After Weathering First-Year Challenges, KidZui Launches a ‘YouTube for Kids’

Bruce V. Bigelow8/5/09Comments (1)Follow @bvbigelow

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he was a founder of the dot-com that eventually became Infogate. “So our perspective wasn’t, ‘How do we limit the bad?’ Our question was, ‘How do you explore the good?’ ”

The early reviews were encouraging, although some were a bit tepid. “KidZui may be worth a try, but don’t expect it to be perfect,” wrote Walter S. Mossberg of The Wall Street Journal. He suggested there are ways for kids to find prurient materials if they know how to look—for example, by searching for news stories about New York Gov. Elliot Spitzer, who resigned in a sex scandal.

More significantly, the company was almost immediately challenged by a wave of online grousing over the high cost. Following a 30-day free trial, KidZui’s initially charged subscribers $9.95 a month, or $99.95 a year. The company soon revised its business model to offer some services for free, and overhauled its paid subscription model last October. Now the big question facing the business is whether enough parents will buy the “freemium” concept, which combines a basic service that’s free with premium features that cost $7.95 a month or $39.95 a year.

“It’s a hard business decision to make,” Boro says. “I regret that we didn’t come out for free on day one, but I’m proud of the fact that we changed course very quickly.”

Cliff Boro

In summarizing KidZui’s first year, Boro says, “We launched well. We had reasonable growth in 2008. Then we hit the venture reset in the fourth quarter.” The company reduced its burn rate by laying off nine of its 30 employees, including a recently hired marketing team. Since then, KidZui has been getting the word out mostly via news coverage, online reviews, and word-of-mouth endorsements.

“We’ve grown an average of 20 percent month-over month since July of last year,” Boro says. “So we’re proud of the fact that we’re growing without spending money.”

The KidZui chairman and CEO tells me he met his business partners at Infogate, an online news and information company that was formed in the 2000 merger of EntryPoint with the Internet Financial Network. After AOL Time Warner acquired Infogate in 2003–which Boro calls “an honorable, but not necessarily lavish outcome”—the three executives formed San Diego-based CVT Ventures.

While CVT was financed personally by Jack Rivkin, a chief investment officer of Neuberger Berman and former head of CitiGroup’s Technology Venture Group, Boro says it was not a venture firm per se. Rather, Boro says they created CVT as a way to help other entrepreneurs start … Next Page »

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788