Jason Calacanis isn't exactly the most popular online entrepreneur around.
In the past he's called SEO "bullshit" and "a wasted industry" while speaking in front of thousands of delegates at search engine marketing conferences.
February's Affiliate Summit keynote was less controversial, but Jason still pointed out that affiliate spam was polluting the internet and also joked that anyone in attendance from PayPerPost should kill themselves. And at the Future of Web Apps conference he quipped that if you want to be average, you should go and work at 37signals but not for him. Jason Calacanis tells it as it is. And he's not too concerned about the consequences.
"You've got thousands of SEOs who hate the fact that I damaged their industry and told people not to hire an SEO," Jason says. "But I don't mind that. People can disagree with me. A lot of them are anonymous 12-year-old kids anyway – it's no big deal. You can't take it too seriously. People can hate me if they want to and debate what I say but as long as they check out my project and consider using it and talk about it, that's fine with me."
The project Jason is referring to is human powered search engine Mahalo, which he launched a year and a half ago. Mahalo (motto: we're here to help) uses a full-time team in Santa Monica, plus an army of freelancers all over the world, to write and edit results pages, free from spam and other junk. "Nobody is really doing it the way we're doing it," Jason explains.
"There are a lot of copycats that are trying to do social search and letting people vote, but I don't think anybody is actually paying a couple of hundred people to write really high quality pages. We're exactly 50 per cent Wikipedia and 50 per cent Google. And I think that's the future of search, to put a little bit of Google and a little bit of Wikipedia on the same page. Our articles are better than Wikipedia because we have real, paid people working on them and fact checking them. We don't have as many yet but we will. And then our search results are better than Google's because we have humans go through them. It costs us a lot more money than Wikipedia, which spends nothing, but it's probably costing us less per search result than Google because they have a billion dollars in server costs every year."
Mahalo recently reached 100,000 search terms, at which point Jason took the beta label off. Not bad considering the site only launched with 4,000 pages. In August it attracted 4.6million uniques, which – as Jason points out – is a very good result. He says that no other alternative search site has even broken a million uniques and that Mahalo isn't in any rush to make money. The company has secured five years of funding from, among others, Sequoia Capital, CBS, News Corp and Mark Cuban and so has three-and-a-half years to figure out how to turn Mahalo into a proper business.
One thing's for sure, though: according to Jason, 'curation' and 'trust' is the new business model. Mahalo will do well (Jason hopes for five or 10 per cent market share) because there's a lot of information online but no trust available. On Mahalo there's no SEO.
"A lot of people spend more time on SEO than actually building good pages. It's unfortunate that in order to compete in search, you have to spend time doing SEO because there are a lot of people who are making bad sites and then trying to rank them high. People who are doing good content have a hard time. I just think it's like an arms race.
"The solution is to have humans look at the pages and rank them. The algorithm will get you to, let's say, 80 per cent complete and then humans should do the final 20 per cent. An algorithm can only take you so far. You might trust an algorithm to tell you the address of a sushi bar or which one is closest to you but you might not ask it which one has the best sushi. You wouldn't expect an algorithm to know what's great sushi but you would expect a human to be able to tell you that. It's common sense."
The death of blogging?
Before Jason launched Mahalo, he was in the blogging business. He co-founded Weblogs, Inc, the portfolio of which includes dozens of blogs such as Engadget, Joystiq and Download Squad. In 2005 he sold the network to AOL for a reported $25million (he now says he'd give AOL a 'B' average for what they've done with Weblogs in the last few years) and, having become increasingly disillusioned, Jason recently quit blogging altogether.
"It feels like blogging is different to when it started," he explains. "When it started, it was a very authentic conversation and I think it's now more about marketing, promotion and link-baiting. In general, blogging has devolved. There are still great blogs and I still read them but the majority of blogging is not about authentic conversations any more. The blogosphere is at a crossroads. They'll either find a way to deal with all the noise or it'll collapse on itself. Just like Usenet collapsed on itself. There are no good conversations on Usenet."
As an alternative, Jason has started a private mailing list, writing essays on various topics such as 'how to demo your start-up' and 'how to be a good CEO'. Initially, Jason meant to cap the list at 750 subscribers, then it got so popular that he didn't have a choice but to allow more people to join. Within six weeks almost 6,000 people signed up.
"When I'd post on my blog I'd get 10-30 comments and most of them were bad comments from weird, anonymous people," Jason says. "When I moved to the email I started getting 200 or 300 comments – all from incredibly talented people – that were 10 paragraphs long. And they were just to me. On a personal, selfish basis I'm getting more out of this email and these 6,000 people than having 30,000 people read my blog."
In a recent newsletter called '(The) Start-up Depression', Jason predicted that 50-80 per cent of start-ups would fail "or go on life-support (ie three to four folks working on them) within the next 18 months". Today, Jason is a bit more optimistic:
"What's the loss? People have three, five or 10 employees, so if the company doesn't work out they can make it a company of two or three people working from home and five people get laid off and go to another company. It's not like the old days when you had people raising $100million or $200million, thousands of employees and then the company goes out and thousands lose their job. If there's a shakedown, you might have hundreds of people that'll lose their jobs and then get hired by Google and Yahoo and other companies. It's not going to result in thousands of people suddenly being out of work and not being able to get a job."
To survive, Jason recommends you either raise a lot of money and invest in the down market or cut all your costs and break even. Mahalo, which itself has just laid off 10 per cent of its staff, should be fine because with five years worth of funding in the bank the company isn't in any rush. And, as Jason points out, "The down market is good for us because we can take market share and it'll be easier to get people to join the team."
At the moment, Mahalo isn't even trying to make any money. Most pages have Google AdSense at the bottom but Mahalo won't sell any proper advertising for another half a year or so. The focus now is on reaching 10 million uniques. Jason is also planning to figure out how people can use the site more and increase the value they get out of the service. A redesign is on the horizon and there'll be plenty more pages.
Jason reckons that in 2009 most people will 'get' human powered search and for the time being he's got no plans to sell up and move to yet another market. "I want to try to build the next Yahoo or the next Wikipedia," he says, raising the bar high. "I don't want to sell it too early. I'd rather have it become its own business."
First published in .net magazine, Issue 183
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