Richard Jalichandra was lured in as the CEO of Technorati, a site that bills itself as providing: “Real-time search for user-generated media (including weblogs) by tag or keyword. Also provides popularity indexes.”
Technorati competes with Google and IceRocket and to a lesser extent, memetrackers such as TechMeme, Megite and Tailrank.
By way of disclosure, I actually know Richard personally though not very well. He was the IGN executive that courted my old company and handled the negotiations of our sale to the Brisbane-based video game publisher.
After IGN was itself acquired by Fox Interactive Media, he left to advise a handful of companies, including Pixsy (one of the video search engines that we index in our video meta-search, MetaMojo.com). He was an entrepreneur in residence at Battery Ventures, and by way of Battery’s investment in Technorati, he moved in to the CEO’s job this week.
Today in an interview with Wired, he referred to industry sweetheart TechMeme as a “nice little site”. When I saw that, it surprised me, but I thought I was alone in thinking twice about it. Apparently not. Invariably, Michael Arrington pounced on the quote and drilled both Technorati and Jalichandra.
My problem with the non-stop Technorati bashing isn’t the criticism itself, it’s the focus of the criticism.
First off, we need to ask: Should blog search tools be judged based on what users (people who look for info) think or what bloggers think?
If it’s the former (what people who don’t blog but mainly look for content on blogs), then Technorati is not perfect, but it’s a fine product. If the judge and jury are bloggers, then invariably Technorati falls short, but so does Google, Ice Rocket and according to 99.9% of bloggers, TechMeme.
In other words, yes, it’s fair to blast Technorati for:
They missed huge opportunities - Techmeme (rapidly passionate readers), MyBlogLog (social network around blogs) and Sphere’s related search product (stole Technorati partners like WSJ and Washington Post) are all opportunities that Technorati just plain missed, and shouldn’t have. All of those “great little companies” could have added up to one big company, and Technorati could have been it.
But the part about Technorati’s authority being off, I figure: thank God.
All the talk about authority is more about bloggers’ vanity and caste mindset than anything else.
Today Om Malik - a genuine gentleman and scholar - emailed me and said he liked my post on Google’s doing 40% of US ad revenue in the first half of 2007, and apologized for not linking to it because he was - get this - flying. Mate, why apologize? Is there a secret code that we need to link to one another and build up this private boys’ club? Can’t we just read things and not link right and left (we should credit when we write an article but do we need to link to one another just for the sake of doing so?).
There must be. This week alone TechMeme (admittedly a great site built by a great entrepreneur with a great outlook) was taken over by somewhat pointless topics. Pointless, in my opinion, and to a few others, but clearly not to the elite that make up its content composition because it was non-stop.
To me, and many others, it lost a lot of authority frankly, yet we give it props for being a good source for judging authorities of bloggers, even though it is largely contained to a select elitist few bloggers.
This is not a knock to Gabe Rivera’s TechMeme, which I agree is the best product in the broad blog reference space, but to put TechMeme on such a pedestal and defecate on Technorati is unfair.
Technorati, in all fairness, as woeful as it might be on so many levels (and it is on many), does have some interesting assets. Mind you, having gone through $20M of funding, I sure hope they have something tangible to show for it.
Technorati: Buyer or Seller
One more thing about my experience with Richard: he’s a buyer, not a seller. Sure, he knows M&A, but something tells me that Technorati is actually looking for a few select acquisitions be it in search technology, blog reference tools or dare I say it, blog networks that have proliferated over the years. Maybe that is the “unique media experience” Jalichandra was talking about in his interview. Content is so the way to go in a sea of user-generated content, spam comment etc., so don’t be surprised if some of the blog networks get consolidated by tech players.
Anyway, I’m guessing, and am probably wrong, but if history repeats itself, and it usually does, then expect Technorati to make a few deals (just like IGN bought Rotten Tomatoes, Team XBOX before selling itself to IGN Entertainment) to make itself look prettier.
Merger in Sights?
One more thing about Richard, he’s a pretty good executive to court young, talented, ambitious entrepreneurs. So something tells me that behind closed doors, one of Jalichandra’s mandates is to actually open up talks with TechMeme, or Tailrank, or Megite, or dare I even say it Digg regarding a potential merger of sorts. Digg is actually quite complimentary with Technorati. Both companies are not easy sales right now, together they become interesting.
One more thing about IGN’s history: it merged with leading competitor GameSpy, basically combining 2 of the top 3 players in their category (with CNET’s GameSpot being the odd man out) and marched towards a $650M exit to News Corp.
Mind you, it’s tough to dice up who is larger, but I don’t think Jalichandra or even Battery would have an issue merging as the smaller entity if it means landing with Digg or TechMeme and “making the pie higher”.
I’m not insinuating that Technorati is smaller than TechMeme, but Digg, perhaps.
Imagine former CEO Dave Sifry sitting down with Rivera talking about a potential merger… that chat would not have lasted and the mere thought sounds crazy, but with Jalichandra leading those talks, it’s less crazy.
One thing about Jalichandra’s hire is that Richard is not (this is not a knock) a product guy, he’s not an engineer, he’s not a sales guy; he’s a dealmaker, so there won’t be any sacred cows.
After having plunked down $20M, Technorati could actually get smaller - but it could also get more complex - via financial engineering.
I know what you’re thinking, Rivera has delivered a gargantuan product with relatively little resources but he is a one-man show and every entrepreneur realizes that having more resources helps. Rivera could raise a whopping amount of money via VCs or angels, but as I’ve written before, right now, scaling is not obvious.
Meanwhile, Technorati does bring a lot of know-how and reach across the blogosphere and would allow TechMeme to really hatch similar services in more verticals that entertainment, politics, sports and technology.
For the record, I don’t think Rivera would agree to any of this nonsense because Technorati comes with a lot of baggage, but hey, we’re here to speculate…
People, it’s Early!
Much the same way that the 2003 Iraq war helped bloggers rise to prominence and 2004’s Presidential Elections catapulted them further into the limelight, I definitely expect blogging to evolve and grow in popularity in the years to come, particularly with the Elections just around the corner (regardless of what Technorati’s State of the Blogosphere would suggest).
Blurry Blogosphere
Ultimately, however, the critics are right, much the same way that mainstream sites have proliferated the blogging ranks, the lines between blogger and any given website has blurred enough to make it hard to draw the line. Does Technorati still have a raison d’etre? I am not sure, especially when indeed, Google indexes everything and anything almost as fast as Technorati does, and probably more relevantly.
So, with all of this said, is Technorati a buyer or seller?
It depends, let’s see:
- Google’s blog search is top notch, I don’t think they need it either.
- Yahoo! bought MyBlogLog and you have to wonder just how much weight they’ll put behind all-things-search as Google continues to gain momentum in search… so Yahoo! is a fit.
- MSFT is always an option, especially as it aims to become more of an advertising-based entity.
- Ask.com bought Bloglines but that is a reader and not a search product, IAC’s Barry Diller has said that they’ll look at anything that walks, though valuations are too rich for his taste.
- Time Warner is busy “finding itself”…
Perhaps News Corp.? Not crazy. What about CBS. News is changing… and those companies would be intrigued… ultimately it boils down to price.
$20M invested, what would the company ask for? Apparently in 2005 the board turned down $90M and asked for $150M… would they get even a $90M offer today? Who knows.
But if I were Battery, the Board or Jalichandra, I’d probably take a cue from IGN’s playbook, make a few acquisitions, then merge with one player and restore Technorati to its promised greatness.
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WatchMojo NewsletterOne thing stood out in the IAB’s report that online ads clocked in over $10B in the US alone.
How much went to Google?
Google generated $3.66B in Q1 2007 revenues and $3.871B in Q2 2007, that’s $7.531B.
Its Q1 revenues grew 63% compared to the first quarter of 2006.
Its Q2 revenues represented a 58% increase over second quarter 2006 revenues of $2.46 billion and a 6% increase over first quarter 2007 revenues of $3.66 billion.
Anyway, in the first 6 months, Google did $7.531B in sales. Q3 is slow for display/banner sales because, well, a lot of people are on vacation and the summer effect kicks in, only entertainment (think new movie releases) really see a spike in advertising. But with Google, I don’t think that will really be the case. Q4, we know, is always blowout quarter.
By my calculations, Google will do well over $15B in 2007.
Bear in mind, Google’s:
- 2002 revenues grew 409%
- 2003 revenues grew 234%
- 2004 revenues grew 118%
- 2005 revenues grew 92%
- 2006 revenues grew 67%.
CNN got it right (this was posted last week, so I hope so!):
Most of Google’s ad revenue, which is expected to exceed $15 billion this year, currently comes through online searches and Web pages viewed on personal computers connected to the Internet. [source]
Then can someone tell me why all of these analysts got the numbers so wrong?
[source]
Mind you, that poll was done in March 2006… which is another reminder of why outside-analysts will usually get the numbers wrong. As early as Q3 2006, I was calling for Google to hit $15B on the assumption that its 2006 revenues would probably be 70% growth (it did 67%) and that 2007 would be at least 50% higher than 2006. Do I get a sticker, at least?
Anyway, onto the question: how much did Google account for in the US?
Last year, it was reported that $1 out of every $4 of online advertising spent in the US went through Google. Not search, that was much more, we’re talking all online advertising.
If you consider that Google did $7.531B in Q1 and Q2, and all online advertising was $10B, and that Google’s global sales
- represented 48% of total revenues in the second quarter of 2007, or $1.75B
- represented 47% of total revenues in the first quarter of 2007, or $1.81B.
The math suggests that Google did $3.57B from global, and (oh-oh) $7.531-$3.57 = $3.97 Billion in the US in Q1 andQ2.
How much was online ad spending in the first half of 2007 again?
Right, “for the first six months of 2007 were nearly $10 billion”, not even $10B.
If my math is correct, the for the love of all things holy, Google accounted for nearly 40% of US online ads in Q1 and Q2?
Wow, maybe Google will be worth more than MSFT by 2010.
And good thing Google didn’t sell, after all.
In Part I, we looked at why the Facebook vs. MySpace comparisons were off. We concluded by saying that the mere comparison was moot because one is a privately held tech company, and the other is a unit of a media empire, which prompted us to ask if News Corp. was planning something bold.
Learning that News Corp.’s Chairman Rupert Murdoch earlier this year tried to boldly go where few have gone before by trading MySpace for 25% of Yahoo! (which was even ballsier than his unsolicited $5B offer for Dow Jones, frankly) and yesterday hearing Mr. Chernin mention that “sure, Facebook is worth $15B, but we’re worth more,” I think the case can be made that News Corp. is planning something bold:
- either a spin-off of MySpace in an IPO to actualize a Gargantuan capital gain and leverage proceeds to make more investments and mainly, acquisitions. After all, in the short to mid term, the value of MySpace is largely in the capital gain, and not the income component. Besides, no one said News Corp. won’t hold on to a large stake post-IPO.
- entire spin off of Fox Interactive Media where News Corp. retains ownership but use proceeds of IPO to make more acquisitions.
- sale of IGN, which has done well if you don’t consistently benchmark it to a social phenomenon, MySpace. I’ve also long, long maintained that IGN needs no help with marketers (though MySpace did) and given all of its assets - particularly in digital distribution and in-game advertising - would be worth more outside, than inside a media company.
News Corp. just bought Dow Jones but it is looking for an acceleration to the Web, especially with today’s report than Q1 and Q2 ad spending in the US crossed $10B.
News Corp. is worth $70B but it has admitted that it will sell some of DJ’s more far flung assets to reduce the debt load required to scoop up the venerable publisher of Wall Street Journal and Barron’s.
Maybe one of these scenarios makes sense? Or, maybe I’m crazy? Both perhaps…
I think we need to stop it with the Facebook vs. MySpace much like we needed to stop the LinkedIn vs. Facebook talk, too.
After all, if Facebook is supposedly like LinkedIn and also supposedly like MySpace, then Aristotle would deduct that LinkedIn is on a collision course with MySpace, right? Well, technically, it could be argued that yes, they are, but I think by doing so we’re stepping back in history, not forward.
Let’s consider some trends and realities:
What the Cool Kids Say
Ultimately, much the same way that LinkedIn isn’t “nearly as cool as” Facebook (or so say the geeks), then invariably, Facebook isn’t as cool as MySpace (or so say the hip crowds). I actually think, like most sane people, that simply put, LinkedIn is far more useful professionally and Facebook is more useful personally.
But ultimately, Facebook does not really pose a threat to MySpace for a few reasons (yes, despite our ealier tongue-in-cheek posts here and here about how Facebook’s growth suggests that it will inherit the earth soon).
Mainstreet vs. Silicon Valley
Yes, Facebook has gone mainstream, but as many reports (unofficial, mind you) suggest, Facebook a more tech-oriented, educated audience whereas MySpace attracts the masses.
Admittedly, online “masses” is not a good term, but with the acquisition of Strategic Data Corp. last year, it’s a matter of time, one would presume, before MySpace offers the kind of targeted solutions that advertisers of the 21st century will come to expect and demand. And once that happens, as much as I hate to say it (honest bias: cause as a content producer, I won’t lie, I ain’t a huge fan of UGC, but ask yourself what came first…), MySpace will see an acceleration of revenue per page view much as Yahoo! did with Right Media. Right Media gave Yahoo! an auction-driven push, SDC will give MySpace a behavioral-driven push.
Either way, it’s a step in the right direction for HQ.
But Users Don’t Care About the Bizness Stuff
WatchMojo.com works with a lot of bands’ management etc. and we haven’t come across any Facebook pages, and as teens get older and get into music - and subsequently get beaten into submission WWF-style - they’ll grow up viewing MySpace as MTV (well, when it was relevant and cool) and see Facebook as a great interactivity tool.
Sit down folks: they’ll probably interact with both. In fact, I’ll say they’ll start off with a MySpace page when they’re just getting rebellious, then they’ll move on to Facebook, and once they realize they need more than beer money in life, they’ll take a liking to LinkedIn, too. It’s awfully like the beer, to hard liquor, to wine evolution.
It’s all about PR
Yesterday Paid Content pointed to a speech by News Corp.’s Peter Chernin that got me thinking.
“I have a healthy level of respect and paranoia for Facebook. Competition is a very valuable thing. In most countries, we continue to outgrow Facebook. We [MySpace] are worth significantly more than they are. I think they’re worth at least $15 billion (he said with a mischevious smile). I don’t think they are for sale….MySpace and Facebook are doing fairly different things. MySpace is much more of a discovery platform, while Facebook is much more of a utilitarian platform for connecting with people you already know.”
I agree with Mr. Chernin that it’s really like comparing apples and meatballs, ultimately. I always tell press and investors “I didn’t build a company for the press or for investors to understand”, I built a company that makes sense to users, partner companies and ultimately, advertisers.
The lesson there is we in the media and technology business are trying to project things onto users and marketers and that might be the biggest mistake of them all.
I think the longer News Corp. focuses on the “Facebook/MySpace: Who is better and mainly, who’s worth more” the more they’ll lose the war with partner sites and advertisers. Notice I didn’t say users. Why? Unlike us folks in the media/technology business, marketers, investors, etc., users really don’t care about the business stuff of a company’s offerings, while it’s natural to follow the crowd to some extent, they’re not sheep or lemmings, they know that MySpace and Facebook are pretty dissimilar just by looking (what’s that expression with porn? “I can’t define it porn but i know it when i see it” - never mind that I can define it… but I digress).
But if News Corp. consistently gets on a soapbox and says “we’re better than Facebook” then it is giving marketers a reason to pause their ad spending on MySpace and look at Facebook.
That’s dangerous, because MySpace is helped by Google’s deal but not limited to it, unlike Facebook, which largely gets its revenue from MSFT, but hey, who’s comparing?
Media vs. Technology
Ultimately, the main area why the Facebook vs. MySpace rhetoric loses steam, in my humble opinion, is that by virtue of being a part of one of the largest, most powerful and profitable global media companies, MySpace is now largely “traded” and seen as a media entity, whereas Facebook has taken the Google cue and positions itself as a tech play.
Ok, what would the analysts say?
All right, so we’ve made the case why Facebook and MySpace, while increasingly indirectly competitors, have fairly divergent futures. But much how we compare the market values of somewhat dissimilar firms like MSFT and Google - as we did here when we asked whether Google will surpass MSFT in market cap by 2010 - we’re curious as to, pound for pound, who’s worth more.
Facebook or MySpace.
Some arguments to consider:
- If the media vs. technology argument is a correct dichotomy, then it can be argued that Facebook gets a trading multiple premium over MySpace…
- Of course, MySpace is larger in terms of audience, it is both the largest social networking site in the world and the largest property when measured by page views.
- Its revenues higher.
- Being part of News Corp. it has a lower liquidity discount.
- Facebook, I believe is younger, and thus boasts a higher growth rate.
I think the edge, still up to now, would have to go to MySpace. But, we’re not saying anything new or shocking.
Besides, it’s a moot point, how come, read part II, below.
