Whenever a company has looked at acq-hiring Mojo Supreme (WatchMojo.com video site, BloggerMojo.com network of blogs, MetaMojo.com search technologies and StreetMojo.com database products) they ask me for a list of suggestions regarding the strategic value and integration plans.
Call me crazy, but reading Jason Calacanis’ email re: The First Ten Things the New CEO of MySpace Should Do, I couldn’t help but thinking that this was awfully similar to one of my “1+1=10 game plans” I submit as part of the song and dance, and in fact was Jason’s email to new News Corp. digital head honcho Jon Miller’s after Mr. Miller asked him: “hey Jason, we’re looking for a new guy to run MySpace, what would you do?” Mr. Miller bought Jason’s last company Weblogs Inc. for $25M when he ran AOL.
Whether Jason is really in the running or he’s simply found a way to play the media into thinking he’s in the running it’s moot; it’s good PR and buzz-building and he’s once again showing he’s quite adept at it.
Good for him. I highly suspect Owen Van Natta will get the job, mainly because he is coming from the company that stole MySpace’s mojo, that being Facebook.
In a few minutes I will post you an example of what I mean, check again soon.
Here is my sales pitch to CBS dating back in 2007, enjoy, I removed about half of the content and left the “strategic value” part.
From the Wikia Search emailing list:
———- Forwarded message ———-
From: Jason McCabe Calacanis <jason@calacanis.com>
Date: Fri, Apr 10, 2009 at 9:13 PM
Subject: [Search-l] Why did Search Wikia Fail, where did it succeed?
To: Mailing list for Search Wikia <search-l@wikia.com>Friends,
I’m thinking of writing up a recap of what went well with Wikia search (nutch/lmprovements) and what didn’t.
Was wondering if in the spirit of disclosure those involved would give a public (or private) accounting… Jason@calacanis.com
Also, Mahalo has some open crawl interest and would love to host this list If it is going to get shut down. Perhaps we should move to a google group before it does?
Note: not looking for Jimmy Wales bashing–just lessons learned.
Best j
No comment. Actually, that’s a lie: how about that stupid email list? I emailed Jimbo and his sidekick and offered them MetaMojo.com (which I pretty much discontinued to focus on WatchMojo.com, wisely), which was based on Nutch/Lucene and they could not even explain what they were up to.
Wales might be a God for investing Wikipedia, but this search project has disaster written all over it. More on Wikisearchwhatever and Mahalo here.
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?
Let me guess, Jason Calacanis had a 3-year non-compete, right?
Why do I say this:
- AOL bought Weblogs in early October 2005.
- We’re now October 10 2008.
- By turning his latest venture Mahalo into a “live blog / news service”, Mahalo is now pretty much like Weblogs, no?
That, or the weight of a $16M investment on a $100M post-money valuation is forcing them to add new tactics to the gameplan.
What do you think?
Today is Sunday. I sure wish I could hop in my car, drive to the ballpark and catch the Montreal Expos. Problem is, it won’t happen. It can’t. That train long left the building. The only way it might happen is if I come across over $500M to buy a franchise and build a new ballpark. Even then, I need to move fast because in a decade, baseball will be a footnote in this city’s history.
How on earth does this relate to the search marketplace? Just because one might desire something does not mean it will happen.
Everyone agrees that it’s good to have some kind of competition against Google’s march towards a checkmate situation in search (on the desktop). The problem is, it’s too late.
#1 - We’ve already explained why Google was a one-in-a-million, perfect storm, lightning-won’t-strike-twice kind of business case.
#2 - We’ve also expressed why search startups - including our own MetaMojo.com, but thinking mainly of others suck as Haika, PoweRset, Mahalo, Eurekster etc. - will have very hard times. Mainly: an economic and user behavior-driven impossibility to gain distribution. And second, their only lifeline to survival is a deal with, you guessed it, Google.
A Better Mousetrap?
In search, the history has been quite simple.
2005 Buzzword: Vertical search;
2006 Buzzword: Social search;
2007 Buzzword: Natural language search;
Yet the result in 2008 remains the same: Google is stronger than ever without really banking on any of those trends.
When we built MetaMojo.com, it was a bet first on the theory of vertical search. Basically, you search for Madrid, you should get the best results from best-of-breed travel sources; you search for prostate cancer, ditto health sources.
The first problem? Distribution
No one would leave Google to search on MetaMojo.com (that was not surprising). So we initially launched a myriad of blogs (which became the BloggerMojo.com network) in order to showcase the search results and convince other bloggers to use it, too.
The second problem? Economics
You cannot possibly expect to survive by being in both the content and search spaces, each one deserves its own focus. Incidentally, another unit of ours in content - the WatchMojo.com video property and mainly, syndication network - took off, reducing our own appetite to have our asses kicked by Google/Yahoo/Ask/MSFT.
Of course then, the idea was then to have other blogs do this, not only have our blogs feature MetaMojo.com.
The problem? Google comes with a built-in monetization engine, too… meaning that no site operator in their right mind would pick us over Google. Our strategy (I won’t get into it all) was to then layer a set of personalization and social media bells and whistles. We didn’t, because then Jimmy Wales’ Wikia began to make noise and despite the challenges it would invariably face, I made the decision to focus 100% on WatchMojo.com and leave search for the major players with VC-backed resources.
Monetization is moot if you don’t have distribution: an audience and thus, search volume. This is why MSFT wanted to buy Yahoo!, because it could hit 30% market share, a threshold at which you can become a meaningful player in the market.
Of course, bear in mind that once you have distribution, it’s very easy for one of those Big Four to simply emulate the one bell or whistle you have. Within months, Google launched Co-op which basically gave no site or person to even consider using MetaMojo.com.
The End Game for Google Competitors Remains the Same
MetaMojo.com was always a toy while WatchMojo.com launched… I still think that we could have built a very solid vertical search product with considerable social media attributes but the problem is, even had MetaMojo.com been able to get off the ground, ultimately, the end-game ain’t pleasant. How do I know? A bit of revisionist history?
Nope. Let’s look at one of those wanna-be search competitors, Eurekster.
Eurekster essentially did what I wanted to do in the distribution sense: getting sites to use it. The problem is, even with a number of sites using it, it’s now in the deadpool. I am not sure how long it will remain in the deadpool… but ultimately, Google has built a perfect 1-2 combination punch that proves lethal in that it has locked up distribution and monetization in search, desktop search, that is.
Indeed, Google is the 21st century version to Microsoft and Standard Oil (and it very well might be more valuable soon). But I don’t see a problem, personally.
Sure, an argument could be made that Google (search product) and AdSense/AdWords need to be spun off to create a healthy and competitive market. I am not sure that argument is fair. But that’s another issue.
A Brave New World: Mobile,Wireless Search
Wireless is the biggest pile of hype before/after social networking (before in terms of chronology, after in terms of rank)… when it comes to advertising-supported business models.
However, wireless presents a brave new world, a new frontier, so to speak, for search. The one area where Google could become an after-thought, frankly, is in wireless search.
As such, when Mahalo raises $16M, or PoweRset gets all of this hype (when others like Cognition seem to be doing more, for longer periods of time), etc., I wonder, why bust a nut over something that is already over… why not put all of those resources in wireless (in fact, Mahalo might be scaling, but it’s scaling in the wrong direction).
Then again, maybe mobile search is also a big pile of hype, too?
I doubt it. I say right now video is the killer app, but the idea to search anything at anytime on a wireless devices and get the info I need is arguably a bigger killer app than video…
Jason Calacanis goes crazy this morning… but I wonder if he realizes the irony of his attack on YHOO.
First, his beef:
Yahoo made a huge critical blunder today: they decided to compete with their customers. Today they launched a content site called Shine dedicated to women. It looks really slick, and they make a point of talking about all the great editors they have working on it from Jane and the Wall Street Journal.
Anyway, back to Shine: wow, really dumb idea on Yahoo part. I would kill myself if I was running the publisher network right now. Can you imagine what it would be like to go to WSJ, Jane, iVillage, Glam, or Sugar publishing and try and get them to support Yahoo services?
- Yahoo sale person: “Hello, I from Yahoo. We would like you to use Yahoo Publisher Network and share ad revenue with you”
- Glam/Sugar/Jane/publisher “oh, really? That’s great! I hope you take the profits and put them into your competing content site that will drink our milkshake!”
- Yahoo sale person: ” You bet! We will drink it up…. we will drink your milkshake.”
When Microsoft takes over Yahoo this will create even more problems. MSN/Live is trying to compete with Google AdSense and Yahoo’s blunder is going to feed right into Google’s “we won’t compete with publishers” position.
If I was running a women’s site today I would make a point of puling everything I have off of Yahoo and building a voting block of women’s sites to do the same. If Yahoo wants to go “winner take all” that’s their right, but the niche content sites should stand up for themselves and vote with their partnership dollars for a true partner who doesn’t run off with your business in the night.
Someone please explain to me why they would do something so dumb right now. Rafat Ali? Kara Swisher? Mike Arrington? Om Malik? Henry Blodget? Someone please clue me in… because this seems so dumb I can’t understand it.
Second, this is hypocritical.
Let me explain. Yahoo! did this for the same reason Mahalo.com started off creating pages linking out to 7 websites per a given topic… and then after a while decided to create full articles on said topics.
Pretty much like this vs. this.
Content is king. Having a page with links out (gee, sort of like YHOO and Mahalo 1.0) is somewhat limiting… but having a page with actual content is slightly more valuable. Jason, you of all people should know this.
I appreciate the nuance that Yahoo! has an ad network for publishers, but that is no Google network. In fact, this is no different Google.com competing with Google’s network for ad revenue (if a client’s ad budget is tapped, it’s tapped, after all).
To boot: Yahoo can leverage Shine to get more ad dollars for themselves and for their publisher partners.
I do agree that Yahoo!’s excessive hail marries are starting to seem desperate, but this move in of itself is not all that dumb.
Disclosure: long YHOO stock… but trust me, no one enjoys criticizing YHOO more than I do.
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.
Sometimes, the nicest things you can say about someone come across as awfully critical. I say that because this post actually is intended to give a lot of credit to both Jason Calacanis and Jimmy Wales, but a cynic would argue it strives to do the opposite.
This morning it occured to me that Jimmy Wales might have blown his opportunity for redemption, before he even had a chance. I’m hoping I’ll be proven wrong, but we’ll say.
The Background?
Last year, between Christmas and New Year’s, Wikipedia co-founder Jimmy Wales said that he was looking to rely on humans and open source technology to build a Google-killing search engine. That raised a lot of eyebrows, but it got a lot of people excited. Over the next few months, people rushed to join his army of developers in the attempt to develop an open-source search engine built by legions of programmers. That’s right, people signed up to a mailing list and got cracking. I always wondered: how many Google employees signed up to that list, too?
Frankly, from the get-go, it was a hazy objective with a murky action plan. To his credit, Wales had built one of the most successful social media properties in Wikipedia.org, the world’s largest free encyclopedia, relying on wiki software that allows everyone and anyone to make changes to a text.
Wikia = a for profit Wikipedia
When the plans were being conceived, people were confused as to Wikipedia.org’s role in the new startup, whose name, it was reported by Wikiasari, then Wikia Search. Wikia was the for-profit company Wales had set up to develop wiki-powered communities. By the looks of it today, the name of his search is Wikia Search, though we could be wrong and this could change.
All Quiet on the Inbox Front?
Sometime in February or March 2007, I was going to publish a cynical post wondering if all of the members on the mailist list had been kidnapped, because I went one whole day without getting an email. At its peak, subscribers would get bombarded with 20-30 emails per day with everyone chiming in on everything you can imagine. It would start off with someone introducing themselves, why they wanted to collaborate and what they saw as a problem with the current search landscape. It was information overload but a great social experiment. Things have settled down now, but you still get the odd flurry of emails, usually when there is something in the news that touches on the project.
Enter a New Incumbent
In all honestly, this mailing list information overload phenomenon led me to realize why Google was successful: there were only two guys early on. It was easy to get things done. Ultimately, I thought, Wikia Search’s biggest drawback was its greatest strength. The wisdom of the crowds theory was making it unlikely for anything to get done, at least on the surface.
Over the subsequent months, web entrepreneur Jason Calacanis - who had founded and ran Silicon Alley Reporter in the late 1990s and sold his second startup Weblogs Inc. to AOL for $25M - encouraged Wales to embrace advertising on Wikipedia. That prompted me to publish “What would Wikipedia.org be worth as a for-profit,” which got a lot of people excited about the commercial upside of Wikipedia.org. Calacanis was one of them.
What If…
But, because Wikipedia.org had launched as a non-profit, it had to remain as such, and Wales to this say maintains, quite honorably and candidly, that launching Wikipedia.org as a non-profit was his best and / or worst decision ever. No doubt, Wikipedia.org would have maybe not become as big had it been a for-profit, but then seeing socially-edited content sites like Digg and YouTube explode run counter to that assertion… what if Wikipedia.org had been a for-profit all along?
With that thought in the back of Wales’ mind, he sought out to start a new company, one that was structured outside of Wikipedia.org, but built on a lot of the tangible and intangible tenets thereof, that would become his brass ring.
Man’s Hubris: Search
And in order not to try to re-invent the wheel - though technically he was doing that too, with Wikia - Wales decided to tackle search. I’ve long stated that search is the hubris of the Web entrepreneur.
Why, I thought, would someone with Wales’ mythical stature risk it all to lose to Google in search? And lose badly?
By way of disclosure: I should state that I too developed a search engine, called MetaMojo.com, but I did so out of a personal interest as a hobby, and because it was something that would not violate my employment and non-competition agreement. Today, I spend a good amount of my time and energy on search, but the bulk of it goes to video, a far more nascent field when we’ve already developed a leadership position.
After all, search, while still a somewhat new sector of the overall communications and commercial economy is a more mature space. Oh, there’s also a massive player in the room called Google that has gone from $0 to a market cap of $160B in less than ten years, which last year generated $10B in revenues, over $3 billion in profits and could at current growth rates surpass Microsoft in market valuation by 2010, maybe at least.
Enter the Naysayers
Wales was not only ridiculed by many for attempting to create a Google-killer out of thin air, but he also has been criticized in the past six months for what comes across as inaction. As the mailing list at Wikia Search expands every day, people become impatient and Wales himself has frequently stated that “you can’t build a search engine like his overnight.”
To his credit, he recently hired Jabber founder Jeremie Miller to spearhead the project. I say this to emphasize: no doubt Wikia Search is making a lot of inroads and advancing, and there’s plenty of time left in search, but clearly, others are not standing still.
Thank You for nothing!
Of course, as excitement and innocence surrounding that mailing list gave way to cynicism and frustration, others have not sat still. Today’s New York Times article on search and the human touch should have technically talked mainly about Wales’ project, be it Wikpedia or Wikia Search. But instead, it does not, it touched on Jason Calacanis’ Mahalo. And not too long after someone in that same venerable mailing list sent the article around, another subscriber asked:
I am not sure if something similar like Mahalo (e.g.
http://www.mahalo.com/Java) was considered by Wikia.It seems to me that their way of providing search results is closely
related to the idea of a public Wiki.
I wonder what the reactions of both Calacanis and Wales were after that email was opened. Surely, Calacanis must have grinned when he clicked and opened that message, and Wales must have been somewhat miffed, for Calacanis is surely combining a lot of the elements of Wikipedia into his new project, Mahalo. I’m not saying that Calacanis borrowed from Wikipedia, though the use of wiki software, the human-compiled database etc., are all signature tactics of Wikipedia.org, though clearly by way of its open source status, not proprietary to it.
What Could Have Been?
It should also be stated, that had Wales long ago encouraged Wikipedia editors to add the most relevant and pertinent links for each topic, it would already have a human-compiled search engine directory consisting of millions upon millions of web sites. Of course the same things that plagued Yahoo! Directory, Looksmart, DMOZ and that will plague Mahalo would threaten it, but as it stands now, you can’t help but think that Calacanis pulled a Digg/Netscape 2 by borrowing heavily from Wales’ baby and applying to search at Mahalo.com. In no shape, form or fashion does this imply that they two are directly competing etc., but when I opened that email this morning (yes, I’m on the list) my reaction was: “Wales must not be smiling.”
Heavy Backers
While Wales was able to secure funding from the likes of Amazon.com and raised $3.5M for his search project, Mahalo raised a massive $16M on a valuation on $100M. That is an insane amount of money for a startup that many will ridicule as Looksmart or Squidoo, or even Chacha, all companies with many obstacles in the marketplace and no real strategy to be relevant.
In Search, Distribution is Everything
After all, the key consideration in search is not the quality of the algorithm, size of the index etc., but rather the distribution thereof.
While Wales had been openly talking about his new search engine since Christmas in a mailing list, Calacanis was coy. It was only recently that Valleywag eerily accurately described Calacanis’ project that the details came to light. Shortly thereafter, Calacanis unveiled Mahalo.com and the naysayers outnumbered the believers quite a bit.
I’m still not sure of how relevant Mahalo.com or Wikia Search will be, frankly. I do think however, that by having secured Sequoia as a backer, Calacanis has managed to ensure his company’s exit before Wales even hits the entrance.
Of course, if distribution is king in search, then Wales cannot be written off, since adding Wikia Search (whenever it launches) across the sprawling Wikipedia.org site would overnight create a winner out of his project, too.
The lesson, I suppose, is that online advertising is only starting to come to fruition so even the laggards in the space might have better prospects than the winners of many of the new segments of online commerce and communications that many are getting over-excited about.
Redeye VC Josh Kopelman beat me to it, but indeed, everything that is old is new again.
Let’s get a few things out of the way:
Jason Calacanis is one helluva promoter. Between Silicon Alley Reporter and Weblogs Inc. (the latter which sold to AOL for $25M), Calacanis has a unique track record. Let me also say this: Jason - who posted about the launch on his blog - might very well succeed in a few ways because he’s got willpower en masse.
That track record - we think - is what prompted an all-star cast of investors to invest in Mahalo, his latest venture that he’s been working on since January 2, 2007.
What is Mahalo?
Mahalo - meaning Thank you - is essentially a new venture-backed player in search, directories and navigation. It’s in fact a contrarian play in the space, arguing that human beings can do a better job at finding what people want than technology.
For the record, we think in theory this makes sense, but by the time you finish updating the results page for a given keyword, the results are outdated, or worse, listing dead links.
A who’s who list of investors
The investors range from my old employer News Corp., to lead investor Sequoia, along with VC superstar Fred Wilson (not sure if this was as an individual or on behalf of his fund Union Square Ventures), along with random investors like German-based publisher Burda (yes, the Burda your mom laid out for you), deal-happy CBS, X.com/Paypal shareholder/spaceman Elon Musk and of course, Mark Cuban who seems sold on Calacanis.
We don’t think, for a New York minute, that any other entrepreneur would have been able to raise the amount of money that in JC’s words will allow him to “to run the company for at least five years without any revenue.”
Rumor has it he raised $20M on a $100M valuation, according to an earlier report on Valleywag, who has developed a strong accuracy rating of late…
It’s a good thing, because every possible factor suggests that Mahalo will flop. Will it? Well, not so fast. I swear that we’re not being critical, this post is actually a
- Jason Calacanis is in a league of his own for having convinced people that this could work AND
- Jason Calacanis is one of a handful of people to make this work.
I don’t dole out compliments like this, so to dole it out, I must be somewhat critical on some blaring problems I have (and we’re not alone):
But make no mistake about it: for investors to get a positive return on this will take a Doug Flutie-esque hail marry miracle. More on this below.
Let’s proceed:
a) Been there, done that
Mahalo comes across as a cross between:
- About.com and
- Magellan
We know About.com. Magellan faded into oblivion for many of the reasons that the odds are stacked against Mahalo.
But, the flip side is, MySpace was Geocities 2.0 and it’s the most successful startup of the last 10 years - Facebook euphoria of the past week notwithstanding.
Moreover, all directories ceased to exist and paved the way for algorithsm: Looksmart bought Wisenut, Yahoo! bought Inktomi. There was a reason for that, no?
b) Mahalo seems way too labor intensive to pass any test of common sense.
Google crushed everyone because of, well, the algorithm. Ask flopped because it did not have one (despite the new, eerie ad campaign Mr. Diller). Yahoo! too suffered because it lacked an algorith. Magellan vanished.
The trend, clearly, is that the pace of content being created FAR outstrips any rate of indexing by people. Which takes us to the next point.
c) Mahalo is not a search engine, it’s a directory…
Which is fine, but this begs the question: why not call a duck if it walks like one, quacks like one, etc. Because ducks are oftentimes lame and Calacanis does not want to associate his new puppy with multiples bestowed on directories, but rather, search.
Don Dodge recently posted about how 1% market share in search can translate to $1B-$3B in market value. Well, Google has 55% market share, Yahoo! 27%, MSN has 10%, Ask about 5%, AOL ditto, which means that the remaining 45 in the top 50 have 1%.
Will Mahalo be able to get even 1% by that magical 5 years before it runs out of money?
Probably not. But Calacanis has the track record to prove us all wrong… though I’ve written before that search seems to be mankind’s hubris. Why else would Wikipedia founder Jimmy Wales risk his Midas reputation on Wikia, something that confuses even the most reputable of media?
Considering how tight this space already is - plus the entries of players like Powerset, Wikia, and of course, MetaMojo.com (yes, I’m kidding, sort of - read disclaimer at the end) - within five years, Mahalo might at the very most get 1% market share. Since it won’t be a destination, in Jason’s own words, then he won’t command the $1B market share Don Dodge outlined, but closer to $500M, at most, IN FIVE YEARS! And that’s IF he hits 0.5% market share. But pause for a second and ask yourself how many companies in search are worth $500M despite being in search for decades: Infospace? Enterprise value of $250M. Answers.com? On Google’s results page… market cap? $120M. Looksmart, the original directory: $47M enterprise value. Mamma? $60M. Here’s a rundown of search players I posted just yesterday.
The search destinations #6 through 50 command 1% folks! So IF Jason can ramp this up - despite no distribution - then this will be worth $500M, in theory. That, people, assumes a decent monetization strategy. But if Jason is planning on riding his entity without worrying about revenue, them cut that in half, at least, if not more. The investors probably came in at a valuation touching $100M. If they think this is a good risk/return ratio, more power to them. Just wait until more money is needed for staff, rent, etc.
Problem? Jason has 40 staffers - not IT folks - but artists essentially (based on the description), burning through the VC money. To get into the black, this puppy will need more money, since the demand for Web talent is increasing, particularly in places like the US…
Which introduces problem #2: Jason should have focused on global, and not US search/advertising. Yet his plans call to focus on what Americans search for. That’s nice and dandy, if the gameplan was being drafted, well, in 1996. Quick example of what I mean: Canada has 1/10th of US’ population, yet US commands 16x the ad revenue. That will converge over time. The openings are in global, non English markets.
What Mahalo will do, probably, is make a lot of noise with the blogger community, the digerati and technorati but the masses - those who made google a verb (hence the lower case) - won’t care because Jason Calacanis is as familar to them as Mahalo is. Of course, Google wasn’t a household name either, but that was back in 1999 when search was boring and everyone was leaving the space. ’tis not the case today.
But we’re not boosters here, we’re trying to offer candid observations, and on the surface, the only thing Mahalo has going for itself is Calacanis himself.
If you doubt me, ask yourself this:
- How different is Mahalo from Chacha, fundamentally?
- How different is Mahalo from the 80% of startups that Michael Arrington covers with brazen bravado and hoopla, only to disappear or end up in the deadpool? Here’s his coverage of Mahalo, by the way.
The Web, clearly, is becoming a cess pool of sorts, because there is no logical reason why such marquee investors would back a labor-intensive project like this.
Frankly, Jason just confirmed something that I’ve realized. Unless your sole motivation is money, as an entrepreneur you are better off selling your company, securing a nice exit, and moving on to the next great thing. Had Calacanis held on to Weblogs, sure, he could sell it for more, but the currency of saying “I’ve pulled off a successful exit” is worth more than money. And, as a side note, the currency of saying “I was the founder/CEO in an exit” is miles greater than just being on the executive team… but we’re sidestepping way too much.
In fact, in the very best case scenario, Mahalo will be a version of:
- Wikipedia and
- Netscape 2.0
Ironically, Calacanis was running Netscape, and if he could not make that into a success despite AOL’s billions, how could Mahalo - with no distribution - survive? Distribution is everything in search. Ask is trying to get is by advertising. Google did it via Yahoo! Wikia has a chance - if it sees the light of day - due to Wikipedia’s traffic. What’s Mahalo’s plan? Even investors like CBS and News Corp. will balk at using Mahalo on their portals because in the former at least, Google is paying a whopping $900M to power ads.
I’d like to reiterate, every few paragraphs, that Calacanis can make this work. Weblogs was not an obvious model either, but he made the numbers add up. The problem, was that Weblogs was content, this is not. For this to work, it needs distribution, and I just don’t see it happening.
Mahalo, is, in fact, a contrarian bet on web search: while Powerset, Podzinger, and the many other search engines try to improve on technology, Mahalo turns a blind eye, arguing that 24% of the top searches are a result of the top queries. Perhaps, but staying on top of those queries is a freaking challenge. Mahalo’s top results will within weeks become irrelevant.
We’ve put in a request for an interview, will keep you posted. We don’t think JC will give us one, which is a shame, because we genuinely want Jason to do well… it just put MetaMojo.com into play as a very valuable asset. After all, we index a million times more pages than Mahalo does… and we swear, even if we didn’t run MetaMojo.com, we’d write the exact same thing.
Disclaimer: Mojo Supreme, our parent company, runs the MetaMojo.com vertical search engine, not quite a competitor of Mahalo, since, well, it’s actually a search engine. Jokes aside, its high-quality results, retrieved from best of breed sources based on the category would make a nice addition to Mahalo - and any search engine’s - results page. But my point was: distribution is key, we use MetaMojo.com in the Mojo Supreme network and that has helped search queries skyrocket. Without a distribution angle, any new search engine is DOA, in our humble opinion.
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