A tale of resourcefulness from the little-guy economy.

How to start and grow companies.
July 30 2010 6:40 PM

How a Failed App Became a Business

A tale of resourcefulness from the little-guy economy.

In early 2009, Foursquare's CEO sashayed out of South by Southwest with  2,500 users  and enough  chatter  to launch a rocket. Social Bomb's founders, meanwhile, left deflated after the launch of their product, Paparazzi—another mobile location app, with a photo-sharing tool—which delivered on the promise of its maker's name: It bombed.

A little more than a year later, Social Bomb boasts a groundbreaking module that spans a panoply of networks and devices, has a regular revenue stream from a Fortune 500 company, and a new deal to create a social-media platform for HBO's True Blood. The start-up is also in talks with Sony.

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Like many in the little-guy economy, Social Bomb's dreams have been beset by more twists and turns than a spinning top. The failure of a lean and nimble app-based start-up is as familiar as a summer heat wave. Social media is still in its infancy, and there are just a handful of concrete success stories beyond the massive networks that have changed our work and play. The  fledgling  industry is a low-risk marketplace where ideas can take shape fast, but frequently yield little tangible value. And failures often occur when the concepts aren't mined for other uses. But Social Bomb's trajectory shows how plain old resourcefulness can be a remarkable weapon in the little guy's arsenal.

After the South by Southwest debacle, Social Bomb's founders scrambled. In spring 2009, investors were either were cash-strapped or guarding their reserves. So Scott Varland, Mike Dory, and Adam Simon stopped taking paychecks and freelanced on the side, juggling up to five jobs each. They argued and considered parting ways.

But instead of walking, they retired their dreams of a killer app and returned to the technologies underlying Paparazzi and Tagnic, their Twitter app. As Facebook and Twitter grew, the trio began thinking about apps that would span more than one network. They had already built Paparazzi for the iPhone and Facebook. But if they wanted to extend their app's currency in the social-media landscape, they would need to harvest information on many platforms. So the team created a module to monitor user activity and bounce back and forth between relatively proprietary networks and custom Web sites. Their infrastructure, it turned out, was the killer app—and their willingness to see this was their ace. "That ability to bridge different kinds of networks is what's special," said board member and author Clay Shirky, who taught the founders in graduate school.

This wasn't a newfound perseverance. Social Bomb's short history had already been replete with fits and starts. In 2007, the founders entered the business-plan competition at New York University's Stern School of Business, thinking they'd get bounced in the first round. They took home the $50,000 in prize money. The 40-page plan helped Social Bomb send a clear message while raising funds in 2008. But in December of that year, they lost $100,000—one-third of a funding round from a backer who had second thoughts.

Social Bomb's triumphs so far are also unusual because its founders, who had backgrounds in design and theater, made the leap from a failed app to a viable enterprise. Creating an app is nothing like building a business that requires a mastery of sales and product management, among others. "These are radically different skill sets. It's easier for young Net natives to go after the consumer market, but the odds of success are quite small," said Brad Burnham, managing partner at Union Square Ventures.

With money in short supply, the team continued down the road of reinvention familiar to denizens of the little-guy economy and targeted large corporations eager to leverage brands online. It took months to sign a deal, but in October 2009, Social Bomb contracted with Mattel's Fisher-Price, which became its first Fortune 500 client—and the source of recurring revenue—to create a social-media campaign. Four months later, Facebook fans descended onto the toy company's new "Moments to Share" platform, which features a scrapbook for mothers to upload photos and videos of their kids. The page has about 36,000 users.

Social Bomb's about-face wasn't pain-free. Three hipster bachelors who were recent graduate students at New York University's Interactive Telecommunications Program were now devising a social media campaign for moms and kids under the direction of a set-in-its-ways entity founded in 1930. While Varland, Dory and Simon had spent years thinking about social media, corporations like Mattel were just waking up to it.

Little-guy entities like Social Bomb also operate differently. Large companies are known for being buried in paperwork and overexecuting. Often, an outsider who introduces something new is suspect and beholden to layers of bureaucracy, from the marketing department to IT. Social Bomb's saving grace was its patience and flexibility, which would pay off when its trajectory shifted again.