Deal Radar 2008: TechCrunch

We all know TechCrunch, a popular blog, a web 2.0 phenomenon, that reviews and profiles Internet companies and products. Founded on June 11 2005 by Michael Arrington, it focuses on how various companies are impacting the web. In this post, we explore the details of Arrington’s ambition.

Arrington worked as an attorney for a few years and later co-founded start-ups like Achex, Zip.ca, Pool.com and Edgeio. Arrington started TechCrunch when he realized that no one was covering Web 2.0 start ups. Like all tech blogs, this too started off as a hobby.

The Internet community celebrated Techcrunch and it soon became one of the most influential blogs of all times. According to Technorati , it is the second most popular blog on the web. TechCrunch soon led way to a TechCrunch network that includes CrunchNotes: an opinion blog; CrunchBoard Jobs: A jobs site; CrunchGear: A gadget blog; TalkCrunch: A weekly podcast about web 2.0 companies and products; CrunchBase: a directory of tech companies that users can edit and MobileCrunch: a blog dedicated to mobile computing. The network of blogs also constitutes TechCrunch Japan, TechCrunch UK and TechCrunch France.

Arrington hired Heather Harde as CEO and Erick Schonfeld as the co-editor in 2007. Harde has worked as Senior Vice President, Mergers and Acquisitions, for Fox Interactive Media and in other parts of News Corp., while Erick Schonfeld was an editor-at-large in Business 2.0, until Time, Inc. shut it down.

It was a busy year for Arrington who collaborated with GigaOm, ReadWriteWeb, VentureBeat for Crunchies. The Crunchies award ceremony was held on January 18, 2008 in San Francisco where the most compelling startups and innovations, voted for by the Internet community, were felicitated. TechCrunch also hosted a conference, TC40, where startups, chosen carefully, announced and demonstrated their products.

Techcrunch.com which, according to QuantCast, attracts more than 2.8 million unique monthly visitors.

In 2006, TechCrunch did about $800,000 in revenue, and jumped to around $3 million in 2007. Advertising, the blog’s main revenue source, is being handled by Federated Media, although Arrington often complains that FM doesn’t sell enough of his inventory.

In July 2007, TechCrunch acquired InviteShare, an invitation swapping service for private beta sites, for $25,000. Given the fact that TechCrunch often features invitation-only sites, the acquisition seems to be a good (and cheap) move.

In October 2007, Henry Blodget created quite a stir with a post on his blog, Silicon Alley Insider, which suggested that CNET or another big media organization is interested in acquiring TechCrunch for $100 million. No one explains where Blodget got the $100 Million number from. It seems ridiculously overblown to me. And Arrington seems to have a real vendetta against CNet, since he keeps pointing to CNet as the company he wants to knock out.

The company has already killed about four to five VC deals and reportedly also turned down an $8 million acquisition offer in 2006. CNet, apparently, had tried to acquire Tech Crunch in late 2005 but nothing concrete shaped up.

Though TechCrunch hasn’t raised any venture money so far, Arrington feels that he would need to raise money at some point given his ambitions of doing a roll-up of the blogging space. In a post yesterday, he expressed his frustration that bloggers he would ideally like to acquire as part of such a roll-up are all getting venture money, thereby pricing them out of the roll-up that he would ideally like to master-mind. Another company that would be a perfect business model complement for Techcrunch is Federated Media.

As I said in the GigaOm post earlier, and almost two years back when this blog funding frenzy had just begun, the egos of Om Malik, Rafat Ali, Matt Marshall, and John Battelle would likely not allow them to work together as part of a roll-up.

That means, Arrington, to make his dream come true, needs to look at personalities that have less overbearing ego issues. One such blog entrepreneur that comes to mind is Richard MacManus of ReadWriteWeb. Richard has not taken venture money, and has built a site with over 850,000 uniques and 1.6 Million page views monthly. The content is also synergistic with Techcrunch, which makes is a ripe target for the first major blog / network that Techcrunch could try to acquire. Richard, from the way I have come to read him, is someone who can probably work with Mike Arrington.

Meanwhile, Heather Harde certainly has her work cut out. She needs to go find other compelling bloggers with credible content, traffic, and manageable egos that are willing to play ball with Arrington, accepting him as the “master,” bowing at his alter.

Robert Scoble is already out of the game, having joined Fast Company. In any case, he thinks, Arrington has the wrong goal (beating CNet isn’t inspiring, and doesn’t get people out of bed everyday).

Scoble also recommends FriendFeed as a research tool for Heather to find the roll-up targets that Arrington wants.

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