Checking In from the Meebo Bar: A Social Startup’s Latest Big Swing at Bat

10/12/11Follow @wroush

“Meebo has a culture of doing what we call ‘big swings at bat’ every 12 to 18 months,” Seth Sternberg is saying. “We try something new, a hard project that’s highly innovative. And either it’s going to flame out wildly, or succeed wildly. If it works, great. If not, oh well, it was an experiment. It keeps things interesting.”

I’m meeting with Sternberg, Meebo‘s CEO, at the company’s San Francisco office, opened recently to accommodate the dozens of engineers and salespeople who prefer not to drive to the startup’s Mountain View headquarters. He explains that he and his co-founders Sandy Jen and Elaine Wherry started the Web messaging and content sharing service back in 2005, so they’ve had time to try four or five of these big swings. The most ambitious one before this year was probably the 2008 launch of the Meebo Bar, a strip of ads and social-sharing buttons that Web publishers can add along the bottom of their Web pages. Before the bar, Meebo had been known primarily for its Web-based instant messaging service, which allows users to communicate across AOL Instant Messenger, Yahoo, Facebook, Windows Live, Google Talk, ICQ, and other IM networks without firing up actual IM software. The new bar included those functions—but far more important for the company, it carved out a valuable piece of screen real estate that Meebo could use for advertising and other features.

When you hover your mouse cursor over the ad at the left end of the Meebo bar, a multimedia ad appears on screen, often showing video spots. Today at Seventeen‘s website, for example, you can select from videos about Virgin America or the new Mini Coupe. Rich-media advertising launched from the Meebo Bar now brings in the lion’s share of the company’s revenues, which have tripled in the last year. Sternberg says 80 million unique users per month see the bar, and that 0.8 percent of them click on the ads. While that may sound low, it’s actually about 10 times the industry average for Web display advertising—and what’s more, the average ad viewer spends 60 seconds looking at the ads, twice as long as a typical TV commercial. No wonder 200 brands, like Starbucks, LG, Samsung, Toyota, Procter & Gamble, and Unilever, have signed up to advertise through Meebo’s network.

Meebo CEO Seth Sternberg

Now Meebo is at bat again, and Sternberg is hoping that its next hit will go equally far. The company is adding a “check-in” button to the Meebo Bar. The term comes from mobile social networks like Foursquare, Gowalla, and Facebook Places, and the concept is similar, except that Meebo check-ins are tied to the Web, not a physical location. When you check in at a website such as CafeMom, a record that you visited is added to your Meebo profile, so that your Meebo friends and followers can see where you’re hanging out online. By following other Meebo users who check in at your favorite sites, you can find new sites that might interest you. If you check in enough times at one site, you can become a VIP (Meeboese for mayor) and earn rewards.

The buzzword for all this is “social discovery,” but Sternberg puts it more plainly. “Meebo lives at the intersection of content and people,” he says. “We do a lot of research, and it turns out that people really want to learn about sites from other people. So when we were thinking about check-ins, we were thinking about how to hook up people with similar interests, and how to use that to make navigation easier.”

But there’s another motive too. Every time users click on the check-in button, they’re telling Meebo something about their interests—and that’s information the company could use to serve targeted ads, which typically have higher price tags. “If you look at the Web check-in stuff, at some level that is about delivering better brand content to users,” says Sternberg. “If we know you are really into road cycling because you have been checking into a lot of road cycling sites, it would be great to put an ad for Trek [the high-end bicycle maker] in front of you.”

Meebo certainly needs to sell more premium ads, because as fast as it’s growing—it passed 200 employees this summer, more than a quarter of them just hired this year—it has some very high expectations to meet. Over the last six years, the startup’s venture backers, who include Draper Fisher Jurvetson, Khosla Ventures, Jafco Ventures, Sequoia Capital, Time Warner Investments, True Ventures, and KTB Ventures, have poured $70 million into the company. (The most recent infusion, a $27.5 million Series C round, came in December 2010.) That means an acquisition or, less likely, an IPO, would need to bring in almost a billion dollars to satisfy the typical venture-scale hopes for a 10x return or greater.

But Roelof Botha, a partner at Sequoia, says the company has shown an admirable ability to adapt so far. “I’ve known Seth, Sandy, and Elaine since they were working out of their respective living rooms,” Botha says. “They have continued to grow all the way. The team has been willing to question what it is they do and how they continue to make the service better.”

In particular, Botha says Sternberg is “one of the best strategic thinkers when it comes to the Web that I know.” He credits Sternberg with realizing about three years ago—just as people began flocking to Facebook and Twitter by the tens of millions—that social recommendations would join search engines as major sources of page views for large Web publishers.

“If social is going to drive this much traffic, how are you going to take advantage of it?” Botha asks. The answer, for Meebo, has been to continuously tweak its communications tools to win wider distribution, weave the brands of its advertising and publishing partners into consumers’ social activities online, and translate the act of sharing into something monetizable. “Now people talk about the value of a share, and you see people catching up to an insight that [Sternberg] had years ago,” says Botha. (Sternberg, melding terms from the social networking and search industries, calls this “social graph optimization.”)

Sternberg says he has an entrepreneurial gene that first showed up when he was young. “When I was eight I had various business ideas, but my mother told me that they were all illegal,” he jokes. While he was still Yale, majoring in political science, he started a college consulting firm called IvyBound. He went on for some formal business experience—an MBA from Stanford, a couple of years with IBM in its mergers-and-acquisitions department—but he says he’s one of those people who can’t sit still in a real job, since he has an idea for new business about every three days. “I’d keep calling up my friends on the West Coast and saying ‘What about this one!’” he says. “I think if you can’t stop thinking of new business ideas, you eventually will start one that gains traction. It will ultimately just happen, because you cannot turn it off.”

Sternberg met Jen and Wherry at Stanford, and the trio spent about two years testing their various business schemes. They were eventually attracted to the world of instant messaging, which, at the time, was fragmented into separate silos, each based on its own desktop software client. People on AOL couldn’t chat with people on Yahoo, neither group could talk with people on ICQ, and so forth. “The original idea [for Meebo] was to do for IM what Hotmail had done for e-mail,” says Sternberg—namely, bring it to the Web and make all of the services interoperable.

Introduced in the fall of 2005, Meebo Messenger quickly proved popular. But something unexpected happened. “Immediately after we launched people started coming to us to say, ‘Can you put Meebo into our site?’ Which we didn’t understand at first,” Sternberg says. “But what they meant was that they wanted to connect their users to each other within their dot-com domain. So that if you’re on TMZ, you can connect with your friends and people with similar interests around the content on TMZ.”

Sternberg and his co-founders liked the idea of giving the conversations on Meebo a focus, so they took several cracks at the problem. One was Meebo Me, a chat widget that publishers could embed on their Web pages. Another was Meebo Rooms, a private rooms feature that could be opened from Messenger or the widget or embedded in public Web pages.

Then came the Meebo Bar, which had the huge advantage of being present all the time—it’s affixed to the browser frame for a given site, rather than being embedded in the Web page itself, so it doesn’t disappear as users navigate the site. “If you are trying to build a layer that connects people with people, then you can’t get interrupted when you scroll or move from page to page,” says Sternberg. “It has to be ubiquitous.”

Of all the startup’s products, the Meebo Bar “is what took off from a traffic perspective,” Sternberg says (about 40 percent of U.S. Web audience hits a site with a Meebo Bar at least once a month). “Initially, it was just a way to get IM out there, just to let people talk to each other. But with that out there, you could also do inviting, sharing, navigation, and so much more.”

When its big swings have turned out to be a big swing-and-a-miss in terms of profitability, Meebo hasn’t been afraid to walk away. A case in point: the company turned off Meebo Rooms last week, even though the four-year-old feature still brought in 15 to 20 million unique visitors per month. “You have to be careful to allocate resources to what’s really killing it, and the bar as a platform is killing it,” says Sternberg.

The “platform” part is key. Meebo sees the bar as the launching pad for new products and experiences, the latest one being check-ins. The feature hasn’t shown up yet on every site with the Meebo Bar—it’s still “somewhere between alpha and beta,” Sternberg says, meaning it’s being tested with selected publishers, such as CafeMom and Pep Boys.

If the check-in feature has a tactical goal, it’s to help Meebo users learn more about each other’s interests. If it has a strategic goal, it’s to help brands build communities of like-minded consumers who can evangelize to each other. “If you think about how you discover content on the Web today, it’s either search, which is very specific and pulled by the user, with high intent, or it’s social—the cute cat videos on Facebook, which are pushed to the user, and low-intent,” says Sternberg. Check-ins provide the best of both worlds—a social recommendation (which can be more authentic and trustworthy than either a search result or an ad) in the context of a high-intent situation. “We are trying to find you great content, and obviously that has interesting implications around advertising,” Sternberg says.

Meebo is clearly in the explosive-growth phase that every startup hopes to hit: revenue tripled from 2009 to 2010, and will triple again from 2010 to 2011, says Sternberg. Twice as many people will see the Meebo bar this year as in 2010, and repeat advertisers are spending more with the company with each campaign. “They had a crazy-aggressive plan for the first half of the year, and they exceeded it,” notes Sequoia’s Roelof Botha. Getting to this point may have taken a lot of cash, but Botha says that’s not surprising. “There are all these things that make it very easy to get a startup going these days, but getting going and building a large, sustainable company are not the same thing,” he says. “Hiring the right people, building your sales team, building an international footprint, all of these things remain necessary.”

The bigger a company gets, though, the smaller the number of other companies that can afford to acquire it. Will the startup’s work on things like the Meebo Bar and check-ins ultimately translate into a home run for its investors?

“I hope so,” says Sternberg. “I don’t think there are many properties that reach 40 percent of the U.S. Internet audience, that enjoy an 0.8 percent engagement rate, where a user spends 60 seconds of time inside the rich media unit once they engage, that is doing very substantial revenue. So I would hope so.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

By posting a comment, you agree to our terms and conditions.