MappingTheWeb //

There has been a huge fuss about TechCrunch’s valuation and a possible buy-out from CNET. A $100 million price tag has been tossed around and Arrington has joked about the whole situation. Rumours and possible acquisitors aside, let’s explore a deeper issue - the valuation. Digging even deeper, let’s take a look at how a blog (in particular) should be valued. Surprisingly enough, I’m not even going to use numbers.

Where does the true value of a blog come from? The content. Where does the content come from? The publisher. In the case of a multi-author blog, the true value is traced back to the original publisher. So what am I trying to say? A blog is worthless without the original publisher. Or, in this case, TechCrunch is worthless without Mike Arrington. You can strap a $100 million or $500 million price tag on the blog, but all goodwill is lost when the Arrington leaves. I think this is true for any blog. The user base is built around the style and perspective of the creator. All subsequent authors can try to mimick the original style, but it truly cannot be copied.

If CNET does buy TechCrunch, I doubt Arrington will be around for long. My guess is that he’s looking to pursue more exciting and captivating opportunities. If this does happen, what’s the outcome? Well, CNET will have bought the most expensive content management system in history.

NOTE: This post wasn’t meant to put down any of the other publishers or authors of TechCrunch. In fact, I have quite enjoyed most of their work. All I am illustrating is the need for the creator.

Once again, Facebook rumours are all the talk in the blogosphere. The newest gossip, courtesy of the Wall Street Journal, states that Microsoft is in talks to buy a 5% stake in Facebook for a reported $300-500 million. But the plot thickens… The article goes on to say that Google may also be interested in buying a stake of its own, further upping the ante.

Surprisingly, we’re not hearing about any full-blown acquisition rumours anymore. Why not? No-one can afford the damn company anymore. Apparently, Microsoft is pegging the social network at a current valuation of $10 billion. Are you kidding me? The company is only slated to pull in $150 million in revenues this year. Now, I’m not a financial analyst, but I can tell you that such an amount is rather ridiculous based on historical valuation methods. Furthermore, previous acquisition talks this year started at $1 billion and escalated to a seemingly preposturous $6 billion.

And get this… Facebook may be turning down the high profile deal in hopes of attaining a $15 billion valuation. Yes, you heard me right. The bubble may be closer than we think. Either that or Zuckerberg’s ego has ballooned to Donald Trump-like proportions.

Is it just me or is web 2.0 suffering from a stagnant lapse? Don’t get me wrong - I love the concept of web 2.0 and social media. That definitely isn’t the problem. The lack of innovation and inferior business models are what bother me most. Add to that the fact that ideas are being ripped off and clones are abundant. Honestly, do we need another social bookmarking site or a generic video portal?

This lack of creativity and thought around business models is quite discouraging. A business plan full of buzz words and a flashy PowerPoint just don’t cut it anymore. What users really want is value; they want a service they can use. This seems obvious, but I can’t believe how many ridiculous ideas continue to be funded.

What about revenue models? We all know that a majority of start-ups are dependent upon Google ads as their key income generator. Truly, this is not a sustainable model. Unless a given property is able to generate millions of page views a month, then such a model is impractical. Creating a paid service isn’t difficult. Creating a truly compelling service and convincing the customer that it’s worth the price is the hard part. If there is a stunning value proposition for the end user, they will pay. One thing to keep in mind is the general trend that (almost) all Internet services eventually progress to free.

Having said all that, I am optimistic that the tables will turn. Despite all the clutter in the web 2.0 space, we have witnessed the growth of some remarkable start-ups over the past year, most notably Twitter. I refuse to use the term ‘bubble’ in this context, but I do believe that changes are in the pipeline. Funding will become more scarce and investors will become more selective. Hopefully this will weed out the crap and pave the way for innovative new ideas. Let’s keep our fingers crossed.

As Mark Evans points out in a recent post, there is a Facebook application “gold rush” taking place right now. Everyone and their dog is scrambling to launch an app to capitalize on this fad opportunity. Many are seeing astonishing growth - from zero to tens of thousands of users in a mere couple days. But is this truly sustainable? Even more importantly, is it really worth it? I don’t think so. But don’t tell that to Facebook or the application creators.

Anything that vaults to stratospheric popularity levels in a short period of time is bound to see a fall-out or backlash of some kind eventually. In this case, the novelty of apps will eventually wear off. Some may disagree, but I would wager that ’superpoking’ and ‘throwing food’ are only cool for so long. Frankly, I’m already tired of all these ridiculous app invites after only a couple months.

The promise of monetization or a sale is what is driving this boom. But let’s be honest here - how many will actually profit from a sale or achieve reasonable revenues? My guess is under 1%. In other words, Facebook is almost creating a false sense of hope for developers. Subsequently, facebook profits from additional PR, user growth, and developer evangelism.

To me, Facebook applications are no more than a marketing funnel to an outside web presence. If you plan on making the app the entire business, you are walking a dangerously fine line. Forever more, you will be at the mercy of Facebook. If they decide to change course, you could be screwed.

My intuition tells me that the introduction of the developer platform was simply a move by the company to create short terms success and fuel PR ahead of an IPO or potential sale. Let’s analyze this further:

1. Facebook launches the developer platform.
2. Developers experience exponential growth and boast about their success.
3. The press takes notice; widespread PR ensues.
4. More developers jump on the bandwagon.
5. A positive feedback loop is created: success feeds PR, which fuels further applications. Repeat.
6. Eventually, a bubble is created as the app market is saturated and over-crowded. The dilution leads to a fall-out.

In other words, I believe that the developer platform is a short term ’stunt’ to raise awareness and exposure for the company. Over the long term, I see the move as being more detrimental than beneficial. I, for one, am already starting to get disgruntled by the addition of clutter and useless knick-knacks. The Facebook crowd, for the most part, is an older group. Such silly applications should be left for the MySpace or hi5 crowd. They degrade the quality of the experience. A seeming endless amount of scrolling is now needed to browse most profile pages. Is this the Facebook that we all remember?

Note: I refuse to make any parallels to MySpace or Geocities just yet…

Today, News Corp and NBC Universal announced the name of their much anticipated YouTube killer - Hulu. A couple of weeks ago, the unnamed venture raised $100 million via Providence Equity Partners in exchange for 10% of the company. A quick math calculation equates the valuation to a whopping $1 billion. While many scoffed at this ridiculous valuation, I’m not so quick to count out this potential industry player.

Why is YouTube as big as it is? Obviously their video widget provided a viral marketing channel, but that only funnels potential users to the site. It still doesn’t explain the ’stickiness’ and allure of the video-sharing portal. Nonetheless, it quickly becomes clear that illegal content is the driving force. YouTube is nothing with it. Millions of users hit the site everyday to watch music videos, TV shows, and movie clips. Not many care that Joe from Connecticut can juggle. The only exception I can think of are how-to videos. These non-commercial, useful UGC clips provide value to the viewer, regardless of whether you know the creator or not.

So how can Hulu compete against YouTube and the other big boys? Simple. Hulu has one thing that nearly all of other video sharing sites lack - the rights to production-quality content*. Sure, YouTube and others will continue to stream illegal content, but is this truly a sustainable long-term strategy? I’m not so convinced. What catapulted YouTube to the top in the first place may ultimately lead to its demise in the end. This is imminent flaw of social media. Just ask Digg.

So now anyone can watch legitimate, high-quality episodes of Heroes, madTV, 24, The Office, Family Guy, and Las Vegas (to name a few) for free, on-demand, anywhere in the world? Sounds pretty compelling to me. What does all this mean for traditional TV? Well, traditional folk can still view News Corp/NBC programming via the old tube, whereas tech-savvy users will turn to the Internet. Moreover, if you were to miss a given episode on TV or you happened stuck in Kenya without a TV, you can still tune in and watch on Hulu.

This brings up another huge advantage that Hulu has over the competition - a stunning revenue model. Hulu can command huge ad dollars and premium CPMs as they have complete control over the content. Furthermore, the site can leverage pre-existing relationships with advertisers at News Corp and NBC Universal. As opposed to traditional TV where viewers can’t click or ‘follow’ the ads, this form of programming is interactive and opens the door to new advertising opportunities. This conversion process is not only more effective, but also measurable.

It’s still too early to speculate the potential features and functionality of the offering. For what it’s worth, the portal may only stream old episodes or segments of episodes. I highly doubt this, but we will soon find out. Hulu isn’t currently operational. The home page is simply a landing page where interested parties can enter their e-mail to get a sneak peek of the BETA product when the time comes (apparently sometime in October according to Hulu).

I look forward to catching of glimpse of this potential industry-changing venture. Many aren’t giving it a chance, but I wouldn’t be so quick to make a judgment just yet.

*Note: As far as I know, there will be no user-generated content (UGC) on the site. It will strictly consist of company-owned premium content. Please inform me if you know otherwise.