BUSINESS BLOGS
BUSINESS BLOGS
category: business
11 Jan 2008

HitWise reports that Jason Calacanis‘ new venture, Mahalo.com, garnered 0.02% market share in the search market.

Jason - whose previous ventures include Silicon Alley Ventures and Weblogs Inc. - raised $16M on a $100M post-money valuation round earlier this year.

VCs historically like to get at least 5x or ideally 10x on their investments. Sure, they all want more, but bravado aside, most VCs just want their money back and their track record as a group is so woeful that, well, as they say, beggars can’t be choosers.

All to say, if you believe that target return range, then Mahalo.com would have to grow to $500M to $1B in an exit to make the VCs happy. Is that possible? You tell me. I’m no clairvoyant.

What does that translate in market share? If you believe MSFT’s VP of Emerging Businesses Don Dodge, who published a great post saying that 1% market share in search = $1B in market cap, then Mahalo.com needs to grow 25 to 50x to hit that.

Will it? I don’t know. 25 to 50x might not seem like much, but Google, Yahoo!, MSN.com, Ask.com and AOL.com command over 99% market share, so Mahalo.com would have to grow to be as large as all of the other players combined… which is not obvious. But give him credit for trying in a cut-throat and competitive space like search.

One thing however is obvious: with the valuation that Jason managed to snag, the pressure is on. I think Jason can make it happen, despite what some will say (note the shock that he is growing traffic), he has the drive and smarts to pull any reasonably sane project off.

Read Write Web’s Marshall Kirkpatrick mentions that Mahalo gets a lot of searches off search engines. Not all such traffic is created equally, however. Take for example how I landed on Mahalo tonight: I read about former Jakob Lodwick’s latest venture, Normatist, on Valleywag.

Then, to learn more, I searched for it in Google.

The first result? Normatist.com itself.
Second result? Valleywag.
Third result? Mahalo. But the result was less than impressive… and created by Jason himself. I am actually commending his entrepreneurial ways, but the page was a placeholder for Normatist with no actual content (mind you, it shows how Calacanis recognizes an opportunity… which is more important frankly than the idea itself).

Technically, I registered as a visitor from Google… but the question is: will I go back?

Not sure. In fact, Jason proves his point: human-powered search can create pages quickly… but the really impressive thing is that Google - a computer-powered search engine - indexed all of those three pages even though they were created within the past 24 hours. I alluded to this before.

Search is really competitive and ultimately, it is Google’s universe. Not to take anything away from Jason and the team he’s built at Mahalo, but the biggest thing Jason has got going for himself is the A-list cadre of investors (including Sequoia) who will find a way to make the exit worthwhile.

Disclaimer: Mojo Supreme owns MetaMojo.com, a domain-specific vertical search engine and video meta search engine. I am sure, and hope, that some of WatchMojo.com’s great videos appear in the Mahalo 7.