It's really unfortunate that they won't even try the freemium, or (shock!) even the outright pay to play approach. I'm sure with two million users there would have been enough paying customers to create a profitable business.
How the fuck do they think this whole cash flow thing works?
2 million users, and they don't even put out a god damn paypal donation widget? Show ads? Freemium anything? Charge something outrageous, lose 90% of your 2 million users, and you'll still have a significant monthly income.
This is just the stupidest news I've heard in a while. Zero respect for these guys, they clearly don't have even a shred of business sense.
Things are probably not that simple. They have investors. It may not be a case of "Hey, we can make a business that pays for three guys to eat." Perhaps their investors need to see a certain minimum return or else the investors would rather close up shop.
Maybe they have a better buysiness idea and it's better to close this one and put 100% of their energy into the new idea. Have you heard of justin.tv? IIRC, a large number of people on reddit were criticizing Justin and his partners for selling their previous startup on eBay. They got some money and started again with a blank piece of paper.
I am not saying that you're wrong about what to do given the information you have. I am saying that (1) It is difficult to be absolutely certain that they are making the worst possible business decision in this case given how little we know, and (2) Even if they are making the worst possible business decision, how does this extend to having zero respect for the complete human beings who laugh, love, play, and built something many people value?
p.s. The company is for sale. If you have an opinion of how it ought to be run, there's no better way to make your case than to buy it for a fire sale price and run it. In all honesty, I would be absolutely delighted if you were to make a go of it. That would be a very inspiring story.
If you spend years, and millions of dollars, and don't make _any_ attempt to bring _any_ money in the door, I think you are making a mockery of the entire startup culture.
It's a business. What part of that do they not get?
Maybe maybe maybe, maybe they could try being a business and not seriously expect that some magical revenue stream is going to come knocking at their door with sacks full of cash.
Who funded these people? How can you seem to be so technically competent and marketing savvy, and not have a shred of business sense?
Are they going to go "focus on the next thing"?
Do they really deserve to be given funding for anything?
I think if you take someone else's money under the pretense of creating a business, you have some responsibility to the entire system to actually _try_ to create a business. And they haven't!
Another thing. What is this responsibility you speak of? A funded startup exists to find an equilibrium between the needs of the investors and the needs of the founders. Nobody else gets a say in what happens. They have zero obligation to do what you want them to do if you aren't sitting on their board.
It sounds to me like you have strong opinions about what is and isn't the right way to do a startup. You might be right, but still there's something disquieting about taking a culture based on disruption and revolution and writing rules for what is and isn't the right way to revolt against the existing business structure.
(Do you really think I'm saying they are responsible to my opinions? You seem like a smarter guy than that.)
I do have strong opinions about the right way to borrow money from other people:
When someone like Xmarks.com flops, it makes startups look bad to the 2 million users who are going to think twice about storing their data on someone's servers. It makes startups look bad to people who would like to make a return on their investment.
You can disrupt and revolt and rethink and metaprogram all you'd like, especially if you're sitting on VC funding. You can call cashflow an "existing business structure", but at some point, eventually, I think you need to charge something for something.
A simple back-of-the-envelope calculation shows that a freemium, subscription, or (uhm...) donation model won't work. We're talking six-figure revenue, most likely.
I guarantee you their current business model of modifying the SERPs and inserting links to Amazon and other affiliate programs is generating an order of magnitude more revenue than your proposed model would.