All good things must come to an end. We heard it first from our parents, and we’ve likely all experienced it in one way or another through our personal and/or professional lives as we’ve grown up and experienced the real world. Although my primary professional career currently resides in the oil and gas industry, with the previous five years consisting of a four year tour in the Marine Corps, and a quick 7-month stop in wind energy manufacturing, my side business is this: the web. I started building and running websites in the mid-90’s as a freshman in high school, and have been obsessed ever since. Outside of the Marine Corps, which I absolutely loved, but voluntarily walked away from, the web is my true passion. It has never felt like work to me, and I see myself building websites and running web ventures until I’m buried six feet underground. Late last night however, I stopped in at 1Up.com, which is one of the largest video game online publications around, only to notice that no new content had been posted since March. Then I came across this bomb of a post: a “this is it/farewell to 1UP” letter from the now-former editor in chief, Jeremy Parish. Seeing this news, even four months late (the closure announcement was published in late Feb), really hit home: not because I was a fan of 1UP per say, but because as an online business owner, I experienced that exact, painful process in the Summer of 2007.
One Bad Business Deal + Changing Market = LLC Dissolved
In early 2007 my web venture, which was essentially a college entertainment portal along the lines of a “College Humor”, began to reach its peak in both traffic and financial terms. With over 1.6 million monthly unique visitors, our users were also extremely “productive” as they generated more than 12 million monthly page views, which led to more than 10 page views per unique visitor. Our revenue, much like 1Up’s, was almost entirely advertising based, as we did not have our own product to sell. In early 2007 the online advertising market was monstrous, but it was starting to really get tight with the explosion that was YouTube (especially for us, as we relied on getting in on new funny video traffic first). That being said, our revenue was solid; both myself and my business partner were now on year 3 working for ourselves, and living comfortably.
Things were going so well that we started getting major acquisition offers from Corporate America; we followed through with a very enticing one, and reached a verbal agreement to sell out once Corporation X’s entertainment web asset filed its IPO on the stock market. Using this mega-momentum, we were finally able to jump out of the “tail end of the web” with online advertising and nab a stellar CPM rate and ad deal for our entire ad inventory, but then something happened: our new-found advertising partner never paid. Over three months we pushed this “partner” more than 40 million ad impressions, and at our agreed-upon rate, would generate upwards of mid-five figures in monthly ad revenues for our business; we are talking exponential financial growth right before leap frogging our competitors by getting acquired. That was facepalm number 1. What was number 2, you ask? That Corporation’s web asset, or subsidiary company that was planning on bringing us into the fold, went completely under, and ended up filing for bankruptcy. We had hired a prominent investment bank to court us during our acquisition talks, and between those consulting fees, the extremely bad business deal, and the “there’s no way that just happened” bankruptcy of our future parent company forced us to shut down our business, and close our virtual doors.
It’s a pretty humbling feeling to realize that you have to shut the thing you love down, especially after all of the hard work you put into it. That’s probably why the 1Up is closing down letter hit me so hard, because it made me think instantly of my own business.
So why did 1Up.com really shut down?
Jeremy touches on the reasoning about halfway through his letter, but of course, the fine print details aren’t included, and quite honestly they don’t even matter. What’s interesting is that 1Up.com is getting shut down for almost the exact same reason my web venture would have been shut down for had we not encountered the potential acquisition: the online advertising market was tanking, and only the top-tier sites that had successfully anchored big-time advertisers would survive. And heck, I witnessed the market downturn in 2007, which was six years ago; today content-modeled websites like 1Up and SQ (meaning revenue is focused on advertising sales since we don’t sell a product or service) are getting hit especially hard with the advent of in-browser advertising blocking programs. If your site pulled down 12 million monthly page views that generated $8,000 in monthly revenue last year, with all of the ad blockers in place today both of those figures would be effectively cut in half. The sad thing however is that your overhead costs stay the same, which means your profit margin just went in the toilet.
So the long story short: 1Up’s profitability was essentially destroyed by the evolving market and increased competition. With IGN staying strong, and essentially running under the same business model, parent company Ziff Davis basically said enough was enough, and decided to shut 1Up down.
Want to see the after-effects? All you have to do is take one glance at 1Up’s 3-month Alexa rating to see not only the decline, but just how HIGH 1Up really was:
All good things must come to an end.
1Up had a ginormous following, and although they had financial/investor backing, the success that website and company saw is really amazing. What I get out of this whole story is exactly what I learned as a first-time business owner: it can all change in a second. You really have to keep pushing, diversifying, and innovating in order to stay ahead of the market not only to live another day, but to keep your business growing.
But much like Jeremy’s great farewell letter, it’s better to focus on the positive rather than the negative. 1Up is a monster success story, and should be celebrated. Here’s to 1Up, and here’s to SQ! (Of course I’m going to toast my own site!)