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Jason Calacanis Explains How He Pivoted Mahalo

on May 22, 2012

Here is some of my coverage of the 2012 Future Insights Live conference in Las Vegas where I was reporting for Dice and Dice News.

Back in 2007, Jason Calacanis (@jason) started a human search-powered company called Mahalo (Mahalo on Wikpedia). It achieved a level of respectable success with 15M unique a month and $500K in monthly revenue, becoming the 150th most popular site in the U.S., according to Calacanis. But all of that work and success came crashing down when Google released its Panda update in 2011 that prevented content farms from building any influence. The update resulted in traffic being cut in half.

Calacanis realized he was falling into a marginalized business. He could quit, tough it out, sell, or pivot. Too proud to quit, Calacanis decided to pivot. But to do that, he’d have to ask himself questions as to what are the biggest market trends and what does he ultimately want to do.

From quantity to quality

In 2011, Calacanis saw intense market trends of mobile, social, video. While he wanted to stay in the content business, an industry he knew very well, he realized that content-farming had no future. Thanks to alpha users reviewing content, apps, and products in such places on Yelp, iTunes, and Amazon a business in high quality content could be very viable.

Thus came Calacanis’ “pivot” from a search-powered company to a content-app company with such offerings as how to learn to play guitar. To keep the business viable, he would need to get four and five star ratings on the app stores, an image Calacanis refers to as the “gun” histogram. When people see the “gun” ratings they instantly purchase the app. If you see the inverse you instantly leave the page.

Anything other than the “gun” histogram and then you lose. “Insta-buy if a gun and insta-pass if it’s the mirror,” said Calacanis.

The Age of Excellence

To succeed in a world where alpha consumers anoint winners, a business must be built on providing high value, in both product and design, said Calacanis. These rating systems which highly affect purchase decisions will cause an enormous divide between the winners and losers. “Winners will win bigger and losers will lose bigger,” said Calacanis. And it will all happen much faster than it ever did before.

To be able to deliver an excellent product, Calacanis had to build in a process to review the quality of his product. This required honest, brutal, and uncomfortable debate about content. But this yielded a better product. Calacanis discovered that his best teams would have brutal product fights and not only would they still work together, they would work better. Debate is critical to success.

“Most teams fail not because of fighting, but because of a desire to keep the peace,” said Calacanis.

As Calacanis continues to build his business he continues to focus on reviews such as achieving a high Net Promoter Score (NPS) and “gun”-style ratings in the app stores.

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