buyer: AOL/Time Warner | seller: Weblogs Inc. | price: $25 million | date: October
takeaway: As the first major blog M&A transaction to come to market, some in the publishing industry had hoped AOL’s acquisition of Jason Calacanis’ network of Weblogs would serve as a benchmark for future blog deals. But post-sale due diligence;done, naturally, by competing bloggers;unearthed a controversy surrounding just what, exactly, AOL had bought.
When you’re first, particularly in the blogosphere, it’s in your best interest to cover your tracks. For Jason Calacanis, founder of Weblogs Inc., it was exactly those tracks left uncovered that appeared to get him in trouble, at least in some parts of the blogosphere. In October, when America Online issued a press release announcing the $25 million acquisition of Calacanis’ network of 85 blogs, including the popular Engadget and Autoblog, it had the makings of a watershed moment for a medium that had been emerging, at least in publishers’ eyes, for five years. In fact, some wondered privately and publicly if the deal would help answer the question on the minds of plenty of publishers: Will blogs ever make money? The release promised links to "85 unique blogs seamlessly embedded and intregrated" across AOL.com’s channels.
But some of those 85 blogs had gone AWOL before they were bought. The same day the acquisition was announced, Scott Kidder, an employee of Gawker Media, the popular blog-network run by Nick Denton, posted a competitive analysis of Weblogs Inc. on his own blog. "WIN claims to have 85 blogging sites, but how many do they really have?" wrote Kidder, who spent "several weeks" analyzing each blog, omitting "sub-blogs" and personal blogs, to see how many were active. His answer: 31. Kidder concluded that many of Weblogs’ blogs stayed artificially fresh with "best of" posts, single posts on multiple blogs, and exaggerated the total by counting categories within a blog as separate blogs.
The backlash from the blogging community was swift. "Here’s a question: when will Jason Calacanis put some of his 50 defunct WIN titles out of their misery?" Denton wrote in a November post on his blog. "It seems like the point of keeping the blogs up is to inflate the number," read a message boarder’s post on Calacanis’ own blog.
Calacanis, for his part, has staunchly defended the sale and his company’s seemingly inflated number of active blogs. "There is no reason to turn off an inactive blog because people still get value from the archives;and the archives make money," Calacanis wrote in an e-mail responding to Folio:, adding that the controversy surrounding the sale has been a "non-issue" for both AOL and WIN. "It’s not a controversy and has never come up," he wrote.
According to Calacanis, AOL has infused WIN with promotional and advertising support, and WIN’s blogs are being integrated into AOL’s content channels.
Riding such a wave seems to be in Calacanis’ DNA. He founded the Silicon Alley Reporter, an influential New York City dot.com bubble magazine;which became Venture Reporter after the crash;and sold to Wicks Business Information in 2003. "I don’t build businesses with an exit in mind," Calacanis wrote. "I only build sustainable businesses."
comments: AOL missed the boat by not being able to offer a high-speed service solution. Its core service is nothing but a really nice (and probably desirable) customer base with apparently not much growth potential. On the flip side, its instant messaging service holds huge upside potential. Tapping into that enormous base of users with new and sponsored product offerings is key to AOL’s survival.
http://www.timewarner.com/corp/ | http://www.weblogsinc.com/ | http://www.calacanis.com/ | http://www.gawker.com/ |