From a:c euro “An uncertain future for pure-play blogging startups” February 21, 2006Posted by fukumimi in IT, Japan.
a:c euro has an interesting article with a comment about the size (and by inference value) of the blogging paltform/tools market from one of the bigger potential users for blogging platform vendors.
From the link:
Stephane Pictet, co-founder and CEO of Virtual Network in Nyon, [said] that his small team of developers put together in three months a new blogging platform for his firm’s popular web sites, Romandie.com, musique.com and jeu.com. These are highly-trafficked, French language web-sites, whose users are potential casual bloggers, basically newcomers to online publishing in the blog format.
Virtual Network could have undertaken a partnership with one of the established players active in the Swiss and French market, but Pictet told us that it was “five times” cheaper to build rather then buy space on an existing platform [my emphasis].
Whilst this particular comment seems to be commenting directly at the blog hosting ASP market, the article also notes that Virtual Network had developed its platform on the pblogs open source software distribution, so blog software vendors are also at risk.
It may be aruged that VN as a player with a significant on-line presence already was in a particularly strong position to leverage its internal skill sets and existing infrastructure to deploy an internally developed platform.
However, looking at the bigger picture, as open source blogging software (and blogging software in general) becomes more and more mature, OSS is likely to become more than good enough for most applications, and become the default choice in the same way that sendmail or apache have dominated their respective niches.
As far as personal blogs are concerned, I think a:c euro is right in assuming that mass market users will flock either to portal/content provider/SNS provided platforms where these users spend most of their time. As user numbers grow at these sites, given the availability of open source material to work with, it is not beyond imagination for such sites to go with a non-licensed approach (as some have already done)
This would leave provision of branded ASP and software models to corporate customers as the significant market, and for this to become a significant revenue stream, blogging must become truly established as a must-have means of communication for the wider business community (ie beyond media content providers and portals(=personal blogs)). The verdict is till out on that count.
In this light, Drecom’s market cap of $700M (shares were down another 10%, to JPY4.12M today) still appears crazy…..
On a related note, Rodrigo and Om Malik are talking about Six Apart’s rumoured $12M financing, and Rodrigo is doing some number crunching about a possible valuation, which seems to be in the right ballpark (he says $350M, on an estimated $15M revenue) compared to the Drecom IPO price. His sane calculations reinforce my instinct that having a company with an estimated $5M revenue for the year ending March haveing a valuation of $700M is rather crazy….
Of course, Drecom may yet justify this valuation. But it needs to start diversifying upstream in the blog value chain, hopefully their foray into search advertising is a signal of that intent. But their current arrangement with CyberAgent gives them just 5% of ad revenues from this service, so unless they get a more significant chunk for providing advertisers access to their user base, the model doesn’t seem to pan out.