All Failed Startup Stories
ChaCha

ChaCha

Software & Hardware

General Information

Industry Software & Hardware Country United States Started in 2005

Failure

Outcome Shut Down Cause Competition Closed in 2016

People

Employees 50-100

Funding

Funding Rounds 9 Funding Raised $96 Million Investors 9

What is ChaCha?

ChaCha (Search Engine), founded in 2006 by Scott A. Jones and Brad Bostic, was an American search engine which provided free, real-time answers to any question through its website or by using one of its mobile apps.

So how was it different from existing search engines like Google and Yahoo? ChaCha had a chat interface where one could interact with a live human, called a “guide”. Instead of searching for answers on your own, you could ask someone else for answers. You could have a chat and interact with the guide during your search.

How did ChaCha work?

Chacha provided two options; one human-assisted search and immediate search results. 

1. Human assisted search - a “guide” would chat with you in real-time to help you with your queries.

2. Immediate Search Results - this showed search results that included instantaneous user ranked results.

By 2008, they grew their guide network to 30,000. Each guide could map their profiles to a particular topic they were interested in. When a user asked a question, ChaCha automatically pointed the question to the interested “guide”. Users could dial a specific number from their mobile phones or send questions as SMS from their mobile phones and get answers back from ChaCha’s "guides".

In June 2011, ChaCha partnered with Wolfram Alpha to provide instantly computed facts and answers to questions from over 100 topic areas, such as demographics, definitions, mathematics, geography, and celebrity facts.

Is chacha still a thing?

ChaCha’s Business Model

Like Google and Yahoo!, ChaCha relied on advertising to generate revenue. Whenever a personal guide answered a question, It would get stored in their archive, and the library available on the website showed advertisements. 

In 2009, a user reported that when he searched for nearby IMAX theatres via SMS, an advertisement was the first result he got.

ChaCha paid around $0.03 per question answered up to twenty cents per question, or an average wage of $2.50/hour to their guides. Jones, CEO of ChaCha, reported being profitable and generating revenue of over $9 Million by the end of 2009.

The Short Success of ChaCha

Bostic and Jones launched the alpha version of ChaCha on September 1, 2006, and a beta version was introduced on November 6, 2006. 

Chacha had registered 20,000 guides by the end of 2006 and had raised US$6 million, including support from Bezos Expeditions. By 2008, they had around 500 guides working at a time and a total workforce of 30,000. 

In 2008, Kgb offered to purchase the 2-year-old firm for $100 million, but ChaCha didn’t accept the offer. By the end of 2009, Chacha had raised close to $52 Million.

ChaCha launched its text messaging-based service in the United Kingdom in August 2011, . The same month the company reported having answered over 1.7 billion questions.

Until the very end, ChaCha raised more than $96 Million from various investors, including Bezos Expeditions, Qualcomm Ventures, and Rho Capital Partners.

The Downfall of ChaCha

In April 2009, co-founder Brad Bostic stepped down as company President, saying that the company no longer needed him for day-to-day operations. He also showed concerns over the company’s inability to gain profitability in the global recession.

In 2011, ChaCha started to experiment to launch its service worldwide, starting in the UK in September. But just nine months later, they shut down their operations in the United Kingdom, stating that "adoption rates for new price-competitive services are quite low in the UK."

Back in the day, the search engine algorithms weren’t too evolved; you had to search 4-5 pages manually to get the desired result. Google released its Panda algorithm back in 2011 that virtually pushed down the results from sites like ChaCha, Ask.com, and Answers.com. This proved to be a significant reason for ChaCha’s failure. 

By 2012, Google started working on ways to understand human language and provide accurate search results even to complex queries. With mobile phones coming in, it became difficult for users to use ChaCha as a search result, and they started to shift towards Google.

Management and operational issues also became a significant reason for Chacha’s failure. They had 50,000 part-time “guides” to answer the queries of a million users. This became difficult for the guides, especially if the user asked long theoretical questions.

In 2015 Scott Jones started looking for ways to land an offer from an investor or sell the company. However, when traffic on desktop and mobile started to decline, this didn’t help.

So Is ChaCha still a thing- No, In November 2016, ChaCha discontinued the guide program due to having insufficient funds available. By the next month, ChaCha shut down operations due to declining advertising revenue, leaving them unable to service its debt.

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