What happened to ChaCha?

  • ChaCha was a human-guided search engine founded in 2006. The platform provided a valuable service at a time when traditional search engine algorithms were unreliable and less developed.
  • When algorithms did become sufficiently developed, they provided answers to questions for free and much more rapidly than ChaCha could. The ChaCha business model was also unscalable, with employees overworked as the company tried to stay ahead of innovation.
  • ChaCha’s demise was also compounded by the smartphone, which provided another avenue for consumers to find information. A belated attempt to restructure and cut costs followed, but the company could not service its debt past 2016.

Background

ChaCha was a human-guided search engine founded by Brad Bostic and Scott A. Jones.

When ChaCha was launched in 2006, Facebook was in its infancy and Google was just beginning to assert itself as the dominant search engine.

However, ChaCha offered something different. The search engine gave its uses the ability to interact with a real person who would then manually search the internet on their behalf. This was a useful service in 2006 because search engine algorithms were far less adept at serving up relevant results. 

At its peak, 55,000 employees were answering nearly 600,000 questions a day on the platform. But after one decade in operation, ChaCha ceased operations in December 2016. 

Let’s take a look at the series of events that crippled this once popular service.

Search engine evolution and advertising

As search engines became better at delivering accurate search results, there was less need for users to hire others to find information for them.

When Google released its Panda algorithm update in 2011, ChaCha and similar sites such as Ask.com were relegated to the second or third page of search results. Voice-activated services such as Siri also contributed to the problem through increased competition.

As the ChaCha business model became increasingly obsolete, users became accustomed to finding their information through a simple Google search. Google returned results instantaneously, a benefit ChaCha could never replicate.

Advertising revenue fell as advertisers migrated to a search-engine-based pay-per-click (PPC) model.

Scaling and culture problems

From a financial point of view, the ChaCha business model was difficult to scale. The company did expand into the United Kingdom in 2011 but shut down operations after just eight months.

Subjective topics such as politics and religion were difficult to answer efficiently. What’s more, ChaCha employees with expertise on these sorts of topics were not paid enough to make their time worthwhile.

This created a poor company culture where employees became frustrated at the long working hours. Frustration also grew as the company consistently pivoted to stay ahead of innovation and fluctuating consumer preferences. Disgruntled employees would later note that the company never progressed beyond the start-up phase.

Smartphone innovation

ChaCha was also disadvantaged by the introduction of smartphones with internet functionality.

The consumer shift from ChaCha’s SMS-based answer service to internet search was as rapid as it was devastating.

Restructuring and shutdown

With little advertising revenue to service operations, ChaCha moved from a physical office to a virtual office in the middle of 2015 with a core skeleton crew of around a dozen employees.

Assets were also sold off in a final attempt to meet debt obligations, but the company was ultimately shut down after failing to secure a buyer.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"