Doing the numbers on the AOL-WeblogsInc deal

AOL bought Weblogs inc., the two year old weblog network founded by Jason Calacanis and Brian Alvey, for a number that is rumored to be anywhere between $25 million and $40 million. In this process, Time Warner may be providing some ideas as to the valuation of blogs by traditional media.

The power of the network and links

Many in the blogosphere say that traffic is not a good measure of what blogs are but that conversation, as represented by links and indexes like Technorati, represent a more accurate view of the value of a blog. As a result, I decided to look at how may sites were linking to sites in the WeblogInc empire. Jason and Brian have been doing a great job at building a stable of blogs but it seems a large portion of their success comes from a single blog. Let’s dig into the numbers.

In the following table, I took a look at the list of blogs listed on the weblogs Inc. main site and ran the Technorati site numbers against them (duplicate entries in the weblogsinc list were removed as well as entries that pointed to sites which no longer exist).

Weblogs Inc. BlogsTechnorati Sources
Consumer
AdJab593
Autoblog1,573
AutoblogSpanish129
AutoblogChinese18
AutoblogSimplified Chinese27
BloggingBaby518
CardSquad193
Cinematical1,118
DownloadSquad1,041
Divester(scuba)240
Engadget13,354
EngadgetChinese348
EngadgetSimplified Chinese37
EngadgetJapanese518
EngadgetSpanish334
Gadling461
hack aday1,906
HD Beat206
Joystiq1,740
Luxist430
PVR Wire233
Slashfood288
TUAW(Apple)1,853
TV Squad1,090
Technology
CSSInsider147
Digital Photography301
FlashInsider224
Google(Unofficial)526
JavaScript119
Microsoft(Unofficial)263
Office271
OpenSource244
Peer-to-Peer336
Photoshop(Unofficial)265
RSS339
SAS(Unofficial)211
SearchEngine Marketing123
Social Software548
Spam121
TabletPCs287
VoIP257
Yahoo(Unofficial)326
Wireless
BBHub(BlackBerry)156
Bluetooth246
Engadget:Cellphones226
Engadget:GPS222
RFID237
UltraWideband218
WiFi116
TheWiMAX Weblog217
Engadget:Wireless235
Wireless Dev233
Wireless310
Video Games
BloggingE31
Engadget:Gaming255
Playstation 3117
VideoGames219
Xbox2232
Media and Entertainment
Design215
Digital Music306
Droxy(Digital Radio)220
DV Guru(Digital Video)147
Magazine Design237
Nanopublishing243
Business
EnronBlog188
TheMortgages Weblog192
OutsourceReporter62
SCM Wire(supply chain)201
Life Sciences
TheCancer Blog229
TheCardio Blog186
TheDiabetes Blog106
Medical Informatics Insider139
Telemedicine Insider137
Personal
BrianAlvey278
JasonCalacanis1,145
BlogMaverick1,917
GordonGould169
JudithMeskill211
Events
BloggingBlogHer124
BloggingDEMO166
BloggingETech186
BloggingGnomedex189
Futureof Music79
BloggingMilken211
BloggingSundance128
BloggingWeb 2.076
Live8 Insider184
Other
Weblogs,Inc.9

Once you have this data, you can start doing some quick analysis. For starters, I started to analyze what percentage of the overall network linkage each blog represented. I then took that percentage figure and used it against three different financial scenarios which have been floated around: some people say the company received 25 million dollars in the acquisition, and others have mentioned a figure of 30-40 million dollars. The details look as follows:

Weblogs Inc. BlogsTechnorati Sources% of overallPrice at 25 millionPrice at 30 millionPrice at 40 million
Consumer
AdJab5931.34%$334,831.51$401,797.81$535,730.42
Autoblog1,5733.55%$888,178.70$1,065,814.44$1,421,085.92
Autoblog Spanish1290.29%$72,838.56$87,406.27$116,541.69
Autoblog Chinese180.04%$10,163.52$12,196.22$16,261.63
Autoblog Simplified Chinese270.06%$15,245.28$18,294.34$24,392.45
Blogging Baby5181.17%$292,483.51$350,980.22$467,973.62
Card Squad1930.44%$108,975.52$130,770.62$174,360.83
Cinematical1,1182.53%$631,267.50$757,521.00$1,010,028.01
Download Squad1,0412.35%$587,790.22$705,348.27$940,464.36
Divester (scuba)2400.54%$135,513.60$162,616.32$216,821.75
Engadget13,35430.16%$7,540,202.37$9,048,242.84$12,064,323.79
Engadget Chinese3480.79%$196,494.71$235,793.66$314,391.54
Engadget Simplified Chinese370.08%$20,891.68$25,070.02$33,426.69
Engadget Japanese5181.17%$292,483.51$350,980.22$467,973.62
Engadget Spanish3340.75%$188,589.76$226,307.71$301,743.61
Gadling4611.04%$260,299.03$312,358.84$416,478.45
hack a day1,9064.30%$1,076,203.81$1,291,444.57$1,721,926.10
HD Beat2060.47%$116,315.84$139,579.00$186,105.34
Joystiq1,7403.93%$982,473.57$1,178,968.29$1,571,957.72
Luxist4300.97%$242,795.19$291,354.23$388,472.31
PVR Wire2330.53%$131,561.12$157,873.34$210,497.79
Slashfood2880.65%$162,616.32$195,139.58$260,186.11
TUAW (Apple)1,8534.19%$1,046,277.89$1,255,533.47$1,674,044.63
TV Squad1,0902.46%$615,457.58$738,549.10$984,732.13
Technology
CSS Insider1470.33%$83,002.08$99,602.49$132,803.32
Digital Photography3010.68%$169,956.64$203,947.96$271,930.62
FlashInsider2240.51%$126,479.36$151,775.23$202,366.97
Google(Unofficial)5261.19%$297,000.63$356,400.76$475,201.01
JavaScript1190.27%$67,192.16$80,630.59$107,507.45
Microsoft(Unofficial)2630.59%$148,500.32$178,200.38$237,600.51
Office2710.61%$153,017.44$183,620.92$244,827.90
OpenSource2440.55%$137,772.16$165,326.59$220,435.45
Peer-to-Peer3360.76%$189,719.04$227,662.84$303,550.46
Photoshop(Unofficial)2650.60%$149,629.60$179,555.52$239,407.35
RSS3390.77%$191,412.96$229,695.55$306,260.73
SAS(Unofficial)2110.48%$119,139.04$142,966.84$190,622.46
SearchEngine Marketing1230.28%$69,450.72$83,340.86$111,121.15
Social Software5481.24%$309,422.71$371,307.25$495,076.34
Spam1210.27%$68,321.44$81,985.73$109,314.30
TabletPCs2870.65%$162,051.68$194,462.01$259,282.68
VoIP2570.58%$145,112.48$174,134.97$232,179.96
Yahoo(Unofficial)3260.74%$184,072.64$220,887.16$294,516.22
Wireless
BBHub(BlackBerry)1560.35%$88,083.84$105,700.61$140,934.14
Bluetooth2460.56%$138,901.44$166,681.72$222,242.30
Engadget:Cellphones2260.51%$127,608.64$153,130.36$204,173.82
Engadget:GPS2220.50%$125,350.08$150,420.09$200,560.12
RFID2370.54%$133,819.68$160,583.61$214,111.48
UltraWideband2180.49%$123,091.52$147,709.82$196,946.43
WiFi1160.26%$65,498.24$78,597.89$104,797.18
TheWiMAX Weblog2170.49%$122,526.88$147,032.25$196,043.00
Engadget:Wireless2350.53%$132,690.40$159,228.48$212,304.63
Wireless Dev2330.53%$131,561.12$157,873.34$210,497.79
Wireless3100.70%$175,038.40$210,046.07$280,061.43
Video Games
Blogging E310.00%$564.64$677.57$903.42
Engadget: Gaming2550.58%$143,983.20$172,779.84$230,373.11
Playstation 31170.26%$66,062.88$79,275.45$105,700.61
Video Games2190.49%$123,656.16$148,387.39$197,849.85
Xbox 22320.52%$130,996.48$157,195.77$209,594.36
Media and Entertainment
Design2150.49%$121,397.60$145,677.12$194,236.16
Digital Music3060.69%$172,779.84$207,335.80$276,447.74
Droxy (Digital Radio)2200.50%$124,220.80$149,064.96$198,753.27
DV Guru (Digital Video)1470.33%$83,002.08$99,602.49$132,803.32
Magazine Design2370.54%$133,819.68$160,583.61$214,111.48
Nanopublishing2430.55%$137,207.52$164,649.02$219,532.03
Business
Enron Blog1880.42%$106,152.32$127,382.78$169,843.71
The Mortgages Weblog1920.43%$108,410.88$130,093.05$173,457.40
Outsource Reporter620.14%$35,007.68$42,009.21$56,012.29
SCM Wire (supply chain)2010.45%$113,492.64$136,191.16$181,588.22
Life Sciences
The Cancer Blog2290.52%$129,302.56$155,163.07$206,884.09
The Cardio Blog1860.42%$105,023.04$126,027.64$168,036.86
The Diabetes Blog1060.24%$59,851.84$71,822.21$95,762.94
Medical Informatics Insider1390.31%$78,484.96$94,181.95$125,575.93
Telemedicine Insider1370.31%$77,355.68$92,826.81$123,769.08
Personal
Brian Alvey2780.63%$156,969.92$188,363.90$251,151.87
Jason Calacanis1,1452.59%$646,512.78$775,815.34$1,034,420.45
Blog Maverick1,9174.33%$1,082,414.85$1,298,897.82$1,731,863.76
Gordon Gould1690.38%$95,424.16$114,508.99$152,678.65
Judith Meskill2110.48%$119,139.04$142,966.84$190,622.46
Events
Blogging BlogHer1240.28%$70,015.36$84,018.43$112,024.57
Blogging DEMO1660.37%$93,730.24$112,476.29$149,968.38
Blogging ETech1860.42%$105,023.04$126,027.64$168,036.86
Blogging Gnomedex1890.43%$106,716.96$128,060.35$170,747.13
Future of Music790.18%$44,606.56$53,527.87$71,370.49
Blogging Milken2110.48%$119,139.04$142,966.84$190,622.46
Blogging Sundance1280.29%$72,273.92$86,728.70$115,638.27
Blogging Web 2.0760.17%$42,912.64$51,495.17$68,660.22
Live8 Insider1840.42%$103,893.76$124,672.51$166,230.01
Other
Weblogs,Inc.90.02%$5,081.76$6,098.11$8,130.82

However, in order to get a cleaner picture, I started to dig into more details. First, I analyzed the different segment performance:

Network segmentsTechnorati Sources% of overallPrice at 25 millionPrice at 30 millionPrice at 40 million
Consumer28,24863.80%$15,949,950.31$19,139,940.37$25,519,920.50
Technology4,90811.09%$2,771,253.05$3,325,503.66$4,434,004.88
Wireless2,4165.46%$1,364,170.21$1,637,004.25$2,182,672.33
Videogames8241.86%$465,263.35$558,316.02$744,421.36
Media and Entertainment1,3683.09%$772,427.50$926,913.00$1,235,884.00
Business6431.45%$363,063.51$435,676.21$580,901.62
Life Science7971.80%$450,018.07$540,021.68$720,028.91
Personal3,7208.40%$2,100,460.75$2,520,552.90$3,360,737.19
Events1,3433.03%$758,311.50$909,973.80$1,213,298.40
Other90.02%$5,081.76$6,098.11$8,130.82
Whole Network44,276100.00%$25,000,000.00$30,000,000.00$40,000,000.00

What’s interesting here is that the consumer segment is responsible for the majority of linkage so I dug in much further. What I found is that the sum of the EnGadget linkage represents over a third of the overall network traffic (the actual number is 15,529 links for a 35.07% share of the network).

Data for the rest of us?

In acquiring Weblogs Inc., AOL has now provided us with some numbers traditional media are willing to pay for a blog. Looking at the numbers above, one can try to guess at the value of a link from an external site. a single link on the weblogsinc network represents 0.002258559942180087 percent of the overall network.

At the different rumored price points from AOL, it looks as follows:

Link$25 million value30 million value40 million value
1$564.64$677.57$903.42

I don’t know if those values are based on any real rationale but it’s nice to dream up the value of one’s blog based on this.

Should we now assume that traditional media companies are willing to pay between $500 and $1000 per site that links into a blog?

Not quite. The incremental value is in the size of the network and the underlying tools. Jason and Brian have been working on developing a blog authoring technology, called BlogSmith, that sits at the core of their network and one has to believe that AOL saw some value in the software too. However, one can easily say that blog valuations are going to be easier to make after this deal since it provides the first yardstick in that space.

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