop was never able to get to critical mass.

The app had previously leveraged Craigslist for both exposure and content. It allowed users to cross-post to the website and pulled in around 5% of its listings from external sources, notably Craigslist. It’s not surprising then that it, too, ended up on Craigslist’s radar. But even though companies like Airbnb have been able to leverage Craigslist to boost their own discoverability, the percentage of users who discovered the EggDrop app on Craigslist was in the “single digits.” Users tended to find the app through more typical means: word-of-mouth, app store searches, and for a short time, through a featured listing on Google Play.

If anything, getting the letter from Craigslist was almost bittersweet. “The C&D is funny in a sense that we finally got big enough for them to notice, but it’s too late to sustain [EggDrop] and move forward,” Zheng says. Still, he remains positive, saying that EggDrop was a great learning experience, and he’s excited to move on to focus on what’s next. And what is that, we asked? He and two of EggCartel engineers are now working on a health and fitness app, he says. Stay tuned.

Update, 5 PM ET: Here’s the company blog post.