Flickr owner SmugMug emails subscribers with an urgent request: help us find more paying users

When in April of last year, the photo hosting service SmugMug acquired the photo-hosting service Flickr from Verizon’s digital media subsidiary, SmugMug CEO Don MacAskill said he was committed to breathing new life into the service, calling it “core to the entire fabric of the Internet.”

MacAskill didn’t reveal at the time how much SmugMug — which is itself an independent, family-owned operation  — paid for Flickr. But it seems now that SmugMug may have underestimated its carrying costs. In an email tonight to users of Flickr who pay roughly $50 annually for the service, MacAskill has basically asked them if they know anyone else who might be interested in a yearly subscription to Flickr, explaining that it “still needs your help. It’s still losing money.”

Adds MacAskill, in terms that Flickr fans will surely interpret as acutely worrying, SmugMug “cannot cannot continue to operate it at a loss as we’ve been doing.” (To sweeten the deal for new subscribers, SmugMug is offering 25% off a Flickr Pro account for those who visit this link and input the code 25in2019.)

This editor happens to be a Flickr Pro user and shudders to think how many photos I’d have to move if the service shuts down. At the same time, no one who uses the service can be terribly surprised by the development. Just months after SmugMug acquired Flickr, it curbed free use of the platform to 1,000 pictures per account holder. In fact, it threatened to actively delete the photos of users who did not sign up for a subscription if they exceeded that number.

Beyond its operating costs, SmugMug, like so many other companies, also found itself engulfed in controversy recently when the New York Times reported that millions of Flickr images dating back to its 2005 founding had been sucked into a facial-recognition database called MegaFace to “train a new generation of face-identification algorithms,” “track protesters, surveil terrorists, spot problem gamblers and spy on the public at large.”

Ben MacAskill, Don’s brother and the company’s COO, said at the time that the flaw “potentially impacts a very small number of our members today, and we are actively working to deploy an update as quickly as possible.” He also noted that the images that had been accessed pre-dated SmugMug’s involvement with Flickr by several years.

Either way, it sounds like Flickr’s future is very much up in the air again unless more people either subscribe to the service, or someone — or some outfit — swoops in to save the day with the capital required to keep it up and running.

Here’s the full text of Don MacAskill’s note to its customers:

Dear Flickr Pros,

First, and above all else: thank you. Thank you for being a part of our community. Thank you for caring about Flickr. Thank you for supporting Flickr. Thank you for being a Flickr Pro.

Two years ago, Flickr was losing tens of millions of dollars a year. Our company, SmugMug, stepped in to rescue it from being shut down and to save tens of billions of your precious photos from being erased.

Why? We’ve spent 17 years lovingly building our company into a thriving, family-owned and -operated business that cares deeply about photographers. SmugMug has always been the place for photographers to showcase their photography, and we’ve long admired how Flickr has been the community where they connect with each other. We couldn’t stand by and watch Flickr vanish.

So we took a big risk, stepped in, and saved Flickr. Together, we created the world’s largest photographer-focused community: a place where photographers can stand out and fit in.

And yet, Flickr—the world’s most-beloved, money-losing business—still needs your help.

We’ve been hard at work improving Flickr. We hired an excellent, large staff of Support Heroes who now deliver support with an average customer satisfaction rating of above 90%. We got rid of Yahoo’s login. We moved the platform and every photo to Amazon Web Services (AWS), the industry leader in cloud computing, and modernized its technology along the way. As a result, pages are already 20% faster and photos load 30% more quickly. Platform outages, including Pandas, are way down. Flickr continues to get faster and more stable, and important new features are being built once again.

Our work is never done, but we’ve made tremendous progress.

Flickr still needs your help. It’s still losing money. You, and hundreds of thousands of loyal Flickr members stepped up and joined Flickr Pro, for which we are eternally grateful. It’s losing a lot less money than it was. But it’s not yet making enough.

We need more Flickr Pro members if we want to keep the Flickr dream alive, and we need your help to share the story of Flickr.

We didn’t buy Flickr because we thought it was a cash cow. Unlike platforms like Facebook, we also didn’t buy it to invade your privacy and sell your data. We bought it because we love photographers, we love photography, and we believe Flickr deserves not only to live on but thrive. We think the world agrees; and we think the Flickr community does, too. But we cannot continue to operate it at a loss as we’ve been doing.

Flickr is the world’s largest photographer-focused community. It’s the world’s best way to find great photography and connect with amazing photographers. Flickr hosts some of the world’s most iconic, most priceless photos, freely available to the entire world. This community is home to more than 100 million accounts and tens of billions of photos. It serves billions of photos every single day. It’s huge. It’s a priceless treasure for the whole world. And it costs money to operate. Lots of money.

As you know, Flickr is the best value in photo sharing anywhere in the world. Flickr Pro members get ad-free browsing for themselves and their visitors, advanced stats, unlimited full-quality storage for all their photos, plus premium features and access to the world’s largest photographer-focused community.

Please, help us spread the word. Help us make Flickr thrive. Help us ensure Flickr has a bright future. Every Flickr Pro subscription goes directly to keeping Flickr alive and creating great new experiences for photographers like you. We are building lots of great things for the Flickr community, but we need your help. We can do this together.

We’re launching our end-of-year Pro subscription campaign on Thursday, December 26, but I want to give you a coupon code to share with friends, family, or anyone who shares your love of photography and community so they can enjoy the same 25% discount before the campaign starts.

We’ve gone to great lengths to optimize Flickr for cost savings wherever possible, but the increasing cost of operating this enormous community and continuing to invest in its future will require a small price increase early in the new year, so this is truly the very best time to help everyone upgrade to a Pro membership.

If you value Flickr finally being independent, built for photographers and by photographers, we need your help.
With gratitude,

Don MacAskill

Co-Founder, CEO & Chief Geek
SmugMug + Flickr

How startups close their first big sales

No matter what your startup sells or who you’re selling it to, companies that survive — and grow — need big customers and lots of them. But how do you land million-dollar deals with limited resources and no credibility?

In more than 20 years of building companies and products, I’ve learned that in the grand scheme of the startup lifecycle, while you scale your way through growth to eventual sustainability and success, acquiring your first customer is relatively easy. Any good salesperson can sell a good product to the prospect of their choice. Hell, any mediocre salesperson, even when they’re hawking complete crap, can get lucky once. Your first customer is a great signal, but it’s just a signal, not a savior.

What actually matters is what we learn from that first signal and all the signals that follow.

Aggregate value to target prospects

The process starts way before the first sales pitch. Your chances of closing your first big sale are going to be directly related to how well you’re targeting your prospective customers. So let’s begin with a discussion of aggregation and targeting.

All product and service sales come down to usage and aggregated value. It doesn’t matter if your target customer is a consumer or a business. It makes no difference if your price point is dollars or thousands of dollars. It doesn’t matter if your transaction is completely frictionless or requires a six-month hand-hold by your sales team.

If your customer is a consumer, they’re going to have limited usage with your product or service and the value needs to be tightly wound into that small usage window. If your customer is a business, they’re likely going to have multiple users and almost continuous usage of the product or service, so the value will be delivered over time.

So a “lot of customers” for your product or service might be 100, or it might be a million. Either way, you’re offering the same value per dollar based on usage. You’re aggregating that value into the sale, so you need to be targeting those customer prospects with the highest expected usage.

A classic rookie mistake made by most entrepreneurs is spraying and praying at large prospect audiences for the sake of their largeness alone, hoping that those shards of value surface for the right people at the right time.

Don’t do that. Instead, for B2C sales, you’re going to need some intelligence about your prospect list, which means more than Facebook ad demographics — it’s being able to predict the usage based on the source of the prospect. For B2B sales, you need to determine the optimum type of business to sell into: their size, their industry, their appetite for innovation, and anything else you can use to narrow your focus.

Figure out who is going to get the most aggregate value for their usage and target them.

Targeting customer prospects based on value aggregation is not only going to increase the chances of closing, it’s also going to dictate the near future in terms of the growth of your startup. A targeted, good customer is going to make your life a lot easier. A random, poor customer is going to fill your world with complaints, support requests, change requests, feature requests, and ultimately severe changes to your product roadmap.

Consolidate and find a champion

When you’re a startup, your customers are buying innovation. The tricky thing is, no one needs innovation. Rather, they need the derivatives of that innovation  —  time, simplification, throughput, security.

In order to close a big sale, in other words, the aggregation of many, many units of that usage and value, you’re going to have to consolidate that usage and find a champion of value on the customer side.

So the question becomes: Who benefits the most from the derivatives of innovation brought about by maximizing the usage of your product or service?

Don’t wait to plan your exit, even if it’s years away

Startup founders have a million things to worry about every day.

Finding product-market fit, great talent and and a sustainable plan for constant growth are top of mind, but perhaps most importantly, they need to keep the lights on, whether it’s by raising venture capital or managing cash flows while bootstrapping.

The flip side to thinking about fundraising and growth, however, is skipping ahead to the final chapter — whether that involves M&A, an IPO or perhaps a bankruptcy, eventually all startups come to an end.

Instead of thinking about an exit while in the final throes, founders need to strategically lay the groundwork, even if it is potentially years away. Here’s how.

On the Extra Crunch stage at TechCrunch Disrupt SF, we had a deep conversation on what founders should do to prepare for an exit with Jess Lee of Sequoia, who sold her startup Polyvore to TechCrunch parent company Yahoo; Justin Kan, who sold Twitch to Amazon and now runs legal startup Atrium; and Mike Marquez, the founding managing director of boutique investment bank Code Advisors.

The good news is that the primary requirement for exiting a startup is really the same work that a founder has to focus on: building a great business. “The best way to sell your company is to actually build a good company,” said Kan, since no acquirer is looking to buy damaged goods.

But even if you are building a solid business, that’s not nearly enough to get a transaction done some time down the line. One consistent piece of advice from the group was that founders should be thinking about an exit much more regularly, even if they are steadfastly opposed to one. That means identifying key relationships that will make an M&A possible and working to build and maintain those relationships.

“I thought about it too late,” Lee said about her time running Polyvore . “The same way you build relationships with investors, you should spend at least a little bit of time building relationships with partners who could become potential acquirers.”

Kan elaborated further. “I think that in the beginning, your responsibilities as a founder is just to find product-market fit [and] work on your product,” he said. “And then once you have a product that people want, you want to figure out how to get it in the hands of more people, and that’s when it starts to become really valuable to know everyone in your market and then adjacent markets.”

Far from being a completely separate task from the other duties of being a CEO, connecting with potential acquirers often has benefits for growing a company in the first place.

HuffPost is reportedly on the auction block

Late last night the Financial Times reported that HuffPost, arguably one of the crown jewels of Verizon Media Group’s remaining network of media properties (which includes TechCrunch), is up for sale.

Verizon has been shedding media properties in a retreat from the strategy that it had begun to execute with the acquisition of AOL for $4.4 billion back in 2015. Through the AOL deal, then-chief executive Tim Armstrong became the architect of the telecommunications company’s media and advertising strategy.

Armstrong’s vision was to roll up as much online real estate as he could while creating a high technology advertising architecture on the back-end that could better target consumers based on their media consumption (which the telecom company would also own).

The idea was to provide a broad-based competitor to the reach of ad platforms on Google and Facebook which were also targeting users based on their browsing history and interests. The benefit that Google and Facebook had was that they had a more holistic view of what consumers did online and they positioned themselves as a distribution channel between media companies and users — essentially redistributing their articles and videos and hoovering up the ad dollars that had previously gone to those media companies.

The multi-billion dollar land grab continued when Verizon paid $4.5 billion for Yahoo in 2017.

Now it appears that Verizon has a multi-billion dollar case of buyer’s remorse. Part of the billions that Verizon spent on Yahoo was for the early social network Tumblr, which Yahoo had acquired for $1.1 billion back in 2013.

Earlier this year Verizon unloaded Tumblr for the cost of a luxury Manhattan apartment. That $3 million sale was presaged by the significant fall from grace of other former high-flying media and tech properties.

Vice was once worth $5.7 billion at the height of the media investment bubble, but earlier this year Disney wrote down its stake in the company to virtually nothing.

At least Vice is emerging as a survivor. the company has rolled up Refinery29. Vox Media is also doing well in the new world of media. It bought Recode back in 2015 and recently acquired the publisher behind New York Magazine to expand its purview into paper publications and get its hands on the popular New York websites Intelligencer, The Cut, Vulture, and Grub Street.

Other publications like Hello Giggles, which was founded by the actress Zooey Deschanel, were sold to Time Magazine. High-fliers like Buzzfeed, HuffPost, Vice and Vox have all had to lay off staff in recent months.

It’s been a wild ride for HuffPost, which began in 2005 as a collection of celebrity bloggers brought together under the auspices of Arianna Huffington, from whom the site took its name.

AOL acquired The Huffington Post back in 2011 in a deal that was valued at $315 million less than a year after picking up TechCrunch for $25 million.

Verizon announced layoffs across its media properties at the beginning of the year. It cut roughly 7 percent of its staff — or around 800 jobs — including some at HuffPost.

In a statement to the Financial Times, Verizon said that it would not comment on rumors and speculation.

Neither Verizon Media nor HuffPost responded to a request for comment by the time of publication.

How you shouldn’t handle your data breach

So you’ve had a data breach. Don’t worry, it’s not just you. These days it happens to everyone, no matter how large or small your company is. It’s almost inevitable, some might say, and not a case of if but when.

A lot is already out of your control. Whether a hacker broke in and stole customer data or someone on staff left a cloud server exposed without a password, the incident alone is bad enough. But then you’ll also face a stream of headlines, flack from your customers, and endless tweets and social media posts. Trust will invariably suffer, your brand will hurt, and recovery seems like a million miles away.

But as breaches become more commonplace, few companies remember the actual incident itself — or even the number of users or customers affected. No matter what kind of security incident you’re thrown into, what happens afterward is how you will be remembered.

Get it right, you can save face. Get it wrong, and you’ll never live it down. Here’s what not to do when you have a data breach.

Don’t try to cover it up

The latest version of Yahoo Mail helps users find attachments and deals

Yahoo Mail is getting a mobile update, with new versions of the iOS and Android app launching today.

Many of you probably haven’t tried out Yahoo Mail in years, but Senior Director of Product Management Josh Jacobson noted that it’s one of the top productivity apps in the Apple App Store, where it has been rated 2.1 million times, with an average rating of 4.6 stars.

Jacobson also said that Yahoo Mail is trying to do something very different from the Superhumans of the world, because it’s not one of the many apps that “solve for essentially corporate use cases.” Instead, it’s “completely focused on the consumer email use case, solving the business of your life.”

For example, Jacobson said he joined Yahoo after the company acquired his previous employer, the smart inbox service Xobni. (Yahoo, like TechCrunch, is owned by Verizon Media.) At the time, everyone assumed that when it came to helping users find things in email, “search is the way to go.”

Instead, he said it turns out “people just don’t know or want to have to figure out what to type into that imposing white box to find the thing that they’re looking for.”

Yahoo Mail

So Yahoo Mail now offers a number of different views that should help you find stuff without searching, by focusing on specific types of content from your inbox.

If you’re looking for a photo or a file that someone sent you, there’s a view that just brings up all your attachments. Or if you’re looking for deals, there are three different views that you use — the overall Deals View, the currently iOS-only Location View (which shows you nearby deals on a map) and Grocery View (which shows you grocery discounts based on your loyalty cards).

Director of Product Management Shiv Shankar noted that while the app is sorting and prioritizing these offers, the deals themselves come from your inbox, not from Yahoo.

The new Yahoo Mail also includes a view for checking all your email subscriptions, and a button that allows you to unsubscribe from any of them with a single tap. And there’s an additional view (also iOS-only for now) focusing “active updates,” namely pressing and time-sensitive emails, such as package tracking and travel updates.

The Yahoo Mail team has also refreshed the app’s overall look. That includes adding a navigation bar at the bottom of the screen, which Shankar said will make “single-hand usage” possible again despite the fact that phone screens are getting bigger. The navigation bar is customizable — each user can decide which views to include.

And by the way, if you’re a little leery of sending email from a Yahoo address, Jacobson pointed out that you can use the Yahoo Mail app to access non-Yahoo email accounts, including Gmail and Outlook.

How Zhihu’s become one of China’s biggest hubs for experts

Zhihu may not be as well known outside of China as WeChat or ByteDance’s Douyin, but over the past eight years, it has cultivated a reputation for being one of the country’s most trustworthy social media platforms. Originally launched as a question-and-answer site similar to Quora, Zhihu has grown to be a central hub for professional knowledge, allowing users to interact with experts and companies in a wide range of industries.

Headquartered in Beijing, Zhihu recently raised a $434 million Series F, its biggest round since 2011. The funding also brought Zhihu two important new partners: video and live-streaming app Beijing Kuaishou, which led the round, and Baidu, owner of China’s largest search engine (other participants in the round included Tencent and CapitalToday).

Launched in 2011, Zhihu (the name means “do you know”) is most frequently compared to Quora and Yahoo Answers. While it resembled those Q&A platforms at first, it has grown in scope. Now it would be more accurate to say that the platform is like a combination of Quora, LinkedIn and Medium’s subscription program.

For example, Zhihu has an invitation-only blogging platform for verified experts and since launching official accounts, it has become a channel for companies and organizations to communicate with users. A representative for Zhihu told TechCrunch that the platform had 220 million users and 30,000 official accounts as of January 2019 (for context, there are currently about 800 million Internet users in China), who have posted a total of 130 million answers so far.

The company’s growth will be closely watched since Zhihu is reportedly preparing for an initial public offering. Last November, the company hired its first chief financial officer, Sun Wei, heightening speculation. A representative for the company told TechCrunch the position was created because of Zhihu’s business development needs and that there is currently no timeline for a public listing.

At the same time, the company has also dealt with reports that its growth has slowed.

Tumblr’s next step forward with Automattic CEO Matt Mullenweg

After months of rumors, Verizon finally sold off Tumblr for a reported $3 million — a fraction of what Yahoo paid for the once might blogging service back in 2013.

The media conglomerate (which also owns TechCrunch) was clearly never quite sure what to do with the property after gobbling it up as part of its 2016 Yahoo acquisition. All parties has since come to the conclusion that Tumblr simply wasn’t a good fit under either the Verizon or Yahoo umbrella, amounting to a $1.1 billion mistake.

For Tumblr, however, the story may still have a happy ending. By all accounts, its new home at Automattic is far better fit. The service joins a portfolio that includes popular blogging service WordPress.com, spam filtering service Akismet and long-form storytelling platform, Longreads.

In an interview, this week, Automattic founder and CEO Matt Mullenweg discussed Tumblr’s history and the impact of the poorly received adult content restrictions. He also shed some light on where Tumblr goes from here, including a potential increased focused on multimedia such as podcasting.

Brian Heater: I’m curious how [your meetings with Tumblr staff] went. What’s the feeling on the team right now? What are the concerns? How are people feeling about the transition?

Fresh out of Y Combinator, Tandem lands millions from Andreessen Horowitz

Tandem, one of the most sought after companies to graduate from Y Combinator’s summer batch, will emerge from the accelerator program with a supersized seed round and an uncharacteristically high valuation.

The months-old business, which is developing communication software for remote teams after pivoting from crypto, is raising a $7.5 million seed financing at a valuation north of $30 million, sources tell TechCrunch. Airbnb investor Andreessen Horowitz is leading the round.

Tandem and a16z declined to comment for this story. The round has yet to close, which means the deal size is subject to change. Y Combinator startups raise capital using SAFE agreements, or simple agreements for future equity, which allow investors to buy shares in a future priced round at a previously agreed-upon valuation.

We’re told several top venture capital firms were vying for a stake in Tandem. One firm even gifted the founders a tandem bike, sources tell TechCrunch, resorting to amusing measures to sway the Tandem team. But it was a16z — which has an established interest in the growing future of work sector, evidenced by its recent investment in the popular email app Superhuman — that ultimately won the coveted lead investor spot.

Tandem provides a virtual office for remote teams, complete with video-chatting and messaging capabilities, as well as integrations with top enterprise tools including Notion, GitHub and Trello. The service launched one month ago and has signed contracts with Airbnb, Dropbox and others. The company claims to be growing 50% week-over-week.

“Every company is a remote company,” Tandem chief executive officer Rajiv Ayyangar said during his pitch to investors on day two of Y Combinator Demo Days this week. “You have salespeople in the field, [companies with] multiple offices, people working from home. Tandem isn’t just building the future of remote work, it’s building the future of work.”

Ayyangar was previously a data scientist at Yahoo before joining Yakit, a startup seeking to simplify ecommerce delivery, as the director of product. Co-founders Bernat Fortet Unanue and Tim Su are also Yahoo alums.

We’re told Tandem’s fundraise was nearly complete before it pitched to investors Tuesday afternoon. Startups that participate in YC are often flooded with offers from VCs throughout the three-month program. Firms are hungry for the batch’s Airbnb, Dropbox or Stripe — graduates of the program — and will pay premiums on startup equity for their chance to invest in a future ‘unicorn.’

As a result, the median seed deal for U.S. startups in 2018 was roughly $2 million — a record high — with typical pre-money valuations hovering north of $10 million. Tandem’s seed financing represents both a trend of swelling seed deals and valuations, as well as a tendency for VCs to dole out more cash to fresh-from-YC companies amid heightened competition amongst their peers.

The previous YC batch, which wrapped up in March, included ZeroDown, Overview.AI and Catch, a trio of companies that pocketed venture capital ahead of demo day. ZeroDown, a financing solution for real estate purchases in the Bay Area, raised upwards of $10 million at a $75 million valuation before demo day, sources told TechCrunch at the time (months after demo day, Zero Down announced a whopping $30 million financing). ZeroDown was an outlier, of course, as the company’s founders had previously co-founded the billion-dollar HR software company Zenefits.

As for the summer batch, we’re told Actiondesk, Taskade and Tandem are amongst the startups to garner the most hype from investors. Some even forwent the demo day pitch altogether. BraveCare, which is creating urgent care clinics intended just for kids, raised $4.1 million ahead of demo day, we’re told. The company opted not to pitch to additional investors this week.

You can read about all the company’s that pitched during demo day one here and demo day two here.

What will Tumblr become under the ownership of tech’s only Goldilocks founder?

This week, Automattic revealed it has signed all the paperwork to acquire Tumblr from Verizon, including its full staff of 200. Tumblr has undergone quite a journey since its headline-grabbing acquisition by Marissa Mayer’s Yahoo in 2013 for $1.1 billion, but after six years of neglect, its latest move is its first real start since it stopped being an independent company. Now, it’s in the hands of Matt Mullenweg, the only founder of a major tech company who has repeatedly demonstrated a talent for measured responses, moderation and a willingness to forego reckless explosive growth in favor of getting things ‘just right.’

There’s never been a better acquisition for all parties involved, or at least one in which every party should walk away feeling they got exactly what they needed out of the deal. Yes, that’s in spite of the reported $3 million-ish asking price.

Verizon Media acquired Tumblr through a deal made to buy Yahoo, under a previous media unit strategy and leadership team. Verizon Media has no stake in the company, and so headlines talking about the bath it apparently took relative to the original $1.1 billion acquisition price are either willfully ignorant or just plain dumb.

Six years after another company made that bad deal for a company it clearly didn’t have the right business focus to correctly operate, Verizon made a good one to recoup some money.

Aligned leadership and complementary offerings drive a win-win