Why Google or Facebook Buying Your Favorite Startup Means It’s Probably Toast

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When I learned this morning, via Twitter, that the small company behind Mac/iOS e-mail app Sparrow was being bought by Google, I almost didn’t need to read the startup’s announcement to know the upshot.

Google and Facebook buy itty-bitty web companies all the time. And the acquired businesses typically convey what’s happening in an eerily consistent five-step ritual:

  1. Announcement of thrilling acquisition
  2. Reiteration of startup’s wildly ambitious founding notion
  3. Explanation that either Google or Facebook is the best place to change the world
  4. Acknowledgement (or sometimes non-acknowledgement) that the startup’s product is being discontinued or is going into limbo
  5. Expression of heartfelt gratitude to various supporters, usually including the consumers who are losing something they liked

So it seems to be going with Sparrow: Its five-person team will be working on Gmail henceforth; the existing Sparrow apps aren’t being discontinued, but they apparently won’t get any updates, either.

Shall we review other examples of these announcements—some terse, some more chatty–from the past few years?

Google buys Gabor Cselle’s iPhone email app reMail, February 2010:

I’m thrilled to announce that Google has acquired reMail! I will be joining Google in Mountain View as a Product Manager on the Gmail team.

Gmail is where my obsession with email started as an engineering intern back in 2004, and I’m thrilled to be coming back to a place with so many familiar faces. reMail’s goal was reimagine mobile email, and I’m proud we have built a product that so many users find useful. Still, I feel like we’ve only seen the beginning of what’s possible. Google is the best place in the world to improve the status quo on how people communicate and share information. If you have what it takes to make these changes happen, I encourage you to reach out and come join me.

You might be wondering what will happen with reMail’s product. Google and reMail have decided to discontinue reMail’s iPhone application, and we have removed it from the App Store. reMail is an application on your phone. If you already have reMail, it will continue to work. We’ll even provide support for you until the end of March, and we’ve enabled all paid reMail features for you: You can activate these by clicking “Restore Purchases” inside the app. reMail downloads email directly from your email provider to your phone, and your personal information, passwords, and email are never sent to or stored on our servers.

I want to take this opportunity to thank the people that helped make reMail a success. Fabian Siegel, Einar Vollset, Sridhar Srinivasan, Paul Bohm, Marissa Coughlin, Erol Koc, Matt Ronge, and Stefano Barbato have all contributed to building a great product. Our investors saw the potential in improving mobile email and took a bet on reMail in the darkest days of the recession. I couldn’t be more grateful to YCombinator: Paul Graham, Jessica Livingston, Kate Courteau, and Trevor Blackwell all have provided invaluable guidance. Paul Buchheit and Sanjeev Singh endured my slide deck on our multi-step plan for global email domination, and pointed out that instead I should build something small, simple, and useful. It worked.

Google buys 3D interface company BumpTop, April 2010:

Dear BumpTop fans,

More than three years ago, we set out to completely change the way people use their desktops. We’re very grateful for all your support over that time — not just financially but also through all the encouraging messages from people who found BumpTop inspiring, useful, and just downright fun.

Today, we have a big announcement to make: we’re excited to announce that we’ve been acquired by Google! This means that BumpTop (for both Windows and Mac) will no longer be available for sale. Additionally, no updates to the products are planned.

For the first week of May 2010, we kept BumpTop Free available for download to give BumpTop fans one last chance to grab a copy. BumpTop is now no longer available for free download.

Thanks again for all your support over the years. Despite our change in strategy, we remain as passionate as ever about helping shape the future of computing!


The Bumps

Google buys SageTV, June 2011:

We’re thrilled to announce that SageTV has been acquired by Google.

Since 2002, we’ve worked to change the TV viewing experience by building cutting-edge software and technology that allows you to create and control your media center from multiple devices. And as the media landscape continues to evolve, we think it’s time our vision of entertainment management grows as well. By teaming up with Google, we believe our ideas will reach an even larger audience of users worldwide on many different products, platforms and services.

We’ve seen how Google’s developer efforts are designed to stimulate innovation across the web, and as developers have played a core role in the success of SageTV, we think our shared vision for open technology will help us advance the online entertainment experience. We look forward to joining Google, and while we don’t have anything specific to announce at this time, we encourage interested developers to email:

Full speed ahead!

The SageTV Team

Google buys interactive web-content company Apture, September 2011:

Since 2007, all of us here at Apture have worked hard to add new dimensions to the web. We’ve always believed that by transforming flat web pages into interactive multimedia experiences, we could enable readers to see, hear and truly experience the ideas on the page.

After enhancing more than a billion pages with our products, we think now is the best time to expand our efforts with another team just down the road that shares our vision of making the web better. :) That’s right — we’ve been acquired by Google and will be joining the Chrome team to continue driving innovation and creating a better user experience on the web. The modern web is an amazing platform, so stay tuned for even more enhancements to your Chrome browsing experience.

The Apture Team

Google buys friend-sorting app company Katango, November 2011:

Facebook’s circle just got bigger — because we’re joining Google!

Katango was founded a little over a year ago to develop social algorithms that improve people’s online social interaction. We’re excited to join the Google+ team and carry on fulfilling that mission. Google+ is seeing tremendous momentum, so it’s a perfect time to join and make Circles smarter for millions of people.

We’re incredibly grateful to our investors, team members, and users who made Katango awesome. We can’t thank you enough.

See you on G+!
– The Katango Team

Facebook buys Foursquare-like social network Gowalla, December 2011:

Three years ago Gowalla’s journey began when I took a photograph of Lake Tahoe on my iPhone. I had just finished a phone call with my dad, and I wanted nothing more than to share that photo and place with him. Not just in a text message or status update sort of way, but with a bit of weight that said “I wish you were here” and “this moment and place are meaningful to me.”

We created Gowalla to inspire people to go out and share those places, photos and stories. The past three years have been quite the journey, oft-times in a very literal sense!

The Gowalla Passport has become a record of all the places we’ve visited, the people we were with, the photos we took, and the stories we told. Many of you even use Gowalla like a scrapbook of sorts — a place to keep all those memories.

About two months ago, my co-founder Scott and I attended F8. We were blown away by Facebook’s new developments. A few weeks later Facebook called, and it became clear that the way for our team to have the biggest impact was to work together. So we’re excited to announce that we’ll be making the journey to California to join Facebook!

Gowalla, as a service, will be winding down at the end of January. We plan to provide an easy way to export your Passport data, your Stamp and Pin data (along with your legacy Item data), and your photos as well. Facebook is not acquiring Gowalla’s user data.

We know how much many of you loved Gowalla. It’s been the highlight of our lives as we’ve built it with your help over the past two years. As we move forward, we hope some of the inspiration behind Gowalla — a fun and beautiful way to share your journey on the go — will live on at Facebook.

We’re so very grateful for the support of our community, our investors, our families, and, of course, the City of Austin as well. You’ve all played a special role in seeing us to this day.

Facebook buys social discovery app company Glancee, May 2012:

We started Glancee in 2010 with the goal of bringing together the best of your physical and digital worlds. We wanted to make it easy to discover the hidden connections around you, and to meet interesting people. Since then Glancee has connected thousands of people, empowering serendipity and pioneering social discovery.

We are therefore very excited to announce that Facebook has acquired Glancee and that we have joined the team in Menlo Park to build great products for over 900 million Facebook users. We’ve had such a blast connecting people through Glancee, and we truly thank our users for being a part of the Glancee community.

I could go on–and on and on. But you get the idea.

Why does this keep happening? There are several related factors at work:

Google and Facebook are already pursuing ginormous dreams of their own and don’t need new ones. They’ve got the resources they need to turn them into reality, and hundreds of millions of users who are already on board. Which is why they’re rarely all that interested in the actual products produced by the companies they snap up, especially if they cater to relatively specific needs and small user bases, such as Sparrow’s signature creation, its Gmail app for OS X.

Tiny startups are full of smart, ambitious people. To keep growing, Google and Facebook need to hire armies of  smart, ambitious people–and the most efficient way to do so is often to buy small companies and thereby acquire their teams.

Large, well-established companies are envious of small, young companies. Both Google and Facebook remain more intrepid and innovative than your average great big company. But when you’re huge, you obsess over the possibility of becoming bloated, lethargic  and bureaucratic. You also get paranoid that some little-known upstart will create the next big thing. Buying startups is a way to address all these fears–or at least seems like one.

Getting bought by Google or Facebook is a viable business model. Many startups with cool products don’t have a clear idea of how they’re going to make money with them. Cashing a check for a few million dollars is an expedient way to do it.

Working for a powerful web giant probably does sound appealing. I don’t think the startup founders are fibbing when they say that joining a huge company will help them fulfill their founding missions. Still,the scrappy renegades who found startups and invent new things rarely seem to be content at bigger companies forever. One example that springs to mind involves Twitter rather than Google or Facebook: Loren Brichter, creator of the amazing app Tweetie, left Twitter only 19 months after he joined it.

I don’t mean to suggest that being bought by Google or Facebook inevitably spells doom for a startup. When Google bought YouTube it worked out fine for everybody involved. And whatever Facebook does with Instagram, it’s not going to shutter the wildly popular photo-sharing service.

In those cases, the web giants were acquiring fully fleshed-out creations that already had enormous fan bases, and which felt like they might appeal to a meaningful percentage of the people on the Internet. But in the case of reMail, BumpTop, SageTV, Apture, Katango, Gowalla, Glancee and now Sparrow, the stuff the startups in question had built was cool enough to intrigue Google or Facebook, but not a big enough deal to trump the acquiring company’s own products and ambitions.

So if the inventors of something you love tell you that they’re thrilled to announce they’ve sold themselves to Google and Facebook, remember this: They have a reason to be thrilled. So does the company doing the buying. It might even be a happy development for users of the Google or Facebook services that the acquisition is intended to bolster.

But it doesn’t really matter how celebratory, thankful and ambitious the announcement sounds–it’s probably bad news for you.

(MORE: Grading Google’s CEO Larry Page: A First Year Report Card)