BUSINESS BLOGS
BUSINESS BLOGS
category: business
22 Oct 2008

You knew this was coming…

When Mahalo launched, the naysayers came out in droves: we penned a post called Mahalo: English for 1996.

Then as the company morphed from one project to another, the cynicism grew.  Last month founder Jason Calacanis penned a post calling for 80% of Web 2.0 to shutter.  Knowing that Jason is a master of PR, you knew he was laying the foundation for Mahalo’s own cuts and potential shutdown.  Right now, the latter is by no means a fait accompli, but for Jason to suggest that the company will be able to survive without any ad revenues until 2012 is a bit of a red herring; the real question is,will Sequoia, who itself rang alarm bells just last week on the need to get one’s house in order, sit by and watch Calacanis burn through $20M in VC?

Yeah, I don’t think so.

Mahalo, like many other startups that were funded in the past few years, were over-confident VCs flipping a coin in the air hoping it would land on jackpot.  But as the economy tanks and credit becomes scarce, financiers realize this isn’t time to play Grown Up Monopoly with real money…in fact, many companies don’t pass Go and don’t collect $200.

This is why we’re seeing all of these layoffs.  Make no mistake about it:

- quality companies with a glimmer of hope are being funded and reinforced as we speak,
- so-so players are being asked to reduce costs until a final judgment is rendered,
- defo losers are being shut down.  Some might have to repay the money they raised.

Today’s news from Mahalo means that its backers put it in the second or third pile.  Where will it end up?

Mahalo’s traffic strategy right now is simply to jump on the latest, breaking news, publish a page on it, and hope that Google’s super quick spiders index their page… It’s a gimmick, not a worthless one, but not exactly priceless either.

Mahalo’s dilemma remains the same: the more Mahalo becomes an actual content hub though, the more it strays away from its core.  The more it sticks to its core, the less relevant it is over time.

From Jason Calacanis’ website:

We’ve laid off a just under 10% of our full-time staff, cut our overhead by doing smart things like renting desks (we have six offices in Santa Monica fyi), and reorganized our editorial department to focus on freelance positions over in-house editors. The net result of the effort is we are giving Mahalo another year of “dry power” (or runway) to complete our mission.

Yeah… that might not be a good idea.  Who the F needs six offices?

20 Dumb Things of Web 2.0.