(or, "How to spend $130 million and blithely deny any responsibility for your actions")

"I am sure that Microsoft will do an excellent job of misinforming the public

about the reasons for this decision, and so I want to put the record straight."

- Keith Teare,

Former CEO & currently overpaid "consultant" to RealNames

The man whose photograph appears above, Keith Teare, is the former CEO of RealNames Corporation, an insolvent dot com company that closed its doors last week when its two year Keyword distribution agreement with Microsoft expired.  Since that time, Mr. Teare has been making a significant amount of noise on the web and in the media, purporting to "set the record straight" regarding the reasons why his company shut down.  His argument is both as familiar to Silicon Valley observers as it is tired and overused -- "Hey, Microsoft did it!"

Now whenever I hear of a business blaming Microsoft for its untimely doing in, I smell a scapegoat argument.  It works like this:  If you screw something up royally, find someone that is universally despised, shift the blame, and play the role of the poor victim.  Scapegoating has a long and colorful history.  In blaming Microsoft for the world's troubles, I am reminded of all of the public companies in late 2001 that blamed poor earnings results on the September terrorist attacks.  While admittedly not hated as much as the Al Qaeda terrorists who piloted their missiles into occupied office buildings, Microsoft is nonetheless an entity that has become accustomed to public vilification.  Add to this the fact that Microsoft was RealNames' largest shareholder and lender, as well as its most significant business partner, and you have the makings of a juicy conspiracy theory.  What you also have is a perfect scapegoat.

How convenient for Mr. Teare.

The mainstream media would like you to believe that big, bad Microsoft never innovates, and that it simply goes around crushing small companies and stealing their technologies.  The US Department of Justice and several states have spent a lot of effort successfully making the case against Microsoft as a monopolist.  Thus, the scapegoat argument goes, if Microsoft is an evil monopolist, then surely it must be the cause of RealNames' failure, not RealNames' own poor decision making and inability to execute.

How nice for Mr. Teare if this conspiracy theory were true -- it would shift the public inquiry around the company's failure to Microsoft, thereby allowing Mr. Teare to avoid personal scrutiny for the total evaporation of the over $130 million dollars of venture capital invested into RealNames since late 1998.  The problem is, the tale just isn't true.  Admittedly, Microsoft is no angel, having been found to have engaged in monopolistic behavior in other contexts.  Yet RealNames did not fail because of trickery, deception or predation engaged in by Microsoft.  Rather, RealNames failed for many of the same reasons other dot coms failed:  overspending in the face of unattainable, pie-in-the-sky revenue projections, a CEO with incredible hubris who told his board of directors only what they wanted to hear, and an absolutely dogshit business plan.  Most importantly, however, RealNames failed because Mr. Teare deliberately engaged in a "drive off the cliff" strategy with respect to Microsoft -- he placed all of his eggs in the Microsoft basket, and then proceeded to alienate his now sole distribution partner by constantly failing to abide by the terms of the agreement that he signed.  Mr. Teare did this despite repeated warnings from Microsoft and his own management team that his dangerous tactics would almost certainly result in a non-renewal of the agreement.

Now that the car has plunged off the cliff, Mr. Teare is looking for others to blame. 

Let there be no mistake about it, RealNames' failure to persuade Microsoft to sign a new agreement for the distribution of its Keyword service was the immediate cause of the company's shutdown.  But you cannot understand the motivations behind Microsoft's decision unless you also understand the history of the parties' relationship, the operative terms of the agreement, and how RealNames, under Mr. Teare's direction, flouted the terms of that agreement and then was surprised to find out that its lifeline was severed.  Mr. Teare has his version of this history, and then there is the real story. 

^{Part I:  Anatomy of a Bad Deal} 

Number of hits since May 25, 2002