Failure to Monetize: Xmarks Shutting Down

For the popular bookmark syncing service Xmarks, 2 million users was apparently not popular enough. Co-founder and CTO Todd Agulnick announced on the company blog Tuesday that, despite growing by 3,000 users each day, the startup was floundering and would shut down its service in 90 days.

“For four years we have offered the synchronization service for no charge, predicated on the hypothesis that a business model would emerge to support the free service,” wrote Agulnick. Unfortunately for Agulnick and his co-founder Mitch Kapor, that hypothesis proved wrong.

Since it launched as Foxmarks back in 2006, the startup has synchronized more than 1 billion bookmarks between users machines at last count, and the idea was to create a crowd-sourced search engine based on sites that people have saved.

It almost worked, according to Agulnick, and produced “shockingly” detailed lists of popular web sites organized by category. Unfortunately, users who tried the system were looking for answers to questions rather than topical lists of sites. In the years that followed, the company scrambled to find a revenue model that worked.

In 2008, the company hit the 1 million users mark, and recruited James Joaquin, an Apple, Inc. alum and former president of Kodak’s Ofoto online image sharing service to serve as CEO. “‘There’s a scalable business in here somewhere,’ we told ourselves, and we were determined to find it,” wrote Agulnick.

The company tested a variety of services and monetization schemes, including adding a bookmark ranking to Google search results, and SearchBoost for advertisers, which added a bookmark ranking next to paid links. The service even rebranded itself as Xmarks to emphasize that it worked across multiple browsers, not just Firefox. The SearchBoost actually worked, and boosted click-through rates by 10%; however the userbase was too small to make SearchBoost that valuable to advertisers, according to Agulnick.

With money running tight and no buyers, Xmarks has decided to pull the plug on January 10, 2011. Email support has already been shut down, and the company is directing users towards bookmark syncing alternatives from Mozilla, Google, Microsoft, and Apple.