As you probably know, we in Admitad Startups are all about being transparent about our missteps. So in this article, we’ll share two real-life cases of our startup failures.
We interviewed founders of these companies, and they told us about their initial product concepts, the challenges that they faced, their pivots, and reasons for shutting down. Here’s an article that summarizes these interviews. Hopefully, you’ll learn from our mistakes and your startup journey will be smoother than ours!
Banneon — banner resizing platform
This startup couldn’t find ways to scale. However, it didn’t discard its product idea completely, so its founders joined the team of another company that develops a similar solution.
So let’s get into our first case and learn what Banneon was trying to sell.
The original name of this project was Mooovie.ru. Then, it was rebranded as Banneon.
This project included two products:
- Tool for resizing banners
- Module for creating feed-based ads
Let’s concentrate on the first one.
According to the initial hypothesis, large companies wasted too much time and effort to resize banners for all the platforms where they placed them. They struggled to maintain a high conversion level. This hypothesis was confirmed.
Compared to the traditional way of making banners, Banneon freed users from the necessity of finding designers and coordinating the workflows. Users would only create their templates once and adapt them to various formats.
It took Banneon around 3–6 months to sign the contract with each client and around 8 months to break even with them. The project attracted 12 clients. Four of them resized their banners regularly. The remaining eight only used this service occasionally.
This idea failed to take off because market players didn’t appreciate it. Since it was not a whitelisted Facebook tool, Google limited the number of Banenon’s ad viewings. In two years, Aitarget released an identical solution.
Banneon’s team switched to resizing banners. Here’s how it worked:
- The user sent a source image to Banneon.
- Banneon ran this image through a plugin developed to scale vector files.
- Once the banner was ready, the designer checked it for quality and sent it back to the user.
The startup founders created the resizing plugins themselves. These tools let the designer’s work boil down to quality control.
Banneon’s monthly revenue reached almost $4,000, and it even acquired an internal customer — one of Admitad’s companies. After that, the startup started an integration process with getUNIQ — it’s a tool that allows you to optimize and distribute the ad budget among major advertising networks.
The next goal was to get around $20,000 in monthly revenue. This benchmark was achieved in less than a year, even though the growth was backed by the rising AOV rather than the number of customers. The startup became profitable, paid out its debts, and didn’t even spend any of the pre-seed money. During that period of intense growth, Banneon attracted only 3 new customers who had not yet grown.
Banneon’s team expected to survive on medium-sized clients, such as getUNIQ. getUNIQ was supposed to sell Banneon as an auxiliary tool. Banneon was already testing its product for MyTarget and TikTok planning to concentrate on the former.
Banneon encountered a problem with accounting and production. It hardly managed to convince its users to do more resizes. Even though the business scaled, it lacked a strategic partner. It had to choose from two options:
- Raise a large funding round and hire expensive professionals to improve the banner builder. However, such professionals were very hard to find. The founders would have been forced to share a large part of equity with third parties.
- Become a traditional agency that only differentiates itself from competitors thanks to partially automated processing of pictures.
To compete with agencies, Banneon’s team would have had to rely on their personal connections to influence the budget allocation. That would have been too costly, complicated, and far away from their initial concept of a technological startup that promotes automation. The founders leaving the team didn’t help the situation either.
Also, Banneon’s product was not a separate technology but a complementary one. It couldn’t survive as a standalone startup, so it had to be merged with other businesses.
The project was frozen due to going into automation via the feed-based module.
Brief story of the feed-based ads module
The founders came up with a hypothesis that advertisers might be willing to place relevant, visually appealing ads on social networks to indirectly boost sales. This hypothesis wasn’t confirmed.
The main obstacle that the Banneon faced was finding developers. Three of the outsourced professionals left. Then, the founders resorted to the services of a development studio. It took them one month to build the MVP, but the clients who requested it had to wait for twice as long until they could use it. Even though it was working, the project got shut down because of the recent events in East Europe.
Based on the experience of developing Banneon, the team understood that it doesn’t make sense to save up on professionals. Here are some key lessons it learned:
- An attempt to cut down expenses by outsourcing developers might only increase the cost of the project. It would be wiser to hire in-house professionals from the onset or sign a contract with a development agency.
- Don’t trust the developers who say they will complete your request in no time since your task is easy. They most likely underestimate the workload.
- Don’t promise your clients to invite them to test your product soon if your MVP is not ready yet.
- If founders leave, startup expenses can skyrocket. To compensate for founders’ expertise, managers need to either keep learning day and night or hire new professionals.
- When recruiting people for a startup, managers need to give them space to build their own workflows. Even though it’s tempting to describe rules and internal procedures beforehand, no one can really predict a startup’s future, so they should emerge on the go.
That’s why Banneon believed that paying fair market salaries is essential to a startup’s wellbeing. Banneon didn’t offer employees less money simply because they joined a cool brand and got private health insurance with free access to a gym. Instead, managers were striving to truly take care of their employees.
StreamUniq — livestream shopping service
This startup wanted to create a product for the sector of liveshopping ecommerce, also known as livestream shopping. The founders decided to launch a project in this niche based on these statistics:
- Coresight Research predicts that by 2023, the live broadcast market in the US will be worth $25 billion.
- A Facebook study shows that 55% of Generation Z people and 62% of millennials are ready to make a purchase during a live broadcast when brands launch new products.
- In China, livestreaming ecommerce is developing at a tremendous pace. In 2020, the total amount of sales exceeded $171 billion. In 2022, the expected sales volume is $423 billion. From 2017 to 2020, this sector grew by 280%.
StreamUniq’s team knew this technology had become extremely popular in China, so they wanted to introduce it to European and American markets.
According to the initial hypothesis, the functionality of the tools currently available on the market was not enough for influencers to arrange livestreams. StreamUniq roughly categorized these tools into 3 types:
- Facebook, YouTube, Instagram, and other media platforms supporting livestream ecommerce.
- Dedicated livestream shopping services, such as the Asian Kuaishou — a TikTok-style platform that lets users swipe items and watch shopping streams in real-time.
- Ecommerce widgets that can be added to already existing websites or used to create new solutions.
After analyzing their competition, StreamUniq decided to launch a shopping livestream builder. Such a solution allowed users to set up a livestream, edit and personalize it, add widgets, images, and dynamic pricing to their videos, and enable restreaming through various platforms (including the above-mentioned Facebook, YouTube, and Instagram). Plus, it enabled streamers to control the purchasing process and money transactions so that they were able to make a profit. They also got access to sales analytics to measure their streams’ performance.
The editor was an intermediary between vendors and buyers. It allowed vendors to get more visibility, link their landing pages to livestreams, engage with users via layering stream elements over the video, and add the ‘Buy’ button to each product card.
StreamUniq considered two business models for its shopping livestream builder.
- The first one was a standard SaaS. A vendor would need to purchase the license to get access to the full functionality of the platform.
- The second model provided free access to the platform’s functionality in exchange for 5% or 10% of each transaction.
StreamYard is a successful product similar to the one that StreamUniq wanted to launch. Its annual turnover reaches $30 billion. Nevertheless, its solution fails to support restreaming.
Restream.io is identical to StreamYard in many aspects. But it features more options and its interface might be a bit confusing for new users.
Yellow Duck allows users to set up livestreams on Instagram from their PCs. That might be more convenient than streaming from a smartphone.
NTWRK that caters to Western countries gets up to $75 million in its funding rounds. This streaming platform supports live purchases and partially resembles TikTok.
StreamUniq began to research the market. The first challenge that it faced was finding respondents from the relevant niches: showrooms, beauty, travel, cooking, and fashion. The founders failed to detect the respondents without third-party help and switched to profile services instead.
Fiverr and StreamYard
Fiverr turned out to be useless because respondents refused to arrange a meeting. They preferred to bounce messages back and forth, which was inefficient.
The StreamUniq builder catered to the same audience as StreamYard and Restream.io. That’s why the founders tried to get in touch with users of these two platforms. The respondents told them that they liked StreamUniq but didn’t want to pay for its premium functionality — namely, the analytics. The founders weren’t motivated to earn small amounts of money from these people.
That version of the product was frozen. The next version was based on CommentSold. This solution is popular among companies that organize livestreams. It has remarkable functionality: an opportunity to make sales from comments. The system detects tag words during the stream and automatically prepares a bill.
However, the founders failed to talk to CommentSold users. They managed to find the closed Facebook group where active users socialized, but it was only available to those paying for advanced CommentSold plans. The team purchased the most affordable CommentSold package. However, admins didn’t let them join the closed FB group and eventually banned them.
Fortunately, the founders managed to talk to people who watched the livestreams launched via CommentSold. However, they failed to recognize livestream editor involvement and provide any useful details.
Founders tried to conduct Jobs to be Done interviews but struggled to find livestream sellers. So they resorted to Respondent.io and got the first positive feedback on their product idea, especially re-streaming. However, the company’s managers suspected that this first batch of users lacked the budget to afford their product.
During the interviews, StreamUniq’s team found out that one of their potential customers (which was a lifestreaming shopping company) relied on the GoToWebinar platform. It’s a part of the GoTo ecosystem that also includes GoToMeeting, GoToRoom, GoToTraining, and other streaming products. According to an insight obtained from a respondent, users paid GoToWebinar around $500–700 per month. Such a pricing policy seemed appealing, and StreamUniq decided to switch from B2C to the B2B segment.
It divided its B2B segment into two parts:
- Large companies. When large companies need to launch a livestream, they do so on their own web resources. Alternatively, they team up with influencers who launch streams on platforms where they have a vast audience.
- Small and medium businesses, showrooms, and artists who create handmade pieces.
StreamUniq spent over 3 months researching its competitors, but unfortunately, put it on hold. It only managed to find about 10 respondents. As it turned out, GoToWebinar users would primarily resort to it to hold corporate meetups. Among its largest customers were eMedical Media, CitiusTech, Harvard Graduate School of Design and Snapchat, and their meetings involved thousands of individuals. They actively used questions, graphs, and other features of the platform, but they hardly ever streamed anything to the outside audience.
This information turned out useless for StreamUniq. Also, it couldn’t offer a solution to fix its target audience’s pain points. The team could only build a platform where clients would launch their ecommerce livestreams. Such a platform would mimic the already existing TikTok and take too much time and money. Instead, the startup needed a small and simple solution, and so it tried to pivot.
StreamUniq singled out three components of a successful livestreaming ecommerce product:
- Setting up a livestream
- Attracting the audience
The founders prepared 14 product hypotheses. They narrowed the choice down to 5 most promising ones and then left only 2 of them: the automated promotion of livestreams and the automation of sales during livestreams.
In the niche of the livestream sales automation, they found a direct competitor — Upmesh. This project raised $7.5 million from Monk’s Hill Ventures. However, it was not possible to get in touch with this company and it failed to respond to user requests. Potentially, that could have indicated that the product was shut down.
StreamUniq switched to the hypothesis of automated promotion of livestreams. The product idea was an advertising network with the ability to control the numbers of users and views. The network was supposed to promote livestreams on third-party websites.
The new version of StreamUniq included not only the ‘Start’ button but also opportunities for attracting more viewers. Apart from that, the startup introduced a monetization model based on purchases and donations. To engage the viewers, vendors wouldn’t have had to rely exclusively on their charisma. They got access to helpful tools that were built inside the platform. For instance:
- When a livestream begins, funny characters start to run all over the display.
- The platform can show the vendor’s name and logo.
- Viewers can send donations to the streamer.
- Viewers can submit messages for a vendor to read out loud.
- The most active viewers are allowed to take part in the stream.
In theory, gamification could introduce monetization to entertainment painlessly. But when the platform tried to charge streamers for using additional tools, very few of them were ready to pay. That’s why StreamUniq focused on the key components of livestream shopping — launching and designing livestreams as well as attracting new audiences.
References for the reinvented product
Here’s the idea behind StreamUniq’s reinvented product. Users would launch their livestreams, and the streaming service helped to attract customers from various platforms.
While building the new solution, StreamUniq referenced two companies:
- Facebook allows users to deposit ads budget for their streams. As soon as a livestream begins, the social network starts to promote it among the relevant audience according to the amount of the ad budget.
- Twitch offers the Stream Hero function. A user deposits cash and launches a livestream. Twitch re-streams this content as a popup widget to its partner resources. Viewers can’t skip this widget for the first 15 seconds and have to watch it either in the center or in the right corner of their screen. If they like the stream, they can click it and it opens in a new tab or a new window.
The first challenge was to find platforms that could place the livestream widget on their web pages at a reasonable price.
- In 90 days of searching, StreamUniq only came across two platforms that could drive traffic.
- Webmasters who offered advertising space for a fixed fee failed to get in touch with StreamUniq.
- Webmasters who preferred the $20 CPM model were only ready to work under the condition of placing an initial deposit of 5,000 GBP. That was too expensive to test the hypothesis.
The second challenge was to find ways of attracting viewers to livestreams. StreamUniq had to identify large companies that launched ecommerce livestreaming events and find out how they make people watch this content. The startup team contacted some agencies, but the latter said large companies hardly ever asked them to help with livestreaming. They would only get one request per year.
The third challenge was related to the technical capacity of livestreaming. To broadcast a livestream on a third-party web resource, Embed JS is essential. Plus, the client needed to build a landing page for a Google app. The first stage of this work scope would take at least two months. The price of developing a full-fledged product would be over $170,000.
StreamUniq would have to compete with ad networks by offering more competitive prices. But then the startup would earn too little and not be able to pay webmasters the rates that they wanted.
The founders decided to stop working in this direction because all niches in the market were occupied by big players who had large development budgets. Alternatively, StreamUniq had to come up with a product idea that had no analogs on the market — but the team had no such concept.
The founders analyzed the reasons for the failure of their initial concept and decided to switch to social commerce in the B2B sector. Companies obviously had more cash to spend on streams than influencers.
They figured that B2B users might face challenges with:
- launching ecommerce livestreams and acquiring viewers
- retaining the audience
- monetizing their streams.
The 3rd pain point was too complex to solve. For the 2nd one, free or affordable solutions already existed. So the founders focused on the first pain point. They decided to become a supplier of a live audience for B2B streams.
The target audience for the new product included businesses from four sectors:
- Online cinema
The founders wanted to understand how companies acquired customers and what challenges they faced. So they assumed they would need to build a segmented MVP.
In the first iteration, the founders tried to work with the agencies that run B2B livestreams. The agencies confirmed that they received relevant requests but only very rarely.
In the second iteration, the founders wanted to get in touch with the clients who run livestreams on their own. The CustDev center got an assignment to look for respondents, starting with the ecommerce segment. As a result, StreamUniq conducted 4 interviews.
- P&G ran 3 streams in 3 years. They aimed to sell products during the stream and they wanted people to follow the link to the retailer’s website. They promoted their streams through email and influencer marketing. Lack of organic promotion posed a big challenge for them. They planned to run 3 streams with big influencers per year. They wanted to find a platform where people would be able to watch streams and buy items in real-time, without leaving the stream.
- Designer clothes brand. It arranged entertaining livestreams to boost its clients’ loyalty. It promoted its streams through posts and stories on social networks. It didn’t want to run livestreams on a larger scale.
- Budweiser. It streamed 3 times per year on Facebook and YouTube. On average, the brand attracted from 10,000 to 20,000 viewers to each of its livestreams. It wanted to expand its audience but it lacked relevant KPIs and didn’t sell too well. An agency was in charge of promoting its livestreams. But organizing and producing streams was too costly — ideally, the brand wanted one viewer to cost $1. Eventually, livestreams became secondary for Budweiser — their main task was to drive users from online to offline stores and motivate them to touch the brand’s products with their hands.
- Beautycounter. This company ran livestreams on its website. Previously, it used to stream on Facebook and Instagram. It liked this format but it was hard to make sales. The primary goal was to sell a total of $10,000+ and get a minimum of 1,000 views. Beautycounter promoted its streams through Facebook, Instagram, and email as well as with the help of bloggers. It wanted to spend no more than $5,000 on the promotion of one stream. The brand wanted to keep on streaming because streams allowed it to enhance its interactions with clients.
Based on the information obtained from the interviews, the StreamUniq founders decided to quit this sector. They struggled to find a niche for their product and respondents for it. They didn’t understand how to enter the market and organize their work.
StreamUniq came up with a product idea that was ahead of its time. Even though there seemed to be a substantial market for it, it wasn't shaped yet. Influencers and B2C businesses might have been ready to use an ecommerce livestream editor, but their budget was limited and they couldn’t generate a sustainable profit for StreamUniq.
So here are the main lessons that this startup’s team learned.
- If your idea fails to transform into anything interesting and unique, it might be better to put it on hold. This way, you can modify your previous hypothesis or start testing a new one.
- Startups should test as many hypotheses as possible in as short a time as possible. When a whole team is working on a single idea, it is not sustainable in terms of labor costs and budget.
- When you need respondents from a small and/or complex niche, you should search for them on dedicated services (such as Respondent.io). That will be more time- and cost-efficient than asking the colleagues to look for the contacts manually.
Final advice for founders
Here is what Banneon and StreamUniq founders said they wish they knew before launching their startups.
- Some automation tools can’t survive as standalone businesses and need to join other startups as auxiliary instruments.
- The departure of founders isn’t always synonymous with the death of a startup. Still, to compensate for the lack of the founders’ expertise, the company needs to hire new professionals that cost a lot and might be hard to find.
- When you need respondents from a small and/or complex niche, you should search for them using dedicated services (such as Respondent.io).
- It’s more cost- and labor-efficient to hire in-house developers or use the services of an agency rather than outsource developers who might leave the project at any moment.
Promising startups might fail to take off simply because the market is not ready for their products or doesn’t understand their significance. After businesses reinvent their offers, they might be able to grow until they hit an iron ceiling where they will lose their unique selling point.