App.net lays off staff, keeps doors open »

Dalton Caldwell and Bryan Berg, on the state of App.net after its first major round of subscription renewals:

The good news is that the renewal rate was high enough for App.net to be profitable and self-sustaining on a forward basis. Operational and hosting costs are sufficiently covered by revenue for us to feel confident in the continued viability of the service. No one should notice any change in the way the App.net API/service operates. To repeat, App.net will continue to operate normally on an indefinite basis.

The bad news is that the renewal rate was not high enough for us to have sufficient budget for full-time employees. After carefully considering a few different options, we are making the difficult decision to no longer employ any salaried employees, including founders. Dalton and Bryan will continue to be responsible for the operation of App.net, but no longer as employees. Additionally, as part of our efforts to ensure App.net is generating positive cash flow, we are winding down the Developer Incentive Program.

Caldwell goes on to write that support and operations will be run by contractors, and that the more and more of the ADN codebase will be open sourced in the near future.

Honestly, this isn’t too surprising. I didn’t renew my paid subscription, and I heard from many, many people who made the same decision.

That said, I respect Caldwell, Berg and their team. I’ve had the pleasure of working with them over the last year or so on a couple of different things, and it pains me to read the letter. The idea and business model is still very attractive, no matter how hard it can be to pull off in a world of ad-supported content and freemium apps.

It closes this way:

We continue to believe in the usefulness of a sustainable social platform where users and developers are customers, and not the product being sold to advertisers. If this were a company without a clear business model, App.net would have disappeared long ago.

That, of course, was the dream of App.net, which was able to hit the ground running as it launched at a time of a growing unrest in the nerd community about Twitter. Clearly, however, that wasn’t enough to keep the needed number of people interested — or paying to use the service, despite the best of intentions. The good guys don’t always win.