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Facebook: Worth Two Times Mozilla?

Written By Drupad Sil | April 29, 2008 | Share This |

Market Crash

Henry Blodget at Silicon Alley Insider unveiled the SAI 25 Live, an auto-updating list of the world’s “Most Valuable Digital Startups” as assessed by Blodget and his associates. More from SAI itself:

“Like public companies, the value of private change in real-time, but there’s no convenient way to track these changes… until now. We’ve created a real-time tool, the SAI 25 Live, that indexes the value of the SAI 25 companies to the NASDAQ. The SAI 25 Live updates the values in real-time (with a 20-minute delay). So if you’re jealous of all your friends at public companies who can recalculate their net worth all day, just check out the SAI 25 Live. This will tell you how much your stock options are worth right now.”

Now, there are a multitude of techniques available to perform valuations of public companies practiced by investors, ranging from the textbook (dividend discount model, earnings multiplier model) to the obscure (ask James Simons at Renaissance). However, they all have one thing in common: a heavy reliance on the availability of financial data, like revenue and profit numbers, free cash flow and balance sheet results. Unfortunately, these numbers are rarely publicly available for private institutions like those on the SAI 25 Live, leading one to wonder how accurate these valuations are. From the SAI 25 Live valuation page:

“Valuing companies is a subjective exercise, one that is highly dependent on information. In theory, companies are worth the present value of future cash flows, but since no one knows exactly what future cash flows will be (or the perfect rate at which to discount them), theory and a dollar will get you a cup of coffee. An additional challenge of valuing private companies, as opposed to public ones, is that detailed financial information is often unavailable or outdated. And many private companies are often early in their growth cycles and therefore haven’t reached mature profit margins.

Ultimately, of course, private companies are worth what any stock or asset is worth – what someone will pay for them.”

Of course, here Blodget is correct twice. Private companies are certainly worth what people will pay for them. Also, theory and a dollar will get you a cup of coffee, which is exactly the value of this analysis. The SAI 25 Live takes into account implied valuations in private financings (a terrible absolute indicator, but of some value directionally given an existing valuation), financial performance (nonexistent for most of this list), market share and market size (doable), and growth rate (dependent on revenue numbers, which are rarely reported and so must be guessed) making this list a poor indicator of anything other than relative valuations (Facebook is worth more than Ning, who knew?), and even there it can only be used sparingly (company X being worth Y times that of company Z on this list is probably meaningless). In the words of Erick Schonfeld at TechCrunch:

“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 nontheless perhaps one of Silicon Valley’s favorite parlor activities.

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-$8- million that Kara Swisher came up with. Splitting the difference between the two rumors is not exactly the height of financial analysis.”

Agreed. Some have even gone so far as to call it an attention-grabbing activity, like FakeSteve:

“To make it fresh and dynamic, they somehow yoked these made-up numbers to the NASDAQ so their made-up numbers change into new made-up numbers all day long. That way all these [employees] working for worthless companies will click on that list all day long…generating loads of stupid traffic for Alley Insider. And trust me, that’s the real point of this list. It’s a cheap ploy for ginning up traffic.”

Or for pulling financial information straight from the horse’s mouth. There are so many requests for data that could correct these valuations that it almost seems like a device for getting these companies to divulge their actual numbers straight to SAI. Regardless, it is difficult to accept a 25x revenue valuation for Facebook common stock, given that Google trades at between 10.5x and 15x revenue, which in itself is unusual. Also, Wikipedia, valued at $7 billion, is a nonprofit, meaning the assessment measures Wikipedia’s asset value if it were to change into a for-profit organization. This change would certainly affect its users, which in turn would affect the site’s operation, affecting the valuation.

Perhaps the best thing to take away from this is that it is indeed just an entertaining parlor game to perform these valuations. Serious investors should already be familiar with this.

Searchviews: Week in Review

Written By Sepideh Saremi | January 18, 2008 | Share This |

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In this edition of the Week in Review, the Facebook news keeps coming, MySpace tries to wrap its arms around the whole child online safety thing, and it might start costing more to watch video online than just to buy it in a store.

Wikia Search Launches in Alpha, Slammed with Bad Reviews

Written By Sepideh Saremi | January 7, 2008 | Share This |

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The long-anticipated search engine from the people behind Wikipedia, Wikia Search, launched today in alpha to mostly poor reviews. Mathew Ingram sums up the blogosphere’s reactions at The Globe and Mail:

Mike Arrington — the editor of TechCrunch, a technology blog that can help to make or break companies with a favourable review — called the service a “letdown,” while the Centernetworks blog described it as “not ready” for prime time. Stan Schroeder, who writes for a popular tech blog called Mashable, said point-blank that Wikia Search “sucks.” Others were even less complimentary.

After a year of hype and $14 million poured into this project, the resulting search engine interface is pretty (and they win cutest search engine logo, for sure) but the actual search results are indeed disappointing: Mashable’s Stan Shroeder notes that the first result for “Wikipedia” is a German listing, and Search Engine Roundtable points to abysmal results for “George Bush.” Andy Beal at Marketing Pilgrim also writes that Wikia Search looks very susceptible to SEO black-hat tricks, which may kill the project outright.

But it’s important to remember that Wikia Search’s human-powered, social-search approach means that the search results pages will be thin until people start using and contributing to the engine (or rather, if they do so). This is not unlike challenges faced by another social search engine, Mahalo, which is faring a lot better than people had expected. In TechCrunch comments, Wikipedia founder Jimmy Wales himself admits/defends the engine’s shortcomings (as does this caveat on the Wikia Search about page), noting that Wikipedia had a similar paltry start, and he says Wikia Search is a project to build a search engine, not the completed search engine itself:

So the comparison to Google on day one is just mistaken. Google didn’t launch a project to build a human-powered search engine, they launched an algorithmic search engine with a clever new idea. So they didn’t have to wait for the humans to come in and start building it.

We aren’t even running with a real index yet, just a placeholder index. Yeah, the search sucks today. But that’s not the point. The point is that we are building something different.

Wikia Search relies on user-written Mini Articles (here’s one about Google), but it’s strange that they don’t utilize the already user-written content from Wikipedia to help fill these out - why reinvent their own wheel rather than take advantage of their massive content base? It would be a mistake to write off Wikia Search outright, so we’re filing this one under sites to check back on.

Google Launches Encyclopedia Project Knols

Written By Sepideh Saremi | December 14, 2007 | Share This |

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Google launched a project yesterday that will merge the authority of traditional encyclopedias with some of the social aspects of crowd-powered Wikipedia. Dubbed “Knols,” (a “knol” stands for unit of knowledge and is what each article is called) the project emphasizes the authority of its writers in each subject, arguably lending it more credibility than Wikipedia. It will also feature social features such as reader-submitted ranking, commenting, and peer reviews, but Google says they will not have any hand in editing and that authors will own their pages. In fact, they’ll also have the chance to add ads to their pages. The project is not yet live and is currently invite-only but it seems that soon anyone can write; as a preliminary example, Google has provided a knol about insomia from a Stanford sleep expert.

Clearly, the encyclopedic scope of this project is drawing a lot of comparisons to Wikipedia. Steve Rubel of Micro Persuasion thinks Knols will kill Wikipedia, partly because of Google’s resources and its emphasis on authoritative writers, and Wired counters that it won’t because the encyclopedias differ over the fundamental question of collective vs. individual authority, and people will still look to Wikipedia.

There’s one other large-scale knowledge project that may need to worry, though, and that’s the NY Times-owned About.com. Written by “guides,” who are compensated for their writing based on page views, About.com doesn’t have any real social checks-and-balances; the most interaction or input users can make is in comments. I predict that over time, Google’s knols will supercede About.com’s articles in number and quality, and the ability to support one’s writing with ads via knols will be as attractive to subject experts as the page views-based compensation of About.com.

Google’s first foray into content publishing (if you don’t count its acquisition of Blogger several years ago), happened in early September, when its aggregation service Google News penned a deal with several news wires to host and link to their stories directly, displacing the online newspapers that ran the wires’ syndicated content. The knols project is also another example of the convergence of search, social media, and content, as Mahalo Social did earlier this week.

Wikipedia ’s Search Engine Optimized Article on Homepage

Written By Mohammad Usman | July 2, 2007 | Share This |

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Recently there has been much controversy over Wikipedia’s reinstituted policy regarding no follow attributes on most external links within the articles. Many critics have described this policy as a double standard, especially since attributions are not implemented across the board.

However, Wikipedia has responded to this controversy by including its Search Engine Optimization article on its homepage. This article explains the need for the policy, and answers many questions asked by site users regarding Wikipedia’s SEO.

This move follows recent debate in the search marketing community, in which marketers have been heavily critical of Wikipedia search engine. Two popular examples of this criticism include a Open Letter To Wikipedia Editors: Yes, Matt Cutts Is Notable and Search Engine Marketing (& Search Engine Land) Not Notable For Wikipedia?.

The question that remains now is: Will SEO’s article will be effective in quelling criticism?

Google Owns 2/3rds of Top Brands in 2006

Written By Kate Zimmermann | January 26, 2007 | Share This |

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…Two of the top three, anyhow. According to the annual poll by Brandchannel.com, Google, Apple, YouTube and Wikipedia and Starbucks are the Top Five Global Brands of 2006 (by perceived influence). The results are based on the answers of 3625 branding professionals and students to the question, “Which brand had the most impact on our lives in 2006?” This is both Google and Apple’s second time showing up in spots 1 and 2, and Wikipedia and YouTube’s first time on the list.

Discussion

Wikipedia Watchdogs Need Their Own Doghouse

Written By Kate Zimmermann | January 24, 2007 | Share This |

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According to blogger Rick Jelliffe, Microsoft attempted to pay him to edit their Wikipedia pages. The story broke first on the Age:

“Microsoft has landed in the Wikipedia doghouse today after it offered to pay an Australian blogger to change technical articles on the community-produced web encyclopedia site.”

As expected, Jelliffe’s post circulated through tech blog aggregators to the mainstream news. Rather than deny the allegation, however, Microsoft employee Doug Mahugh freely admitted to asking Jelliffe to correct an XML entry,

“…we feel that it would be best if a non-microsoft person were the source of any corrections…Feel free to say anything about the process, about our communication with you, or anything else…”

For a full account of the gossip, check out TechCrunch or Valleywag’s account of the story.

In the meantime, taken in context with Wikipedia’s recent addition of rel=”nofollow” tags on outgoing links (see “Heated Point / Counterpoint Debate on Wikipedia NoFollow Attribute“), this brings into question the whole notion of “spamming” Wikipedia. If the Wikipedia community is so robust that, as one editor claims, “spam” stays on Wikipedia for a “day on average”, does it really matter if someone alters information about their company? Clearly a tech-heavy subject like XML has innumerable editors that will keep any Microsoft alterations in check.

For that matter, why are edits to Microsoft’s information by a Microsoft employee really so improper? As Scott Karp writes,

“And, it now appears that if you are a corporation that feels Wikipedia is inaccurate or slanted on a topic that is of substantive importance to your business, you’re pretty much screwed. If your employees try to change the information directly, you’ll get slapped… And if, like Microsoft, you try to engage an independent expert to make changes — completely independent and without your review — you’ll also get slapped.”

Forgive me for questioning the authenticity of Wikipedia’s “open community” in which real people with real interests, and jobs with really big companies, get slapped for trying to communicate their opinions. Perhaps the appeal to Jelliffe was underhanded, but of all “community” members, you’d think an employee of Microsoft should feel free to correct any false information about their own company.

On that note, Rexblog points out an article about Wikipedia founder Jimmy Wales’ multiple edits to his own profile.

Discussion:

Heated Point / Counterpoint Debate on Wikipedia NoFollow Attribute

Written By Kate Zimmermann | January 22, 2007 | Share This |

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Over the weekend, Wikipedia added rel=”nofollow” tags to all outgoing links to help eliminate link spam. For SEOs, the NoFollow attribute will prevent highly-authoritative Wikipedia links from contributing to a site’s organic search engine ranking. As Search Engine Journal writes, “No matter where you place it, Article Page, Talk Page, User Page, Project Page, whatever. No Link will get any credit at the major search engines.” Wikipedia’s actions have sparked a heated debate on the pros and cons of counting Wikipedia’s external links. To help present the issues in the most fair and only slightly biased manner, Searchviews Presents:

POINT / COUNTERPOINT: The Right Decision vs. The Lose/Lose Situation


Point: “Wikipedia Finally Made the Right Decision”
As Rand Fishkin writes, “Since anyone can add them, Wikipedia is practically the definition of where nofollow should be instituted.” Instituting NoFollow is not only going to help cut down on Wikipedia linkbaiting, it’ll contribute to the quality of Wikipedia results. Furthermore, Wikipedia’s actions indicate a fundamental problem with search engine algorithms - this will force search engines to come up with new indicators of relevance other than external links, which are highly susceptible to spam.

  1. Point One: NoFollow Tags Improve Wikipedia’s Link, and Overall Site, Quality
    By making external links only as valuable (to marketers) as their traffic generated, links will be more qualified. Pages with significant amounts of traffic also undergo a significant amount of editing - thus, non-relevant outgoing links on highly trafficked pages are quickly removed by the Wikipedia community. For pages that undergo low editing, on the other hand, the time spent adding and monitoring links may outweigh the traffic benefits - thus there’s little incentive to add link spam. In other words, NoFollow tags make it difficult for spammers to reap any benefit from link-baiting Wikipedia. As a result, NoFollow tags improve the overall quality of Wikipedia contents.

  2. Point Two: NoFollow Tags Force Search Engines to Improve Their Algorithms
    By adding NoFollow to external links, Wikipedia is challenging the search engines to come up with other solutions to determine what links are trustworthy, and which are not. Links should theoretically exist for the user, as pathways to relevant content. When the search engines professed that external links weighed heavily into their search algorithm, however, they gave links with a new purpose - links were established as beneficial to site publishers, not users. This is the basis for all link spam, not the practice of linking itself. Thus, Wikipedia is not only cleaning up their own spam problem, they’re emphasizing that not all links are created equal, and search engines need a new methodology for separating authoritative content from spam.

In Support of Wikipedia’s NO FOLLOW:

Counterpoint: “Wikipedia Just Threw The Baby Out With the Bathwater”


Wikipedia is a community-built site that enjoys high organic ranking because of the inbound links created by its community members. Furthermore, as a highly authoritative site, search engines rely on Wikipedia’s references to assess the relevancy of other sites on the web. By removing itself as an information hub (in the eyes of the search engine) Wikipedia will not only hurt other sites, but it will hurt its own organic rankings. Finally, its dubious whether or not implementing NoFollow will significantly reduce the number of marketers “spamming” Wikipedia.

  1. Counterpoint One: Wikipedia is Stealing from the Community
    By refusing to share link equity with people who gave Wikipedia stature in the first place, it’s alienating the very community that determines its relevance. Though it may deter spam, it’s also hurting legitimately relevant sites. True, not all links are created equal, but Wikipedia already has a highly-effective editing process in place. Adding NoFollow tags not only challenges the trustworthiness of Wikipedia’s community editors, it deters community members from linking their own sites to Wikipedia. The tone in Marketing Pilgrim’s response post communicates this antagonism, “So, in response, any future links to Wikipedia from us, will include a NoFollow. Maybe if we all take that approach, Wikipedia will lose its PageRank and won’t have to worry about link-spam any longer.”

  2. Counterpoint Two: Wikipedia is Hurting Search Engine Results in General
    Search Engines depend on highly authoritative sites like Wikipedia to inform them of other relevant sites. Functions like Google’s “similar pages” are now rendered ineffective.

  3. Counterpoint Three: Wikipedia is Hurting its Own Results
    Previously, Wikipedia was considered both an authority and a hub by search engines - people went there for information, and it likewise informed search engines about relevant external sites. Now that external links (and related sites) are no longer visible to search engines, Wikipedia will lose its relevance as a hub. Furthermore, disgruntled site publishers who are unhappy with Wikipedia’s implementation of NoFollow will cease linking to Wikipedia, thus further hurting Wikipedia’s relevance. In sum, by hiding all external links from the search spiders, Wikipedia is essentially declaring itself the ultimate authority on all subjects - in the eyes of the search engine, this is false, and will likely have negative consequences on Wikipedia’s page rank.

  4. Counterpoint Four: No Follows won’t significantly reduce Wikipedia spam
    As one user writes, “Nofollow doesn’t have a huge impact on spam. Some spammers have western type return on effort criteria. Others do not: they live in China with a tiny income and are happy with an incredibly low success rate…I do not buy spam is getting worse. The key parameter for me is how long it lasts on average…spam isn’t growing faster than our ability to deal with it.” Adding NoFollow only addresses one of many reasons for spammers to get their URLs on Wikipedia - it’s a “kneejerk reaction to a non-existant problem”.

      5. Opposed to NoFollow:

      Wikiseek Promises to be Wikiasari Killer!

      Written By Anthony Iaffaldano | January 16, 2007 | Share This |

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      Wikiseek (not Wikiasari) is a new engine from SearchMe that returns results from Wikipedia and Wikipedia-linked pages. Like a good 2.0 startup, Wikiseek comes with browser plugins, smart filters, and a tag cloud. Wikiseek was supposed to be announced on Wednesday, but TechCrunch spilled the news a day early. From the Wikiseek About page:

      “The contents of Wikiseek are restricted to Wikipedia pages and only those sites which are referenced within Wikipedia, making it an authoritative source of information less subject to spam and SEO schemes.

      Wikiseek utilizes Searchme’s category refinement technology, providing suggested search refinements based on user tagging and categorization within Wikipedia, making results more relevant than conventional search engines.”



      As a service built with the help and permission of Wikipedia, Wikiseek will donate most of their ad revenue from paid listings to the Wikimedia Foundation.

      Discussion:

      Wikipedia = Britannica? Encyclopedia Demands Recount

      Written By Reprise Media | March 23, 2006 | Share This |

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      Long, long ago, way back in the year two-thousand and five, the journal Nature published a study (we discussed it here) that found that the Encyclopedia Britannica (a venerable, respected reference work), on balance, contained about the same number of errors per article as Wikipedia (the online, “free encyclopedia that anyone can edit”). This month, Britannica pushes back with a heavily footnoted twenty page report offering blow-by-blow refutations of claims made in the Nature study.

      Even among fans of Wikipedia (we sure find it handy), Nature’s findings rasied a few eyebrows. The community reference has suffered repeated and notorious instances of what it calls vandalism, defined as “any addition, deletion, or change to content made in a deliberate attempt to reduce the quality of the encyclopedia” - often including pointless bad jokes and swearwords. Entries about politicians and other controversial topics often seem to be in perpetual states of questionable quality due to competing attempts to mold the text, often to support specific opinions or even serve the interests of those discussed in the articles.

      So it’s little surprise that Britannica has trained its monacle on Nature and dished out a muscular correction. Part of the abstract reads, “As we demonstrate below, almost everything about the journal’s investigation, from the criteria for identifying inaccuracies to the discrepancy between the article text and its headline, was wrong and misleading.” Not to put too fine a point on it, or anything.

      Ars Technica’s John Timmer boils down the report here. Britannica alleges that Nature often cited material that was either fragmentarily truncated or never appeared in the encyclopedia at all. They also called out the skills of Nature’s evaluators, accusing them of being unable to tell the difference between an error and a simplification. But as Timmer observes, that kind of “finger pointing comes down to a ‘he said/she said’ matter of how to interpret the seriousness of a given error. There is really no objective way to determine whether an editorial decision represents an appropriate simplification or a glaring omission.” Given the reputations at stake, we’re sure Nature will have something interesting to say about Britannica’s rebuttal; for what it’s worth, Wikipedia is up to date.

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