Deal Radar 2008: GigaOM

Blogs have changed the face of the web dramatically over the last few years. GigaOm is a network of blogs published by GigaOmniMedia, Inc. You could read my interview with founder Om Malik here to get a flavor of how he pioneered blogging in the early years of the millennium.

GigaOm started off as Om Malik’s personal blog with broadband news and analysis. By 2006, it gained recognition as a broader technology business blog and soon saw a surge in the number of visitors. After much deliberation, Om Malik who has worked with Forbes.com, Red Herring and Business 2.0 magazines, decided to foray full-time into the world of professional blogging, a world which he and a few others like Rafat Ali and Michael Arrington created.

Om decided to run the company as a media publishing house and raised a small round of financing (under half a million) from True Ventures, a small fund here in Silicon Valley. He used the money to invest in a pool of writers and editors. To concentrate solely on writing, Om decided early on to let Federated Media sell the advertising. Over time, however, this has changed somewhat, to a more hybrid model of FM selling some of the advertising inventory, with GigaOm selling the rest. The company has also forayed into the events business, as well as into a TV show in collaboration with Revision3.

The GigaOm blog soon led to a network that includes NewTeeVee that traces happenings in the world of online video, and the changing face of digital television. New web entrepreneurs learn from each others’ mistakes from FoundRead. Other blogs in the GigaOm network are: WebWorkerDaily, Earth2Tech and Ostatic. WebWorkerDaily focused on tips to make virtual offices efficient. Earth2Tech focuses on green friendly companies while the relatively new Ostatic concentrates on Open Source Software.

The network of blogs is already making good progress. According to QuantCast, GigaOm.com—the main blog— attracts close to 375,000 monthly uniques, and over 650,000 monthly page views. Across the various properties, the network reaches close to 700,000 unique visitors and 1.5 Million page views monthly. According to Technorati, GigaOm figures among the top 50 blogs and is currently ranked 37. It is also a part of CNet’s 100 influential blogs and was featured in Hitwise’s Top 100 IT News Sites.

The company hired Paul Walborsky as Chief Operating Officer in August 2007 to manage the growing network. In November 2007, GigaOmni Media raised a second round of funding from True Ventures and angel investors Rakesh Mathur, Venky Harinarayan and Anand Rajaraman for scaling operations and editorial. Total funding stands at under $1.25 Million today.

We recently did some speculative analysis on Seeking Alpha’s traffic, revenue, and valuation. GigaOm has monetized its traffic reasonably well with the help of Federated Media. With the current 1.5 Million page views and let’s say an estimated 4 Million impressions ad inventory, monetized at the rate of 75% sell-through (upper end of the spectrum), and an average $30 CPM, the network’s revenue run rate would be close to $100k a month, $1.2 Million a year. That brings valuation to about $3.6-6 Million. The main business model difference between GigaOm and Seeking Alpha is that GigaOm pays its writers, Seeking Alpha doesn’t. I would have to say, the former model is more sustainable than the latter.

The question facing Om Malik at this point is whether or not to take more investment. He is inclined to take more funding and continue to build his network of niche properties.

I am personally not in favor of venture funding for blogs, since they are essentially small businesses, not venture scale enterprises. The only way to build an “enterprise” out of this business model is to put a lot of successful blogs under one banner. So, if GigaOm, Techcrunch, VentureBeat, PaidContent, etc. could come together as a “network”, that could, conceivably, build critical mass. They would still need to graft more properties, but the only way I see in which venture-style “bulk” can be built in this niche of the media business is through a roll-up.
(This, by the way, is nothing new. Time, Inc. is a cluster of magazines, after all.) Michael Arrington has been talking about this, but Tom Foremski raises the question: would Om Malik ever work for Arrington or vice versa? Yes, the ego issue remains paramount, as does the “too much venture money” issue. I had written about these issues way back in 2006 when Om first got funding from True Ventures.

A slower, more deliberate route is the one that Om has decided to take. If he can pull together a set of patient investors who share his thesis, at least a $10 Million a year company can be built organically over the next few years. Whether a $100 Million or $500 Million a year company can be built without acquisitions – I have my doubts.

This segment is a part in the series : Deal Radar 2008