In 2003, Stewart Butterfield had a problem.
His online gaming venture, Game Neverending, was running out of money. Looking for a solution, Butterfield twisted the technology into a photo-sharing site called Flickr.
Five years down the track, and several years after Flickr's acquisition by internet giant Yahoo, Butterfield is back where he started, out on his own after having recently left Yahoo.
In an interview with ZDNet.com.au during a trip to attend Australia's X|Media Lab in Melbourne this week, Butterfield shared his thoughts on the web, Google, Microsoft and Flickr's acquisition by Yahoo.
Q:What do you see on the web as exciting right now?
A: A project that has received probably less attention than it deserves is the [Flickr] Commons project. I think there are five organisations participating: the Smithsonian [Institution] and the Library of Congress, which are both enormous in the US; also there is the Toulouse Museum, and a big museum from the UK, and another from New York.
They are putting their public-domain archival photos online. These are things that belong to everyone, but they are not really available unless you happen to go to Washington DC or Toulouse or London, or wherever these things are kept.
They are using Flickr in a very Web 2.0 way, to add details which aren't possible for a small number of researchers and archivists to add themselves, even though they have a lot more expertise in the subject — say, racing cars in 1920.
However, if you put a couple of hundred thousand people on the subject, everyone has a little bit of expertise. They are also tagging all those photos. Just putting in the basic things like 'man', 'tie' — the objects that are in the photos.
Did you find it difficult working under the bureaucracy of Yahoo compared to having your own company?
Yes, compared to running my own company, certainly. But we actually had a lot of freedom. I think what was more of a problem was that, in the first two years or so, we actually had a lot of problems getting the resources we needed to do things. We were both successful enough in what we were doing, and stubborn enough individually, to maintain our autonomy.
When you first began, how did you manage a company that was rocketing like Flickr?
It was really hard. We got the idea to do Flickr in early 2003, from the Game Neverending. In 2002, we started the company [Ludicorp]; we were making a game; we made a prototype; we had a couple of thousand people testing it.
We did that; then it was the middle of 2003. It was a terrible time for investment, especially for consumer internet stuff. No-one wanted to invest in it. Venture capitalists weren't investing; angel [investors] weren't investing.
We were running out of money. The one person who got paid was the guy who had kids. We knew there was just no way we were going to finish the game, which is a pretty intensive project from a technical perspective.
We wanted to take the work we had already done and leverage it towards something. The idea for Flickr came to me all at once in a case of food poisoning in New York. Except it wasn't what you see today; it was this horrible version of Flickr that didn't really work.
Technically, it was very cool and very innovative but, as a product, it was kind of worthless because the chance that someone you actually cared about was online at the same time as you was close to zero, so it was a real critical-mass problem, because people already used MSN Messenger or AOL or something like that.
But it was technically impressive enough that it generated enough interest. We decided to do it in December 2003; we launched in February 2004; and, maybe by May or June 2004, it had evolved to pretty much what you see today.
And soon after you were acquired by Yahoo.
The acquisition closed in the early part of 2005 — just a little bit over a year after we launched. The deal was pretty much done 11 months after we launched. It was a pretty intense year.
You were asking about dealing with the growth. It was pretty much one percent per day — sometimes one percent before lunch. One percent doesn't sound like a lot but, when it's compounded on a daily basis, it's crazy. We were often doubling every month. We were rewriting code constantly, [and] adding new servers constantly.
Getting new people in?
Well, you know, it was a pretty small team. At the time we were acquired, there were 11 people in the team in total, including one part-time, customer-service person. Of those, nine were part of the acquisition.
At the time the acquisition closed, there were probably about 400,000 registered users. Now I think there are around 28 or 29 million registered users. We had around a million to a million and a half visitors a month, and now there are around 50 million unique visitors a month.
Depending on what you're measuring, it's been 50 to 100 times growth.
Then what was Yahoo like?
Yahoo was both good and bad. In one sense, we had a lot more resources than we would have had [otherwise] and, in another sense, we had a lot fewer resources.
It wasn't up to me to decide when we were going to hire people. We had a budgeting process that was bigger than my boss's boss. They would stop hiring before the end of a quarter to make the quarter look better. A lot of that sort of stuff went on. There was a hiring freeze that went on for a couple of months while we tripled in size.
What did you think of the Microsoft-Yahoo romance?
It was... not so great. It's a little bit sensitive, obviously. Once the ball was rolling, I would rather have seen the acquisition happen. Obviously, a lot of damage was done to Yahoo, not only from a share price perspective but from a company-morale and leadership perspective.
But, I think it's a little bit of 'live by the sword; die by the sword'. I felt like the biggest problem while I was there was that the management was oriented a little too much towards the quarterly results. It's not a strategy really.
It may be a tactic in certain circumstances to produce certain numbers in a given quarter so the share price stays stable, so you can do something with the share price. But, if the entire focus of the company is to have a certain amount of operating free cash flow or a certain amount of capital expenditure, it's not hard for certain people to outmanoeuvre you when they are not so concerned about those things.
I am sure that the management at Google, despite their outward proclamations, is every bit as concerned about those numbers, but they are also taking bigger strategic risks, and many web start-ups are as well.
