CNet's Greg Sandoval wrote up a great piece about the demise of the ad-supported music start-up Spiralfrog, which was supposed to lure people from file sharing sites by giving them DRM-protected free music. Sounds like a great plan, doesn't it?

Of course it didn't work out, and Spiralfrog shut down earlier this year. The company's demise has often been painted as a result of exorbitant music licensing fees, but Sandoval shows that Spiralfrog actually paid way more on advertising to get traffic to the site:

"According to a list of projected expenditures from July 2008, SpiralFrog expected to spend $2.8 million with Google that year and $1.5 million with Yahoo. Charges at rival MSN are unclear. The tab for AOL's affiliate marketing in 2008 was more than $3 million, an AOL attorney confirmed."

Spiralfrog also spent a ton of money on promotional stunts. The dance club site, which I still think was one of the worst viral campaigns ever, cost the company half a million dollars. Ouch. And then they had to spend some more money to generate some traffic for it so that investors wouldn't question the nonsense. It's like an addict making up excuses for getting the next fix.

As I said, a great piece: However, it kind of left me with a question: Was it a mistake for Spiralfrog to spend that much money on traffic - or did they have to spend it because their product was crap?

Tags: , ,