Lookery

What did it do?

Lookery was an ad network born when Facebook opened its developer platform in 2007, selling ad space in Facebook apps to advertisers. The company later turned to a targeting service that collected anonymous demographic data from websites and sold it to advertisers, social networks, dating sites and e-commerce companies.

Why did it shut down?

Selling ads in Facebook apps brought in very little revenue; in January 2008 the company guaranteed advertisers 12.5 cents per thousand impressions, but by July 2008 it had cut that guarantee to 7.5 cents. Facebook's redesign in the summer of 2008 hurt the app ecosystem and the network's performance. The ad network, which served around 3 billion impressions a month, was sold to Adknowledge in November 2008 and the company turned to data targeting, but according to Rafer this second product was built before the market needed it. Having raised $3.15 million from angel investors over two years, Lookery announced in August 2009 that it would wind down in an orderly way.

The story

Lookery was born at the same time as Facebook opened its platform to third-party developers in 2007. Its founder, Scott Rafer, was a seasoned entrepreneur who had previously sold MyBlogLog to Yahoo. Rafer and his business partner built infrastructure that matched ad space in apps running on Facebook with advertisers. Rather than chasing the highest price, Lookery focused on filling large volumes of ad inventory.

The network grew fast and reached around 3 billion ad impressions a month, but those impressions were worth very little. Having guaranteed advertisers 12.5 cents per thousand impressions in January 2008, the company raised the guarantee to 25 cents for European traffic but was forced to cut it to 7.5 cents in July 2008. That same summer, Facebook's redesign of its site shook the app ecosystem and dragged down the network's performance.

When Rafer realised Facebook would not share anonymised user data in time, he changed direction. In November 2008 the ad network was sold to Adknowledge, and Lookery focused on a targeting business that sold anonymous demographic data collected from websites to advertisers, social networks, dating sites and e-commerce companies. Despite difficult economic conditions, the company had raised a new round in September 2008; angel investment over two years totalled $3.15 million.

In August 2009 Rafer announced in a blog post that the company would wind down in an orderly way. He listed his mistakes as staying dependent on a single large partner, failing to let go of a failing asset in time and building a product ahead of the market. In his view, for a start-up, depending on Facebook was no different from depending on a mobile operator.

Lessons for founders

• In a business bound by a single platform's rules, one design change by the platform can wipe out your revenue; build channels that reduce that dependence as soon as you gain traction.
• Do not put off the decision to sell a weakening asset; Rafer later admitted he should have sold the ad network much earlier.
• Rather than building infrastructure the market does not yet want, go with a product that solves an existing need, and if possible raise money when you have a scaling problem, not a survival problem.

Sources

1. Advertising And User-Targeting Network Lookery Heads To The Deadpool (TechCrunch, 2009-08-21)
2. Lookery's Scott Rafer: Advice in the Aftermath (ReadWrite, 2009-11-07)
3. Interview With Scott Rafer of Lookery (Adweek, 2008-06-06)

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