TechCrunch is reporting that secret merger talks between blog search engine company, Technorati, and Canadian blog network, b5media, have collapsed.

The reason given was a personality clash between b5’s CEO, Jeremy Wright, and Technorati’s Richard Jalichandra and, according to b5 “a lack of transparency on Technorati’s part during due diligence.”

Judging by that, this “merger” didn’t really stand a chance. One wonders if Technorati took it seriously.

Toronto-based b5media has apparently been looking for “merger partners or acquirers” after failing to raise more VC money — it has so far received stage-one funding of $2 million. It seems Technorati has also had its financial problems.

The notion of a mass roll-up of blog networks to make ad sales more attractive and economical has been around a long time. Personally, the dynamic of that approach has still to be proved to me, especially in the current financial gloom.

Technorati has a big name, but is largely associated with a failure to live up to its billing. B5media has relentlessly stuck to its remit and expanded to 340 blogs.

I’ve long since lost faith in this horizontal model, which basically claims that small-scale content sites multiplied n-hundred times add up to a better business than three or four wowsers, or a tight-niched, product-based network, like Glam or TechCrunch. In this case, less is almost certainly more.

No “blog” network has really scaled up to the point where direct-response ads can be replaced with brand advertising. To sustain a company the size of b5 in personnel terms alone, that’s what it takes.

I’ve no doubt b5media will disagree, but they are faced with a double whammy : the brick wall of scaleability in the middle of a credit crunch.

Declaration of interest : I worked for b5media for a few months when it started up, and I am now the owner of a rival content network, Syntagma Media.

The Syntagma Story (continued)

Straws in the wind are important signals for digital farmers. They tell them crucially which way the wind is blowing, its strength, and something about the season/cycle.

There are now a lot of straws in the wind for digital networks (or, for purists, blog networks). BlogNetworkWatch no longer covers blog networks. It’s become a sort of mini Blog Herald. Many networks have shut up shop or are quietly getting on with their business underneath the radar.

So what is the state of the digital network business in these apparently doldrum conditions? As I’ve been writing here for a time, waiting for a knock on the door from the Business Development Officer of Yahoo/AOL/Google, whatever, is a sterile career move, and always was.

When Jason Calacanis announced Weblogs Inc was doing $1m a year on Adsense, followed quickly by its sale to AOL for $25m and a seat on the board, networks of content providers became the new Klondike. Lots of people moved in, including Weblog Empire (Duncan Riley) and b5media (Jeremy Wright and other names from the starry firmament). I worked for both before moving quickly on to form Syntagma Media.

Even then there were two ways you could play a digital network :

1. Build infrastucture and content platforms quickly so it stands out against the competition. Go for size and scale before anything else. Then, with a bit of luck, the BDO will come knocking on your humble door. Bingo! Blogging bliss.

2. Optimize the network for income — remember WIN was making $1m a year from Adsense alone before it sold out.

Here at Syntagma we followed Route 1, aiming always to reinvest income in exchange for size (55 sites and rising), and pushing the envelope into new fields, like network magazines and large retail portals. The business plan also included a move into IP-TV in 2008.

However, a major rethink has been forced on us through a number of events. Not the least is a lucrative publishing offer landing on my lap and, yes, straws in the wind. There are no big buyers of digital networks out there now, and even those that are sold have to settle for a bit upfront followed by a share in the income thereafter — in effect turning the owner into a salaryman of the buyer.

The really interesting point though, is that once you go from Route 1 and start exploring Route 2, something highly beneficial emerges. When you stop pouring all of your treasure into endless expansion, you discover that you can start paying yourself a handsome income just by running the network as a normal business, capping the size and scale, and going for quality and depth, rather than extension and constant revolution.

A network like Syntagma can easily pay its owner a six-figure salary (and rising) from a steady-as-she-goes policy of improvement and quality delivery. That assumes the business is around two-years old (we’re two in October) and has a bunch of mature inventory.

In the end, what you get out of a project is more important than prestige, size, or future bonanzas, real or imagined — try explaining it to your bank manager.

So that’s the subtle shift I’ve made in the running of Syntagma. From a network that, at its peak, employed 15 authors, with five vacancies outstanding, to a trim 30 to 40 sites with maybe six high-quality freelances working. We are now a medium-sized digital publisher aiming for depth and quality. One that pays its owner a decent salary, allowing him to spend time on the book deals.

I’m guessing that many network owners have already come to the same conclusion. It’s not astro science after all. If Route 1 seems like a distant dream, even a total mirage, then Route 2 holds some surprises in store. It’s the old bootstrapper’s adage that, the lower your costs, the less you have to turnover to get into the comfort zone. Syntagma is now officially a Route 2 business. Our motto is :

Mind you, if any BDOs are in the area, do drop into Syntagma Towers for a cup of tea. (The champagne has already been auctioned off).

Pramit Singh, an “information professional working in New Delhi”, has written an interesting piece on blog networks over at MediaVidea.

Trawling through various opinions and scenarios, the main emphasis of the post is on the downside risks and problem areas of digital networks. Many of these points have been aired on other sites, not least on this one.

Here’s the take on Syntagma : “In fact, one blog network, Syntagma Media, which had more than 50 blogs, cut down on all redundant blogs and ended up with just 3 sites, which are now being run along the Engadget model – as magazines.”

That’s not quite accurate since we still have 55 sites. We’ve simply packaged them around three (soon four) portals under a concept we call “network magazines”. It does worry me that some intelligent and otherwise informed individuals can still get this wrong. But then maybe that’s a positive outcome. If visitors now see our inventory as three magazines, rather than a collection of “blogs”, that indicates that the system is working.

Even b5media gets a bit of excessive pidgeon-holing : “B5media specializes in Celeb blogs.” Whatever happened to the other 13 channels?

The fact is, the average surfer is not going to grasp your wonderful arrangements and system concepts while flicking through your inventory. When people who know the ground get it wrong, though, some head-scratching is clearly in order.

It is good to be reminded of these points from time to time, obvious though they are. One thing I’ve learned since coming into this business is that quality of traffic is preferable to tidal waves of Digg- or Slashdot-type invasions. Some of our low trafficked sites make more money than our highly visited ones. The secret of success is not to close down the bigger sites, but to divert specific segments of the tidal traffic flows onto the higher-paying inventory — and that’s the basis of our network magazine theory. It does work too.

There’s one simple principle that’s always drummed into new entrepreneurs : it’s no good making wonderful products if you can’t sell them. This is why our Retailz USA portal will be a step change from what we’ve done before, and will introduce a wholly new concept of managing, producing and presenting content online. What we are dreaming up is nothing less than a revolution in the portalization of commercial content.

Network magazines Mark II will be far in advance of the original concept of blog networks. In fact, you’ll hardly recognize it.

I’ve long been an advocate of the convergence of print and pixel formats. Each has something to learn from the other, and, despite the insistent claims, the online world will not replace print in a clean sweep any time soon.

Despite the obvious limitations of long text pieces online, there’s yet another outbreak of print-death fever going around. Tim O’Reilly has heard whispers that the San Francisco Chronicle is in “serious trouble” and is laying off journalists and staff. Dave Winer wades in with a thoughtful contribution, while Robert Scoble trumpets, “Newpapers are dead”.

The problem with that kind of headline is that this is a complex situation with many variations and possible outcomes. Certainty is not an option here.

Newspapers have been in trouble as long as they have existed. I can name a dozen national titles that went out of business in Britain in the 20th century. It happens — all the time. One failure doesn’t necessarily signal the end of an industry.

Most UK national newspapers now put their whole output openly on websites. They break news online and follow up in later print issues with in-depth analyses and commentary. They also give away DVDs and lottery cards with the print version and have a sizeable magazine-type feature-set aimed at specific demographics. Not many of their customers want to turn their computers on to access all of that when they can buy it in a convenient print bundle for around a dollar while they’re on the move.

As newspapers become more like daily magazines, with retrospective analysis of news already broken on TV and online, urban populations are still buying print products in large quantities. The evening papers, for example, are bought by returning commuters to make their homeward journey a little more bearable and to catch up on the stories of the day. Local papers are increasingly the glue that binds the inhabitants of towns and villages together.

What is actually happening is a convergence, not a replacement. Increasingly print publishers are becoming digital publishers, while maintaining their print operations. Imagine the major titles — the FT, WSJ, NYT, or Times (London) — without their immensely prestigious paper versions. They would lose considerable traction in the marketplace without them.

We forget at our peril that most people like the reassuring feel of a “real world” product in their hands. They go online for certain types of information, but relax with a book or magazine.

Breaking news is covered better on 24-hour news channels than on websites or blogs. Immediacy is the USP here. Fiction is a pain on-screen. Long, complex, nonfiction is easier to handle in book form, and some subjects are presented far better in print than they are on the internet.

What we’re seeing is a weeding out process that will result in rapidly-changing information migrating online — as it already has — while considered analysis will appear in hybrid formats for different audiences. More reflective, longer-term material and fiction will still remain predominantly the province of print formats and subsequent dramatizations.

It’s often forgotten that new technology has transformed the print world too. On-demand book printing, from disc in tiny batches, is already changing the face of book production and will continue to do so.

Can anyone tell me why a wealthy society shouldn’t support many communications formats to their mutual advantage?