Several high profile blogs have taken VC money recently. Om Malik, formerly of Business 2.0 and writer of Giga Om, has struck off on his own with VC money from a startup VC, True Ventures. SoftBank Capital invested $5 million in HuffingtonPost.com, a blog written by Arianna Huffington. Hmmm...what are they doing with the money? What are the VCs thinking?
Om Makik and Arianna Huffington are very talented writers and smart people. I'm sure they have some plan for the money, but it isn't clear to me. Hmmm...they could throw a lavish launch party with open bar and live music. Party like its 1999. Those were the daze....
Blogs are like Open Source projects in that anyone can do them for free. There are literally tens of millions of blogs all available for free and produced by individuals with no investment. Why would you need $5M to write a blog when your investment is zero? What kind of return will VCs see from this investment?
Like Open Source, blogs will produce a few popular brand names that will attract 95% of all the attention and money. These blogs will attract advertisers and sponsorships. But, is there really enough upside to generate VC like returns? Perhaps in very rare cases, but it doesn't look like a very good sector bet.
The vast majority of blogs that do attract advertising and sponsorships will be what I call a "Lifestyle" company. A small fraction of these could graduate to "cash flow" companies, but I don't see any of them getting to the "high growth" high return stage. There will always be an exception, and Om Malik and Arianna Huffington are very high profile bloggers, but I don't see this as a bankable trend.