Google is clearly superior to Yahoo

I couldn’t stop laughing when I read about Yahoo CEO Terry Semel ridiculing Google’s business model. He came across as someone so arrogant about Yahoo business model that I started to wonder what would happen to them if they became as arrogant as Pfizer has been about its strategy.

Google has once again shown that it is clearly a much better company. And Yahoo continues to struggle despite the fact that it is profitable and growing right now. Some of the latest offerings from Yahoo have been so disappointing that you start to wonder when will the company get even one thing right.

And by the way, I think that the most metric for assessing if your business model is working is to look at shareholder value creation. As this chart shows, Yahoo has an uphill fight to beat Google.

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What is your blog worth?

Once you have built enough traffic, most of us start to think about selling it and making some good money. During recent months, some blogs have indeed been sold but the acquisition of Weblogs, Inc. by AOL was probably one of the the largest. The reports say that it was sold for a cool $25 million clearly indicates that high-quality blogs/websites are ripe for acquisitions by large media companies.

But how much will you get paid for your blog/website?

That is a tough question to answer in this case as it is for any other acquisition. For traditional acquisitions, a lot of number crunching goes on before coming up with an acquisition price. In case of blogs/websites, I would expect similar financial analysis.

I decided to run some numbers on the Weblogs acquisition. According to the company, they will end up somewhere between half a million and one million dollars for 2005 from Google Adsense alone. They do carry other ads but since they do not like to talk about it I am assuming that other revenue is small. But for discussion purposes, I assumed that to be as much as a million dollars. In other words if their total revenue is $2 million, they got valued at approximately 12X revenue. This number, while not unheard of during the dot-com days, is clearly very high, particularly for a company that may not be profitable at all (103 bloggers and 9 staffers on payroll).

How to value your blog?

I am a big believer in revenue being the most important metric for evaluating an acquisition candidate, but other metrics such as unique visitors, subscribers, page views, and content focus are equally important. I am adding this new category of content focus to differentiate a blog about celebrity gossip from one on political opinions. Similarly, a blog that attracts senior level decision makers (like my blog does – though the numbers may be small) is far more valuable than a blog that attracts thousands of gardening enthusiasts. In most cases, a blog about a topic that can result in a potential ecommerce transaction is far more valuable than a blog that merely provides opinions on current events or talks about your babies.

Is there a magic formula to calculate the value of your blog?

Take your annual revenue and multiply it by 10. Then, add a 20% premium if you attract higher quality audience. And then negotiate really hard.

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