Why Investors Are Gonna Get Their Asses Burned on UpWorthy

Do you remember those guys at Demand Media that claimed to have figured out how to produce media based on search “demand”?

They pumped out the most boggling, low quality content that basically showed you nothing.

I remember searching or “how to fix a kayak” (or something like that), and I landeded on one of their webpages where a dude stood in front of a kayak, but all he said was soemthing along the lines of ‘kayaks are great… … if it’s sinking, you might consider fixing it’.

I mean, these guys were making a killing off ad revenue, so much that they went public and became a multi billion dollar company.

Until, Google decided that their content wasn’t doing anyone good, and decided to bitch slap them to SEO hell in eternity. Now, their stock price is 1/4 of what they used to be

This happened time and time again.

“Thin” sites that basically do nothing but extract value that other people have created, all in the name of making profits.

That happened with another spam company Geosign in 2008.

They made content worse than Demand Media’s content to arbitrage google’s SEO traffic to adsense’d page.

They were generating $100 million per year and even a private equity company pumped in $160m.

What happened?

POOF was what happened.

$160 million, for which U.S. investor American Capital Strategies Ltd. got a “significant” minority stake. At that time, Geosign said it had more than $100 million in sales. And it was hiring new employees like crazy. At the previous town hall in mid-April, CEO Ted Hastings, who took over from Geosign’s founder and chairman Tim Nye that January, discussed a new facility they were planning for all the staff, then numbering more than 250. There, they would keep building their online media “powerhouse.” Geosign boasted a network of 180 websites, with consumer news and information content ranging from hockey to girlfriends to lawn furniture. It said it had created a technology that drove traffic to its sites through placements in search engines, with up to 35 million unique visitors landing each month. Given the red-hot interest in Internet advertising, American Capital managing director Virginia Turezyn said Geosign’s true value lay in its “automated systems,” not its content.

For everyone arriving at the Holiday Inn, the future seemed golden. But as soon as they were assembled, things turned strange. Each employee was handed an envelope. In the envelope was a piece of paper with a geometric shape on it – triangle or square. That’s when the bomb dropped. Hastings told the assembly that there had been a massive change to the company’s business model, brought about by search engine and Web advertising giant Google Inc. It would require massive adjustments, but Geosign would persevere, he said. Stunned employees tried to decipher what was happening. Many had just joined the company to create “webzine” content packages for its sites. What did Google have to do with their online magazines anyway?

Those with triangles in their envelopes were directed to speak with human resources staff on the premises. Regardless of their circumstance or how long they’d been with the firm, the triangle indicated their time at Geosign was over. Between 50 and 100 people were cut that day, with many more to follow. “It was awful,” says one former employee. “None of us knew what was happening. It didn’t make sense. The woman standing next to me had just quit her job and moved to the city to start. She burst into tears when she realized she’d just been fired.”

Google bitch slapped them into oblivion.

And again with thin affiliates that cloaked the shit out of ad networks. (Hell I confess. I did some of that blackhat marketing too.)

Or try to “game the system”, like with RapGenius (of course, if you have some big names from Silicon Valley, Matt Cutts will look the other way).

So you would think that investors learned about all these, and stay away from these “high volume/low value” media producers, right?

Wrong.

Upworthy, a site that basically takes viral youtube video and repurposes them, raised MILLIONS from investors.

Why?

Apparently, they figured a secret magic sauce to make things to viral.

Hmm.. interesting. I didn’t realize A/B testing was a secret.

1. they don’t even create their own spam – they just “borrow” their content.

2. they rely on Facebook as their bread & butter source of traffic (their business model? lead generation)

Granted that contents on Facebook aren’t the same as SERP content so Facebook doesn’t have to do the same kind of policig as search engines do, but eventually people will get sick of seeing viral content that basically have to cater to the lowest common denominator to get the most eyeballs.

Babies, puppies, kittens, girls gone wild type stuff. You know.. stuff that’s 100% entertaining but 0% useful.

Call me crazy, but I personally would rather read 0% viral, 100% useful.. but then again, entrepreneurs are weird people

Hey, I’m not hating on them, maybe they know people I don’t. Good for them. Time to party like it’s 2001 when spam was easy.

Hell, one of these Facebook billionaire dudes invested. Maybe he’s just bored.. maybe he knows something.. maybe he even hooks them up with some feed algorithm inside secrets.

I personally think if you don’t add value in life, your success is just a mirage… or at least until some other schmuck buys into your dream, and you can unload before the reality check slaps you in the face.

I don’t know. What do you guys think?

Are we in another bubble? Are these investors delusional?

Leave your thoughts in comment box.

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Source: ShoeMOney

Why Investors Are Gonna Get Their Asses Burned on UpWorthy