October 8, 2005

How do we value a blog site?

Filed under: blog,Podcasting,Web 2.0 — Administrator @ 11:03 pm

…I was thinking back to 1998 when my friend Frank Yu and I started our very first blog community called AsiaInsider.com…the idea was to build a network of localized news aggregators (e.g., JapanInsider.com, ChinaInsider.com, etc)…the value add being our “personal perspectives and insights”…

…this was just before RSS/XML was common place…and since neither Frank nor I were smart enough to program a solution to aggregate the news stories for us we did this manually…this was a lot of work and in the end an unsustainable and unprofitable model…and so, sadly, we closed down our Insider.com empire in 2000 and melted back into society…

…only to reemerge five-years later…rubbing ours eyes and wondering what is so different today then yesterday? Is there a new revenue model? Did people get smarter? Are more interesting things happening in the world? Did technology make a quantum leap? Maybe the answer is both…”all of the above” and “none of the above”.

…why guess when we have cold hard data to look at…thanks to a recent Technorati and PR firm Edelman blog survey conducted a couple months ago and given to bloggers…

…the results are interesting, here are the highlights: (1) Less than 5% of bloggers are in the game to make money; (2) the main driver for blogging is that these guys want to either record their thoughts or gain “viability as an authority” in their field; and (3) more than 70% would like product sample given to them from companies so that they have the opportunity to evaluate the products and report their findings on their blogs…

…to be honest, this isn’t all that surprising since early adopters of blogs tend to be professionals with full-time jobs, industry knowledge leaders, and/or university students…so I guess the question is, “how the hell is anyone going to make money investing in a blog?” There might be a model is charging companies to offer their products to bloggers for their review (sort of a quasi advertising model); of course, there are drawbacks and limitation (don’t shot me, I was just giving a suggestion)…

…In the past couple days/months we’ve seen high profile acquisitions/investments, such as AOL’s purchase of two-year old Weblogs Inc for somewhere between US$25m and US$40m. Closer to home we saw four venture capital funds (two with limited China exposure), Granite Global, Mobius, SAIF and Bessemer, invest US$10m on a (rumoured) US$20m pre-money valuation in Beijing-based Bokee.com (formerly BlogChina)…

…I bring all this up because I’m looking at this space now and wondering how best to make money and how best to value these companies?

…On the rev side I think Weblogs Inc has an interesting model, but I also think you can look at vertical sites that incorporate vitural communities and “web-ucation” (okay, e-learning)…I don’t know if we are ready for downloading ringtones from RSS feeds, but maybe?

…On the valuation side…well..before I get all Graham and Dodd on you…I want to point to a quick study that Tristan Louis did on the back of theTime Warner/AOL Weblogs deal. Tristan looks at the value of the AOL-Weblogs deal as a function of the number of links to each blog in the network–a proxy for the conversation–as opposed to the raw traffic (a sort of PageRank vs. pageview valuation)…if you work through all the math you get Time Warner paying about US$600 per link…

…Again, an intersting valuation approach, especially if you pair it up with a fundamental look at the companies bits and pieces, such as revenue, earning, pageviews, management and growth…anyhow, I just trying to figure out how not to pay 10x something when I’m trying to exit on 10x something…

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