via pehub. Here’s the blog post from one of the founders that details what happened. It’s a long explanation but I’ll drop some hints– adware removal apps, bad acquisitions, debt, and rising acquisition costs. The previous two posts are relevant too.
It started when scanning applications, many of which had ignored Hotbar, suddenly began scanning Hotbar’s application off the desktop simply because it was now associated with Zango. This was especially frustrating to watch, because the new application’s behavior was, by any conceivable standard, safer and less intrusive than before. Then, again simply because of Zango’s reputation, Yahoo stopped allowing the Hotbar toolbar to use its search feed, which made the toolbar itself much less profitable. And finally, it turns out that the Hotbar content (primarily emoticons and anti-spam software) was already fading in popularity, and acquiring users through these channels became more and more expensive. These three setbacks, which we could perhaps have foreseen but were otherwise outside our control, were compounded by a mistake that was well within our control, namely, choosing to finance the deal primarily with debt rather than equity. If our models had been accurate, we would have had no problem in paying off this debt, and quickly: but because our users were suddenly more expensive to acquire, more difficult to retain, and less profitable each day they stuck around, we found ourselves forced to cut our user acquisition budget to make the debt payments. Predictably, we watched in horror as our audience shrank, month after month, and the debt payments became ever more difficult to make.
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