Paul Kedrosky nailed it! This is exactly the point I was trying to make about VC investment in individual blogs. See Dr. Kedrosky's comment in my previous post. Bloggers are like Open Source projects in that there are millions of them, and a very small number of them attract enough attention and contributors to be interesting. However, unlike open source software, blogs don't have a services model to support them. Advertising is the game, and you need HUGE numbers to make that work.
Robert Scoble suggests that maybe Om and Arianna are building out blog networks. OK, that might be a big payoff, but I didn't know they were going after a blog network. If so, great, it might be a good investment. Jason sold Weblogs for a tidy sum, but I don't think there are too many of those deals around. Pretty risky bet if you ask me.
There will be a few brand name bloggers that can make money. I said these top bloggers would get 95% of the attention and advertising dollars.
Jason Wood, remember there are 50 million blogs, so the top 5% is still 2,500,000 blogs that are getting most of the attention and advertising dollars. That is a lot of blogs to be in the top 5%. Even the top 1% of all bloggers includes 500,000 blogs. If your blog is one in a million, or one of the top 50 blogs in the world, the VCs will probably be happy to talk to you.
Om Malik and Arianna Huffington are in the top .001% of all blogs and will do well on a cash flow basis. But, as Dr. Kedrosky says, I don't see this as a solid VC investment with 10X returns.
If Om Malik wants to pay me $1,000 a month to write for his network...great!! Sign me up. But even if Om signs up a 100 bloggers and pays them $1,000 a month, that is only $100K per month or $1.2M per year. What do you do with the rest of the $5M?
Blogging can be a great business for a select few A-List bloggers. Om and Arianna are definitely A-Listers. If anyone can do it they can. But it is a risky bet indeed. Good cash flow? Absolutely. But, will they generate the huge growth and profits necessary to generate 10x returns for their investors? Time will tell.