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Having already raised $20m in funding for his human powered search engine, Jason Calacanis is seeking a further $20m.

The serial entrepreneur is valuing Mahalo at a rather whopping / ambitious / ridiculous $175m, according to Matt Marshall at Venturebeat, meaning that the search engine is worth another $75m more than it was when it launched back in May this year. Astonishing...

So what of the initial funding round that was supposed to keep the company going for five years? Has it vanished completely? What has it spent it on? Staff, that's what. It has 50 employees to pay, presumably a seven-figure sum annually. Still, that leaves a lot in the bank. Tech? Marketing? Maybe Calacanis is feeding his dogs truffles these days...

Actually, we feel that he's probably looking for more money because he can. As 'Entrepreneur in Action' at Sequoia Capital (an early stage investor in Google, among others) he is well-connected and no doubt recognises that there has never been a better time for raising equity capital, for web startups, all things considered. 

Mahalo currently pays humans to produce search results, and is adding results at a rate of around 1,000 per week. This is a drop in the search ocean. Is Calacanis going to completely avoid the long tail? Perhaps, and with good reason, as we shall see. The gameplan here is to produce and provide quality results for the top 10,000 search terms.

Is a mooted valuation of $175m too high for a search engine which is only ever likely to cover a small proportion of search terms? Or will those hand-picked search queries - and the hand-written results - be enough to generate returns for investors? It seems doubtful, for three reasons:

  1. Achieving scale will prove (very) costly. Considering the number of staff that is required to achieve anything like comprehensive coverage, its hard to see how it will scale (economically).
  2. The Google threat. Mahalo positioning itself as a 'search engine' and is moving into a hugely competitive space. Presumably it is relying on the likes of Google to index its results prominently, in order to generate traffic. Calacanis is well-connected in these circles, but unless Google wants Mahalo on the map then it remains doubtful that the site's pages will rank particularly well. Results are mixed at the time of writing.
  3. Quality results don't pay, rubbish results do. All kinds of search queries return no results on Mahalo (yet). What you do get is a bunch of Google ads to click on, which is how the company makes money. It seems that it is in Mahalo's interests to point the majority of search queries to pages with no content, just ads / links. Maybe this is the killer business idea behind Mahalo! But pages without content don't rank at all well in Google, so how will users find them? By visiting Mahalo direct? Maybe Calacanis wants extra dough for some brand awareness campaigns...

Despite these concerns, the results that Mahalo does produce are often impressive. A search for 'London hotels' for instance, avoids the kinds of aggregation sites that appear on the same search on Google. However, as a case in point, Mahalo's 'London hotels' page isn't indexed in the first 10 pages of Google for this particular search query, so who would find it?

Well, some people do. In fact, Venturebeat cites a 'reported' 1.5m monthly unique users, which would be impressive if accurate. It feels very high, given the immaturity of the venture, but Calacanis has a fine track record so who knows? I'm sure he could clear this up by releasing some Google Analytics numbers, not that there's any reason to do so.

Anyhow, it will be very interesting to see how this one pans out. I don't want to exhume the dreaded B-word, though it seems that right now we're straddling the narrow crevasse between Boom and Bubble.

Meanwhile, another human powered search engine, ChaCha, has raised a total of $8m in funding, so it looks like Mahalo could have a serous competitor.

Related stories:
Calacanis turns to LinkedIn for help with search engine
Mahalo launches web search toolbar

Graham Charlton

Published 19 November, 2007 by Graham Charlton

Graham Charlton is the former Editor-in-Chief at Econsultancy. Follow him on Twitter or connect via Linkedin or Google+

2565 more posts from this author

Comments (4)

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Chris Poad, Head of E-Commerce at Otto UK

Not only is this model not economically scalable, it's not maintainable either. The effort required to keep Mahalo's content pointing at valuable (and active!) links is directly proportional to the volume of the content it creates. This seems to be the antithesis of many successful online commercial models.

Ask Jeeves tried this approach years ago with its editorially selected answers to users' questions, and quickly abandoned it.

Google has a sky-high valuation, in part, because of the highly scalable nature of its AdWords product. An extra $1 in revenue creates almost zero marginal cost.

Cha Cha is an even more bananas product - answers to questions in "real time" from live-chat operators (who presumably are using... Google).

over 8 years ago

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Tad Chef

He probably he needs more money because he needs it. He failed with Netscape.com now he fails with Mahalo. No wonder: Peole are not stupid, selling an antiquated Web 0.0 web directory concept as a revolutionary search "engine" is ridiculous. The only thing he does well is being flamboyant and offending people. He's a con artist.

over 8 years ago

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Lynn

I am an independent contractor, working for both ChaCha and Mahalo. They are totally different types of search engines with different goals in mind. ChaCha is going mobile and the guides are being trained to produce the best results in seconds, live.
Mahalo is new and there are about 400 people putting this all together. I ,for one, work long hours gathering the most pertinent information I can find on whatever topic I am on. When my work is done it gets passed to a Full Time Employee who does some tweaking here and there before submitting it to the public. This is why you can't always find answers to your queries..it takes time to get it right. But if you want to look up a college or a sports team, if my name is on it, I can guarantee you that you are getting all the info that's out there now on the Internet. I just put it all together in one place for you.
Jason is a hands-on leader. He communicates almost daily with us via newsletter , blogs and e-mails.
He knows where he's going and he knows where Mahalo is going.
Give us some time and you will see what we can do as a team.

MAHALO!
Lynn

over 8 years ago

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eric

Jason Calacanis is irrelevant. Who cares what this guy does? Im not sure I see much value in anything he's written or does.

Literallly....WHO CARES?

over 8 years ago

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