As Facebook’s growth began to accelerate exponentially in 2009 and 2010 and its platform began to emerge, the opportunities for businesses to leverage and apply its social graph in other industries seemed endless. In particular, many saw the social graph as having a fundamentally disruptive influence on eCommerce and it was about that time that investors and entrepreneurs began dumping lots of time and money into building new online storefronts on top of and around Facebook’s burgeoning platform.
One of the many startups playing in this space was Yardsellr, a startup created by former eBay executives, which aspired to become the “eBay for Facebook” — without the auctions. In 2010, the startup raised $5 million from Accel and when TechCrunch caught up with Yardsellr in the fall of 2011, things seemed to be looking up.
At the time, the social commerce platform claimed that it had grown into a community of over 5 million users, its local sellers were listing 6K new items for sale each day and the platform listed over 120K items for sale in total. However, at the time, only 175K of its 5 million users were active on the site each month — usage or stickiness, which, in retrospect, might have rung a bell.
Fast forward a year and a half and things haven’t been going as well as the founders had imagined. Last week, Yardsellr announced that it would be shutting down operations in the next 60 days.
Why? While Yardsellr may have created a social and gamified channel by which local sellers could increase their ability to make a few bucks selling their wares, there had been too much competition, adaptation from incumbents and the social commerce management business model ended up being less attractive than Yardsellr had hoped.
In its announcement last week, the team explained:
A few months ago, we began to talk to a few other companies who wanted to borrow our playbook. They wanted to turbo-charge their ecommerce business using the Yardsellr strategies for blending games and social with buying and selling. As we looked at the growth potential and profitability of that business, it became clear that it was a very attractive option.
But we knew we couldn’t focus on that business — selling software and services to ecommerce companies large or small — and on our existing Yardsellr business … Today we are turning our attention 100% to the ecommerce services business and we will be shutting down Yardsellr.
Essentially, the B2B services model ended up being more attractive — at least in Yardsellr’s eyes — than the alternative. So, the company has decided to shut down its current model and start fresh with a new one. The post goes on to say that the company will quickly be transitioning to a new business as a result — called “CompoundM” — that will launch in “a few weeks.” Otherwise, everything else on Yardsellr will essentially be shut down in the next 30 to 60 days. More on that here.
It’s a disappointing conclusion for a company that was founded by three former eBay executives — CEO Daniel Leffel is a former manager at eBay, VP of Marketing Jed Clevenger used to run the paid search team at eBay and VP of Community Rachel Makool used to run the community team at eBay. In addition, early investor Michael Dearing of Harrison Metal was a former SVP of eBay. At one point, Leffel had even predicted that Yardsellr could be as big as eBay.
Not quite. In fact, eBay has continued to thrive as many of the startups that have popped up in local commerce, f-Commerce (or Facebook commerce) and the like have been forced to pivot, sell or consider alternative ways to make money. It’s difficult to find a model that is incentivized in such a way that it can convince local merchants to make it their sole destination for selling, especially when there are so many options. Managing that interface between an infinite variety of sellers and buyers is a difficult proposition.
Of course, naturally, in Yardsellr’s case, those merchants have been, unsurprisingly, less than excited to hear the news that one of their sales and distribution channels will be no more. One seller commented on the announcement saying, “I got out of YS months ago, when they raised their fees and started making the sellers pay them. Their customer service sucks, they never responded to any emails and the photons were just crap. It just sucks that a lot of people will be out of money because of this, but at least now they can’t do it to anyone else in the future…”
While another commented, “I agree that things should not have been implied, costs should not have jumped, especially when the possibility of shut down was so high. I’m very glad I didn’t drop any more [money] into buying photons and boosts. This has been pretty much a bummer for me. I have several platforms that I sell on and [Yardsellr] and Etsy have been my best, however, I have 73 sales on [Yardsellr] in less than one year and it is my #1 selling platform. Now I have to figure out where to go next. That’s the part I am struggling with.”
Keep in mind, these are sellers reacting after they just learned that the site was shutting down, so emotions are a bit heated, and some went even further to suggest some foul play — that the company ramped up its sales of Photons to merchants (its virtual currency) even though it knew it would be shutting down.
In its defense, Yardsellr claims that they’re doing their best not to abandon their sellers and will be paying out all the money that is owed to merchants from outstanding transactions. “As always,” it responded to one commenter, “Yardsellr will pay sellers in the method they’ve chosen (Direct Deposit, PayPal or Check) for all legitimate sales with valid tracking,” even though that means that, at the end of 60 days, some merchants who just invested in putting inventory on the site or in buying up Photons, may be left holding.
Naturally, while some sellers even offered to purchase Yardsellr’s platform and help sell it or keep it going, most seemed more concerned about where they would take their business next. In response, Fredrick Nijm of Facebook-integrated eCommerce site Addoway tells us that, within 48 hours of Yardsellr’s announcement, the company had received requests from “hundreds of sellers wanting to shift platforms because they had no place to go.” In response, Addoway built a Yardsellr importer to make it easier for merchants to port their businesses to a new home, even if temporary.
That’s all well and good, Addoway at the very least continues to operate and grow, albeit slowly (the founder claims that its marketplace will hit $1.2 million in sales this year — just about three years removed from its launch), but, overall, it seems to be another example of a growing trend: The struggles of social and f-commerce platforms to maintain a business, especially for those not selling under a B2B or services model.
Yardsellr is the latest in a series of closures and pivots. Done.com, for example, is no longer operational, in spite of a promising team and promising interest from early investors. Furthermore, the Facebook-based social auction site, Boocoo, closed its doors in December, local commerce marketplace, Peddl, closed at the end of January and NBC shuttered its Knight Foundation-backed local news and information marketplace, EveryBlock, after “failing to find the right business model.”
In turn, Payvment announced recently that it was shutting down and, seeing a good deal, Intuit quickly swooped in to buy its team, technology and patents. Of course, in spite of the fact that Payvment had grown to “hundreds of thousands of merchants,” it still struggled to find any traction in f-commerce.
Intuit didn’t want to touch the actual business — just wanted the raw materials, Josh wrote at the time — so they essentially gave their 200,000 merchants to its largest competitor, Ecwid, which, in turn, made Ecwid the Facebook store-builder with the most monthly active users, according to the report.
It’s not a hopeful series of outcomes for those trying to build a profitable businesses around f-commerce, hyper-local networks or social commerce. Zaarly, the much touted and well-funded startup that had focused on building a mobile-first, reverse craigslist platform for local buyers and sellers, launched “Storefronts” last September to give their top service providers/sellers a better way to showcase their talents and wares to customers.
Since then, the startup has completely abandoned its original business to focus exclusively on its merchants service — on becoming a less-crafts-oriented, more mobile-centric version of Etsy. Zaarly Co-founder Eric Koester tell us that they’ve been finding increasing success since pivoting, but there’s still a long road ahead.
Naturally, those companies that are still operating in this space are now left to vie for Yardsellr’s free-floating merchants and to pick up the spoils, though it looks like Addoway has a head-start on that front.
In a way, it’s not surprising that yet another segment of the consumer tech space is feeling the series A crunch and is experiencing contraction and consolidation. (Another example from social commerce? Take Ebay’s recent purchase of Svpply). It could be a matter of timing. After all, Facebook commerce may be huge one day, but in the present, consumers are more interested in “liking” articles, writing status updates, sharing photos and connecting with friends — not in using Facebook as a destination for purchasing or commerce. Today, social commerce-as-a-service businesses — or those that offer social as a layer to be integrated into or on top of existing platforms are surviving, but the rest are finding it difficult to survive.
Yes, local marketplaces and commerce continue to be attractive and niche services continue to emerge around local transactions, but hyper-local online services that rely on local advertising, for example, are finding a bumpy road. There are multiple forces at play here, so it would be reductive to pin the decay of these sites on a single cause.
But it is safe to say that building a sizable two-sided marketplace is extremely difficult. As Boris Wertz recently pointed out, businesses like Airbnb and Ebay have made this process look easy and have shown that the model can work like a dream at scale. Of course, the chicken-and-egg problem (among others) make it really tough for young companies to reach that kind of scale.
Growth for fledgling local marketplaces is slow, as Addoway’s aforementioned growth shows, and it requires capital to sustain the business over time, focusing intently on achieving a slow-burn rate and avoiding the temptation to pivot too early. With Yardsellr’s decline as further evidence, in these conditions the downsides of f-commerce, social commerce and local commerce are becoming increasingly apparent. And, as always, when a space becomes overrun by me-too companies and models, contraction seems inevitable — if not necessary.