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From Friendster to Instagram's change of its Privacy Policy and TOS, this article will discuss some of the tech world's most notorious flops.  What happened and where did these companies go wrong?

 

HP TouchPad

Probably one of the most infamous crash and burn stories recently, the HP TouchPad is a lesson for both the company and its consumers.

In July 2011, Hewlett-Packard launched the TouchPad in the United States.  With at 9.7-inch screen, a storage capacity of up to 64 gigabytes, and a respectable processing power, this was the company's ambitious answer to Apple's iPad.

The public did not buy it, literally.  The TouchPad was panned by reviewers and its early buyers complained about its poor performance.  Not even several price cuts made it an attractive enough buy.  Best Buy complained that they were able to sell only 25,000 units out of the 270,000 they ordered.

What went wrong?  Industry observers are saying that the HP TouchPad was simply not enough in terms of specifications and performance.  The drastic price cuts first gave consumers the signal that there might be more price cuts, so they held out.  When HP did cut the prices further, consumers were definitely convinced that there was something wrong with the product.

To make matters worse, HP did not know what to do when it saw the tablet's lackluster performance and gave up without even trying to solve the problem.

But perhaps this let down was needed so that HP could recognize that they did not really understand the tablet business.  For one, TouchPad did not have a good selection of apps, which is a key factor to the success of both Apple and Android devices.  At that point, the iPad had a good 90,000 apps.  TouchPad, by comparison, only had 300.

As a result of this flop, HP soon gave up on the TouchPad and subsequently pulled the plug on its WebOS operating system.  The debacle also led the company to consider spinning off its PC business.  It planned on getting out of the hardware business, but relented just months after.

The demise of WebOS left the field open for only three major players: iOS, Android and Windows.  With Research in Motion also in oblivion, this solidifies the market share and dominance of these three mobile OSes.

 

IBM's PC division

For decades, IBM was known to be a manufacturer of personal computers, and a successful one at that.  So, it is with not quite a small irony that the Big Blue should sell its PC division to the China-based Lenovo Group.

Sure, the deal gave IBM $1.75 billion more to play with, but why did it happen?

Ken Fisher at ArsTechnica reveals that the company's PC arm has not been profiting for many years before the sale.  Fisher has revealed that the PC business lost $1 billion from 2001 to 2004.  Maybe they were completely unprepared for the rise of Dell, but the losses were real.

Samuel Palmisano, who was the IBM CEO at that time, also revealed that he felt the PC business did not have much room to grow and innovate, which was the main reason why he decided to get rid of it.

Despite the deal IBM did retain a minority stake in Lenovo, which meant that it was not really completely out of the PC business.  Palmisano also added that it gave the company a way to get into the Chinese market.

Nevertheless, it would seem that this particular "flop" paid off for the company.  It became more focused on other businesses, which proved to be very profitable.  It now sells out servers and storage systems, chips and business services.

 

Friendster

Even before Mark Zuckerberg came up with the idea of creating what would become the 1-billion user strong Facebook, Friendster was already a popular social networking site that reached 1 million members while MySpace was still in its infancy.  The site was so popular that Google offered developer Jonathan Abrams $30 million for it.  Abrams subsequently snubbed Google.

Unfortunately, the bravado did not last long.  As MySpace and, soon, Facebook came along, Friendster gradually lost out, forcing it to reinvent itself as a social gaming platform in May 2011.  Even before that, a majority of users were no longer accessing and updating their Friendster profiles.  Some previous members had even forgotten that they have a still-active, yet abandoned Friendster account.

What happened? Myspace happened, then later down the road, Facebook happened.  But that is oversimplifying things.  Along with Abrams' bloated ego came a management team that was ironically out of touch with social networking.  They did not understand how social networking works.  More than that, they did not upgrade their resources.  As more and more people logged into the site, Friendster slowed to a crawl.

User experience was so bad that people started looking elsewhere.  One of their alternatives was MySpace.  In 2004, MySpace started to build a following.  In 2005, Friendster was on the selling block but nobody was interested, even when it was selling for "only" $20 million, $10 million cheaper that what Google wanted to pay for it.

Five years later, Friendster would re-engineer itself as a social gaming platform in order to stay alive.

 

Instagram's change of its privacy policy and terms of service

For years after it was launched, Instagram looked like it could never do wrong.  It had 25,000 downloads in the first 24 hours, that would balloon to 300,000 by the third week.  It soon counted a million users in a short time.  After 18 months, Facebook bought Instagram for $1 billion.

But then, you know what they say about something hitting the fan.  In December 2012, Instagram decided to change its terms of use.  In the new policy, the company would have the right to sell users' photos to advertisers who can use the photos for their own ads.  The policy states that they can sell these photos without informing or telling the users.

Instagram users saw the policy changes as a potential violation of their privacy and threatened to leave the service.  And it seems that some of them have made good on their threats.  Garrett Sloane at NY Post reveals that Instagram has already lost close to half of its active users.  Considering that that would represent close to 8 million users, Instagram has quickly gone from saying "oops" to "OUCH!"

The backlash has caused the company to backtrack on its new policies.

 

Disruptive technology and flops

In telling a good story about tech flops, we can't forget to include moments of disruptive technology.  Disruptive technology is when a new product or technology overtakes existing ones.  In short, disruptive technology makes exiting products obsolete.

Friendster is a prime example.  It was a powerhouse and an innovator.  They had a good idea and people adopted that idea as eagerly as ants to sugar.  But they failed to keep it interesting and so left the door wide open for MySpace and Facebook to come in and boot them out of their own domain.

IBM also failed to anticipate Dell's moves, which ended up making it the top PC manufacturer during the time of the Lenovo sale.  Had IBM continued its PC business, it would have another disruptive technology to compete with just years down the line: mobile devices.  Already, smartphones and tablets are now eating into the PC market share as people are buying mobile devices instead of PCs.

In light of that statement, HP's WebOS should have been a disruptive technology, except that compared to similar technologies, it paled in comparison.  HP just did not have Apple's or Google's vision and focus to make the WebOS spectacular, despite all its potential.

According to TechCrunch.com, Sergey Brin and Larry Page first offered to buy Yahoo's search technology, but Yahoo snubbed it.  It preferred to keep its $1 million while Page and Brin were spurred to create Google, and this would later be the reason for its downward spiral.

The morals of these stories are clear: companies making technology products should be innovative or they will get overturned by newer, better and more useful technologies.  They should also be able to recognize what good technologies are and harness these to their advantage, or else they will be swallowed by those who do.  It has happened with the world's biggest technology companies time and again.