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).
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. Blogs | Technorati Sources | % of overall | Price at 25 million | Price at 30 million | Price at 40 million |
|---|---|---|---|---|---|
| Consumer | |||||
| AdJab | 593 | 1.34% | $334,831.51 | $401,797.81 | $535,730.42 |
| Autoblog | 1,573 | 3.55% | $888,178.70 | $1,065,814.44 | $1,421,085.92 |
| Autoblog Spanish | 129 | 0.29% | $72,838.56 | $87,406.27 | $116,541.69 |
| Autoblog Chinese | 18 | 0.04% | $10,163.52 | $12,196.22 | $16,261.63 |
| Autoblog Simplified Chinese | 27 | 0.06% | $15,245.28 | $18,294.34 | $24,392.45 |
| Blogging Baby | 518 | 1.17% | $292,483.51 | $350,980.22 | $467,973.62 |
| Card Squad | 193 | 0.44% | $108,975.52 | $130,770.62 | $174,360.83 |
| Cinematical | 1,118 | 2.53% | $631,267.50 | $757,521.00 | $1,010,028.01 |
| Download Squad | 1,041 | 2.35% | $587,790.22 | $705,348.27 | $940,464.36 |
| Divester (scuba) | 240 | 0.54% | $135,513.60 | $162,616.32 | $216,821.75 |
| Engadget | 13,354 | 30.16% | $7,540,202.37 | $9,048,242.84 | $12,064,323.79 |
| Engadget Chinese | 348 | 0.79% | $196,494.71 | $235,793.66 | $314,391.54 |
| Engadget Simplified Chinese | 37 | 0.08% | $20,891.68 | $25,070.02 | $33,426.69 |
| Engadget Japanese | 518 | 1.17% | $292,483.51 | $350,980.22 | $467,973.62 |
| Engadget Spanish | 334 | 0.75% | $188,589.76 | $226,307.71 | $301,743.61 |
| Gadling | 461 | 1.04% | $260,299.03 | $312,358.84 | $416,478.45 |
| hack a day | 1,906 | 4.30% | $1,076,203.81 | $1,291,444.57 | $1,721,926.10 |
| HD Beat | 206 | 0.47% | $116,315.84 | $139,579.00 | $186,105.34 |
| Joystiq | 1,740 | 3.93% | $982,473.57 | $1,178,968.29 | $1,571,957.72 |
| Luxist | 430 | 0.97% | $242,795.19 | $291,354.23 | $388,472.31 |
| PVR Wire | 233 | 0.53% | $131,561.12 | $157,873.34 | $210,497.79 |
| Slashfood | 288 | 0.65% | $162,616.32 | $195,139.58 | $260,186.11 |
| TUAW (Apple) | 1,853 | 4.19% | $1,046,277.89 | $1,255,533.47 | $1,674,044.63 |
| TV Squad | 1,090 | 2.46% | $615,457.58 | $738,549.10 | $984,732.13 |
| Technology | |||||
| CSS Insider | 147 | 0.33% | $83,002.08 | $99,602.49 | $132,803.32 |
| Digital Photography | 301 | 0.68% | $169,956.64 | $203,947.96 | $271,930.62 |
| FlashInsider | 224 | 0.51% | $126,479.36 | $151,775.23 | $202,366.97 |
| Google(Unofficial) | 526 | 1.19% | $297,000.63 | $356,400.76 | $475,201.01 |
| JavaScript | 119 | 0.27% | $67,192.16 | $80,630.59 | $107,507.45 |
| Microsoft(Unofficial) | 263 | 0.59% | $148,500.32 | $178,200.38 | $237,600.51 |
| Office | 271 | 0.61% | $153,017.44 | $183,620.92 | $244,827.90 |
| OpenSource | 244 | 0.55% | $137,772.16 | $165,326.59 | $220,435.45 |
| Peer-to-Peer | 336 | 0.76% | $189,719.04 | $227,662.84 | $303,550.46 |
| Photoshop(Unofficial) | 265 | 0.60% | $149,629.60 | $179,555.52 | $239,407.35 |
| RSS | 339 | 0.77% | $191,412.96 | $229,695.55 | $306,260.73 |
| SAS(Unofficial) | 211 | 0.48% | $119,139.04 | $142,966.84 | $190,622.46 |
| SearchEngine Marketing | 123 | 0.28% | $69,450.72 | $83,340.86 | $111,121.15 |
| Social Software | 548 | 1.24% | $309,422.71 | $371,307.25 | $495,076.34 |
| Spam | 121 | 0.27% | $68,321.44 | $81,985.73 | $109,314.30 |
| TabletPCs | 287 | 0.65% | $162,051.68 | $194,462.01 | $259,282.68 |
| VoIP | 257 | 0.58% | $145,112.48 | $174,134.97 | $232,179.96 |
| Yahoo(Unofficial) | 326 | 0.74% | $184,072.64 | $220,887.16 | $294,516.22 |
| Wireless | |||||
| BBHub(BlackBerry) | 156 | 0.35% | $88,083.84 | $105,700.61 | $140,934.14 |
| Bluetooth | 246 | 0.56% | $138,901.44 | $166,681.72 | $222,242.30 |
| Engadget:Cellphones | 226 | 0.51% | $127,608.64 | $153,130.36 | $204,173.82 |
| Engadget:GPS | 222 | 0.50% | $125,350.08 | $150,420.09 | $200,560.12 |
| RFID | 237 | 0.54% | $133,819.68 | $160,583.61 | $214,111.48 |
| UltraWideband | 218 | 0.49% | $123,091.52 | $147,709.82 | $196,946.43 |
| WiFi | 116 | 0.26% | $65,498.24 | $78,597.89 | $104,797.18 |
| TheWiMAX Weblog | 217 | 0.49% | $122,526.88 | $147,032.25 | $196,043.00 |
| Engadget:Wireless | 235 | 0.53% | $132,690.40 | $159,228.48 | $212,304.63 |
| Wireless Dev | 233 | 0.53% | $131,561.12 | $157,873.34 | $210,497.79 |
| Wireless | 310 | 0.70% | $175,038.40 | $210,046.07 | $280,061.43 |
| Video Games | |||||
| Blogging E3 | 1 | 0.00% | $564.64 | $677.57 | $903.42 |
| Engadget: Gaming | 255 | 0.58% | $143,983.20 | $172,779.84 | $230,373.11 |
| Playstation 3 | 117 | 0.26% | $66,062.88 | $79,275.45 | $105,700.61 |
| Video Games | 219 | 0.49% | $123,656.16 | $148,387.39 | $197,849.85 |
| Xbox 2 | 232 | 0.52% | $130,996.48 | $157,195.77 | $209,594.36 |
| Media and Entertainment | |||||
| Design | 215 | 0.49% | $121,397.60 | $145,677.12 | $194,236.16 |
| Digital Music | 306 | 0.69% | $172,779.84 | $207,335.80 | $276,447.74 |
| Droxy (Digital Radio) | 220 | 0.50% | $124,220.80 | $149,064.96 | $198,753.27 |
| DV Guru (Digital Video) | 147 | 0.33% | $83,002.08 | $99,602.49 | $132,803.32 |
| Magazine Design | 237 | 0.54% | $133,819.68 | $160,583.61 | $214,111.48 |
| Nanopublishing | 243 | 0.55% | $137,207.52 | $164,649.02 | $219,532.03 |
| Business | |||||
| Enron Blog | 188 | 0.42% | $106,152.32 | $127,382.78 | $169,843.71 |
| The Mortgages Weblog | 192 | 0.43% | $108,410.88 | $130,093.05 | $173,457.40 |
| Outsource Reporter | 62 | 0.14% | $35,007.68 | $42,009.21 | $56,012.29 |
| SCM Wire (supply chain) | 201 | 0.45% | $113,492.64 | $136,191.16 | $181,588.22 |
| Life Sciences | |||||
| The Cancer Blog | 229 | 0.52% | $129,302.56 | $155,163.07 | $206,884.09 |
| The Cardio Blog | 186 | 0.42% | $105,023.04 | $126,027.64 | $168,036.86 |
| The Diabetes Blog | 106 | 0.24% | $59,851.84 | $71,822.21 | $95,762.94 |
| Medical Informatics Insider | 139 | 0.31% | $78,484.96 | $94,181.95 | $125,575.93 |
| Telemedicine Insider | 137 | 0.31% | $77,355.68 | $92,826.81 | $123,769.08 |
| Personal | |||||
| Brian Alvey | 278 | 0.63% | $156,969.92 | $188,363.90 | $251,151.87 |
| Jason Calacanis | 1,145 | 2.59% | $646,512.78 | $775,815.34 | $1,034,420.45 |
| Blog Maverick | 1,917 | 4.33% | $1,082,414.85 | $1,298,897.82 | $1,731,863.76 |
| Gordon Gould | 169 | 0.38% | $95,424.16 | $114,508.99 | $152,678.65 |
| Judith Meskill | 211 | 0.48% | $119,139.04 | $142,966.84 | $190,622.46 |
| Events | |||||
| Blogging BlogHer | 124 | 0.28% | $70,015.36 | $84,018.43 | $112,024.57 |
| Blogging DEMO | 166 | 0.37% | $93,730.24 | $112,476.29 | $149,968.38 |
| Blogging ETech | 186 | 0.42% | $105,023.04 | $126,027.64 | $168,036.86 |
| Blogging Gnomedex | 189 | 0.43% | $106,716.96 | $128,060.35 | $170,747.13 |
| Future of Music | 79 | 0.18% | $44,606.56 | $53,527.87 | $71,370.49 |
| Blogging Milken | 211 | 0.48% | $119,139.04 | $142,966.84 | $190,622.46 |
| Blogging Sundance | 128 | 0.29% | $72,273.92 | $86,728.70 | $115,638.27 |
| Blogging Web 2.0 | 76 | 0.17% | $42,912.64 | $51,495.17 | $68,660.22 |
| Live8 Insider | 184 | 0.42% | $103,893.76 | $124,672.51 | $166,230.01 |
| Other | |||||
| Weblogs,Inc. | 9 | 0.02% | $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 segments | Technorati Sources | % of overall | Price at 25 million | Price at 30 million | Price at 40 million |
|---|---|---|---|---|---|
| Consumer | 28,248 | 63.80% | $15,949,950.31 | $19,139,940.37 | $25,519,920.50 |
| Technology | 4,908 | 11.09% | $2,771,253.05 | $3,325,503.66 | $4,434,004.88 |
| Wireless | 2,416 | 5.46% | $1,364,170.21 | $1,637,004.25 | $2,182,672.33 |
| Videogames | 824 | 1.86% | $465,263.35 | $558,316.02 | $744,421.36 |
| Media and Entertainment | 1,368 | 3.09% | $772,427.50 | $926,913.00 | $1,235,884.00 |
| Business | 643 | 1.45% | $363,063.51 | $435,676.21 | $580,901.62 |
| Life Science | 797 | 1.80% | $450,018.07 | $540,021.68 | $720,028.91 |
| Personal | 3,720 | 8.40% | $2,100,460.75 | $2,520,552.90 | $3,360,737.19 |
| Events | 1,343 | 3.03% | $758,311.50 | $909,973.80 | $1,213,298.40 |
| Other | 9 | 0.02% | $5,081.76 | $6,098.11 | $8,130.82 |
| Whole Network | 44,276 | 100.00% | $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 value | 30 million value | 40 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 $1000 per site that links into a blog?
Not quite. The incremental value is in the size of the network and the underlying tools. Jason and Brian have been working on developing a blog authoring technology, called BlogSmith, that sits at the core of their network and one has to believe that AOL saw some value in the software too. However, one can easily say that blog valuations are going to be easier to make after this deal since it provides the first yardstick in that space.
Related Terms
AOL, Google, Media, Microsoft, Time-Warner, VOIP, Video, Yahoo8 Comments
1The Big Picture — June 8, 2007 at 7:57 pm
I know we’ve mentioned this before, but Dane Calrson’s fun little applet that uses Technorati’s API to calculate linkage and display a blog’s new worth using the same link to dollar ratio as the AOL-Weblogs deal. This makes it pretty clear that — Surprise! — AOL likely overpaid for their acquisition.
Questa funzione è stata creata da Dane Carlson autore di Business Opportunities e il valore è calcolato tenendo conto del numero dei link al blog negli ultimi 6 mesi. Per saperne di più controllare anche qui.
3Michael Hosting — June 22, 2006 at 11:51 pm
Blogging E3 — more then 500$ for a single link? I think that dividing overall sum by number of links is a wrong measure. May be you need some quadratic dependency and not a linear one. I mean using:
cost_of_i_links = constant * i^2
instead of:
cost_of_i_links = constant * i
Then you will get about 25$ for a single link that is much more reasonable.4esofthub — October 18, 2006 at 9:06 am
Go to pingoat. The values are much lower than technorati. This text link business is so subjective. How much money is the site making? That should be the relevant question.
[…] “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.” (via ti.net) […]
[…] Jason Calacanis leaving AOL/Netscape and joining Sequoia Capital (Jason Calacanis was a founder of Weblogs, Inc., a blog network which was acquired by AOL) […]
Chris Anderson started thinking about the long tail.All this data got me more interested in data, and particularly metrics both hard and soft as well as how one could possibly weight them. None of this prepared me for the success of a simple entry: Doing the number on the AOL Weblogs Inc. deal. To this day, this entry is still the most popular entry on the site, now having single-handedly clocked over 8 million page views. The concept was simple: if links were the new currency of web 2.0, then how much were they worth? Someone developed a
8Michael Laine — November 21, 2007 at 2:19 am
hi, very interesting. I know this info is pretty dated, but is there any chance you would re-wrok the number, to reflect today’s reality? for example, how many of those sites above still exist? what are their revised traffic numbers? gains/losses, since this transaction? and what would that do to new valuations. I have calculated the value of my blog to be about $15k, but that was in “2005” value terms. Any chance for an update?
Thanks for your effort on this. i find it very entertaining.
Take care. mjl
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