Business Failures in the Internet Age: Blockbuster, Xanga, Blackberry

Modern times have seen the rapid rise of new companies, only to see them quickly decline into obsolescence – being replaced by new operating competitors that scoop up their market share.

Surprisingly, established companies are often slow in catching major trend changes in their own industry. They become complacent and miss the shifts in consumer demand. An example is Microsoft missing connecting computers to the internet, and as a result had to play a desperate game of catch up with internet browser Netscape.

Here’s a look at three companies that made critical mistakes  in dealing with their competitors that cost them their prominent positions at the top of the market:

 

Blockbuster:

In July, the last two Blockbusters in Alaska closed their doors. This leaves just one sole surviving Blockbuster store left, in Bend, Oregon.

Once a thriving company of over 9000 stores throughout the US, only one store remains of this once mighty empire.

What went wrong? They missed the boat when it came to the evolution of internet and movie watching. They dismissed Netflix as a minor niche player- would you believe they had the chance to buy Netflix for just $50 million, and passed on that opportunity?  Netflix is worth billions today.

Of course this was when Netflix was a “video by mail” operation and internet throughput speeds across the county where not yet ready to handle quality video streaming. Blockbuster lacked the foresight to see where the internet was headed, while Netflix didn’t. As a result, many opportunities to correct the ship were lost until it was too late.

 

Xanga:

In the early 2000’s Xanga was one of the top players in the social media blogging arena. Then came MySpace which dominated social media followed by the current reigning king, Facebook.

Xanga’s cruise into obscurity was hastened due to bad business decisions:

1) Failure to upgrade their platform for nextgen internet activities, such as advanced video/blog editing features. Their software was great for the 2G web, but became constraining as the web advanced with making more features available and Xanga not being able to take advantage.

2) Loss of one of their top visionaries/entrepreneurs. Biz Stone was one of the co-founders of Xanga. In time he decided to leave and eventually became one of the co-founders of giant success story Twitter.

3) Their regular service had too many good features which made selling their premium features hard. Xanga offered a great set of 2G editing features, but the standard set up was sufficient for many which made their up-sell to premium a daunting task. As a result, they couldn’t maximize their subscription revenue.

4) Completely missed the boat as to what the real problems were. They were losing more and more advertising revenue over time as users left for Myspace, then Facebook. Their conclusion wasn’t that they needed to work harder to improve their ad revenue stream. Instead they surmised that the advertising payment model was obsolete in the internet age and destined to fail over time. You know, the same advertising payment model that has made Google and Facebook two of the richest and most powerful companies on the planet… 🙄

5) Failed to listen to their users. They also missed the boat on what their users desired and were notorious for their lack of communication. Is it any surprise Biz Stone exited? The fact that they stopped updating their current site status shows they haven’t learned anything.

6) Abysmal transition to a new platform. Perhaps I should say “attempted” transition, as the “changeover” they proclaimed in 2013, looks to be still in its beginning stages and shows no signs of improvement to the point where they haven’t issued any official updates since 2015.  The new site remains stripped of all the social media benefits that made Xanga a stand out. And believe it or not, it’s no longer free and they now charge for people to use this service. 😲You can read my status check/reviews here.

It’s a shame since many people are growing weary of the “Facebook experience” and would likely be returning to Xanga if their site was up to par.

 

Blackberry:

Blackberry texting phones use to be called “crack-berry” because of their widespread popularity and high demand. They were the go to phone of the business world that allowed people to text each other and access the the internet on the fly. It was the original smart phone mania. Then Apple came along just as the general public was beginning to warm up to smart phones and introduced the iPhone.

Blackberry, along with Nokia, and the other traditional cell phone companies dismissed the iPhone as not being all that special. The original iPhone model was certainly not fault free, but many competitors missed the growing potential of the device over time. Like most status-quo companies- they failed to see the makings of the next leap forward.

Blackberry had an entrenched business marketplace and a devoted user base to take on Apple, but squandered it over time with failing to to successfully compete with Apple where it mattered most- favorable user experience. In a genius move, Apple encouraged and opened up its phone Apps to the public instead of creating a locked market of just Apple apps. Blackberry didn’t have a big library of Apps and the ones they did have were often klunky compared to the ones on Apple. Blackberry would come out with some great hardware models of their new phones, only for them to fall flat in software functionality.

Eventually Blackberry cried uncle and left the hardware field all together, selling off its hardware line, and focusing now only on enterprise software.

 

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