Kyle McRae, founder of Scoopt, talks about the creation of a business based on UGC, its sale to Getty and it’s eventual demise two years later.

Warning: These are rough notes, taken by me, for me at today’s JEECamp in Birmingham. This means there are typos and misspellings aplenty.

Kyle McRae – Scoopt

@kylemacrae

Asian Tsunami pictures taking two to three days to get onto CNN.

Realised need to connect people with news agencies.

Created scoopt.com – consumer facing, don’t sell to The Sun you’ll get shafted. We negotiated money and split it 50/50

Total website cost £5,000 to build (had quotes of £50,000).

(Probably do it for half that these days)

Taking the plunge was the hardest – how much of personal time, effort commitment should I put in?

Put in everything. Sold house, moved down to the south from Glasgow, wife gave up her job and dedicated ourselves wholesale.

If starting new business critical decision is whether to launch without funding.

Soft launch saw three VCs approached him from Silicon Valley and wasted a lot of time having nice chats with investors.

Best thing with Scoopt was to launch it first and see how it goes.

Ideal world get your project funded first.

Longer you take over it though, the dodgier it gets.

Key thing is making the business the best it possibly can be. Managing consumers’ expectations was key. Can’t tell people their photos are crap.

We focused on revenue – all about selling pics and videos.

Advice was to go for critical mass and go for the network and worry about selling later.

If you are building a business it needs to be selling something – more so now than ever. VCs are going to look at your revenue model first.

Focus entirely on where the money is coming from.

Pulled together bunch of very experienced and useful people to turn it into a realistic business.

I didn’t have much idea of business, just journalism. Needed experience from people who had already built business. Was tremendously advantageous.

Before you launch anything – sanity check it.

There are experienced people out there who can do that. You should listen to them.

Problem with Scoopt was that it doesn’t scale. Most important one was the sales side of things. We found it easy to build a network of thousands of contributors. First problem was filtering it. But the impossible side of it was selling things on to the media.

Anything less than a nationally important story it was impossible to get the reach into the regional and hyper local level.

This came out painfully in every pitch I made to VCs. I had £10mill revenue in year 2 but in order to make things happen it didn’t add.

By middle of 2006 we realized it wasn’t going o fly.

We decided we had to sell it. Forecast for Yr 1 was £30,000. It wasn’t making real money but with sales and distribution network in place it could work.

Drew up fantastic business plan, told a brilliant story, but nobody bought it.

Went through some early due diligence with Getty. We left that meeting thinking they might buy it, but a day after they said it didn’t make sense for them.

I’d lost faith in the business model. Options were to grind on, or stop.

One book you should buy is The Dip. You have to know when to stop and move on.

Latter half of 2006 we were grinding on and had enough faith if we could bring it up to a certain level it would have to be of interest to a Getty or Reuters.

We were the first in the market and similar businesses were starting to set up.

Had some successes – a few front pages.

Times and Glasgow Herald. When pitching VC that looks good.

Reality of the Times sale was they paid £300. The Herald paid £75, but wanted to pay £25.

Pic Desk guy at herald had a daily budget of £250.

Realised budget wasn’t there.

December 2006 driving home

I sent Jonathan Klein CEO of Getty images a message from Blackberry admitting we couldn’t make a go of it without funding and said we wouldn’t be there in a month.

He said don’t do anything rushed.

Met with people in Munich and they agreed they would buy it. Wouldn’t say how much. They talked strong game of what they could do with Scoopt. Scoopt would just be another supplier along with hundreds of photographers. Woollier about the marketing campaign.

Knew we would be shafted on price, but Scoopt would survive.

Decided to sell.

Took Getty 3 months of due diligence before they signed. Could have been done in an afternoon.

During which all I could do was drop the ball.

Did Newsnight and CNN interviews thinking “why am I promoting this, all I can do is screw this out”

Got out on the other side. As part of the acquisition I became part of Getty’s citizen media. We’d asked for minimum staff of six. Realised that wasn’t going to happen – it was just myself and my wife. Just the two of us, but we were still getting paid.

People presumed I was a millionaire.

All the talk about what Getty was going to do didn’t happen. Scoopt stagnated. In terms of acquisition it was a one off fee, no targets. Not particularly incentivized to make a success, but it was my baby and wanted to prove it could work.

The inertia from Getty was very frustrating.

I don’t know why.

If you’re cynical you could say they bought Scoopt to seal up the citizen journalism market. All our competitors went bust.

Once Getty had a piece of the action it didn’t make sense for anyone to compete with them.

Istockphoto bought for $50 million by Getty in order to control the space.

Another argument is that Getty didn’t know what to do with it, but wasn’t going to throw any funds with it. It was going through financial turmoil itself. Picture market had dropped, share prices had dropped.

Getty had to put itself onto the market just to survive. Sold to private equity for $2.2billion

In the end Kyle left on the first day he could when his contact came to an end.

Self-assessment a few months before I explained where the company had gone wrong, that the business still had potential and Getty were squandering.

Left not exactly on best speaking terms.

Carried on with a staff of zero and kept it going for a year and pulled the plug on it this March (two years after business sold).

No real competitors did anything special in this space during the past 2 years. Even the big boys, no one got further than Scoopt. Maybe fundamentally the business doesn’t’ work.

Must be some way of using amateur citizen journalism content and making money out of it, but Getty didn’t figure it out.

Personal lessons:

All about the dip moment.

Grind on or get out?

Enormously frustrating. Running the business was fantastic. One of the most controversial bits of content was a stolen royal family video. Prince Andrew made it for Beatrice’s 18th Birthday. Lots of nice stuff. They had a party at Westminster and rented DVD equipment and left

Obvious and gross break of privacy (before we sold to Getty).

That could’ve been a big money spinner. The obvious candidate was the News of the World but one of their journalists was locked up for phone tapping.

The Sunday papers’ lawyers said no.

Advised him not to approach the papers personally, but he did.

Sunday People exposed him as a squalid rat, got DVD off him and sent it back to the Royal Family making them out to be the heroes. Got a double page spread on it.

There’s an argument to say anyone here thinking of starting a business, I think it pays dividends to escape the echo chamber and think about what you’re doing form a distance.

Being plugged into the industry and reading blogs is not the best way to do it.

Need to take a step away. Remove yourself form the scene for a bit; stop reading Jeff Jarvis and the other pundits. Ask if they really know anything or do you need to work out something by yourself from scratch.

If you can do it without funding, it’s the best way to do it.

Q: Where did the £10 million revenue prediction come from? Extrapolation from how many pictures we got on the percentage we could sell (5%) and we knew average price.

Spent a year in discussion with Flickr. No route to market so pitched route to market as commercial partner can if they want nominate Scoopt as a commercial broker.

Stuart Butterworth? Got pushed down to biz development in the end Yahoo thought it detracted from core proposition.

Partnered with CC that had a commercial license for those who want it. Had it working. Flickr wouldn’t do it.

In the end I did an open letter to Flickr members tagging it Scoopt and we’ll try and sell it.

30,000 pictures tagged and Flickr sent us some very angry emails.

Since then Getty has partnered with them and there is a group – halfway house.

BBC UGC Hub robbed us of revenue; The Telegraph even used our strap line.

When people got our message they tended to buy into it, but more people know the BBC and understand how to get into them.

£10daily budget on Google ad words. Now I would call the marketing we did social media marketing. Talked to people in Flickr and photography and journalism email lists. The key thing was engaging with professional photographers first who at first thought we were out to take their business. In every blog comment, email or forum discussion I made of point of engaging with people who thought we were the devil.

We also got into mobile phone forums, subtly spreading the idea that with a camera they could make a few hundred dollars.