Now How Bad Is The Industry With Startups Sold on eBay from $1k?

My inbox gets tons of all types of promotional messages from all kind of startups that want to get some coverage everywhere they can think of. But some messages are very different even though they arrive from startup owners as well – like today’s message I had to extract from my spam folder from Streamzy entitled “Streamzy jumping ship”.

Basically the email contained very little text to explain what exactly the situation was about and looked more like an advertisement for a bidding for Streamzy itself on eBay. Of course the reason behind sending such an email to press people is trying to get some coverage and more bids for the auction – and more money as a result – so it is quite understandable.

But what struck me about it is that while Streamzy did not get much buzz lately, it was kind of cheap to sell a whole web startup with bidding starting at $1,000. So it is no wonder I clicked through to view the auction itself and of course I have not found anything particularly surprising there: a description of a pretty solid entertainment startup now available for sale.

For those of you who don’t remember, Streamzy is a search tool to find media files already available on the web within a nice user-friendly interface. When a user finds some music or videos, he can then add them to a playlist and stream them. Additional benefits for the lot included very low costs involved in running the site as the backend runs on Google App Engine for free and the hosting costs involved are only to cover the Flex frontend.

It is also worth mentioning that Streamzy has been covered by many important technology blogs when it initially launched a little more than a year ago – the list included TechCrunch and Wired (the startup now uses this fact as an additional benefit on the eBay bidding page). But the irony is that both we (the bloggers) and startup guys still seem to value our coverage probably way too high – after a year since the site’s launch and coverage just about everywhere (and coverage on both TechCrunch and Wired is usually everything any startup founder feels is totally enough for success) it now only features 2,400 registered users – hardly the number that can make any startup profitable.

But the main problem that I see with this bidding is total absence of the word “profit” or at least “revenue”. Usually when you see a business sold (and this is exactly the category where Streamzy is offered for sale on eBay), you expect the owner to brag about its revenues (if he or she wants to earn very good money off selling the business) or at least its revenue prospects and potential (if the business is not profitable at all but the owner wants to make something off the deal). After all, a business should be about making money, not about hosting a service for some happy customers for free and enjoying the process.

But this bidding idea of Streamzy looks like a very good indication of the big problem we are in with this entire startups industry – they keep forgetting about business models and making money off their innovative and great ideas somehow hoping that everyone will be able to get some funding or will be acquired by Google somehow. Unfortunately it rarely happens and I guess that we will see more and more startups sold in this manner for less than impressive money – simply because so many of them lack any business model. And the current recession will probably send more startups to eBay looking to cut at least the costs involved in hosting and get rid of the projects that generate nothing but expenses.

UPDATE: The bidding has ended and the winning bid was mere $2,750 so Streamzy owner is more than right telling that “It turns out streaming music sites are not worth anything at all” in an email I have just received from him. I actually hoped it would be a little higher at least.