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. Blogs Technorati Sources
Consumer
AdJab 593
Autoblog 1,573
AutoblogSpanish 129
AutoblogChinese 18
AutoblogSimplified Chinese 27
BloggingBaby 518
CardSquad 193
Cinematical 1,118
DownloadSquad 1,041
Divester(scuba) 240
Engadget 13,354
EngadgetChinese 348
EngadgetSimplified Chinese 37
EngadgetJapanese 518
EngadgetSpanish 334
Gadling 461
hack aday 1,906
HD Beat 206
Joystiq 1,740
Luxist 430
PVR Wire 233
Slashfood 288
TUAW(Apple) 1,853
TV Squad 1,090
Technology
CSSInsider 147
Digital Photography 301
FlashInsider 224
Google(Unofficial) 526
JavaScript 119
Microsoft(Unofficial) 263
Office 271
OpenSource 244
Peer-to-Peer 336
Photoshop(Unofficial) 265
RSS 339
SAS(Unofficial) 211
SearchEngine Marketing 123
Social Software 548
Spam 121
TabletPCs 287
VoIP 257
Yahoo(Unofficial) 326
Wireless
BBHub(BlackBerry) 156
Bluetooth 246
Engadget:Cellphones 226
Engadget:GPS 222
RFID 237
UltraWideband 218
WiFi 116
TheWiMAX Weblog 217
Engadget:Wireless 235
Wireless Dev 233
Wireless 310
Video Games
BloggingE3 1
Engadget:Gaming 255
Playstation 3 117
VideoGames 219
Xbox2 232
Media and Entertainment
Design 215
Digital Music 306
Droxy(Digital Radio) 220
DV Guru(Digital Video) 147
Magazine Design 237
Nanopublishing 243
Business
EnronBlog 188
TheMortgages Weblog 192
OutsourceReporter 62
SCM Wire(supply chain) 201
Life Sciences
TheCancer Blog 229
TheCardio Blog 186
TheDiabetes Blog 106
Medical Informatics Insider 139
Telemedicine Insider 137
Personal
BrianAlvey 278
JasonCalacanis 1,145
BlogMaverick 1,917
GordonGould 169
JudithMeskill 211
Events
BloggingBlogHer 124
BloggingDEMO 166
BloggingETech 186
BloggingGnomedex 189
Futureof Music 79
BloggingMilken 211
BloggingSundance 128
BloggingWeb 2.0 76
Live8 Insider 184
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. 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.

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About the Author

Tristan Louis

Writing and working on the internet since 1993, I've launched six companies, of which two went public and three were sold. This is my personal site and all opinions here are mine.

  • http://www.milliondollarhosting.net Michael Hosting

    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.

  • esofthub

    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.

  • http://www.liftport.com Michael Laine

    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