The inside story of Hipstamatic’s losing struggle to keep pace with Instagram, Facebook, and others in the white-hot photo-sharing space. In the third and final chapter of the series, Hipstamatic searches unsuccessfully for capital, and founder Lucas Buick and ex-employees ponder the future of the business.
Lucas Buick, the CEO of Hipstamatic, failed to define his startup’s mission over the past year. But several of his ex-employees seem to have no problem nailing precisely what set it apart. “Whereas Instagram was a social network that had a camera, Hipstamatic was the camera that shared to any other social network,” says one former staffer. “It was very clearly distinguished.”
To outsiders, the distinction may seem insignificant, even pointless. But inside the company, some felt it was Hipstamatic’s golden ticket, a chance to become the go-to smartphone camera for sharing with social giants like Facebook, Twitter, and Flickr. Instead, the opportunity was squandered when the company lost its focus.
Since Buick launched Hipstamatic in late 2009, the service, a $1.99 photo app that takes analog-style photographs on your iPhone, has undergone relatively little change. It didn’t need to. The startup attracted millions of users and millions of dollars in revenue by selling in-app digital lenses and films that effectively turn your iPhone into an old-school instant camera.
If it’s common wisdom for founders to heed the call of social, then Hipstamatic proves that every founder should be wary of conventional Silicon Valley wisdom. Social for Hipstamatic was a siren song, and its turbulent journey over the last year only demonstrates the oft-overlooked dangers of pivots, especially ill-conceived ones that damage a startup’s core business so deeply that no amount of venture capital can repair it.
Throughout the summer of 2012, Buick says he and his cofounders took meetings with investors, hoping to raise the company's first round of funding. But the team could never find the right terms, Buick says, partly because of Facebook's bungled IPO. "We went down this path one other time, and the term sheets have gotten worse since the Facebook IPO, just from what we've seen," Buick says.
The other issue, ironically, was Hipstamatic's bottom-line, Buick says. While startups with no revenue can often drum up seemingly arbitrarily high valuations, Hipstamatic was plagued by its own market success. Instagram had generated no revenue since it launched, yet sold at a market valuation of roughly $1 billion. Hipstamatic didn't have the same “advantage.” According to Inc. magazine, the self-funded startup pulled in $10 million last year, and was on track to more than double its revenue in 2012. "For us, raising money was always super awkward because we made money," Buick says. "It fucked everything up and we'd get a different valuation. Like, 'Oh you have numbers? Well, I'm going to put the X here and the Y here, and this is what you're worth.' It's like, 'No, no, no, we don't make money! I lied!'"
"They thought raising VC money would be really easy--that they'd basically be picking money off trees," says Jonathan Wight, a former engineer at the company. "Every few weeks we'd get an update, and it would be, 'Oh it's a lot harder than we thought,' or, 'The terms aren't what we want.' Blah blah blah."
Fast Company reached out to a slew of top-tier VCs but was unable to find one who had met with or even looked at the company. Two of the VCs surmised the startup would have a very difficult time raising money after the Instagram acquisition. “Another billion-dollar photo-sharing exit is hard to imagine. The category is over and done with, and I’d be surprised if they can even raise,” says one of the topflight VCs.
The investor agrees that general market sentiment for social media investments is down because of Zynga’s and Facebook’s declining market caps. However, the VC disagrees with Buick’s argument that having revenue would hurt its chances to raise funding. “The real problem is that Hipstamatic is perceived as a copycat that desires to be Instagram, and VCs don’t want to be in a me-too deal,” the investor says. “Having revenue absolutely won’t hurt; if anything, it helps, though the idea and market size matter much more.”
At that point, however, Hipstamatic's biggest problem was finding the right idea, regardless of the size of its market or revenue. And its development team back in San Francisco felt completely disconnected from whatever the founders were planning. "They were gone for weeks and were impossible to reach," says one former employee. "Apparently they were meeting with VCs, but I don't know. We were just trying to ship this new product that was already behind. The original goal was to ship it when the new iPhone came out, but there was no fucking way we could do it. All we had was what we hacked together for them to demo to VCs." (Hipstamatic denies that its cofounders were impossible to reach during this time.)
By the time the “Wolfpack,” the self-appointed nickname for the company founders, decided to offer other members of the team stock in the company, many had already lost faith, multiple sources say. “All of us were like, ‘Dude, you’re never going to IPO,’” recalls Stuart Norrie, then a designer at Hipstamatic.
In late July, Buick and his cofounders went to New York, which Wight says felt like the “last chance to get VC money." (Hipstamatic denies that it was the company’s last chance for VC funding. It’s also worth noting that I had met with the team during their visit, and none of the products herein described were mentioned at that meeting. Buick was focused more then on ways to work Hipstamatic into third-party services.) When the team returned, however, there was no news of a round being raised. "Nothing was said. It was like, 'Well, I guess we didn't get any money,'" Wight recalls. "I confronted Lucas about it and he said, 'Yeah, we didn't find any terms that we liked, but we have something in China.' It was kind of obvious then that they weren't going to get VC funding."
Wight also says he pressed Buick on whether they could still go ahead with the social product without raising capital. "Lucas said, 'Yeah, we're going to mortgage [Hipstamatic's] building if we need to,'" Wight recalls. "He actually said, 'Our backup plan is to mortgage the building.' At that point, all my alarm bells went off. It was obvious that something crazy was going on. As far as I could tell, they were running out of money. That was about a week or two before the layoffs."
Hipstamatic says that it’s simply not true that the company considered mortgaging the building as an option. Hipstamatic also denies that anyone ever indicated the company was prepared to go forward with the social product without raising a round of funding.
If Hipstamatic’s product roadmap seemed slapdash, the rapidly evolving landscape of the photography space was only making its business even more chaotic. By mid-August, Instagram was racing toward 100 million users, in part due to the app’s successful launch on Android. Viddy, arguably the model for CS9, Hipstamatic’s squashed video product, had raised a $30 million round at a reported $370 million valuation. Path, Dave Morin’s private social network, had raised $40 million at a reported $250 million valuation. Camera+, its camera app competitor, was nearing 9 million users, more than double Hipstamatic’s user base, and would soon launch on the iPad. And Tumblr, Pinterest, and any number of other white-hot startups, which arguably served as inspiration for Hipstamatic’s social products, were flying into the upper-echelon of Silicon Valley superstardom.
But even in such a hectic time for the company, Buick was starting consider yet another pivot for Hipstamatic. Pivots, Eric Ries’ term for a change in company direction, are usually reserved to describe companies that have made successful shift in focus: Instagram, for example, is famous for pivoting away from its unsuccessful, complicated earlier iteration, called Burbn, which included a host of random features, such as game mechanics and future check-ins. Pivots are also used to designate startups that have lost focus, as was the case with Color, the proximity based photo-sharing app, which has become a punch line in the Valley for a startup desperately spiraling in all different directions.
But Hipstamatic never truly pivoted. If anything, it lurched. The startup performed a series of missteps throughout 2012 that snowballed and left the company stagnant by the summer’s end.
In further violation of Ries’s revered business principles, Hipstamatic seemed almost incapable of putting out a minimum viable product: most every prototype product was either killed or not given the attention it needed to get to market.
Worse yet, the company was not run like a lean startup. The company's headquarters, for example, a wide brick building on Langton Street in SOMA called the "Haus of Hipstamatic," cost roughly $1 million. Additionally, the cofounders decided to renovate the building's rooftop with deck and minibar, an upgrade that cost at least $800,000, explains Sam Soffes, a former engineer, who says he saw an invoice for the construction. “Lucas told me the stain for the deck had been imported from Belgium, and I was like, 'Dude, there's a Home Depot in Daly City--we could’ve just gotten it for way less than you paid to have that shit imported form Belgium!'" recalls Norrie. (Hipstamatic confirmed the cost of the building, but declined to confirm the cost of rooftop construction.)
Inside the $1 million "Haus of Hipstamatic" Parties at company headquarters were frequent. As Buick once told me, "Our entire lifestyle is built on the philosophy that work and play are one."
"It felt like a bloody frat house," says Wight, who says he was told the company's alcohol budget was $20,000. "I've never worked at a startup with an alcohol budget. People would be getting drunk at night and end up sleeping on the floor of the company. I think Lucas wanted a certain amount of rock n' roll there."
(Buick denies that the company had an alcohol budget, though he adds, “I mean, if we did have one, I’d be curious what it would be.” Buick also clarifies that, with all parties thrown--for product launches, say, or app updates--he always considered whether they’d generate short-term income or long-term revenue. Molli Sullivan, Hipstamatic's director of communications, says that much of the money spent on parties and other “fun events” was designed for team building.)
"We had a ton of parties--maybe that's what they meant by having a 'lifestyle brand,'" says one former developer, referring to Buick's company motto.
So while Hipstamatic was still generating revenue, it's perhaps no surprise why some employees started to wonder if the company was speeding toward bankruptcy. Employees were not privy to the startup's earnings; they only knew of revenue figures that had been reported by the press. When it became clear the company was not going to raise a round of funding, some started to think the worst. "I inferred that they were running out of money--that they had just gone through money way too quickly," says the former employee. "You've seen the office--it's really expensive. They all have really lavish lifestyles. I figured they were seeking out funding because they needed more runway to keep the ship afloat."
The truth according to Buick is, by mid-August, the company had several different options. Buick could've continued down the path toward social and raised a round of funding at less-than-pleasing terms. He also could've sold the company. ("We can't comment on who [we could’ve sold to], but it just seemed like a shitty option--it felt like giving up to cash in a check and buy a boat," Buick says.) Or he could've pivoted backward, scaled down the company's ambitions, and refocused on Hipstamatic's original photo app.
After much deliberation, Buick says he went with the last option. (Also in early August, one of the company’s iOS developers quit voluntarily, which helped reinforce Buick’s decision, he acknowledges.)
Over dinner in mid-August, Buick presented the plan of scaling back to several other founding members of the startup. "From the time we decided to pull the trigger to the time we executed was about 48 hours," Buick says.
On Aug. 16, the company began laying off employees, either in the office, over the phone, or over coffee. Employees were (not surprisingly) unhappy when they were told the news. "Yeah, I got my pink slip, or plaid slip, whatever hipster term you want to call it," says the former employee.
At the Mondrian Soho in mid-September, over dinner and drinks, Buick appears genuinely unfazed by the internal drama at Hipstamatic and the way it negatively spilled into the press after employees were let go. Later, when I ask Buick whether Hipstamatic is going bankrupt, he immediately responds, “No, we are not.” And even when I press him about the startup’s runway and burn-rate, he retorts with a giggle, “You're using startup terms that we've never internally used. I mean, I've heard burn-rate and runway, but let me say this: I have no idea what our burn rate is. I have no idea how long our runway is.”
Throughout our dinner, Buick’s general nonchalance gave the impression that the layoffs were not a financial decision, regardless of whether they actually were or not. (Molli Sullivan, the company’s spokesperson, says the company is not running out of money, and explains the layoffs had nothing to do with “paying the bills.”)
"The honest truth is I took a lot of bad advice and started building stuff we weren’t passionate about," he says. "That whole product development was all about how to make money and maximize users, and we were focusing on the shit that we didn't really care about. We started focusing on money and talking to a whole different scene, and we started to lose touch with our community--the photographers, for example, who totally got ignored for a year. I don't know what the trigger was but the honest truth was we hadn't shipped anything, and that drove me nuts. And what we were building was still so far away from being available that I didn't even like coming to work.”
Ex-employees can’t speak fast enough to list off the many problems that plagued the company: a lack of transparency, an incoherent product roadmap, and so forth. Almost every source I spoke was offended that Buick would say the layoffs were due to not shipping products—the ex-employees chalk up the dearth of shipped products to the company’s poor leadership. And many sources place the blame on the ever-mounting disconnect between the cofounders and new hires, who say they were not given the agency to push new developments forward. (At least three sources I spoke with said the cofounders had a “death grip” on the original Hipstamatic app, for example, and only gave developers read-only access to the service for much of their time at the company.)
While one could certainly argue Hipstamatic had many original ideas, Hipstamatic’s central problem was execution—and it was a problem that worsened as the team’s cohesion deteriorated. The startup could not act as a functional whole.
When I ask Buick what went wrong, he reflects for a moment, and answers, "I think we totally got caught up in the San Francisco bubble. If you don't leave enough, you forget that not everyone has an iPhone, and not everyone reads TechCrunch. The rest of the world doesn't care about that stuff. The San Francisco bubble is a sounding board for the same idea heard over and over in a thousand different ways. We fell into that, and it led to a lot of frustration and wasted time and resources. So we took a left turn."
Adds Buick, "We should coin this the unpivot."
Stuart Norrie, the former designer, summarizes the company’s issues most eloquently: “In this industry, it’s inevitable that you’re going to pivot. You should be expected to be switching direction at a moment’s notice. But not weekly--not changing direction completely every week. They were trying to become Camera+ and Instagram, and that’s a losing battle. It’s suicide to take them on. And if you focus too much on your competitors, you’re going to lose sight of your own business, and that’s what really happened.”
He continues, “The biggest problem with Hipstamatic is that [Lucas] didn’t focus on Hipstamatic. What did Instagram do when lightning struck? They did nothing but focus on Instagram. What happened when Hipstamatic got successful? They made [separate products such as] Swankolab, Incredibooth, D Series, Family Album, Snap Magazine, and splintered off in so many different directions. They lost sight from the very beginning, and it still makes me sad because it was a golden opportunity to make something really amazing.”
Other members of the team echo Norrie’s sentiment. Says one former employee, "The people I worked with at Hipstamatic were the best people I've ever worked with."
Buick agrees. "It sucked," he says. "We've let people go before but it was always justified because they weren't doing their work. This had nothing to do with that. They were all really awesome and talented. What we did was build a Ferrari and we didn't know how to drive stick. So we had this awesome machine that wasn't able to perform like it should. We built the wrong type of team to solve the wrong kind of problem.”
Finishing up his second or third old-fashioned at the Mondrian Soho, Buick transitions away from the past to talk about Hipstamatic's future. As he takes me through the roadmap, I can't help but be intrigued by what he and the company might have to offer--if the surviving team can even pull it off. All the while, a song by a French pop band blares over the restaurant's sound system. Then, later, another song by the same group. Then a third in the course of an hour. The band is Phoenix, the name for the mythical firebird that rises from its own ashes--not that anyone catches the heavy-handed, trite symbolism. Says Buick, "This fall we're launching a bunch of stuff…"
Jason Kilar’s vision for Hulu transformed web video. So why is Hulu in trouble and Kilar rumored to be on his way out? Because his vision transformed web video. Photo by Joe Pugliese
It's an unseasonably warm summer day, and Jason Kilar is "in the zone," as he puts it, buzzing around his Santa Monica, California, headquarters, putting the final touches on a massive redesign of Hulu, the streaming TV and movie service he runs. Despite the heat, and despite a deadline that is only weeks away, the boyish 41-year-old CEO looks calm and collected. (He always looks this way, actually.) He's dressed in his uniform of jeans and a dark blue T-shirt peeking out from under an über-starched button-down, and his thick turf of hair is cut in what looks like a $17 mow from Fantastic Sam's. As he natters on about the new site, walking me through its tray-style layout and a feature that lets you pick up exactly where you last left off watching a show, it's easy to see why people liken him to a grown-up Boy Scout. "This morning we had a 45-minute debate on the amount of gradient on the sticky header!" Kilar boasts, standing in a cluttered warren of darkened offices from which members of the design team periodically emerge, blinking like moles. Kilar's obsession with user experience--one source says it borders on "maniacal"--is a large part of why Hulu has created a service that customers have deemed "brain-spray awesome."
But as Kilar frets about the opacity of a tiny black line and the exact placement of a button, Hulu's corporate parents--News Corp., Disney, and Comcast/NBCUniversal--are fretting about Hulu. The day before Kilar's redesign was finally unveiled, Varietypublished excerpts from an internal memo that had been circulating among those owners. One of the bullet points: "Outline transition plan for new CEO. Discuss potential candidates and process." Kilar, who just three years ago was the wunderkind of digital media, now appears to be on the verge of being dispatched by his bosses--after which they may dismantle much of what he's created at Hulu.
The prevailing wisdom in business is that it's best to disrupt yourself before someone else comes along to do it for you. News Corp. and NBCUniversal had the foresight to start Hulu as Internet video was taking off in 2007. Thanks to Kilar's vision and leadership, the service has grown from a single website serving up last night's episode of The Simpsons to a service featuring content from more than 400 partners as well as original series from filmmakers Richard Linklater, Morgan Spurlock, and Kevin Smith. Revenue soared 60% last year, to $420 million, and is on pace to exceed $600 million this year. And despite broad consumer resistance to paying for digital content, especially when it's available elsewhere for free, Kilar has attracted more than 2 million people to Hulu Plus, a $7.99-a-month subscription service that offers full access to Hulu's library on an array of devices such as mobile phones, game consoles, tablets, and, most recently, Apple TV. Even more remarkable: He's serving ads to both free and paying customers, an industry-leading 46.4 ads per viewer per month, according to comScore's July 2012 online video rankings. Hulu's own stats suggest that 96% of those ads are watched in full.
Despite all that brain-sprayingly awesome news, the lords of television are having second thoughts about this whole disruption thing. The loudly noted woes of the entertainment industry aside, TV still generates more than $70 billion in advertising revenue annually. Cable companies still pay content providers like Disney (ABC's parent) and News Corp. (Fox's parent) tens of billions of dollars in licensing and subscription fees. Hulu's revenues are but a speck by comparison; but its audience, which now totals around 25 million unique visitors a month, according to comScore, is threatening. Network television viewership is down 12.5% since Hulu's launch in 2008, while approximately 3.6 million U.S. residents have abandoned pay-TV for Internet video over the same period. These metrics make studio and network people shiver, and Hulu bears the brunt of their alarm. "Half the people at those companies wish [Hulu] would go away," says one source who, like many of the dozens of studio execs, agents, producers, and Kilar's colleagues I interviewed for this story, asked not to be identified for fear of alienating any of the parties involved.
Kilar handpicked his team via "a bit of an Ocean's Eleven strategy," he says. Content chief Andy Forssell, left, and ad chief J.P. Colaco, right, were friends from Harvard Business School; CTO Rich Tom, center, knew Kilar through Hulu's original CTO, Eric Feng, a colleague from Microsoft. | Photo by Joe Pugliese
Hulu's owners and Kilar find themselves at this crossroad after years of long-simmering tensions and occasional battles. In the past few years, Hulu has shelved IPO plans, backed out of a sale, lost its key corporate supporters, and seen its partners sell rights to its rivals. The leaked memo was the third rumor of the summer that Kilar was on his way out. First, he was reportedly a finalist to be Yahoo's CEO; he killed that buzz by issuing a head-scratching statement that he "graciously declined to be considered" for the job. After that, he was going to work for Facebook. Press Kilar about all this Sturm und Drang, however, and all you get is his game face: "We've never grown so much in an absolute way as we have in the last couple of years."
Kilar will admit that his five-year journey at Hulu has "not been for the faint of heart." More palpitations are in store. This fall, Providence Equity Partners, the private-equity firm that has a 10% stake in Hulu and has generally backed Kilar, plans to sell its stake back to Big Media, leaving Kilar more exposed than ever. (Of course, he might also become richer than ever, given that he'll be able to liquidate stock options worth a reported $100 million.)
When I ask Kilar if Hulu is simply too successful for its owners' tastes, he throws his head back and laughs. "I don't know! You should ask them!"
I'd like to. No one at News Corp., Disney, or Comcast would comment for this story.
Hulu's saga, which has only been told in broad strokes and not since its honeymoon days of 2009, is one that Hollywood trucks in all the time. Kilar is the willful maverick who rides into town with fresh ideas and no interest in playing by the rules. On-screen, Hollywood loves this tale. In real life, it's a different story.
When Jason Kilar left Amazon in 2006, he was unsure of what to tackle next. So he rented office space in Fremont that became his own personal Fortress of Solitude to think big ideas. Over time, he developed ideas that would contribute to what became his "vision" at Hulu--of an elegant, clutter-free, easy-to-use video hub for all the TV and movies anyone could ever want, available whenever and wherever they wished. This vision is what drives him still; it's the one thing he talks about with a sincerity and genuineness that is not guided by MBA bullet points he picked up at Harvard Business School or by overcooked PR savvy. After Kilar got hired to run Hulu in 2007, he made it L.A.'s incubator for the future of video, a place where crazy ideas were not only scrawled on whiteboards but implemented.
He needed every bold idea he could get. Television studios detested the nascent world of online video. They saw YouTube as a haven for piracy. And while they had the sense that technology might force them to put content online, they shuddered at the thought of their high-production shows sitting next to short, clumsy low-tech vids of "cats on skateboards," as J.P. Colaco, Hulu's head of advertising, jokes about that era. A-list advertisers wanted nothing to do with such an environment, and the thought that anyone would ever pay to watch web video was laughable. Before Hulu even had a name, observers dubbed it Clown Co. The idea that two old-school media rivals, Fox and NBC, could collaborate on a startup and make sense of all this seemed insane.
But the observers hadn't reckoned on Kilar. His attention to detail made Hulu a success from the get-go. He made Hulu's video player larger than usual. He led the move to put content in HD. He let viewers watch fewer ads than they would on TV, and he let them swap out spots to watch others they preferred. "We wanted to draw an emotional reaction," says current CTO Rich Tom. It was all so risky, and it turned out to be all so smart.
"When we started, we had nine brave-soul advertisers who were willing to test it," Colaco says one day over lunch at Stefan's at L.A. Farm, a sleek restaurant within walking distance of Hulu's offices. ("Stefan" is Stefan Richter, the cocky Finnish-born finalist from season five of Top Chef--clips of which are available on Hulu.)
Now Hulu has served more than 1,000 advertisers, including top brands such as Geico, Johnson & Johnson, and Toyota. It delivers a very attractive demo of young, tech-savvy viewers with an average annual income of $75,000. (On Hulu Plus, it's $100,000.) And it commands a premium price for those spots, typically $30 to $35 per thousand views but even up to $50--close to 10 times what YouTube can charge.
"We've introduced a number of practices that have since become industry standards," Kilar says. "The Hulu team takes pride in exploring uncharted territory. It is who we are."
Few of those breakthroughs came without a fight. At his first meeting with senior Fox executives in July 2007, Kilar got an early taste of what he was up against. Instead of Kilar and his team getting an opportunity to talk about what Hulu might be, the meeting began with the network executives--a species famous for neither humility nor technological foresight--pontificating about the Internet "in animated ways," Kilar says. "After about 20 minutes, the head of the network waved his team to quiet down for 15 seconds so that at least I could introduce myself."
From the vantage point of the executives, it is Kilar who is the demanding and overbearing partner. Upon realizing that NBC and Fox were not going to allot him enough new episodes to create a meaningful warehouse of content, Kilar made a wish list of back episodes. When the networks told him that many of those programs either hadn't been digitized or had digital rights that were still frozen, Kilar continued to press. "There were some very uncomfortable phone calls," says one former Fox executive. "There was a lot of 'Jason, that's just not reasonable.'"
When thwarted, Kilar didn't think twice about vaulting up the ladder to make his case to the two men who hired him--Peter Chernin at News Corp. and Jeff Zucker at NBCUniversal. He usually got more, if not all, of what he'd asked for. Kilar has a talent for managing up. At Amazon, he was "kind of special," according to Jason Child, a former Kilar peer at the online superstore who is now Groupon's CFO. "Jeff Bezos loved him. He was one of the youngest people to be promoted to senior vice president."
Chernin and Zucker were protective godfathers. "I'm not sure everybody who worked at Fox necessarily agreed with me or loved what I was saying," Chernin remembers. "But ultimately, I was in a position to make the final decision. I just said, 'We're doing it.' " When ad sales executives at Fox and NBC complained that suddenly they were competing with Hulu for advertisers on fox.com and nbc.com, Chernin and Zucker batted them down. Ditto when competing network executives moaned that Hulu was yet another drain on TV ratings.
Not surprisingly, Kilar's relationship with Chernin and Zucker bred resentment. "Jason knew how to play Peter and Jeff off of each other like nobody's business," says a former NBCUniversal executive. "It's like he was going to his parents and saying, 'I got this from my other dad. You've got to give me that.'" A Fox source denies this, saying Chernin was always "very balanced" about the interests of Hulu and those of Fox.
Kilar was the "golden-haired boy getting all our content for free," says one former NBCUniversal executive, referring to the fact that Hulu did not pay NBC or Fox licensing fees for its shows. Instead, it gave them a share of ad revenue with no minimum guarantees.
Kilar further rankled the industry when he rejected older shows from the studio's libraries, because they did not meet his quality standards. In doing so, he ultimately forced the networks and producers to improve the way they encoded content. "Sometimes it takes a fresh point of view to realize these things," he says. But the us-against-them dynamic played into something that really grated on the network guys. "They were the cool, new thing and the internal businesses were seen as stodgy and traditional," says one source. So when the techie violated some of Hollywood's myriad unwritten rules, they let him have it. For example, when Kilar reached out directly to showrunners like Joss Whedon (Buffy the Vampire Slayer) and Seth MacFarlane (Family Guy), network executives let him know that they didn't want him treading on their turf. But Kilar, as he so often did, wound up with the cool stuff. Whedon and John Cassaday released their graphic novel, Astonishing X-Men, as a "motion comic" on Hulu. MacFarlane created and starred in an ad for the service.
Kilar admits that "anytime you move away from the traditional norm in the media industry, there's going to be ruffled feathers, and I know that was the case in the summer of 2007." But he insists that he "spent a great deal of time listening to his new colleagues. "We would go visit everybody we could possibly meet, just to make sure people understood why we thought this was good for them as networks and as content creators," he says. Zucker, a renowned corporate politician, puts it this way: "I always thought Jason was very even-keeled about the fact that he had to deal with three media companies and one private-equity firm. I think he learned a lot of diplomacy in the process."
And he was successful. A clever Super Bowl ad in February 2009 that featured 30 Rock's Alec Baldwin as an alien who reveals that Hulu is actually a plot to turn humans' brains into mush sent Hulu's traffic soaring 42%. A couple of months later, Hulu added Disney as a stakeholder. Kilar lured hundreds of content partners and grew Hulu's library to 870 different TV shows and close to 500 movies. By the fall of 2009, Hulu had become the second-most-popular video hub online and the only one with a clear business model. Clown Co.? Not so much.
Hulu's swift rise minted Kilar as a superstar. His all-American looks and aw-shucks charm only cemented his status as a mogul on the make. He was not just a tech guy but a tech-media guy--a rare and very valuable commodity, then and now. He may have hailed from Amazon, but Walt Disney was his inspiration.
"I tried to do everything I could to study Walt Disney," Kilar says. "I would read every book I could on the company, and then I found out more about him as a person, as an entrepreneur, and it was just fascinating to me that this guy was able to live a great life with his family but also do these amazing things at work."
When he was 9, Kilar's dream came true. He and his family--he has five siblings--hopped in a "12-passenger cargo van" and drove from Pittsburgh to Orlando for a Disney World summer vacation. His memory of the trip is not of cool rides like Space Mountain, or what it felt like to be hugged by a larger-than-life Pluto, but, he says, of "the forced perspective of the architecture, how it all naturally led to Cinderella's Castle." In college at the University of North Carolina at Chapel Hill, according to his roommate Akbar Sharfi, Kilar threw himself most intensely into lining up an internship--and then a job--at Disney. In lieu of a cover letter, he created a comic strip starring himself.
This kind of deep passion makes Kilar a "product guy," a CEO who gets his hands dirty. It's an uncommon quality that he shares with people like Steve Jobs, Jack Dorsey, and Marissa Mayer, the executive who did become Yahoo's CEO. But Kilar's microfocus is both his greatest strength and weakness. According to one Hulu source, "Steve Jobs could obsess about 200 of 400 details, and they'd be the exact right 200. Jason's more about two, and sometimes they are arbitrary. Like fonts. There are bigger issues to worry about."
When I ask Kilar about his granular focus, he grins, sensing an opportunity for a show. "Hey! Makiko!" he barks into one of the dark offices in the design area.
A petite Asian woman pops out, her eyes wide as saucers. "I have a question for you," Kilar says. "She asked"--he jabs his finger toward me--"if I spend any time on design and product at Hulu. You know, product details."
Makiko's face remains frozen. She seems to be considering whether she's about to get Punk'd. Then a big smile breaks out and she nods her head frantically up and down. "Oh, yeah! Yes! Yes! He's different from any other. He sees a change I've made and gets so excited. He's the first one to say, 'That's cool!'" Kilar beams. The grown-up Boy Scout just earned a merit badge.
At moments like this, Kilar truly lives up to his persona. As any Kilarite is more than happy to broadcast, he is the too-good-to-be-true boy next door, the kid from Pittsburgh who made it big out West, the family man who makes a point of going home to tuck his four kids into bed every night, and who wakes up at 5 a.m. to go running. He's so squeaky clean, he doesn't even drink coffee! "He basically has no vices," says Child.
There are no tales of Kilar delivering the kind of humiliating brow-beatings that make other CEOs infamous. "Jason is always in complete control of his emotions," says another former colleague. At Amazon, "Jeff [Bezos] would say things like, 'Okay, I just read this document, and it's pretty clear we're meeting with the B team. Is there an A team around here we can talk to?' That's not Jason's style. Jason's very direct, but he has a gift in that he can tell you that you suck, but he won't say it as crudely as 'You suck.' He's really got textbook management down."
Not surprisingly, Hulu employees truly do seem like happy campers, insulated from corporate warfare by their boss. The offices are stocked with every startup cliche in the book. Foosball table? Check. Beer tap? Check. This is a place where an Experience Team is dedicated to celebrating employees with Mylar balloons, cakes, and Hulu-branded onesies. As Laura Goldman, a member of the team, explains, "I do birthdays, babies, and anniversaries!"
To Hulu's media company partners, this approximation of startup life is an eye-rolling affront that has no place in Hollywood. "They had computers set up on cardboard boxes!" scoffs one source. And Kilar wasn't seen as a visionary but as a noodge with endless, perfectionist demands. "Things would escalate over small [stuff], like the placement of a logo on publicity materials," says one. "It was like, There he goes again."
Just about every person I spoke with for this article cites one day as the moment when the Hulu rocket ship changed course: June 30, 2009, when Chernin left News Corp. after failing to reach a contract agreement with Rupert Murdoch. "It was a seminal moment when Peter left," says one. "Not only was he a champion of Jason, he was a champion of the concept and the idea that Hulu could both have stand-alone value and help drive value for the content over time." Kilar acts upbeat when I bring up Chernin leaving. Even this, apparently, is an opportunity to make lemonade. "It was a big moment in our history," he acknowledges, "but we've gotten past it and our growth has accelerated since that time."
It's hard to find anyone else with that rosy view. One former Hulu board member describes the first post-Chernin board meeting as nothing short of a disaster. The gathering took place at ABC's headquarters in Manhattan, since it was also the first meeting since Disney had signed on. In lieu of the soft-spoken Chernin was Chase Carey, News Corp.'s new president and COO. A burly ex-rugby player (on the Harvard Business School team) with a handlebar mustache, Carey dominated the conversation. According to two sources, one Carey lieutenant, Jonathan Miller, News Corp.'s then-chief digital officer, leaned back in his chair and appeared to snooze. Disney chairman and CEO Bob Iger, who has generally been favorably inclined toward Kilar and Hulu, seemed visibly frustrated as the conversation grew more prickly. And Zucker's influence was on the wane due to the upcoming acquisition of NBCUniversal by Comcast. (As part of the deal, the FCC ordered Comcast to give up any management say in Hulu to avoid a conflict of interest.)
"We were not in Kansas anymore," the former board member recalls. "It was a whole new [Fox] team, and it was not clear that they had any interest in supporting Hulu. It was more about protecting their own core businesses."
Carey's main point that day was that Hulu could no longer exist solely as an ad-supported business. It needed a dual-revenue stream, just like a cable or satellite TV network, a model Carey knew well from his six years as CEO of DirecTV. Cable companies like Comcast were paying content providers billions of dollars to retransmit TV shows, a shift that had occurred since Hulu was formed. Why, the cable companies wanted to know, should they pay so much if the shows were available on Hulu for free?
"Chase Carey was not supportive" of Hulu, says yet another former Hulu board member. "He put up a lot of roadblocks to progress." Soon after Carey's arrival, Kilar hammered out plans for a fee-based subscription service that would offer more content than was on regular, or "free," Hulu, and be available on more devices. Older episodes of shows would only be streamed on the pay service, called Hulu Plus.
Next, tensions flared over what the pricing of Hulu Plus should be, though Kilar denies that he threatened to quit over the issue, as was reported by The Wall Street Journal. "It's fair to say that there were disagreements about whether to go higher priced, in the teens, or at $10 or lower," he says. Kilar believed that Plus should be cheaper than Netflix's streaming service ($7.99 a month), but the media companies felt that such a measly price tag devalued their content. In the end, a compromise was reached at $7.99, but the battle gave Kilar a sense of what life would be like without his corporate benefactors.
In August 2010, Steve Levitan, the showrunner of the hit ABC sitcom Modern Family, let loose with an angry tweet. "Some estimate Hulu IPO could bring in $2Bil," he wrote. "What will the content providers get? Zero. What is Hulu without content? An empty jukebox."
Rumors had heated up that Hulu was headed for the public markets. The scenario was seen as a way to (a) turn a nice profit for Hulu's owners (the site was indeed valued at $2 billion) and (b) raise capital so that Kilar could go license and create more content. A public offering was also seen as a way to end the political infighting and provide a happy ending to a narrative that was getting more gnarly by the day.
To Levitan, though, the news was outrageous. Hulu cannibalized the TV audience for shows like Modern Family, he felt, and neither he nor the networks were being adequately compensated. Levitan even asked ABC executives to remove Modern Family from the Internet.
But if Kilar was frustrated by Levitan's outburst (the two men later reconciled over breakfast), he was more upset--disappointed is the word he uses--when plans for the IPO fell through that December. After months of discussions with investment banks, the media companies (News Corp., in particular, according to several sources) were uncomfortable signing long-term licensing agreements for their content. Before Hulu tabled the IPO, in fact, both ABC and NBC made deals with Netflix, giving Hulu's rival access to Lost, Saturday Night Live, and much more.
The IPO reversal was the first public sign that things might be in disarray. The second came a couple of months later, in February 2011, when Kilar took to Hulu's blog to write a 2,000-word state of the union titled "Stewart, Colbert, and Hulu's Thoughts on the Future of TV."
The post began by explaining how The Daily Show and The Colbert Report were now back on Hulu after a nearly yearlong hiatus that had resulted from a contract dispute with Viacom (which has no equity stake in Hulu). But Kilar was burying the lede. The essence of the treatise was to summarize what he saw happening in the new media space in Hollywood, including some harsh observations about his partners. Included in the post were pronouncements such as "Traditional TV has too many ads" and "History has shown that incumbents tend to fight trends that challenge established ways and, in the process, lose focus on what matters most: customers."
Never mind that these are, well, truisms. Hollywood took the public airing as a giant middle finger to Hulu's owners. And those owners were, predictably, furious. "The response was terrible. Terrible, terrible, terrible," says one former Hulu board member. "Everyone thought, This guy's a wild card." Both inside Hulu and in the media gossip blogs, speculation sparked that Kilar was begging to be fired.
When I ask Kilar if he in any way regrets writing the missive, he insists his intent was not to offend. "Of course, in hitting 'publish,' I anticipated that there was going to be a lot of talk about it," he says. "But that blog post holds up really well. When you read it, it's very obvious that it was a document that had been thought about for a long period of time. Nobody truly appreciated where we saw this world going, and what we were hearing from customers."
So was he surprised by the reaction of Hulu's owners? "Not in the precise, no," he says, before muddying his answer. "Because, I think, in the aggregate, based on conversations I had, frankly, there were a lot of people who said, 'That makes sense. That's a great summary of the landscape and where you're going.'"
An unlikely opportunity for all parties to save face emerged in June 2011, when Yahoo reportedly made an unsolicited bid to buy Hulu. Hulu's board opened up the sale process to any company that wanted to make a bid, and Google, DirecTV, Verizon, Microsoft, Apple, and Kilar's alma mater, Amazon, all were rumored to have at least considered an offer. But the talks collapsed for the same old reason: Hulu's owners refused to commit to long-term licensing agreements. The company was taken off the market in October, and a happy ending seemed ever less likely.
It's 9 p.m. on a Friday night, and Kevin Smith is lecturing a group of young men and women who have volunteered to participate in Spoilers With Kevin Smith, the movie-review show that the Clerks director hosts for Hulu. The group has just seen a screening of The Bourne Legacy at Universal CityWalk and they're about to be shepherded into the Spoilers studio, where they'll discuss the movie with Smith as cameras roll.
But Smith needs to clarify a few things first. "The likelihood of you saying, 'This movie's for cocksuckers' and getting that on the air isn't good,'" he says, dressed in baggy jean shorts that fall well past his knees and an orange-and-blue hockey jersey. "What are we? PG-13 or something?" he calls out to a huddle of Hulu executives off to the side of the room.
He goes through a few more rules (smile like crazy during his opening monologue) and scolds an audience member. "Sunglasses," he barks, "you can rock those in your pockets," before sauntering off stage. "Now I'm going to go upstairs and make myself pretty. Have more hairs put in my head."
Spoilers, which debuted in June, is part of Hulu's ambitious foray into original programming, Kilar's plan at forging a new identity for the streaming service. By investing $500 million into creating series, coproducing new episodes of British cult favorite The Thick of It, and licensing foreign programs such as the Israeli drama Prisoners of War (the forerunner of Showtime's acclaimed Homeland), Kilar is hoping to follow in the footsteps of HBO, or, for that matter, AMC. "Four or five years ago, AMC was known for just showing The Last Starfighter over and over again, or Some Like It Hot," says J.D. Walsh, the writer-director of Hulu's first scripted original show, Battleground, a mockumentary about political campaign staffers in Wisconsin. "Then they started making TV shows, and with Mad Men and Breaking Bad, now they're legit."
The strategy is anything but a sure thing. For one, Amazon, Netflix, and YouTube are pursuing the same path, armed with far more cash. Netflix, for instance, is spending $100 million alone on 26 episodes of House of Cards, a remake of the British miniseries directed by David Fincher and starring Kevin Spacey. YouTube, which has poured several hundred million dollars into seeding scores of original channels and is sharing advertising revenue with its partners, has lined up a roster that includes Ashton Kutcher, Amy Poehler, and Madonna.
Kilar describes Hulu's initiative as more of an indie thing, akin to Robert Redford's creation of the Sundance Film Festival, a place to "house storytellers and incubate their stories." And he has attracted idiosyncratic talent, like Richard Linklater and Armando Iannucci, the acclaimed writer-director of The Thick of It, by giving them great creative independence. But both he and his company have strong techie DNA and lots to learn about dealing with the egos and protocol involved in making, and not just distributing, a Hollywood production. (This is true for Hulu's rivals as well: Netflix and Fincher have reportedly been feuding about the budget for House of Cards.)
"I think Jason has to green-light shows, but he's not a development exec, so that's new territory for them," says one agent who was still waiting to hear on a project he pitched. "Things are just dragging. I'm told, 'We want to present it to Jason and Andy [Forssell, Hulu's VP of content] in the right way, but they're not so great at reading scripts.' These are things you don't hear out of network TV."
So far, Hulu lacks the kind of breakout hit that defines a network. Forssell says that this will take time, since, unlike the networks, Hulu isn't papering Sunset Boulevard with publicity billboards. The idea is to spend less money more efficiently, and mostly online, and to patiently develop a larger audience. And to use the new Hulu redesign to expose viewers to its originals. "I want to look at these shows on a two-year basis," he says. But that assumes Hulu still has a couple of years ahead of it.
"Hulu is everything we hoped it would be but were never really sure it could be," says Zucker, who now produces Katie Couric's daytime talk show. "It's almost shocking how successful the company has been." Chernin, Hulu's other founding father, is less bullish. "The world changes so fast," he says, pointing to the fact that at the outset he didn't have to worry about Hulu paying content creators exorbitant retransmission fees. While he still praises Kilar and still believes the entertainment business must invest to avoid the path of the music industry, he admits to a certain sympathy for the worries of old-line media companies. These business-model debates, he says, "are age-old and appropriate questions, which the media business should grapple with."
The leaked "transition plan" suggests that Hulu's current owners are doing a lot more than grappling. After Providence sells its stake, the media companies will supposedly revamp Hulu in a way that could prove intolerable for Kilar. The proposed changes include doubling the number of ads that run on Fox shows streamed on Hulu (not Hulu Plus) and letting competitors like YouTube have equal access to current-season shows. It's deeply ironic that the networks would now turn to YouTube, given that they created Hulu to fend it off. But YouTube is believed to generate six times more revenue than Hulu and remains the most popular hub for online video. Hulu regularly falls out of the top 10 list of most-visited Internet video sites, as ranked by comScore. No wonder the studios won't prize Hulu at the expense of their bread and butter--cable subscription fees and advertising.
Ultimately, Hulu might well get diminished to a site that's the equivalent of fox.com, which only makes episodes available for a limited time. Hulu Plus, with its dual revenue stream, might be protected. But while the subscription service could reach 3 million subscribers by the end of the year, "that's just not that impressive," says Dan Rayburn, principal analyst at Frost & Sullivan. As ratings dip, TV production costs soar, and video-streaming competition increases, the networks may well wind up having less command of the digital future of content than they did when they launched Hulu in 2007. And while Kilar still believes, deeply, in the future of a digital content warehouse that satiates millions of customers, much of his vision has been co-opted by others who are doing things bigger--if not necessarily better--than Hulu.
In the wake of all this drama, assessing Kilar's future has become one of Hollywood's favorite parlor games. "I don't think he has any intention of leaving until this plays out more," says a former Fox executive, "unless he gets forced out--though I very much doubt that, because it would look real bad."
But another source who knows Kilar says, "It's just a matter of time" until he decides his job has become too compromised. The consensus seems to be that Kilar and team will hang on until his network partners make things truly untenable. And with Providence gone, that time could come very soon. Still, Kilar's professional future remains bright: He's a star CEO in his early forties with five years' experience in one of the most challenging jobs on earth.
When I press Kilar on all this, he'll only say that he is not a "dabbler." The ruthless world of entertainment hasn't smothered his optimism. "So much ground has been covered since those first days when most everyone had a fear of the unknown," he says. "We're not yet at the stage where all content producers and executives think of online video distribution as naturally and obviously as they think of traditional television distribution, but we're certainly getting closer. If history is any guide, we'll get there."
For now, Kilar still seems to be enjoying the ride. At Hulu's Friday afternoon "wind down," he plops onto the floor amid a roomful of Hulugans as Lonn Lee, Hulu's director of product development and this week's wind-down host, welcomes the crowd. Goofily dressed in a Canadian Olympics hat with furry earflaps and a Team U.S.A. jersey, Lee gets the "Intern Olympics" started, joking that, "The most interesting thing about speed-walking is that it's a real sport."
Kilar claps his hands in applause and laughs. Here in the thick of what he's created, he seems genuinely happy, not to mention relaxed and unscripted. His vision may be battered, but it's not dead yet.
Document sharing service Dropbox is improving the photo viewing experience for mobile phone browsers.
Dropbox says users can now view photos via mobile phone “as easily and vividly as you would from your computer.” By visiting the Dropbox site from their mobile phone, users can then select the Dropbox icon, click the “Photos” button and see the photos in their “Camera Uploads” folder in what Dropbox is promoting as a “big, shiny gallery format.” Dropbox photos can also be viewed at full size on a mobile phone and mobile users can flip through photos one at a time.
Enhancing Photos for All Mobile Users
One of the most significant aspects of this move by Dropbox is that the mobile site itself has been enhanced. Thus users of mobile platforms that Dropbox has not yet developed an app for (such as Windows) can now get the same enhanced photo-enhanced experience as users of Dropbbox’s iOS and Android apps.
A new article in TweakTown comments on the importance of the latest upgrade to the Dropbox mobile experience. “Dropbox have moved toward a gallery-style image viewer, which is available to anyone with a mobile device,” states the article. “Windows Phone is included, which is great news as there's no official Dropbox application on Microsoft's mobile OS.”
Dropbox Aims at Photos
Most people with a digital camera or mobile device with a camera installed quickly accumulate a giant collection of digital photos. And photos are also becoming an increasingly important form of corporate content. Recognizing the value of this trove of visual data, Dropbox has been focusing on providing the best photo experience possible as a way to differentiate itself in the document sharing/storage market.
As reported by CMSWire, in April 2012, Dropbox added a new Photos page and the ability to upload those photos from just about any device as part of its Dropbox 1.4 release. The minimalistic layout organizes the photos in a very Flickr-esque way. When new photos are uploaded to Dropbox with Camera Upload, photos are grouped by month, and hovering over them will show the date. Users can see full size versions and share/download them by clicking. As an added bonus, Dropbox is throwing in 500 megabytes of free storage when you upload your first image with the new version.
Additionally, Dropbox will add another 500 megabytes of free storage for every 500 megabytes users upload with Camera Upload (up to three gigabytes extra). Camera Upload will prompt you when a device is plugged in to the computer or if using the newest version of the Android app.
The inside story of Hipstamatic’s struggle to keep pace in the white-hot photo-sharing space. In part two of the saga, Facebook's billion-dollar acquisition of Instagram rattles Hipstamatic, which fumbles through a series of half-baked products and social features that never stick.
When I ask Hipstamatic CEO Lucas Buick if he lost focus in the last year, he immediately responds, “Absolutely.” Since laying off roughly half of his workforce in August, Buick has had to come to terms with his darling Silicon Valley startup suffering negative press, ex-employee reprisals, and a public perception that his company is approaching bankruptcy.
Three years ago, Buick launched a $1.99 photo app that takes analog-style photographs and sells in-app digital lenses and films that effectively turn your iPhone into an old-school instant camera. The startup attracted millions of users and millions of dollars in revenue, and Buick believed the company could become “Kodak for the digital era.” He envisioned a future where Hipstamatic would become the industry leader in digital camera goods and third-party photography and printing services. But the fickle app market where Hipstamatic dwells has since become obsessed with finding the next killer social photo app.
Throughout 2011 and leading into the new year, Buick began moving his own startup toward social. But by that time, it was perhaps already too late: Its photo-sharing competitor Instagram had soared beyond Hipstamatic in popularity, and would soon capture the attention of Facebook. We pick up where we left off in part one of our three-part series, as Buick realizes he can no longer ignore the siren call of social. Like so many other startups that have undergone a similar transformation, Hipstamatic will soon experience severe growing pains. As it hires more people and pursues new products in an attempt to keep pace with competing apps, Hipstamatic's culture becomes fractured. On one side, founders chase venture capital and rush a series of half-baked products, while on the other side, newly hired employees struggle to build something they think will last. The two groups strike out after very disparate visions for Hipstamatic's future.
For a startup that prides itself on the originality and creativity of its users, Hipstamatic spent much of 2012 chasing many other companies’ ideas. "I can honestly say that there was a lot of talk about Instagram, Path, and social," Buick says of his company's internal discussions. "Ultimately, that’s what shifted our focus away from who we really are.”
In the most regrettable ways, Hipstamatic was, in fact, becoming Kodak. Like the once venerable brand, which failed to keep pace with industry changes during the 1990s, Hipstamatic was struggling to adapt to the daily chaos and external pressures of the social app world.
It had arrived at a crossroads that many other startups inevitably encounter: Hipstamatic had to pivot. So in February of 2012, an engineer started work on a project internally called CS9, which would expand Hipstamatic's filters to video, similar to the 18-month-old service Viddy, which is often called the Instagram of video. (According to Buick, the idea was on the “product list for two years,” but only kicked into gear again in February.) Around that time, another team began developing a prototype web service and iPhone app codenamed Timeline. ("It was a horrible name," acknowledges one former employee. "I was confused by it so much I begged them to rename it internally just so I could keep up with the differences between Facebook Timeline and our Timeline app.") Timeline would aggregate photos from a user's fragmented social networks, pulling images from Instagram, Tumblr, and Twitter into one unified stream; the team also had plans to add Facebook photos and implement cross-network interactions for commenting and liking.
Also on the docket was Hipstamatic Classic, the internal name for the new version of the original photo app, which would have more mainstream, point-and-shoot-camera-like functionality. (The social app would assume the Hipstamatic branding, or possibly be called Hipstamatic Next, sources say, though nothing was ever finalized.) "They wanted to make a Camera+ killer--it was actually described in those terms," says Jonathan Wight, a former engineer at the company, referring to the popular camera app that had become one of the top-selling photography services on iTunes.
(Molli Sullivan, Hipstamatic’s director of communications, disputes Wight’s recollection. “There were no conversations around app killers--there was nothing around any type of killing of other companies,” she says. “When we looked at the competitive landscape, we would have discussions around other companies, but it was never malicious. That’s not what the conversations were like.” However, at least one other source says it wasn’t uncommon to refer to the product as a “Camera+ killer.”)
In March, Hipstamatic held a companywide meeting to demo Timeline. Buick distributed questionnaires to employees afterward to gather feedback about the prototype, but their feelings had already become evident at the meeting. "Once you attached Timeline to a camera app, it became Instagram," Wight says. "During the meeting everyone was like, 'You know this is Instagram, right?' It was voiced several times: 'This sounds a lot like Instagram.'"
One former developer, who was also present in the meeting, recalls, "People raised concerns that it didn't offer anything more than an Instagram feed of photos, and that we would basically be mimicking all the functionality that Instagram already had."
Hipstamatic CEO Lucas Buick and CTO Ryan Dorshorst
“At the beginning of the meeting, Lucas was very vocal and upbeat, but the second that was said--that it was basically just a version of Instagram--he immediately shut down, became quiet, and seemed pissed off,” says Stuart Norrie, then a designer at the company. “It was very clear those comments touched a nerve.”
Sullivan confirms the meeting took place, but clarifies, “There were a lot of questions about [Timeline]. We were testing a lot of different technology. I wouldn’t put so much focus on Instagram--it wouldn’t be right to focus entirely on comparing things to Instagram. While Instagram may have been mentioned, there were other companies [mentioned]. When you're looking at the competitive landscape, more than one company comes up.”
Indeed, by that time, rather than viewing Instagram as a competitor needing to be challenged, Buick had actually decided to partner with Instagram. He and Instagram CEO Kevin Systrom, who Buick refers to as his "best frenemy," had been in talks for weeks over ways to team up. (The two are friendly and get drinks together every so often. Says Buick, “I'm a whisky drinker, though not quite as hardcore a whisky drinker as Kevin is.”) In late March, the companies unveiled an exclusive partnership that would allow Hipstamatic photos to be seamlessly shared on Instagram's network with one click. "When we launched, it was all about Facebook, Flickr, and Twitter, and now we're seeing a huge shift in our user base toward Instagram," Buick told me at the time.
The partnership provided additional exposure to Hipstamatic on Instagram's platform. By then, Instagram boasted 27 million users, while Hipstamatic had peaked at roughly 4 million active users.
But what the partnership most demonstrated was the powerful social pull that Instagram wielded. "We started to see how many people were sharing to Instagram, and I think [Buick] felt like he was missing out on all that," says Sam Soffes, a former iOS engineer at the company, who would later have a dustup with Buick.
“I was sitting next to Jon [Wight] who just said aloud, ‘Oh, Facebook bought Instagram?’ I think it was [CTO] Ryan [Dorshorst] who was like, ‘No way--that’s a joke.’ We all thought it was a headline on The Onion,” recalls Laura Polkus, a former designer at Hipstamatic. “Then we saw Mark's blog post. And it was like, ‘Wait, one billion? Like, a billion dollars? What? What does that mean for us? Does that mean that [Instagram] won?’” The team spent most of that April morning reading stories about the acquisition.
Buick was on a plane landing in New York from London when he heard the news. He sent Systrom a congratulatory note, but otherwise didn’t return to Hipstamatic’s headquarters for several days. “It was never our goal to be acquired,” explains Buick, who adds that, if anything, he was happy for Systrom. “We weren’t building that type of company.”
“He didn’t have much of an outward reaction. He was more like, ‘Well, that’s fine; we didn’t want to be bought,’” confirms Polkus. “At least that’s what he told us, regardless if it’s true. I mean, I don’t know who wouldn’t want a billion dollars. It would’ve gone through my head if I was in his position: Why not us?”
Lucas Buick was shopping at Uniqlo when he received a phone call. It was mid-April, not long after Facebook had announced it would be acquiring Instagram. (Some sources say it was on the day of the announcement.) The call Buick received, it turned out, was from Twitter, which again expressed interest in acquiring Hipstamatic, sources say. Before Facebook beat it to the punch, Twitter was reportedly interested in purchasing Instagram in order to bolster photo sharing on its network. Perhaps Hipstamatic wasn’t such a bad secondary option. Buick entertained the idea, sources say, but never seriously considered it. (Hipstamatic and Twitter declined to comment on this matter.)
By that point, the Hipstamatic team already had enough on its plate without potential acquisition offers. Outside CS9, Timeline, and Hipstamatic Classic, multiple sources say the company was juggling an ever-growing number of projects, including a physical Hipstamatic camera. “There were plans to do a photography field guide, a bunch of community initiatives, and always talk of physical products,” says one source. “I guess none of that really happened. Products would get shelved, ideas would get thrown away, and new things would take their place.”
In the spring of 2012, for example, after both Timeline and CS9 had died, another social idea started to take priority: The Hipstamatic team began work on a new product that Buick says was a cross "between Tumblr and Instagram." It would be a private social network, like Path, designed to share the photographs you still find yourself inefficiently sending to friends via email or text or showing them in person. (The sharing feature was internally called PhotoMail, sources say.) As Buick explains, "It all comes down to brunch. After some shit goes down on Saturday night, there's always the great iPhone swap over brunch. These are photos that you don't want on Facebook but you want your friends to have."
But nearly all involved say the experience never came together in any coherent way. "They wanted it to be everything: to be Camera+; to be Path; to be Pinterest," the former employee says. "It was kind of like the new [group photo-sharing] Flock app--that's pretty much what we wanted to do." Even “director of fun” Mario Estrada, who is still with the company, admits, "None of us could really identify it. We kept on talking about the elevator pitch to describe what the product was. The product never really made complete sense."
Despite the internal confusion, Buick knew that if his company were to seriously compete in social, it would need to raise a round of funding. Hipstamatic's pivot toward social would be a huge risk for the company. In order to scale a private social network and achieve viral growth numbers, Hipstamatic would have to become a free service, Buick explains, which would upend its business model and cut off its revenue stream. Buick also had hoped to triple the size of the startup's team. Over the summer, he set out on a financing tour to meet with as many investors as possible, in hopes of raising between $15 million and $20 million.
"We didn't need money to operate the type of business that we had," Buick says. "What we needed money for was scaling the social network--to build another fucking social network."
"At a company meeting they announced they were going after VC money, which we thought was kind of strange because we had a good amount of money coming in. Well, supposedly. I didn't get to see the financials," Wight recalls. "I started to wonder if the financial situation was worse than I thought. When they decided to go for venture capital money, that's when things went a little bit crazy."
As the summer progressed, multiple sources say Hipstamatic’s product plans only became more complicated. “Whenever Lucas came in, he would have another crazy idea,” says Wight. At one point, the team started experimenting with a Zynga-like virtual goods store where users could purchase Hipstamatic credits that could be spent on individual photo filters. “The idea was you’d go to this store and spend $1 to get 50 credits,” Wight recalls. “I had very strong objections because it was basically relying on the end users being dumb to get more money out of them.”
The team also explored the concept of digital galleries, which were going to be akin to Pinterest pinboards but for Hipstamatic photos, so users could start their own galleries and list their favorite pictures. Another idea involved situation-specific filters: say, a filter for night photography, or for taking pictures of food.
Sources say the product kept changing from week to week, with little or no concrete direction from higher-ups. Says the former developer, "There was a lot of direction change--a lot of, 'We're going to do this! No! We're going to do that instead! No, that doesn't matter; this matters now!'"
“We didn’t know what we were supposed to keep adding to this social app without getting any feedback,” the former employee explains. “At a certain point, we would come to work and just talk for hours. They kept pushing everything off, and it got to the point where by the end, we were just twiddling our thumbs trying to find stuff to do.”
Hipstamatic disputes this characterization of the company. When asked about the startup's seemingly haphazard product roadmap, Buick says, "I feel like we're reliving our whiteboards here."
"It's just not true that there was a new idea every single week," says Sullivan, the company's spokesperson. "Absolutely, we would whiteboard. Everyone would talk and throw ideas out about what the product could look like. But to lay this out like Lucas and [CTO] Ryan [Dorshorst] were changing their minds every other week is not accurate, and it's not fair to what the process was like."
Stuart Norrie, the former designer, describes a different atmosphere at the company. “There were nine billion ideas on the table and nobody was saying what to do,” he says. “They didn't really know what their next move was, and it was very apparent that they were paralyzed in making decisions. They were constantly switching back and forth. I’d ask them for feedback and they would never have an answer. They'd be like, ‘We'll talk about it next week.’ I’m like, ‘But it's only Tuesday! What am I supposed to do?’ It was the most unproductive time of my life, and I'm including grade school.”
As if the company didn’t already have enough projects in the pipeline, in June of 2012, Hipstamatic released yet another side project called Snap Magazine. Snap was an iPad magazine that would give Hipstamatic an editorial voice, and enable the company to highlight exemplary user photography as well as potentially push advertising and in-app purchases down the road.
In a sea of stop-and-go projects, Snap Magazine somehow turned out to be a big success. Its first several issues over the summer received more than 100,000 downloads, and Apple would eventually feature Snap on billboards and in an iPad commercial.
But despite the external success of the product, internally, tension had reached a boiling point, and demonstrated Buick's growing disconnect with Hipstamatic's developers, in terms of both product development and company direction. The tension spoke to a larger divide between the company’s designers and engineers, an obstacle that most startups face at some point. As Buick tells me, his founding team, which was composed mostly of designers, "never operated [Hipstamatic] as a software company. As we started building that type of company, we ended up with really talented engineers, who were not used to our creative process. There was tension. There was separation on the teams."
The “teams” that Buick describes can be divvied up into two groups: the new hires, composed mostly of the development team, and the members of the founding team, who call themselves the “Wolfpack,” a likely reference to the film The Hangover. The “Wolfpack” includes Buick, Dorshurst, Mario Estrada, and creative director Aravind Kaimal, most of whom were friends from the University of Wisconsin at Stevens Point. The “Wolfpack” became a source of resentment for the new hires, who felt the clique created unnecessary splintering within the small startup. “It was not a well-loved term by nonmembers of this group because it felt divisive and, for some, just further evidence that there was an in- and out-crowd within the company,” says the former developer.
“I shit you not: They’d actually be like, ‘Wolfpack is going to lunch,’ or ‘Wolfpack just got back from Vegas,’” recalls Norrie. “It was like, good god.” Another source confirms that it was common for the founding team to say, "I want it to just be a Wolfpack thing this weekend.”
The tension between the “Wolfpack” and other hires reached a breaking point during the development of Snap. At the time, the team was discussing whether to build an in-house solution for the magazine or to outsource it to Adobe's publishing platform. The latter solution, which is used by publishers such as Condé Nast and Fast Company, would allow the company to quickly get to market, but it would also cost upward of $75,000 for an annual license. Hipstamatic’s team could build its own publishing platform, but in one watershed meeting, Buick directly questioned whether his developers could even build the product themselves.
The discussion became heated, and a war of words erupted between Buick and Sam Soffes, the former iOS engineer, who argued he could build a solution that was just as good as or better than Adobe’s platform. "It was a big argument right in the big open area of the office," recalls Wight.
Music was blaring through the headphones worn by Laura Polkus and Stuart Norrie when the two heard shouting between Buick and Soffes. “My music was really loud but I started hearing raised voices, so I sent an IM to Laura and was like, ‘Are you hearing this?’” Norrie recalls. “I hit pause and all of sudden F-bombs were dropping like it's D-Day.”
"I remember I was like, 'You're completely wrong. I can pull up graphs on my computer and show you how much faster we can build it,'" Soffes recalls. "And he goes, 'I got two graphs for you.' And then he gave me the finger in both hands."
“The double bird,” Polkus recalls.
"The entire company basically saw the CEO of this company give the double finger to a developer," Wight says. "It wasn't in jest either. It was, 'I'm angry, so fuck off.' Lucas walked out. That pretty much sums up the company for me. You just don't do that as the CEO."
Buick acknowledges that the argument took place, but says he wanted to go with Adobe’s platform only because there “were not enough engineering resources to go around.” Buick also clarifies that he hadn’t realized how expensive it would be to use Adobe’s platform yet. “I mean, I certainly feel bad about it,” he adds, referring to the exchange. “I don’t feel like an adult about what I did, but it happens. Shit happens. Let’s move on.”
Of course, it's far from uncommon for tensions to spill over in any environment where strong-willed personalities tend to prevail. But the tenseness of the relationship between designers and engineers at Hipstamatic was palpable, ex-employees say. In fact, Soffes left Hipstamatic not long after his argument with Buick.
The quarrel also highlighted bigger issues simmering within the company regarding its overall vision. To Buick, Snap Magazine was an opportunity to further cultivate its growing photography community, in industries ranging from fashion to media. It was part of his strategy to make Hipstamatic a “lifestyle brand,” as he calls it.
But others inside the organization felt that idea made little sense. To some, between D Series and Family Album, two past, semi-social products soon to be discontinued; Timeline and CS9, which were both killed; and ongoing plans to make a social app, remake its camera app, and develop potential hardware products—in addition to Snap Magazine and two other previously released photo products called Incredibooth and Swankolab—Buick’s referral to Hipstamatic as a “lifestyle brand” was simply wishy-washy jargon meant to mask the company’s floundering product strategy. "They kept pitching us, 'We're a lifestyle brand,' whatever the fuck that means," says the former employee. "We didn't know what to do because there was no direction. It was a bunch of art school kids that didn't know how to run a software company.”
“Most of my time was trying to convince the development team of what the lifestyle brand was, and then trying to convince the lifestyle people what the development team was doing,” acknowledges Buick. “Ultimately, we never got on the same page.
"We may have been a lifestyle brand," says Wight, "but we also make software. And we had to get serious about making software. We had the loosest, most disorganized plan I have ever seen--there weren’t even regular developer meetings. We needed someone who could lead the development team."
“Very clearly there was a growing disconnect between the teams. It’s a company of designers versus guys who are engineers, so it’s not always easy to speak the same language. Did we experiment with a lot of different ideas over the course of the last year? Absolutely,” says Sullivan, the company’s spokesperson. “These engineers are very used to a certain structure or company or schedule, and maybe that wasn’t quite aligned with the vision we had.”
Says the former developer, "Hipstamatic needed to transition to a software company, but it failed to do that.”
Tomorrow: In the final installment, Hipstamatic's founders go hunting for venture capital but come up empty. In a perceived cash crunch, they lay engineers off and attempt a do-over. "We should coin this the un-pivot," Buick says.
In 2006, one of the most vibrant social networks in the world was the photo-sharing site Flickr. By November, Google had purchased the video-sharing site YouTube for 1.65 billion. But lost in that year's community-content boom was a little company called Ear-Fi that hoped to do for audio what Flickr and YouTube had already done for photos and video. Founder Manolo Espinosa says, “Our idea was, ‘Hey how about setting up a platform that helps people tell stories as simple as talking, sharing as simple as clicking a button, and listening as easy as picking up a phone or computer?’”
It was an inspired notion. After all, in the broadcasting revolution of the previous century, radio came before TV. Why shouldn't there be a platform where professionals and non-professionals can share sound clips as easily as photos or video clips? And the timing was perfect, or so it seemed–-the financial crisis hit the following year, and Ear-Fi never made it through 2008.
Now Espinosa has a second chance to revolutionize how the web listens to itself. Last September, he became the “Head of Audio” at SoundCloud, the sound-sharing platform famous for its orange and blue audio player that lets listeners comment directly on a clip's waveform. First marketed toward musicians as a cleaner alternative to MySpace, SoundCloud wants to expand its user base to include anyone with a microphone connected to the Internet (which, thanks to smartphones, is now nearly half of American adults).
So what’s a non-musician’s SoundCloud page supposed to sound like? Some clues can be found on Espinosa’s own sound stream. There’s a minute-long clip recorded at a San Francisco Giants game capturing crowd noise, stadium music, and the cry of a food vendor yelling, “Peanuts!” Espinosa also recorded a short thank-you message to the organizers of #wjchat, a weekly journalism discussion group which Espinosa guest-hosted a few weeks ago. Dig deeper and you’ll find off-the-cuff recordings of lectures and presentations given by media heavyweights like the New York Times' Brian Stelter and Columbia University's chief digital officer Sree Sreenivasan.
None of it sounds professional, and that’s the point. “You get a fair amount of authenticity when you record someone’s voice," Espinosa tells Fast Company. "You get the background noise which helps with informal sharing of thoughts and ideas.” In a world where texting, tweeting, and chatting have all but replaced the traditional phone call, SoundCloud’s focus on the human voice is filling a gap not only in the digital space but in our everyday lives. Wouldn’t you rather your friend post a spoken birthday greeting on your Facebook wall than a perfunctory block of text or, even worse, an e-card? “We’ve had people who have recorded stories about their unborn kid and shared that with their family," Espinosa says. “About two or three weeks ago we found out (a couple) had proposed on SoundCloud. There was a collective hooray across the office. We’ve worked with big artists, but when we have a story like that, we’re just like, ‘Wow, this is amazing.’”
Journalists are another group not using sound to its full potential, Espinosa says. “When the Supreme Court had their health care debate, numerous news outlets referred to the fact that they were recorded, you could listen to them. But even a smaller percentage of those actually embedded the audio of that.” Beyond obvious uses of audio, Espinosa also encourages journalists to use SoundCloud like they use Twitter, to broadcast stray thoughts or to include interview clips or other sound content left on the cutting-room floor.
The biggest challenge for Espinosa’s team is convincing audiences that sharing and preserving sound is as worthy an endeavor for everyday people as it is for musicians, podcasters, and radio stations. The best ways to do that, Espinosa says, is to make SoundCloud compatible with as many platforms as possible (which it's already done so through recent integrations with Facebook and Flipboard), and to make the act of recording, uploading, and sharing sound clips as pain-free as Instagram makes photo-sharing.
[ Image: Flickr user Evan] Source : fastcompany[dot]com
Now Espinosa has a second chance to revolutionize how the web listens to itself. Last September, he became the “Head of Audio” at