On September 4th, Atlassian acquired The Browser Company of New York (BCNY) for $610 Million. I won’t go too much into the details, but here are two articles that I think explain it well.

Here is BCNY’s official announcement themselves and here is a The Verge article that explains it well too.

There’s a lot to disdain about this announcement, but it’s probably worth first giving some kudos to BCNY and what they were able to do.

The affect of Arc on the “tech” scope in the industry was much like what Notion did when it first got popular. At the time, no one else had thought about block based note-taking. The idea of a drag and drop interface being at the core of document editing was entirely new. The slash command, was something no other app had before it. Nowadays, it’s impossible to find note-taking apps that don’t have these features. Almost every app has some sort of drag and drop editing and the slash command has become an integral part of all apps, let alone just note-taking ones.

Arc had a similar effect. Vertical tabs did not have nearly as much popularity until Arc, and Edge, Firefox and other browsers were quick to follow. At the core, the idea of spaces across a browser was smart above anything else - because it accepted the reality that the days of desktop applications was starting to diminish. Most people worked out of their browsers - so different apps didn’t matter anymore. Spaces was a solution that solved this problem perfectly. Above all, clean UI and UX was novel to Arc - something sorely lacking in a market dominated by Chromium based browsers.

But Arc stopped where Notion didn’t. While both companies achieved channel-market fit and product-market fit almost immediately, Notion realized quickly that monetization was brutal in this space. Almost all note-taking companies get this wrong. Evernote is probably the best example. They went from having control of over >45% of this market to less and less because of a terrible pricing model.

Notion got this right in many ways in part because of how quickly people adopted this in their personal life. If people talk about a product they use personally, adoptions by businesses (mainly tech forward ones) is really easy and a no brainer. The other way around is extremely hard to do (that is, a business uses a product and you try to push it to a consumer).

It’s obviously much easier to sell a note-taking app, though. BCNY was on a sort of impossible mission because the idea of paying for a browser is bizarre to most people. But most products trying to monetize is pretty bizarre in the first place. Dropbox made you pay for files in a folder, which in 2008, sounded bizarre when USB sticks were almost free and you could just attach files an email. But they nailed distribution and ease of use. Monetization of software seems absurd because you are trying to charge for a commodity. At first, it always sounds crazy. Shared Files (but people pay for Drive), to-do lists (but people pay for Things), note-taking (but people pay, a lot, for Notion). There is something deeper at the root of this which is that everything feels like a commodity until someone makes it magical.

Magical can mean a lot, but it often times means something so good you can’t live without it. All three of the stuff I just mentioned fit into that. So did Arc, but BCNY made two mistakes.

The first is that they suffered from a sort of “pricing debt”. Once you are able to make something people want, it really should not be a hard task to convert users to premium models. This is because you have obviously identified that people want to use your product, and in Arc’s case - people used it to such a significant extent that there was overwhelming discussion this was a replacement for Chrome. But you only maintain this virality for so long. What feels like 10 months for the consumer is really few minutes for the company. You would have to act almost immediately to convert a good chunk of users, because they are only in this state of bliss for so long.

So you can’t really follow this mindset of: let’s make it great, and figure out the money later. Because of part of making it great is being able to lock in user expectations and deliver a consistently good product. Not only can you not to do this if you don’t have money (unless you raise), but you also can’t change user expectations if you wait 5 years to monetize.

Dropbox has this same “this is weird to pay for” issue. But they introduced freemium early and a clear upgrade path from day one. Even if most people never ended up paying, the idea was implanted. Free for a while, then maybe you’ll pay.

The lesson here is very simple: if your product in unusual (like a browser), you probably can’t afford to wait on pricing. Part of the normalization of your product is the fact that it’s worth paying for. If you have made something magical, this usually isn’t an issue.

Dia, in many ways, compounded this affect. The first issue with Dia was that you cut your user base in half, because you now have two products that are hard to see the difference between. So you obviously are going to have less paying customers. What’s worse, though, is that you cut your culture in half. There should not be arguments about your product. If you find that people are getting upset about your product decisions, then usually - it is probably not a good thing.

Dia was too little too late. 3 years later, it’s hard to get people on board to pay for a browser, because it became the norm to get something magical in this market for free. Most people can see through the fact that AI at the core of the browser was not unique anymore. All browsers are getting search with AI across tabs, so their uniqueness was getting away. Not to mention that vertical tabs (something that drew people to Arc) took weeks to get to Dia, and Spaces wasn’t implemented in the same way. It was almost like they had to get product-market fit all over again in a space that they created the expectations for.

It’s hard to fight an uphill battle in a space like the browser market. It’s even harder when you are fighting this battle against your own user base. Product brilliance is everything - once you have it, you have seconds to lose it.

One last thing I’ll mention. Somehow, this acquisition seems like one big dichotomy. I can’t help but point out that Atlassian doesn’t seem like the best fit for BCNY. The pace doesn’t match, since Atlassian is such a large company that makes a lot of enterprise products. It also seems like the products are incompatible with each other. Arc tries to be a breath of fresh air compared to Trello, Jira and Confluence. Heavy versues light. Smooth vs clunky. In a world of software that a pain to use, BCNY changed our perception of the internet and what it means to work. I hope I’m wrong, but it feels like these two groups wouldn’t be the best match.

Hopefully this goes somewhere well and BCNY is able to retain their user base with Dia and lay out a plan for Arc. It’s hard to see that this will be the case for now but who knows. I for one hope this happens, BCNY is full of amazing people who have given me personal inspiration for much of the stuff I’ve built in my personal life.