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ActiveRain discovers that the Code of Web 2.0 is the Code of the West: Do unto others before them others do it unto you

The Code of the West ain’t some words on a page
You just naturally know it when you come of age
You eat when you’re hungry, you drink when you’re dry
You look every man in the eye

In the nineteenth century, rogue investors like Jay Gould and Big Jim Fisk would buy up parcels of land parallel to a successful railroad. They would lay some track and invite reporters in, regaling them with tales of the new railroad they planned to build in direct competition with the going concern. The owners of the competing railroad would panic, racing to put together a buy-out package that would get the rogues to sell out — at many multiples of their initial outlay. Did they ever intend to build anything? No one ever put them to the test.

It’s the Code of the West when the boys talk of women
The Code of the West what you know you don’t tell
The Code of the West a man soaps his own saddle
Brands his own cattle and some of his neighbor’s as well

A century later on Wall Street, greenmailers like T. Boone Pickens would put together minor stakes in bloated corporations, then announce with great fanfare their intention to incite a proxy battle, thus to sell the company off piecemeal. The bloated boards of directors of the bloated corporations would race off to find a white knight investor, who would buy out the rogue investors at a handsome profit.

If you’re buildin’ fences then I ain’t for hire
You get me for nothin’ and I’ll bring the wire
You patch up my windows, I’ll plumb up your doors
If you scratch my back I’ll scratch yours

In the world of Web 2.0, we have a similar scam, only by now the entrenched interest has the game figured out.

Let’s say you and two college buddies have built a Web 2.0 “platform” — which is to say something stoopid, goofy and — at least temporarily — viral and sticky.

Why did you do this? To build a business? To set an example? To leave a legacy in the world of hi-tech commerce?

No.

You built it to sell it to Google for a huge profit.

You build the “platform.” You have a secret beta that is the world’s worst-kept secret. You launch to huge fanfare from TechCrunch, which exists solely to gush about stoopid, goofy start-ups.

People flock to your “platform” by the thousands, trading one of their many throwaway email addresses for your free service, which is actually worth quite a bit less than the asking price.

But, so what? You have millions of users overnight. Or millions of registrants, anyway. Your file servers would melt to slag if your “users” actually used your “platform.”

But, so what? Stoopid, goofy, viral and sticky is the perfect Google-food. Or so you think.

And, sure enough, here comes the offer. Twelve million bucks split three ways is a lot of sports cars for pimple-faced nerds.

But here’s an interesting question: What happens if you turn down the deal? Not enough money, or, god help you, you want to leave that legacy in the world of hi-tech commerce. What happens then?

Here’s what: Google releases the clone of your “platform” that it has been reverse-engineering since it first got word of your start-up. Not only are you not worth $12 million to Google, you aren’t worth a wooden nickel anywhere.

It’s the Code of the West you must honor your neighbor
The Code of the West to your own self be true
The Code of the West you must do unto others
Do unto others before them others do it unto you

Tip your hat to the bloody stain on the pavement that used to be ActiveRain.

This is news, and you can read the just-the-facts of the story here (sorry, it’s slipped behind the Inman irrelevance paywall). This is the Cliff’s Notes: ActiveRain entered into a buyout agreement with Move, Inc., the corporation that essentially owns the National Association of Realtors and every milkable teat on that vast cash-cow. The deal was that ActiveRain would sell its multi-user blogging platform, along with all the bloggers and all their accumulated content. For this, Move, Inc., was to pay $30 million, a sum to which we will return. In the course of its due diligence, Move, Inc., discovered that it was overpaying for the asset (ya think?), and backed out. ActiveRain is suing Move, Inc., for $33 million, claiming that facts it disclosed as a part of the due diligence were used by Move, Inc., in the process of building its competing multi-user blogging platform.

In other words, ActiveRain got Googled by the second definition of that word, the one that didn’t make the dictionaries.

Here’s the funny part: Who besides Move, Inc., doesn’t know that ActiveRain is a joke? They have almost 50,000 members. It says so right there at the top of the page. Of those, perhaps 5,000 show up as often as once a month. Maybe a thousand are active as frequently as once a week. The day-to-day traffic on the site — the actual content-generating user base — is maybe 500 people.

Do you suppose someone at Move, Inc., a notoriously stoopid company, might actually be able to divide $30,000,000 by 500 users? Is anyone — even Google — stoopid enough to pay $60,000 a user?

There’s more. Move, Inc., probably wanted a consumer-focused blogging platform, which ActiveRain is not and will never be. They have since built their own weblogging platform at Realtor.com, but this is so inept that the owners of ActiveRain cannot plausibly complain that they were ripped off — or even reverse-engineered. As ugly as ActiveRain might be, visually, the system actually works, both technologically and as a sticky Web 2.0 platform. Neither of these things is true of Move, Inc.’s latest exercise in incompetence.

Active Rain has made its original complaint and Move, Inc.’s response available on-line (you can find those two files mirrored here), which tells us that it knows its legal case has no merit. Lawyers make outsized pleas about fairness when the law is against them. Surely any disclosures ActiveRain made to Move, Inc., were made pursuant to the terms of a strictly-detailed contract, and ActiveRain’s owners know full well that they were trying to sell a very tiny pig and a very big poke. My take: They are shrieking that they wuz robbed first because they got caught, and second because, having been caught, they can’t hope to snooker some other sucker.

Who’d a thunk that Move, Inc., could be smart enough to avoid getting hustled for a change? But: ActiveRain has been well and truly Googled in the most painfully public possible way.
 


Our story so far: Trying to keep up with developments in the ActiveRain/Move saga? These are all the BloodhoundBlog posts to date:

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  • 11 comments

    11 Comments so far

    1. Jeff Brown September 27th, 2007 8:39 pm

      For once, Greg, I’m gonna try to be politically correct.

      Why would anyone sporting a ‘gentleman’s C’ in a high school business class, possibly conclude Active Rain had a value of $33,000,000?

      We need a new category here.

      “So Stupid You Know We Couldn’t Have Made It Up”

      Wow.

    2. [...] The Sales Success FAQ Files There’s always something to howl about « ActiveRain discovers that the Code of Web 2.0 is the Code of the West: Do unto others before them others do it unto you [...]

    3. Todd Carpenter September 27th, 2007 10:04 pm

      Can I nominate this post for the Odysseus award? :-)

      This is your best post in a while. It’s hard to believe Move would be initially willing to pay such a price. I’d love to get Dustin’s take on the whole matter. According to his del.icio.us account, he loves this post.

      http://del.icio.us/tyr

      Also makes me wonder the timing of Caleb’s departure is more than coincidence.

    4. Greg Swann September 27th, 2007 10:06 pm

      > Also makes me wonder the timing of Caleb’s departure is more than coincidence.

      Oh, do tell. I wasn’t aware of this. What was the public explanation?

    5. Todd Carpenter September 27th, 2007 10:11 pm

      Dustin’s del.icio.us feed is the bomb for finding all sorts of good information. I found the story about Caleb there yesterday.

      http://activerain.com/blogsview/216358/Onward

    6. Shailesh Ghimire September 28th, 2007 9:20 am

      Very good article Greg. Very very well put. The comments for points and the blogs for points diluted the quality to the point where everytime I made a post my mail box was flooded with “great post Shailesh, thanks for sharing” e-mails!

      Since it’s such a good thing for SEO and marketing why don’t they just charge agents a fee for using it. It’s a great place to market to Realtors if you’re a lender or appraiser or home inspector – a reasonable monthly fee would be very enticing. I would think.

    7. Jeff Brown September 28th, 2007 9:28 am

      Shailesh – Can we all, in unison, say Duh!? You see what’s clearly there for all to see – well, almost all.

      It would be better for future revenues if AR immediately put Captain Obvious on their Board of Directors. :)

    8. [...] Four posts at Bloodhound. Greg, Brian, Brian, Greg. [...]

    9. Charleston Real Estate Blog September 29th, 2007 3:12 pm

      Rainy season starts early, Active Rain vs. Move.com…

      Rainy season started early this year in Seattle with a lawsuit filed by Active Rain against Move.com…

    10. [...] Move.com said was worth $33 million, Housevalues.com is buying at a substantial discount. Activerain has a “great [...]

    11. [...] from moderation) at BloodhoundBlog. Oh, you bet. Why? Flaming, in both of their cases. During the ActiveRain/Move fiasco, Ardell took it upon herself to flame Brian Brady in words that I thought were beyond the pale. [...]