Friendster CEO Gets a Do-Over

Back in the go-go days of 1999, Kent Lindstrom was a senior manager at accounting giant Deloitte & Touche, rounding the corner of his partnership year, when he had a bit of an entrepreneurial revelation. Rather than advising the Silicon Valley startups that were his clients at Deloitte, he wanted to be in the thick of the startup action. So he nixed the partnership and, along with Pete Alcorn, who now heads podcasting for the iTunes store, launched NetRead, a BtoB website designed to assist publishers who were just beginning to enter the online marketplace.

“Publishers were having a hard time getting the information that was on the jacket of the books — the number of pages, the ISBN, etc  — into their listings on Amazons and Borders,” Lindstrom recalled. “We built a system. But, it turned out that, although it was a big problem for publishers, it wasn’t an expensive one. There wasn’t a lot of money in it.”

But for Lindstrom, being immersed in the nascent business had been a heady experience, one he was anxious to repeat and refine. He was present for the birthing of a number of startups, most notably the early social networking site Friendster. He was the company’s first CFO, eventually rising to CEO. But, it turned out, being CEO of Friendster in the earliest days of social networking was a little like being Pete Best in the earliest days of the Beatles.

“We had no idea if these things would be about communication, whether they would make money or not,” he said. “The other social networks emerged, MySpace and Bebo and, of course, Facebook. They had a chance to watch and learn from us.” Ultimately, Lindstrom said that Friendster’s failure had as much to do with the site’s mechanics as its lack of direction. “There were huge engineering problems,” he said. “We just didn’t perform as well as we should have.”

Lindstrom’s newest venture seems every bit as risky as Friendster must have seemed in 2002. For the past six months, he and his very small team have been developing Spot, a subscription-based twist on the overcrowded deals space that gives members access to high-end experiences instead of the deep discounts.

Like many entrepreneurial venturs, Spot was developed by accident. In 2010, Lindstrom was ensconced at Ooga Labs, a technology incubator on San Francisco’s Market Street, developing a Foursquare-like iPhone app called PlacePop. The idea behind the app was to leverage check-ins in order to create a kind of subscription-based frequent flier program. He believed that a coffee shop owner, for example, would be interested in providing a discount to PlacePop’s 2,500 most active users, especially during a slow time of the day.

“We started out with a product that was a virtual loyalty card,” he said. “It was designed to be used on a mobile phone. It seemed like a good idea, but business weren’t very excited about loyalty. It was difficult to sign them up.”

But Lindstrom says that around this time, he got a whiff of a subscription program that was gaining a lot of traction in London. Tastecard, which Lindstrom characterizes as “an up-to-date version of the old Entertainment Book [a book of city-specific coupons that was popular in the 1990s].” For about $110 a year, Londoners get half off their meals at almost 5,000 of the city’s restaurants. According to Tastecard’s website, it has 350,000 subscribers. The restaurants pay nothing and are paid nothing to participate. Their only incentive is that the service is able to reach its very large list of motivated, paying subscribers and advertise the restaurant’s participation.

With the prospects for PlacePop grim, Lindstrom committed the hallowed pivot — and Spot was born.

“The restaurants we were talking to — we had a business development guy who was in discussions with San Francisco’s high end restaurants — said, ‘we really do want to promote our businesses and fill tables but these Groupons and LivingSocials are not brand appropriate.’”  At the same time, said Lindstrom, there was a segment of the focus groups that PlacePop ran that was coupon-averse.  “We had consumers telling us, ‘What I really want is VIP treatment. I really want to be treated special. I want VIP access.’”

Cribbing from Tastecard, he has fashioned the service has a kind of anti-Groupon. For $10 each month, subscribers get access to what Lindstrom describes as special experiences. He said that the perks could be anything from “a waived corkage fee to a free glass of wine, a free dessert, or a special table that no one else has access to.” The company has moved out of the incubator and Spot’s offices are now located in San Francisco’s Mission district – Lindstrom says the office building also houses Obvious, the company recently launched by Twitter founders Biz Stone, Evan Williams and Jason Goldman — and is home to the company’s two engineers, a business development exec, a marketing and community manager and Lindstrom.

Like Tastecard, Spot will be completely subscription supported. The company doesn’t pay nor do the participating restaurants pay it. Unlike Tastecard, which requires its member restaurants to offer customers two for one dining, restaurants participating in Spot’s program can offer any perk they like. The website has a calendar that alerts subscribers to each opportunity and its availability.

That website, and the service have only been live since September 18 and only in San Francisco. So far, Lindstrom says 25 restaurants are participating and, in the first week, the site has signed up 1,000 members, although many of them have received a free, three-month trial membership. The company is seeding its initial membership with the newly rich employees from the areas many hot tech companies, according to Julia Graham, the company’s marketing manager. A mobile app is set for release in the next couple of weeks and Lindstrom says that he expects that, eventually, members will interact with Spot chiefly through their smartphones.

There will be a social aspect to the service — Lindstrom imagines that users will create lists of restaurants at which they would like to eat and those aggregated lists, he hopes, will tempt those restaurateurs to sign up – and he believes that when his membership reaches critical mass, he will be able to incentivize existing members to get new members to join. But he isn’t very enthusiastic about creating the kind of crowd-sourced reviews that are featured on Zagat and Yelp. Because he relies on restaurants to provide his members with the freebies and experiences that keep them subscribing, his role is as a cheerleader for the restaurants he enlists, not a critic.

The company is “very horizontal, very collaborative” according to Graham. The hierarchy is almost invisible, from the daily 9:30 am staff meeting to the seating arrangements. “I sit next to the web developer. I can make sure that he anything he needs for the site – copy or artwork – and I can get immediate access to analytics, tracking ad campaigns. It’s a great opportunity to work on an idea and find innovative ways to connect to consumers and local businesses,” she said.

It’s very hard to tell is Spot is an idea whose time has come or a candidate for the island of uninspired Internet sites. Subscription services are not the most popular model for Web-based commerce. Consumers accustomed to the upfront costs of Groupon may balk at a monthly charge on their credit cards whether they use the service or not. Lindstrom says his target customer is an American Express Black Card holder who is more interested in being able to order from a secret menu at a popular restaurant than in getting his meal for half price. But the New York Times daily deals service, Timeslimited, is aimed at the same customer, offers similar “experiences” and it has had a very hard time finding its audience. Lindstrom is unmoved.

“What we’re really hoping is that in every major city in the world there will be a Spot membership program,” he said.

 

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