Putting a value on private companies is hard enough for insiders and venture capitalists who have full access to the company’s financial statements. When outsiders try to do it, even well-informed ones, it is nothing more than a guessing game. But it is nonetheless perhaps one of Silicon Valley’s favorite parlor activities.
Today, Henry Blodget & Co. at Silicon Alley Insider try to peg valuations on 25 private Web companies. Facebook is at the top of the list, but it is valued at $9 billion instead of the $15 billion that Microsoft’s investment put on the company. Why? Because everyone knows that the $15 billion is too high, so SAI decided to apply a 25X multiple on Facebook’s 2008 revenue forecast of $350 million. Does that make its valuation correct? Probably not. But in the absence of any true market pricing, anyone can go ahead and make a guess.
The same goes for any of the valuations on the SIA 25 list, which puts Wikipedia’s worth at $7 billion, Craigslist’s at $5 billion, Mozilla’s at $4 billion, LinkedIn’s at $1.3 billion, Ning’s at $560 million, RockYou’s at $325 million, and Spot Runner’s at $250 million. Note that three of the top five (Wikipedia, Craigslist, Mozilla) are essentially not-for-profits sitting on very valuable assets. The valuations for those three are based on what they would be worth if they were run differently with an eye towards maximizing revenues—which, of course, could impact how consumers interact with them, which in turn would impact their valuations.
Another 25 startups make up the contenders list, which includes Federated Media ($245 million), Yelp ($225 million), Meebo ($220 million), Mahalo ($150 million), Digg ($125 million), Etsy ($115 million), Powerset ($80 million), and Twitter ($75 million). A full list that changes dynamically every 20 minutes, based on changes in the Nasdaq, can be found here (although, exactly how the valuations are linked to the Nasdaq is never clearly explained)
Some of these valuations have more merit than others. Some have none whatsoever. For instance, SAI gets at its $125 million valuation for Digg by “splitting the difference” between a $200 million buyout rumor we reported and the $60-to-$80 million that Kara Swisher came up with. Splitting the difference between two rumors is not exactly the height of financial analysis.
But what are you gonna do? At least SAI acknowledges that the list is an imperfect work in progress. Don’t get too caught up in the actual numbers. It is more useful really as a starting point to think about relative valuation between different startups. Is Meebo really worth three times as much as Twitter? Is Ning worth as much as Slide? Let the parlor game begin.
Encyclopedia Britannica often is used in case studies as a definitive example of how new technology can disrupt a business. Everything was great for the nearly 250 year old privately held company until the Internet came around and a Category Five hurricaned on their parade. According to Comscore, for every page viewed on Brittanica.com, 184 pages are viewed on Wikipedia (3.8 billion v. 21 million pave views per month). In short, they are a classic example of the Innovator’s Dilemma (see also the Music Industry).
You can purchase the 32 volume Britannica, which has 65,000 articles and 44 million words, for just $1,400. Or you can access it on the web for $70 per year.
And now, you can get access to the online version for free through a new program called Britannica Webshare - provided that you are a “web publisher.” The definition of a web publisher is rather squishy: “This program is intended for people who publish with some regularity on the Internet, be they bloggers, webmasters, or writers. We reserve the right to deny participation to anyone who in our judgment doesn’t qualify.” Basically, you sign up, tell them about your site URL and a description, and they review it and decide if you’ll get in. I wonder if Facebook, MySpace and Twitter users are eligible? They all certainly “publish with some regularity on the Internet.”
Once you’re in, you get to link to the full version of articles - people clicking the link can read that article but they can’t go and read other parts of the Britannica site. Participants can also embed widgets like the following:
Half Pregnant
Britannica is doing a lot of things right - a relatively small staff of a hundred or so editors manages 4,000 unpaid (I believe) contributors who are recognized experts in their field. But, like the music labels, they still somehow feel as though people should pay to consume their content. And that means search engines can’t index their content. And that means they don’t exist.
Instead of going free and opening up to all, they’re using the new program to simply price discriminate. Give people who may link to the site free access. Everyone else has to pay. So in effect they’re aiming to be half pregnant - they want the benefits of web linking but don’t want to give up the subscription fees from the fools who continue to pay them.
As an outsider, Britannica’s future is clear. Eventually, and if they don’t go out of business first, they’ll be forced to make all their content freely available on the Internet, and will probably create a wiki-like format that allows user editing. Their differentiating factor from Wikipedia will be that they have experts guiding articles, so they’ll have a claim to be more authoritative. This is, by the way, the business model of Citizendium, created by Wikipedia co-founder Larry Sanger in 2006.
The sooner they do that the more likely they’ll be around for the long term. Perhaps they can even continue to sell those 32 volume sets to a few libraries. But it’s hard to give up that online subscription revenue. When this fails, they’ll try something else.
Dutch filmmaker IJsbrand van Veelen stirred a lot of controversy last week at the Next Web conference when he premiered the documentary above, The Truth About Wikipedia. It has now been posted to YouTube and is worth watching when you have a spare 45 minutes. The film pits Andrew Keen, the disapproving author of The Culture of the Amateur, and Bob McHenry, former editor-in-chief of the Encyclopedia Britannica, against Wikipedia co-founders Larry Sanger, Jimmy Wales, and Web 2.0 guru Tim O’Reilly, among others. The film is masterfully made and shows many points of view, but it ends up being more than anything else a vehicle for Keen to put forth his diatribes against Wikipedia. You definitely get the sense that he wins the argument in the movie. And, in fact, when I asked van Veelen afterwards on stage who he personally agreed with the most (I was the conference MC), he admitted it was Keen. This siding with the enemy, as it were, actually makes the documentary more thought-provoking. People in the audience were seething, and one man came prepared with a speech denouncing the filmmaker.
In the film, Keen actually argues that we need gatekeepers for the truth, and those gatekeepers should be experts. Of course, he misses the point that the relatively small handful of people who do most of the writing and editing on Wikipedia may very well be experts in their topic areas, or become experts by writing and researching Wikipedia articles. That is not to say that controversies do not arise all the time about factual inaccuracies, edit wars, and companies trying to conduct PR campaigns by changing their Wikipedia entries. But the film also misses the point that Wikipedia is very much a market of ideas. Like any market, information at any given point in time can be wrong, but in the end it turns out to be right more often than not. Whether you agree with Keen or with the Wikipedians depends on your definition of truth. Keen is an absolutist. There is Truth, and everything else is fiction. Experts are the guardians of that truth. But the truth is that Truth itself is always evolving, even the experts’ notion of it.
Right on schedule: Google is releasing their April Fools jokes onto us as the calendars hit April 1 on the east coast (here’s last year’s efforts). Google Australia got a head start earlier today with the very funny Future Search. Gmail’s effort this year isn’t in my opinion as funny.
Gmail Custom Time lets users send emails with a custom date in the past, putting it in the recipients inbox at the old date:
How do I use it?
Just click “Set custom time” from the Compose view. Any email you send to the past appears in the proper chronological order in your recipient’s inbox. You can opt for it to show up read or unread by selecting the appropriate option.
Is there a limit to how far back I can send email?
Yes. You’ll only be able to send email back until April 1, 2004, the day we launched Gmail. If we were to let you send an email from Gmail before Gmail existed, well, that would be like hanging out with your parents before you were born — crazy talk.
Funny? You decide. The team did better last year in my opinion.
But the joke has started a minor Wikipedia war, which makes it more interesting. In describing the technology Google says “Gmail utilizes an e-flux capacitor to resolve issues of causality (see Grandfather Paradox)” and links to the Grandfather Paradox on Wikipedia. Someone changed the words “time travel” to “gmail” in a revision, along with the comment “Gmail starts a wiki-war by linking directly to this article on April 1st…”
The change was quickly put down by the Wikipedia police, of course. And then changed back. And then reversed. You can watch the drama in real time on the article’s revision history page (or feel free to participate with your own flourishes).
The ten millionth article has been written on Wikipedia - a Hungarian biography of of 16th century painter Nicholas Hilliard (English version here).
Those ten million articles have been written across 250 different languages, Wikipedia says. English is still the most popular language on Wikipedia, with 2.3 million articles (they reached 2 million English articles in September 2007). After English, the next most popular languages are German, French, Polish, Japanese, Italian, Dutch, Portuguese, Spanish, and Swedish.
The Wikimedia Foundation, the non-profit organization which operates Wikipedia, announced a $3 million donation from The Alfred P. Sloan Foundation today. The donation will be paid ratably over three years.
Last year the foundation had total income of $2.7 million and expenses of about $2.1 million (see financials here). This year revenue should be significantly higher. In addition to this donation, Wikipedia has engaged in significant fundraising efforts over the last year. The foundation has 15 employees and hopes to grow to 25 by 2010.
The foundation has also been under close scrutiny lately around potential conflicts with large donors. at some point, it seems, they should seriously consider proposals to become financially independent via advertising on the site. Even very minor advertising would provide a huge windfall. Nearly a quarter of a billion people visit Wikipedia every month (fifth largest on the Internet), generating nearly 4 billion page views (Comscore worldwide, February 2008).
Wikimedia Foundation posted their audited 2007 financial statements (I’ve embedded the document below) last week. Their fiscal year actually ends June 30, so these are already almost eight months old, but they reveal some interesting information about the entity that controls Wikipedia nonetheless.
Generally Wikimedia publishes these five months or so after the end of the year; this year they took eight months. Total donations and other income increased from $1.5 million in 2006 to $2.7 million (the period covered is prior to their recent fundraising effort). Donations of Google stock actually made up a material portion of contributions - 681 shares were donated in fiscal 2007 (worth about $315,000 based on the current stock price).
Travel expenses jumped significantly from $140k to $264k. Given that this period included time when Jimmy Wales was pitching Wikia Search around the world, some conspiracy theorists are speculating that travel expenses related to the for-profit Wikia (which Wales founded) were being reimbursed by Wikimedia Foundation. Wales, however, told me via email that the foundation does not reimburse him for any travel expenses at all, even for pure Wikipedia events, in order to remove any doubt about mixing funds between the entities. “I fund all that myself, out of my own pocket personally,” he said.
The financial statements also note, though, that Wikia and Wikipedia do share some infrastructure costs, assets, employees and expenses:
The Organization shares hosting and bandwidth costs with Wikia, Inc., a for-profit company founded by the same founder as Wikimedia Foundation, Inc. Included in accounts receivable at June 30, 2007 is $6,000 due from Wikia, Inc. for these costs. The Organization received some donated office space from Wikia Inc. during the year ended June 30, 2006 valued at $6,000. No donation of the office space occurred in 2007.
Through June 30, 2007, two members of the Organization’s board of directors also serve as employees, officers, or directors of Wikia, Inc.
Crowdsourcing video startup Kaltura is partnering with the Wikimedia Foundation to put its video-mashup technology on Wikipedia. The program, which is starting in beta today, will allow people to create collaborative videos on Wikipedia and other wikis. Kaltura’s video-editing technology allows multiple people to collaborate in creating a video.
The addition will eventually make it easier for Wikipedia contributors to add video clips, images, diagrams, animations, and PowerPoint presentations to Wikipedia pages. (They could use some livening up, don’t you think?).
As part of this beta, Kaltura is open-sourcing its video/rich media remixing technology. And it will be available to any wiki that runs on MediaWiki software. As part of the program, users will also gain access to a library of videos and other rich media under the Creative Commons license. Kaltura is based in New York City and launched at TechCrunch 40.
What is Macworld without rampant speculation? This year, though, someone is going the extra mile and is using Wikipedia to spread what looks to be a fake outline for the Stevenote tomorrow. Many blogs and media are biting (see here and here), including people who should know better (Steve Rubel).
At first glance, the notes seem plausible. Nothing too earth-shattering: a thin new MacBook, a 16GB iPhone, YouTube downloads on iTunes, and a preview of the iPhone software development kit. But it has a few fatal flaws: No mention of iTunes movie rentals, Microsoft Office 2008, more DRM-free music partners, or the much hoped-for Beatles iPod. (At least one of these highly-anticipated announcements has to be true). Not to mention that the self-correcting mechanisms of Wikipedia are already at work debunking the premise behind the notes. “This is TOTAL BULL,” reads one comment.
Still, it is a well put-together piece of speculation and plays on people’s trust of Wikipedia to spread rumor. My favorite part is the purported SDK news. According to these “notes” Steve Jobs will be spending a lot of time on it. The details: iPhone apps will be sold for $6.99 and widgets for $2.99, with 70 percent of revenues going to the developer (or they can be free). Apple will only accept source code, not executables, to protect the device. And example iPhone apps that Jobs is supposed to demo include an RSS feed reader (that would be nice), a Last.fm music app, and Twitter for the iPhone (this part may be true). Here is the relevant excerpt:
iPhone/iPod Touch SDK
- Apps and Widgets
- Using Cocoa with Objective-C
- Developers submit programs as source code, not executable
- Specify iPhone or both iPhone/Touch (certain features iPhone only)
- Set your own price: Apps $0-$6.99, Widgets $0-$2.99
- Users buy/download in iTunes Wi-Fi Store / iTunes Store (Mac/PC)
- Automatic updating wirelessly or docked
- Demonstration of exporting from XCode 3 to iTunes Store
- Submits source code to Apple for validation (make sure that people aren’t abusing the system, prevent malware and viruses)
- If using microphone or GSM, iPhone only; otherwise, available for both iPhone and iPod Touch
- Apps can be free or up to $6.99; Widgets free or up to $2.99
- Developers recieve 70% of revenue for their products
- Licensed under Apple Mobile Software License
- Can download wirelessly from iTunes Wi-Fi Store or docked to computer from iTunes Store
- Demonstration of wirelessly downloading (and running) the app submitted earlier
- Apps and widgets can be rearranged on front screen; front screen scrolls to show all apps/widgets
- Resubmit updated versions of apps; when added to store, iPhone/Touch will ask you to update it next time you use it (or next time you dock the iPhone/Touch)
- Developers can get their hands on a beta version of the SDK tomorrow on ADC and start developing; final version due early February
- iTunes 7.6 and iPhone/iPod Touch Software update 1.3 allowing for Apps mid-February
Example apps/widgets
Apps:
- iChat (coming with 1.3 update) (AIM, Jabber/Google Talk)
– Quick demonstration
- RSS Feed Reader (coming with 1.3 update) (read feeds online or off)
- One of our partners made something cool: Last.fm (scrobble tracks played on iPhone/touch wirelessly without syncing w/ computer)
Widgets:
- Dictionary (coming with 1.3 update) (quickly look up words, translate, use wikipedia)
– Quick demonstration
- Yellow/White Book (coming with 1.3 update) (search for contacts, add them to your address book directly from the app, will sync back with address book on your Mac/PC)
- Sports Ticker (coming with 1.3 update) (choose your sports and teams, get updates on their progress)
- Another partner: Twitter (update your Twitter on the fly, see your friends tweets)
- Try these out on the show floor today
Again, I say this is all bunk. But it does reflect in its own way what the Apple faithful want to hear. And hopefully, Jobs will shed some light on Apple’s iPhone SDK plans tomorrow.
Update: Turns out this was fake. Check out the real Stevenote here. Barely no mention of the iPhone SDK.
Many of us have waited a year as the Jimmy Wales hype machine promised a human powered search engine that could take on Google. Tonight that search engine launched at alpha.search.wikia.com, and it may be one of the biggest disappointments I’ve had the displeasure of reviewing.
First of all, it’s barely a search engine at all. It’s based on the open source Nutch software and contains an index of web pages created by Grub (a company Wikia acquired last year). The search results are poor and thin, as would be expected if not for the huge expectations that have been set. Absolutely no one is going to use this to search the web, until (and if) it is greatly improved.
But beyond the poor search results, there is really no “human” element to the engine at all. That functionality will come later, says Wikia CEO Gil Penchina. For now, users can add keywords to their profile - things that they are interested in, etc. When a search is conducted by others on those terms, the user’s picture is shown in the right hand column. Eventually, users will be able to edit and improve results for searches they are interested in. But currently, all users can do is add keywords to their profile that they might someday be interested in, and/or contribute to a “mini-article” that appears at the top of search results for queries (example).
And about those profiles. As anticipated, Wikia Search is yet another social network. User profiles include basic elements like a photo, adding friends, and information about interests and skills. And in a direct rip off of Facebook, Wikia Search profiles contain an activity stream of stuff you and your friends have been up to over the recent past.
Wikia search would be a disappointment even without the massive hype we’ve had to endure. And taking that hype into account, this product is an inexcusable waste of time.
To be fair, CEO Gil Penchina warned me it wouldn’t be a great product at launch. It’s simply a proof of concept of what can be created using open source software and little money, he says. Fair enough. But it’s time for Wales to be quiet, let this thing evolve or not, and eventually let the software do the talking. Eventually Wikia will make the index available to third parties. But the index needs to be reasonably decent before anyone will want it. Wikia has a long way to go to get there.
Update: Good debate in the comments below, including a couple from Jimmy Wales.
Putting a value on private companies is hard enough for insiders and venture capitalists who have full access to the company’s financial statements. When outsiders try to do it, even well-informed ones, it is nothing more than a guessing game. But it is nonetheless perhaps one of Silicon Valley’s favorite parlor activities. 
Many of us have 
