Business Model Jujutsu

The big moment in the history of TACODA (a company we invested in early this decade that was sold to AOL in 2007) was when they went from charging customers to paying customers.

I was reminded of that yesterday when Paul Forster, the CEO of Indeed, said this at our portfolio summit yesterday:

We tried charging for our API without much success.  Then we paid developers to use it and it took off.

It is such an interesting move to make on the market. In the case of TACODA, they initially built a powerful behavioral targeting solution for publishers to segment their audiences and sell them to advertisers. They sold the technology to about twenty large online publishers. But the sales cycles were long and the license fees were smaller than they needed them to be.

So TACODA built an ad sales force and said to publishers, give us your inventory and we'll send you back money. That was a much easier sell all around and the business took off.

In the case of Indeed, they initially offered online publishers the ability to pay for a real time search API of online jobs. Not many took them up on that offer. But when they injected their sponsored jobs into the API and offered to share the revenue with publishers, the demand was huge.

Not every company that has an API can do this jujutsu move on the market, but many can and should. It makes life much easier.