Bloggers Raising Money: Smart or Shortsighted?

There’s a wave of blog fundings going on, and with any new infusing of capital comes an infusion of discussion, rants, and general grab-assing. Here’s a quick summary plus the take of one guy (me) who was in the eye of the storm during the previous silicon valley funding bubble.

In 2006, a few blogging-as-a-business setups were out hunting for growth capital, but we were looking at a mere trickle of funding. That all changed in 2007: GigaOm took in a cool million, Xconomy and BlogHer funded at $3.5 million, and both Sugar and The Huffington Post hooked up $10 million a piece. Quick math – that’s almost $30 million there, and presumably since VCs are usually looking to cash in a 10x payout, that would place their expectations at $300 million.  For comparison’s sake, the venerable NY Times is sitting at about a 2.8 billion market cap.

Mike Arrington’s contention is that the blogosphere is more like a grade school playground where fist fights break out all the time, and he contends that blogs need to grow up. Oh, and the blogosphere is an ecosystem dependent on small and mid size players, and that the big blog funding will suck up all the talent, screwing up the ecosystem. Hence the “A list” should consolidate and take on the likes of Cnet. “Phooey” says Robert Scoble – no great accomplishment ever started with a mission statement stating “crush the other guy” (btw: note to Robert – we did in fact race to the moon to beat the Soviets, hence the term “space race”).

It makes sense to have content creators rise to the top, while ranters throwing stones in response to long forgotten insults sideline themselves, for sure. Here’s a pragmatic question though: who’s going to unite the dream team Mike? Did you have a specific blog in mind? Hmm. Anyway, who would subrogate their ego and become a cog in the 250? Unless there is a dearth of money and eyeballs, most of these bloggers will want to roll their own. It’s just like any other growth industry – a shakeout usually happens when the market potential comes close to “ripe”. Read between the lines, intrepid reader.

As for the blog ecosystem, the hope is that we’ll benefit from the infusion of new bloggers to link early and link often to counter the “giant sucking sound” as the brightest get bought up by the machine. I believe this will happen since blog adoption is likely to keep growing fast, but of course time will tell. The other point seems to be that most of these blogs will not live up to VC-optimistic revenue expectations, but come on – we know that’s by design. VCs are often lucky to have 1 in 10 investments become wildly successful and plan accordingly. Eventually rolling up many of the successful blogs into one or two big mega networks is eventually the endgame and VC involvement makes things pricey for the roller-upper. That’s the real rant.

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This entry was published on March 20, 2008 at 2:13 PM. It’s filed under Uncategorized and tagged , , . Bookmark the permalink. Follow any comments here with the RSS feed for this post.

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