The listing had no information with which to value the site. Nothing about the traffic sources. Nothing about the handover process. Nothing about billing the customers. 37Signals did not answer a single question posted to the auction.
It's no surprise nobody bid. Actually, someone did bid but nobody at 37Signals approved it, so the bid expired. You have to wonder why they spent money listing it at all; and, since the auction was essentially abandoned, whether they would've honored a sale if someone had offered the asking price.
A few people have mentioned that they might have just did it for publicity. Initially, I was skeptical, but I'm starting to think it makes the most sense.
Given the prospect of a severe revenue dip once Sortfolio is detached from the 37 signals brand, the asking price (450,000) is very high. Moreover, as far as I can tell, they didn't respond to bidder questions on flippa. To me, it seems like the bidders and the auction were ancillary to their actual intent. Like other posters, I think their actual intent was to gain publicity for the 37Signals brand (not Sortfolio).
I expect they will follow through on their original pronouncement by shutting down Sortfolio soon; however, I don't think they ever had any intention to sell it. I think they are smart enough to know that someone with 450,000 in cash is also probably smart enough to know that it was a bad deal. By providing a spectacle by way of flippa, the narrative is now more impressive, they reaped a lot of positive press, and they reinforced their commitment to their core products.
They said they'd be shutting it down if they didn't sell it. Did they say now they're keeping it? That would look even worse for their credibility, honesty, integrity, etc..
The problem is that the site will lose affiliation with 37signals (which probably drives a lot of their traffic) and existing customers will have to renew their membership. It's safe to say that when buying it revenue will be significantly lower than what it's doing right now.
So the vast majority of this site's value is actually its relationship with 37signals? And 37signals wants to sell the site and dissolve that relationship?
It has good revenue, but it relies upon 37 signals to promote it. Without their support, revenues could tank. Its a big risk for many potential buyers.
Also you need to reengage every customer to change the payment method. Giving everyone a good opportunity to end their subscription or at least reevaluate whether they have gained from the subscription.
37signals uses Braintree and probably stores credit card numbers themselves. Besides, I'm sure for a transfer like this Braintree would transfer these existing accounts to a new Braintree account.
Keep in mind that this is most likely not setup as a separate company.
So there is a contract between 37 signals I'm guessing (and sorry no quick way to verify this but it certainly makes sense that they didn't setup an entire separate legal entity which they can sell) and the person paying the money. My guess is that the wording of the contract legally isn't setup to allow the transfer of payment or card details to another party because the website was sold. While defacto this probably happens all the time I'm not sure a new buyer would feel comfortable simply taking over cc details and continue billing. At least not if they are paying hundreds of thousands of dollars. So at the very least you have to send a letter or email stating what is going on and getting a new contract executed.
As anyone who can tell you about recurring billing will confirm that's not ideal because it gives people a chance to reevaluate and say "nah cancel this I don't really need it".
Added: And in fact if you take some time and scroll to the bottom of the home page it says "sortfolio" is a trademark of 37 signals. Unfortunately there is no way to signup for a new account and see the contract that goes with the "pro" setup that costs $99)
I wouldn't be so sure. I couldn't get a payment gateway to transfer my own stored info to another account also owned by me (to switch merchant account providers), let alone someone else. There must be a PCI rule being violated there somewhere.
It's at least unclear. 37s indicated previously that the buyer would need to build a new billing system and my impression was that customers would need to re-enroll in a new billing relationship. 37s has not clarified one way or the other.
What they ought to do instead of selling it, is pick an entrepreneur from their community and give him/her a go at running Sortfolio for a year or two with some kind of incentive based equity sharing deal.
I don't have any special knowledge about Sortfolio or 37Signals, but it seems like Sortfolio is really inconvenient to divest.
It's big enough that shooting it in the head seems wasteful (and potentially disappointing to existing customers). It's small enough that the opportunity cost of dealing with a sale quickly exceed the proceeds, and that sell-side advisors aren't going to be clamoring for the opportunity to help. And on top of that it's an unusual business, so traditional small business brokers don't know what to do with it.
The demand side has similar size issues, where it's big enough to be a large purchase for a random individual, small enough that it's unlikely to attract attention from strategic buyers with an eye out for acquisition targets, and unusual enough that a purely financial acquisition is unlikely.
I feel like you're on the right track, but again it goes back to value. The expected value from finding somebody to take over sortfolio, spin it into a separate entity, and then get 37s out of their ownership position probably isn't that much higher than the value they'd get from spending the time working on and marketing their key products and simply shooting sortfolio in the head at some pre-determined date.
What really surprises me is that the same people who did the revolutionary Rails years ago came up with rather mediocre products afterwards.
I don't know anybody who is using Basecamp nowadays (and that's their best known product), the same with obscure Highrise and Backpack. Campfire is the only one which is quite popular and well used. But Campfire is just a chat server, really no rocket science and could be substituted by tons of similar services (but I still like it because of the hooks).
Much like "How could X have won, no one I know voted for him", this is a reflection more on one's social circles than the product. (Though there are certainly very successful companies that none of us will ever hear about even third hand.)
Most business is conducted in boring, quietly profitable obscurity.
I used it back in the day and liked it. Other than being used to Basecamp, I don't really see why anybody would choose it over Asana in 2012 though. Given the choice between a free Basecamp and Asana it would still be an easy decision.
I think that everyone who is assuming that 37 Signals is being neglectful or unprofessional here, may be missing the possibility that they let the auction fail with intent.
It is possible that private negotiations have been in process.
I'm ignorant to the rules of posting an auction on sortfolio, and to the fees, but I'd bet that there would be plenty of reasons for a buyer to prefer a different process, and once said buyer approached 37 Signals with a serious offer, they may have changed their mind about it "not being worth their time" [1].
Or, someone they respect and trust could have shown interest and taken initiative to run the site.
[1] I read an unsourced claim in another thread that 37 Signals felt that Sortfolio was not worth their time.
It's not clear if this was a legit auction. I had some interest and contacted Jason from 37signals and he indicated that he was still looking for $480K, no less.
It would be a good buy if they give the potential buyer a time window of 18 months to work out an alternative customer acquisition channel.
Immediate separation will hurt it significantly and sortfolio will not be able to recover when the only growth driver is killed off.
In fact, Why not hire a typical founding team to find a second growth driver under the 37signals brand and then try to sell it? 212k annually should be enough for such a team.
I briefly had a paid sortfolio account right around the time it first launched. I got one good lead which more than paid for my investment, but every other person who contacted me from that point on was an overseas developer trying to sell me their services. I cancelled the account a month later. I see the biggest challenge with this site being coming up with a strategy to reduce spam.
No surprise here. Sortfolio's value comes from its association with 37 Signals. Without it, I'd be surprise if more than 10% of the clients renew their annual listing.
It's no surprise nobody bid. Actually, someone did bid but nobody at 37Signals approved it, so the bid expired. You have to wonder why they spent money listing it at all; and, since the auction was essentially abandoned, whether they would've honored a sale if someone had offered the asking price.