Sean Parker's other notorious startup, Plaxo, is finally dead - here's how it influenced Facebook
- Comcast is officially pulling the plug on an online address book called Plaxo on December 31.
- Plaxo isn't well known these days but it is a startup founded by famed Valley entrepreneur and investor Sean Parker.
- Parker's experience at Plaxo greatly influenced the early days of Facebook and is one inspiration for why CEO Mark Zuckerberg locked down his control of Facebook.
Comcast is officially pulling the plug on Plaxo on December 31, 2017.
Thus ends the long and uniquely Silicon Valley history of this online address book service founded by famed Valley entrepreneur and investor Sean Parker.
Comcast bought the service in 2008 for somewhere between $150 and $170 million, TechCrunch reported at the time.
Parker is perhaps best known for his early involvement with Facebook and as a founder of Napster, the music file-sharing network that collected tens of millions of users in its first year, but suffered a painful death at the hands of the Recording Industry Association of America (RIAA) on copyright infringement charges.
Plaxo was Parker's other startup. Although it never became as well-known as other now-dead social networks like LiveJournal or MySpace, it may have been even more influential in paving the way for Facebook than Napster, its co-founder, Todd Masonis, told us back in 2015.
Here's the long strange story of Plaxo, Parker and Facebook, according to Masonis and a 2010 article in Vanity Fair about Parker.
Parker created Plaxo as his redemption
In 2001, the same year Napster got the axe, Parker dreamt up a piece of software that auto-updated users' email address books when one of their contacts moved, changed companies, or got a new phone number. Users could choose to sync their information with friends. "It was the precursor to social networking," Masonis tells Business Insider.
Parker shared his vision with two recently graduated Stanford grads, Todd Masonis and Cameron Ring, a friend from high school. They signed on as co-founders and chief architects and built the product.
Despite a slow start, Plaxo was gaining 10,000 to 12,000 members a day by April 2004. But it gained a reputation as being obnoxious because it sent incessant email-requests to web users, prompting them to update their entries in their friends' address books.
With success came trouble. Parker, who often slept on Masonis' couch during Plaxo's rough patches, began showing up to work less often. His unreliability gnawed away at the company's investors, Vanity Fair reported and Masonis confirmed to us. "He was more interested in the fun part of [building a] startup," Masonis says. "He had been at Napster where they got to go backstage at concerts and spend money on concert tours."
In 2004, the board pushed Parker out from his own company, as was widely reported, citing his erratic schedule. There were also rumors, which Parker had refuted and called "ludicrous," that he had provided drugs to some employees. Parker said he was the subject of a "a smear campaign," and accused board member Ram Shriram of scheming to throw him out and strip him of his stock.
Parker slipped into a depression, Masonis says, but it didn't last long. "He got kicked out and then immediately ran into Mark Zuckerberg. That's how it all went down," Masonis laughs.
Parker only lasted as Facebook's president for about a year, although he stayed on for some time after that in an unofficial capacity. While he was there, he used a lot of what he learned at Plaxo to help shape the social network into the behemoth it is today. For instance:
Parker understood viral marketing. One of the biggest hurdles in creating a social network is that the value only exists for users if their friends are already on it. At Plaxo, Parker conceived of viral marketing campaigns, and had no moral qualms in pinging the hell out of members' contacts until they downloaded the service, too.
By the time Parker linked up with four-month-old Facebook, he had three years' experience figuring out how to get users to join out of the blue.
Parker helped Zuckerberg maintain control of Facebook. At Facebook, Parker negotiated an unusual deal with some of the company's most powerful shareholders - including cofounder Dustin Moskovitz, Peter Thiel, Accel Partners, and other major firms and investors - so that they ceded their voting rights to Zuckerberg, SEC documents revealed. This corporate structure was intended to give Zuckerberg permanent control of the company he founded, so that he can't be jettisoned the way Plaxo booted Parker.
Parker sought revenge on one of Plaxo's most esteemed VC firms. In 2004, Zuckerberg began taking meetings with venture capitalists about raising money for his other startup idea, Wirehog, a peer-to-peer file-sharing service that linked with Facebook. Sequoia Capital reached out.
There was bad blood between Parker and the firm. Sequoia's Michael Moritz was Plaxo's first major investor, and three short years later, he supported the board's decision to fire Parker as its president. So when the chance for revenge surfaced, Parker seized it.
Zuckerberg took the meeting with Sequoia, but purposely blew it, as we previously reported. He showed up late and wearing pajamas. His PowerPoint deck, titled "The Top Ten Reasons You Should Not Invest," listed off snarky reasons such as "We have no revenue," "We will probably get sued by the music industry," and "Because Sean Parker is involved."
Needless to say, Sequoia did not invest in Wirehog or Facebook.
After Parker left, Plaxo faded from sight. Masonis and Ring, the third co-founder, sold Plaxo to Comcast. Comcast continued to operate the service for years, but it wasn't very high-profile.
Meanwhile, the duo used their exit money to open Dandelion Chocolate, a bean-to-bar chocolate-making factory in San Francisco's Mission District.
And Parker continues to be one of the most interesting characters in the startup world. In the last few years, he was formerly on Spotify's board helping it lock down deals with US record labels; he also launched and quietly shut down the video chat startup Airtime, and donated $24 million to Stanford University School of Medicine to build the Sean N. Parker Center for Allergy Research, dedicated to finding a cure for allergies.
Parker continues to invest and advise startups as well. He has backed Moskovitz's current company Asana, Arianna Huffington's latest company Thrive Global, and others.