InfoArmy — a startup built on the “Data 2.0″ concept of crowdsourced competitive intelligence — has today sent out a letter, printed in full below, to its researchers informing them that it is pulling the plug on its current business model after failing to find enough sales for the research reports, and being unable to sustain the quality of the work that was being produced. As a result, it will be offering reports on its site free of charge and will no longer be paying researchers for their contributions, as it tries to figure out what to do next.

The news represents a big setback both for enterprise-focused crowdsourcing, and also for Jim Fowler, the CEO and founder of the company who sold his previous crowdsourced business company, Jigsaw, to Salesforce for $175 million. To date, InfoArmy had raised $19.3 million from Norwest Venture Partners, Trinity Ventures and Fowler himself. It has been in operation for only about eight months.

TechCrunch learned of the news from some of the researchers. One of them noted that he “really enjoyed” the experience at first. “Things were smooth, a lot of committed folks were involved,” he says. But he noticed early signs of problems with sales — not a surprise, perhaps, since there was only one salesperson hired at the company, but he noted that InfoArmy’s response was to cut the pay of researchers and claim report quality was the reason for the problem.

“I take that as a fair criticism, but given they design the system within the researchers operated, they surely could have made some tweeks to improve quality,” he said. After this came more problems with the payment system, an outsourcing move to India for some of the report editing and publishing, and lots of researcher complaints on a forum — now, apparently, deleted.

“They regularly teased a ‘big February 1st announcement’ that would address all of our concerns and hopefully right the ship. Then came today’s announcement,” he noted. That letter is in full below.

We are reaching out to Jim Fowler as well and will update this post with his statement.

“InfoArmy launched last June. Since that time we have worked together trying to create an innovative new business model that would allow many researchers to eventually earn income on the InfoArmy platform. Unfortunately, the current business model has several large and unfixable problems:

● Sales are not happening. So far InfoArmy has sold just 44 individual report subscriptions ($4,356). All of this revenue was distributed to researchers (InfoArmy did not take 50% as planned under the Revenue Share model).
● Almost two months ago we hired a full time sales person. He has been unsuccessful so far. Data quality is the main issue preventing sales. Common complaints include incorrect revenue estimates and competitors.
● Publication bonuses have created the wrong incentives. Some researchers have published the lowest quality reports they can get away with.

Quarterly updates are very unpopular – even with our best researchers. The report abandonment rate for quarterly updates is high. Updates are critical to the success of the current model. We have been unable to create a sense of report ownership across a large enough group of researchers.

So far InfoArmy has paid $146K to researchers (averaging $23/report), and some researchers have made over $5,000 individually. We are very happy that many hard working researchers have made money. However, without a clear path to revenue this model is unsustainable.

InfoArmy takes full responsibility for the above issues. This business model was our idea. Unfortunately it isn’t working as planned and we have to make some major changes.

We haven’t figured it all out yet, but we believe the new model will look something like this:

● No more 50/50 Revenue Share. Members will exchange information they have for information they need.

● No more report ownership. Many different people will contribute to reports and make estimates. Reports will be updated in real time instead of quarterly.

● All reports will be free (in their current form). The object will be to create added value that can eventually be put behind a pay wall.

For purposes of clarity, we will no longer be paying InfoArmy members for their information gathering. If you choose to continue to provide services to us under the new model, you will not be paid under the Revenue Share model or by any other means. The Terms Of Service that govern the services you provided will terminate with the final payment you receive. InfoArmy is creating an entirely new business model that will have new terms. As of today we have made all existing reports free. If you wish to remove the reports you created from the InfoArmy website please contact us at support@infoarmy.com.

We made one final General Fund Payment on January 31st, 2013. Along with the General Fund payment we included an Appreciation Bonus to thank you again for your support. Each initial report creation was awarded $5 and each update $2. These bonuses applied regardless of whether or not you still owned the report and were split 80-20 between the PR and SR. This final payment will make the total amount paid to researchers approximately $200K (or approximately $29 per report).

We anticipate that you may have questions and concerns. Please email us at support@infoarmy.com and we will respond as quickly as possible. We will also have two webinars to answer your questions. They will occur on Friday, Feb 1 at 3pm PST and Monday, Feb 4 at 7am PST.

To the majority of researchers who believed in the InfoArmy vision of creating a revenue share platform we offer our sincere apologies that the current model did not work. We recognize that many of you poured your hearts into creating reports, and we are very sorry to have let you down. We truly thank you for your support and have enjoyed getting to know you all. We are hopeful to see you again when we launch the new model.

With best regards,

Jim Fowler and the InfoArmy Team

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