The man who started the foodfight

Seth Goldstein's 'craplet' apps - Happyhour, Appaholic, Foodfight - are already facebook gold. But he's got grander plans.

By John Heilemann, Business 2.0 Magazine

(Business 2.0 Magazine) -- There are many fantasies about entrepreneurial life in Northern California, but here's one extreme version: You reside in a vast and fabulous spread in the hills of Marin County. Your commute amounts to a stroll through your backyard, which offers a staggering view that extends across Mill Valley and San Francisco Bay to the city skyline in the distance.

Your headquarters consist of a little bungalow down past the swimming pool. Despite the cushiness of the surroundings, you call the place "the bunker" and fill it with devoted young soldiers who march to your orders - and who, with any luck, will make you, oh, a hundred million bucks in the span of 18 months.

This is the fantasy that Seth Goldstein is living. Goldstein is the co-founder and CEO of SocialMedia, a startup that's rapidly established itself as a leading purveyor of applications on Facebook, the fastest-growing social network on the Internet.

A recent émigré to the Bay Area from New York City, Goldstein is sensible enough to recognize the degree of his good fortune. "With Facebook, there have been more new business architectures formed in the last three months than in the last three years," he tells me on his patio. "I was lucky to be here at the right time, where I was able to get into the thick of it kinda quickly."

But luck is only part of why Goldstein occupies a prime position in the chase to capitalize on the Facebook phenomenon. His story illustrates the importance of two other factors in entrepreneurial success: a talent for improvisation and, as the real estate people put it, location, location, location.

For most of his adult life, the only location that mattered to Goldstein, 37, was Manhattan. Born in Boston, he went to college at Columbia and emerged in the 1990s as a mainstay of the Silicon Alley scene, first as co-founder and CEO of the Web marketing shop SiteSpecific, then as a venture capitalist at Flatiron Partners (where he led the firm's most notorious investment, in Kozmo.com), then as co-founder and CEO of Majestic Research (which uses ComScore and other data to generate proprietary research for hedge funds) and co-founder of Root Markets (a financial exchange for Internet mortgage leads).

As this litany makes clear, Goldstein had, in his words, "figured out a way to get companies started in New York." It was never easy, though. "People there are always dragging you down," he says. "They don't want to give anyone the benefit of the doubt." Goldstein had long thought about moving to California, but he assumed it was just a dream. Then his wife, Tina Sharkey, a co-founder of iVillage who had been running social networking at AOL, was recruited to head up San Francisco-based BabyCenter. As Goldstein recalls, "I said, hey, maybe you oughta return that call."

Goldstein arrived in December 2006 with a few vague notions - "themes and strands," as he puts it, about "attention" and "clickstreams" - around which he intended to build his next startup. By chance, he stumbled on Dave Gentzel, a 24-year-old kid in Roanoke, Va., who'd created a widget called Trakzor that enabled MySpace users to monitor who was checking out their pages. "He had 3.5 million users and 40 million pageviews a month," Goldstein says. "I was like, come here, you!"

Goldstein lured Gentzel to San Francisco with equity in what was then known as AttentionSoft, the aim of which, Goldstein says, "was to help people express themselves on the basis of what they're paying attention to - with total transparency."

Goldstein's plan was, to put it kindly, highly embryonic. But everything changed on May 24, the day Facebook declared that it was opening its platform to developers. In short order, Gentzel wrote a version of Trakzor for Facebook and hacked up what Goldstein describes as "a little craplet" that let people throw pictures of food at one another. FoodFight racked up 2 million users almost instantly. And Goldstein's firm, rechristened SocialMedia, was off to the races, turning itself into a veritable factory of Facebook apps.

Goldstein argues that FoodFight, however frivolous it may seem, is actually a seminal application. To acquire the virtual items to hurl at others, users pay with virtual currency. And to acquire the currency, they must answer questions posed by marketers - the more data about themselves they disclose, the more "lunch money" they earn. "People really like to throw piles of poop is one thing we've learned," Goldstein says. "So you price the poop high and people have to answer a bunch of questions to pay for it. That's the future of Internet advertising: throwing shit at people. Literally."

With FoodFight and other hit apps, such as Happyhour (send drinks to pals) and Appaholic ("FeedBurner for Facebook," Goldstein says), SocialMedia went from zero to 13 million users in a heartbeat. But Goldstein has grander designs. "My goal is to build a better monetization mousetrap for Facebook," he says. The mousetrap he has in mind is called DataPoints, in which "marketers buy access to this live audience of 30 million users and can engage them in any way, at any time, by paying for it. And users want to respond because they want to earn stuff or unlock special items."

This vision of Facebook as a transactional marketer's paradise will turn a few stomachs. But Goldstein is convinced that it's the kind of platform Facebook is destined to become - one that thrives at the intersection of user-generated content and behavioral targeting. He also sees it as a looming jackpot. "If by next May we build a system that monetizes Facebook inventory that's 50 percent better than Facebook can build itself, there's a $100 million-plus exit for us," he says. "That's the simple mercenary math."

The nakedness of such sentiments may surprise some of Goldstein's old friends. It surprises him too. In the past, he tells me, "I thought that if I wasn't missionary and idealistic, I was a flawed entrepreneur." But with Goldstein's move west has come a marked shift in perspective. "Because New York is so mercenary, I always overindexed toward the missionary," he explains. "Out here, I'm way more comfortable being mercenary. Hyperbole and philosophy don't go very far in the Valley."

What does go far in Silicon Valley is the dexterity to spot the next big thing and turn on a dime to embrace it. When I remark on the amorphousness of his pre-Facebook strategy, Goldstein shrugs and replies, "All of entrepreneurship is a sort of confidence game. So all along I thought I had a clear plan; it's only later, looking back, that I realize I didn't know what the fuck I was doing."

It was Louis Pasteur who said that "fortune favors the prepared mind." Goldstein's corollary is that the only thing better than a prepared mind is the capacity to change it. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.