History is not always written by the winners. After Wesabe Inc.'s crumble, those on the sidelines were keenly interested in hearing what the fallen PFM pioneer had learned in its short run.
Wesabe launched in 2005, before the market was flooded with personal financial management providers and before it was commonplace for consumers to almost blindly hand over their banking passwords on the promise of getting a better grip on their spending.
It allowed consumers to pull in transaction data from multiple financial institutions and compare their spending to that of their peers, through software and discussion groups it hosted.
The company quickly faced competition from household names like Intuit Inc. to upstarts such as Mint Software Inc., but Wesabe does not blame its failure on its competitors.
This story is "what Wesabe did to shoot itself in the foot," said Marc Hedlund, Wesabe's second and final chief executive, in an interview. "It was our market to lose and to whatever extent that we lost … we did it to ourselves."
Wesabe approached its audience delicately — in hindsight, too delicately, Hedlund said.
Phishing was a common menace in headlines when Wesabe launched, and banks were extremely vocal about how important it was for consumers to never share their passwords and their transaction data with a third party.
"When I would go around and talk to people about the idea of Wesabe before we started the company, everyone — I mean 90%-plus of everybody — told me that they would never in a million years use a startup website that asked them for their bank passwords," Hedlund said. "That it was just a ridiculous, laughable idea."
Wesabe's first mistake was taking this advice.
Companies should avoid being "too attentive to what the audience says it wants," he said. "That's how you get bad movies."
The easiest thing Wesabe could have done from the beginning was to partner with Yodlee Inc., a company that already worked with banks to pull transaction data after receiving consumers' passwords.
Wesabe chose not to do things Yodlee's way. Instead, Wesabe devised its own system with a more cumbersome process for pulling in bank data.
Wesabe required users to download transaction data from their bank sites in a file and then upload that file to Wesabe's site. It attempted to make this process easier with browser add-ons that could automate the process, but it still required the consumer to do more work than Yodlee required.
In 2007, Mint launched a competing service using Yodlee's technology. Other rivals used a similar system from CashEdge Inc.
Hedlund said he does not believe that Wesabe needed technology from a Yodlee or a CashEdge to succeed, but his company should have better prepared for the prospect of competing with them.
"We should have known that somebody would go with Yodlee and we should have aimed to that as what we needed to achieve, either by going with Yodlee or by replacing them," Hedlund said.
Ultimately, in 2008, Wesabe caved to the demands of its audience and began accepting their passwords to simplify the process of pulling data into its system.
This was not enough by itself to even the playing field.
After Wesabe began accepting passwords, "we didn't significantly see rates of sign-up change," Hedlund said.
Instead of trying to balance the companies' technical approaches to security, Hedlund said he could have paid more attention to their rhetorical approaches.
Wesabe's rivals "really made every effort to reduce the security story to a couple of icons on the bottom of the screen," Hedlund said, whereas Wesabe treated security as "the elephant in the room."
Despite the attention Wesabe's failure has received, it was not the only PFM provider to shut down.
Rudder Inc., which launched in 2008 with a focus on viewing transaction data over e-mail, shut down and wiped its servers last week.
Even Intuit's homegrown effort, Quicken Online, did not last. Intuit made the early mistake of charging for access, and it was virtually alone in this approach. Though Intuit dropped the fee after only 10 months, the damage was done — it began to phase the service out after its 2009 acquisition of Mint, and eliminated Quicken Online this year.
With Wesabe, the reasons behind its problems were less obvious, so after it shut down many people voiced their theories as to why it failed.
One of Mint's designers, Jason Putorti, weighed in with a blog post in September, sparking a fresh debate on why — and whether — Mint fared better.
Putorti's blog post praised Mint's design, executive team and market focus as giving it an edge, but not everyone agreed with his analysis, and others soon began to share their own views of what transpired.
Ron Shevlin, a senior analyst at Aite Group LLC of Boston, attempted to reframe the debate on his own blog: "There's something … that I don't agree with: The inference that not only did Wesabe fail, but that Mint succeeded." Shevlin argued that if Intuit had not stepped in to take over Mint, the PFM provider would not have survived.
Hedlund's voice was initially absent from this debate, and he entered it somewhat by accident.
Hedlund aired his thoughts on a blog that he considered to be private, and linked to the blog on a Twitter account that was known to just 50 people. In his writing, Hedlund addressed the questions of whether Wesabe had the right plan for making money, and whether Mint had the better design and the better marketing.
Hedlund's post was not defensive — though he challenged anything that was incorrect, such as the mistaken belief that Mint launched first. He also agreed with some of the criticism. Eventually his essay — originally intended for a private audience — was viewed by 350,000 people and was republished by CNNMoney, Hedlund said.
SPREADING THE WORD
Though Hedlund's insights led his blog post to go viral, he was unable to similarly capture the attention of a wide enough audience for Wesabe.
Mint is headed by Aaron Patzer, who has not been shy about attracting attention to his company by, for example, taking the stage at a conference in 2009 and declaring most banks to be evil.
Hedlund called that an extreme example of Mint's marketing savvy, but said that Patzer's personality was a factor in Mint having more visibility among consumers. "Aaron certainly had no trouble putting himself out there … I was not going to be that person," Hedlund said.
Today, Hedlund works as the chief product officer for a New York company called Daylife Inc., which makes software for online publishing. Hedlund said he is comfortable in a product role given his background as an engineer.
Shevlin's blog post argued that in addition to a misstep in marketing, Wesabe also did not have the proper resources when it began to sell its PFM software to banks and credit unions to integrate with their online banking sites.
Hedlund said this criticism was spot-on. Shevlin's "totally right that we didn't have a good sales force for selling to banks — we didn't," Hedlund said. He was personally closing its sales.
"I don't think we were that far off; we got some good deals … we got some good names, [and] we were really pretty close to being able to close deals that I think would have been good reference deals," Hedlund said, "but he's right, we didn't have a professional sales force. We had me, and I'm an engineer."
A DIFFERENT MIND-SET
The one revenue stream that Wesabe steadfastly refused to consider was hosting ads on its website.
Mint and other competitors such as Geezeo Inc. and Strands Inc. placed ads within their PFM sites and/or recommended new bank accounts.
Wesabe was philosophically opposed to advertising and referral deals — if its purpose was to save people money, it could not also encourage them to buy products or sign up for credit cards that could add to their debt, Hedlund and his team argued.
Though defenders of the practice said that finding people new cards could save them money by lowering their rates, Hedlund said that shifting debt from one card to another "is not in any way conducive to people having a better financial life."
Wesabe held so firmly to that belief that, Hedlund recalled, one employee even told him that, "If we had to be Mint in order to win, I'm glad we lost."
Hedlund said Wesabe's plan to sell its software to banks and credit unions came very close to working even with its poor sales force, so he does not consider it a mistake to have shunned the advertising model.
Whatever theories he or anyone else put forth about the cause of Wesabe's failure, Hedlund said he believes that there was no single mistake that led his company to fail, and that there are many lessons to be learned from its five short years.
"In any success or failure, it's never any one thing," he said.