How One Startup Gained 16 Million Users by Learning From Mistakes

Business.com / Managing / Last Modified: February 22, 2017

Learn how Meetup.com learned from their mistakes and what your startup can do to thrive as a startup after making major mistakes.

When building a company from the ground up, you're going to experience bumps and bruises along the way. Although it's nearly impossible to avoid mistakes and unexpected situations, how you learn from them and persevere is as important as any other contribution you make toward your business' success (Tweet This). With so many company case studies to research and study, there's really no excuse for not taking advantage of the information out there and applying it.

With that said, here's a look at one company that took a mistake and ran with it to the top of the hierarchy.

Meetup: The Company That Brings People Together

Meetup.com launched on June 12, 2001. Thanks to clever marketing by company co-founder Scott Heiferman, the website that aimed to bring people together was a near-instant success. But in April of 2005, the company made a decision that put its future in jeopardy, transitioning from a free service to charging organizers of meetings.

According to Heiferman, the company figured that people would stop using the site if they didn't want to pay for the services it offered. Instead, people took it personally, and the backlash resulted in the website losing about 95 percent of its activity. The company went from being a hot startup featured on 60 Minutes to a failing enterprise.

Related:7 Habits of Highly Unsuccessful Companies 

Not Much Goes According to Plan

Meetup's original revenue model in 2002 was to charge $1 for each individual that went to a bar, cafe, or another establishment for a meet-up. With too many flaws in the system, this model didn't work. In addition, people used the tool in ways that the company didn't initially envision. Meetup pursued additional revenue streams by charging political organizations for using the website, adding AdSense, and experimenting with a premium offering, Meetup Plus. None of these made a difference, though, and the company didn't want to handicap its free product.

The Two-Headed Problem

The ineffective revenue model that didn't make Meetup profitable forced the company to reevaluate its future. The company started wondering what business it was in, who it wanted to serve, and how it could establish a business model that aligned with these goals while getting paid. Having a simple and sustainable business was the ultimate goal.

Another problem the company faced was that meet-ups were too easy to start and that most of them weren't any good- they weren't successful, they lacked energy, and the organizer wasn't fully committed. From a user's perspective, this meant having a bad experience. The company's goal was to implement a quality filter to change this.

After many internal discussions, Meetup believed that charging people would resolve both problems at once. Pierre Omidyar, Meetup adviser and founder of eBay, loved the thought of charging as a filter. When eBay started, charging for listings was important for filtering quality. Yahoo! and Amazon both followed this model, too.

Craig Newmark also inspired Meetup to use charging as a way of filtering quality. When the site would institute fees in the real estate or job listing sections, the junk would automatically get filtered out because people paying for the listings were legit. The idea of selling a service appealed to Hieferman, so he decided to make the move.

The $19 Pay-to-Play Model

With that said, Heiferman wrote a letter announcing the pricing model to the public, which would charge $19 per month to meeting organizers. Although the company experienced immediate backlash, as mentioned before, Heiferman took time to personally respond to critics across the web. Even with that, most of the site's activity vanished. However, Heiferman remained true to his move and didn't take the complaints too seriously.

Although it didn't initially appear it would, charging organizers eventually turned out to be the right decision for Meetup. As of March 2014, the site has almost 16 million members, more than 142,000 Meetup groups, and about 316,000 monthly meet-ups. According to Worth of Web, the site is now worth about $1.23 billion. According to Heiferman, the company expects to hit one billion RSVPs by 2020. The sky is the limit for this startup!

Related:How to Avoid Pricing Based on Cost: You Could Be Losing Money

How You Can Replicate Those Results

The important thing to take away from this is that entrepreneurs shouldn't give up on your dream. Even when he faced backlash, Heiferman stuck with his business model and it eventually turned a profit (Tweet This). There are a few things that they did to make this happen, and you could benefit from learning from their mistakes.

  • They identified their real audience -- When Meetup first started, they charged $1 for any meet-up. The customers were using it for other purposes and they weren't successful, so they went back to the drawing board. By charging more for a meet-up, they filtered out the group of people that were interested in the service for other reasons. If your company is failing, it might be time to take a step back and re-focus your efforts (Tweet This)
  • Respond to feedback -- When Meetup rolled out their $19 plan, they faced a ton of backlash. Rather than remain silent, Heiferman stepped up and talked with each person directly and addressed their concerns, which he continues to do to this day. This level of customer service, especially by a large company, is almost unheard of. Evaluate your company's customer service. People love to be acknowledged, so take the time to address any concerns with your company.
  • Seek outside advice -- When Heiferman was struggling with Meetup, he got outside advice in the form of Pierre Omidyar, the founder of eBay. He tested out the idea of charging as a business filter with eBay, and it worked. Even if you think you can handle things on your own, you should always get outside help. If you don't know anyone locally that can help, seek out help online in the form of dedicated entrepreneur groups.

Related:11 Hard Decisions Made for Mentors

There's no telling what the future holds for your business, but learning from the mistakes made by Heiferman with Meetup.com will only bode well for your future.

Author Bio: JT Ripton is a freelance business, marketing and technology writer that occasionally contributes to other sites like verizonfiosdeals.com and you can follow him on Twitter @JTRipton

(Image via http://meetupblog.meetup.com/press/)

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