There is nothing funny or ironic about the problems at Technorati. When a company like this hits the wall, all of us ought to pause and think. There was a great idea, there was a great team, there were faithful users. So what went wrong? Was it the pressure to monetize? Was it competitive pressure? Performance problems? We cannot know for sure.

The Technorati We All Used To Love

What makes the whole story sad is that we all loved Technorati, and many of us still do. Just recently Technorati was still the center of the Blogosphere. It was not just blog search. It was a research tool, a buzz tracker, a place for keeping track of your favorite blogs and discovering new ones. Remember when Technorati looked like this:

But in recent months, Technorati made a lot of changes. What has come to the foreground is rather difficult to understand and explain. At some point this year, the site turned into an aggregator of best videos, music, books and movies. It looked overwhelming, with nothing but pictures and tags on the front page. Another strange thing that happened was the release of WTF (Where is The Fire?). This feature is basically a Digg clone, letting users vote on stories. Why this was needed on top of automated popularity ranking is a mystery. Indeed when many users saw this, all they could say was: an accurate name.

What Went Wrong?

There is a big difference between a one year old kid and a four year old kid. The expectations are just so much higher. It's the same thing with startups. The bar for Technorati was set high because it has been around for a while. A four year old startup is pressured to answer how investors will make money. Is it going to be an acquisition or maybe even an IPO? And if neither is the case, then is there reasonable revenue to hope for in the future? It is very likely that these questions caused Technorati to start making changes that ultimately got the company to its current state.

So how does a site like Technorati make money? A simple and fashionable answer is: advertising. But maybe it's not so simple. Firstly, Technorati could not use straight Google ads. That would not look good and would not fit with the spirit of the company. Banner ads are an alternative, but it is harder to make them relevant. When you are showing people popularity rankings and news stories, banners may be out of place. Technorati ended up using generic banner ads (e.g. subscribe to New York Times or book a room in the Hilton Hotel), but how effective these are is unclear.

What Technorati also tried to do, it seems, is refocus on things like books, music and movies. This refocus could allow the company to monetize popular content via affiliate programs. This a straightforward play, but the problem is that people do not come to Technorati for that. The users are there for popular stories, hot blogs and trends. You do not exactly think of Technorati when you are thinking about buying a book. For that you go straight to Amazon.

Monetization is a big issue that cannot be ignored. After all, just having a cool service that makes no money is impossible. There must be revenue and so if the current products do not generate revenue, they need to be replaced with ones that do.

The process of revamping the service on the fly, while it is being used by millions of people, is difficult and error prone. Obviously the company had to make some tough choices - which now, retrospectively, look like mistakes. Instead of focusing on refining the core product, the company was pressured to invent new, tangential spins that did not make much sense - and did not make users happy.

Last, but certainly not least, all of these infrastructural changes caused the site to become painfully slow. In this day and age no one has patience for slow sites. Slow means you are out and eyeballs are headed somewhere else. So in a way, the new services that Technorati tried to push did not even have a chance, because the the site was unbearably slow.

Advertising Mentality is The Culprit

Undoubtedly the worst part about the recent turmoil at Technorati was the agony over monetization. 'How do we make money?' is the question that is hanging like an axe over entrepreneurs heads. What Technorati tried to do was change what it does, to get to the answer. But perhaps the answer was simple: ask bloggers for $20 a year for the service. When someone claims a blog, ask them for $20. Why wouldn't this work? Technorati is a great service, loved by bloggers - I suspect many people would not think twice about paying a nominal fee for it.

But in this day and age, asking users for money is considered out of fashion. The thinking is these days: build the audience and the money will come. Perhaps this is flawed thinking. Not all businesses are advertising businesses. There are hundreds and thousands of services that still charge consumers fees.

Consider Feedburner as an example. It had both advertising and premium services. Many bloggers opted in to pay for additional statistics and learning about their audience. The key thing: there was value in the premium service and that's why people paid for it. Perhaps Technorati should look to the likes of Feedburner for how to derive the revenue from users.

It ain't over

Amidst the sadness about David Sifry's announcement that he was stepping down as the CEO and eight people being let go, there is some good news. The good news is that there is still a lot of potential and hope. The signs actually point in the direction of a come back. The latest home page, although still slow, now looks more like it used to (except for WTF? - we can only hope this goes next).

Could it be that Technorati will stage a comeback? Some good guys do that. Netscape came back with Firefox and Apple resurfaced in a way that no one could even imagine. Granted these moves took decades, but can Technorati do it in a matter of months?

Again, the latest changes point in the right direction - the return to its roots. Yes, Google Blog search is faster, but Technorati is and can be much more fun. There is still a huge need to innovate in the blogosphere - news, trends, popularity - all of these things need to be redone; and done better. We rushed through many technologies and got to the Digestion Phase, but there is no reason why a company like Technorati can't thrive by cleaning up and returning to its roots.

Conclusion

It is disappointing to see good companies struggle. It hurts when they make mistakes. But this is business - tough, competitive business - and that's how things work. When you make mistakes there is a cost. If you do not choose the right path, users leave and competitors come and eat your lunch.

However, the strength of this industry is its spirit and passion for innovation. Good people, passionate entrepreneurs and interesting companies do not just go away. They evolve, change, absorb and come back even stronger. Let's hope Technorati does this, fast.