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:
- 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).
- 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.
- 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.