So far during this Crisis we’ve been discussing the crashing of big banks and financial institutions.

Today, the collapse of flatpack furniture giant MFI in the UK illustrates that the rot has set in on Main Street too. This has a long way to go yet.

But what about startups? These are small businesses with embryo staffing arrangements, usually depending on borrowed, credit card or venture capital funds to pay the bills.

Web 2.0 star and now a venture capitalist himself, Jason Calacanis, writing in Jason’s List — an email list for bright business folk — believes that up to 80 percent of them are on the point of going bust:

It’s my believe that the economic downturn will be much worse than it is today, and that 50-80 percent of the venture-backed startups currently operating will shut down or go on life-support (i.e. 3-4 folks working on them) within the next 18 months. Make a list of every Web 2.0 startup to raise an A or B round and cross 80 percent of them off the list, because they will not make it to their next round of funding or profitability.

I know many such startups personally, particularly tech and internet businesses, and this assessment is devastating. It’s also nothing but the truth in all its stark outline.

Around six months ago, we predicted here that another dotcom bust could not be ruled out. It can’t, but there’s always hope before it happens that some features peculiar to tech startups will not be in the direct path of the storm.

The first thing to note is that the internet is a much maturer place to do business now. Many more people depend on it than back then. It’s also stuffed full of very big players indeed, companies that will ride out the crash on a large cushion of cash — Microsoft and Google, for example.

It’s the overextended startups that will splutter to a halt, fall into mothball mode, or their owners will simply walk away and do something else.

The dotcom collapse earlier in the decade had the effect of destroying the paradigm it was built on: that internet businesses didn’t need to make any money at all, just puff themselves up for an IPO on the stock market which would make the founders very rich.

It was a classic bubble that burst with an inevitability that took believers by surprise, but never fooled more experienced observers.

The problem was that entry costs, even then, were very low compared with similar bricks-and-mortar operations. The potential was obvious, but people simply went mad with the hubris of it all.

The current bursting bubble in house prices — one of the biggest asset classes out there — is apparently similar but much more infectious in that it penetrates to the very core of the financial system and affects everyone, not just a few thousand geeks who thought they had reinvented the world.

If you were involved with the online world at the start of the century you’ll know how it felt to go under with a bang. It must feel eerily similar now.

Small-to-medium businesses with no debt, some cash reserves and crucially no need for further rounds of funding — like Syntagma Media — will survive, if they play their cards right. The danger is that their server companies won’t and they find themselves suddenly cut off.

This Crisis will affect everyone in different ways. It would be a prudent move to assess any business’s configuration to determine its weak points. That could save their skin.

“It’s with a heavy heart, and much consideration, that today I would like to announce my retirement from blogging.”
Jason McCabe Calacanis

Hold the front page? Well, yes, maybe — at least of the Silicon Alley Reporter, the U.S. trade magazine he founded.

Jason Calacanis is more widely known as the man who sold a network of blogs for around $30m to AOL a few years back. He is one of Web 2.0’s highest flyers in the sense that he turned big thoughts into big bucks. He now runs his own hand-rolled search engine, Mahalo.

His resignation “post” (as purists still call them) is worthy of Victorian melodrama, leading to charges of link-baiting — a common way of driving traffic to blogs. Naturally, he denies this, claiming never to have soiled his hands with such practices. Perish the thought.

He will, he says, replace his blogging activities with a private email list comprising roughly 1000 subscribers, all drawn from a group he calls “insiders”. These are intelligent, tech and business types of the kind most often found in Silicon Valley, California. So if you’re an Albanian circus performer with limited English, don’t bother to apply.

Why this move, and why now? Obvious answers include:

1. blogging has had its day.
2. attention spans are getting shorter, hence Twitter.
3. good bloggers often work as hard as journalists for little pay.
4. blogging has failed to build a reputation for quality.
5. spam comments have brought the system to its knees.
6. blog comments have let in demons from the outer darkness.

And there are many more reasons than those.

For good writers with something original to say, blogging has become a downward-leveller, rather than an enabler, as originally intended by weblog pioneers like Dave Winer. If you are a serious blogger, most readers will assume your opinions are prejudices, and ranting your principal method of communication. Otherwise, why don’t you write for The Guardian or Scientific American?

Commenters will lead you to believe the worst of the human race, which is why the traffic lights at the top of this site read “Comments OFF, Email ON.” Signs like this are becoming more prevalent around the “blogosphere” as people start to audit their return on capital from blogging.

The email list system is more like a private forum in which selected subscribers discuss topics in a “thread,” in this case the leader of the group’s weekly email. As a method of publishing to a coterie of like-minded individuals who are able to develop the arguments and refine them in a civilized fashion, the list has much to commend it. It’s also very cheap — no paper, printing and postage costs, or time-overhead batting away the daft, stupid, nasty and positively evil intruders.

For an author writing a nonfiction book with closely-argued chapters, it would be an excellent way of fact-checking the material and the logic of its presentation bit by bit, without having to submit it to academic specialists for verification before publishing.

In Jason Calacanis’s case, I would suspect he just wants to express himself in writing without all the hassle from trolls and oddballs.

In the end, the wisdom of crowds is no such thing because the most reckless, outspoken elements inevitably rise to leadership positions, drowning out more measured voices.

Meritocracy — the spirit of excellence, with decisions taken at points of maximum competence — always needs nurturing in cell-like establishments.

Let’s face it, the world is too big for any one individual to make much of an impact without vast wealth or political power. The blogosphere has become so enormous, comprised of multitudes of tiny, discrete pieces that it takes on the laws of quantum physics rather than the world of direct contact with our peers that humans crave.

There’s no worse tragedy than to have communicated widely for years only to discover that the throng out there still doesn’t know what you’ve been talking about.

We have fielded a lot of emails in the past three days about the still developing situation between internet giant Google and text-link buying agents, like TextLinkAds.com.

To recap, Google has conducted a manual search of mainly networked sites to penalize commercial publishers who sell links via the agencies, or who have hand-rolled ads without rel=”nofollow” in the code. The code stops Google’s robot from following the link to its source, thus avoiding clocking up a backlink for the buying site.

The more ranked backlinks a site has, the higher its PageRank. Google has been progressively lowering the rankings of sites on which perceived mal-dispositions are found.

For example, Syntagma — which we expected to rank 6 by now — has dropped to 3 in the latest round of carnage. Our site Fifty-Something Women — which has around 20 text links of various sorts — has fallen from 5 to 2. This gives the artificial impression that the site has low traffic and puts off some ad buyers who respect Google’s approval.

Google claims the ads are skewing the results of its search engine, replacing relevancy and authority with the ability to purchase links, i.e. buy authority and relevancy rather than earn them through merit.

There is some force in that argument, although the contrarian view is that Google itself is now skewing its own results by retreating from its pure search criteria.

Also, many observers believe Google is attempting to crush the businesses of the astonishingly successful agencies that sell the links. Its own text-based system Adsense, has undoubtedly taken a knock from TLAs in recent months, especially on low-to-medium trafficked sites, which do poorly on the Google system.

Whatever the facts in this case, Google has created the monster from which it is now suffering.

Background
A mere 15 years ago, at Silicon Valley’s Stanford University, founder Larry Page saw literary citations as a software opportunity for the web. Nowadays, it’s hard to see beyond the system he produced, first BackRub, a way of measuring backlinks to articles and sites, and then PageRank, the most addictive element in web oneupmanship. Has that system really served us well?

To generate Googlejuice you have to cite and cite regularly and relevantly. The blogosphere, in particular, is a madhouse of clickability. The genius of Google is that it didn’t just transfer the bane of academic publishing, the citation system, onto the web, but that it discovered how it could profit enormously from the process.
/Background

Is it now pulling the rug from under other companies who are using its innovative scheme to build businesses on the web?

The link, or citation, system is behind the present controversy in the search business. The wonder is that Google tolerated the SEO — or Google gaming — system for so long. The sudden rush to penalize publishers has a rather thuggish feel about it, particularly as the broken bit in this chain lies within the software of the companies that broker the ads.

Jason Calacanis, formerly chief of Weblogs, Inc, which sold to AOL for a reported $30m, has put up a good piece in which he explains how he created the interlinking system between blogs and also hosted the first text link ads.

Where are we now?
We are now at the point where we have to decide. Do we take the ads down, or leave them up and suffer the consequences, the extent of which is not yet clear?

At Syntagma, we have sites which are 90 percent plus dependent on text links. We are therefore going to sit this out and observe what happens. We will keep faith with our advertisers. Business as usual.

However, we strongly urge the brokerage companies of text links to do deals with Google on this matter. Not only is their business model in grave danger of being blown out of the water, but it may be that small tweaks in their software will be enough to allow Google room to compromise.

After all, there are a lot of enraged publishers out there, who feel they have been badly let down by the giant of the internet. Uncle Google has suddenly turned into the wicked stepfather.

At last a major player is joining me in my spluttering campaign against social networking spam. The campaign so far has consisted of not joining any of them, so is not quite up to Emily Pankhurst’s Suffragette movement yet.

The plain fact is, there are not enough years in the day to play around with this stuff — unless, of course, you are paid to review it, in which case I forgive you.

If your job involves something else, though, this is just another dose of poison to limit what you are able to achieve in your real work.

The Low Information Diet is the only way to get things done. #

Wake up, or perish by information overload — a death far worse than slow Chinese torture or garotting with piano wire.

Jason Calacanis has just launched Mahalo, a search engine with real humans making some of the decisions. Crazy? Nothing wrong with humans. A bit slow, but generally much more intuitive and accurate than machines. It’s still in alpha so we must wait awhile before testing it properly.

Like most people I suppose, I searched for my name, “John Evans”, and it wasn’t there. But Mahalo did offer to email me when it was. Now that’s what I call service. You search for a name and then you wait for an email. They are though only five months into a five-year project. Nice touch.

I also searched for Syntagma, and bingo, we came 2nd and third on the list, below Syntagma Square, Athens, but above all the other companies now calling themselves Syntagma. Result!

So what’s the idea behind the human operators? This is from the press release :

Are humans better than machines at creating search results?

Yes and no. Humans cannot possibly create as many search results as machines, nor can they go as deep on each search result. However, humans using machines can create much better search results than machines alone. Our “Guides” use Google, Yahoo, Ask, MSN, Flickr, Delicious, and dozens of other services to hand-craft the cleanest, most organized, and spam-free SeRPs available today.

How much time do you spend building a SeRP? It takes a couple of hours to create a solid search result. However, these results need to be maintained by our Guides on an ongoing basis.

This is an interesting concept and it will be good to watch it mature. I’ll be waiting for that email too. The release doesn’t specify whether the Guides will be responsible for taking the search on from my query, but I guess that’s the way the system works.

So long as I come top, I’ll be content.

Try Mahalo yourself.

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).

Yes, folks the link machine over on Calacanis.com really works. Check this out.

See previous post for all the gen. We might just go linking round in circles forever.

This could actually be a very explosive meme, fuelled as it is by avarice spiced with greed. What greater reason to get involved. Fatblogging it ain’t.

You just gotta give it to the guy. Genius isn’t in it. Jason Calacanis has just written not only the funniest post I’ve read in a while, but also the smartest traffic-hoovering machine in years. I’d call it the industrialization of backlink aggregation. Google watch out — Professor Moriarty is on the case.

Now, if you think I’m doing this post to get a link back from Jason, get a life! His post tickled me puce, that’s all.

Oh, and did I mention he is former Editor of Silicon Alley Reporter, “once profiled in New Yorker piece…,” former GM of Netscape, Brooklyn born, or “his trusty bulldog Toro by his side.”?

His injunction, “DO lie and say we hung out one night back in the Silicon Alley days or after a conference and that I’m actually a really cool guy once you get to know me.” is not possible since I NEVER lie. I once sang a duet with Elvis though.

He ends : If you follow these “Calacanis Link Bait” strategies I will link to you. If you just come out and beat me up I probably won’t… so, there you have it “how to get a link from Calacanis.”

I suspect this is a clever way of using his campaign against SEO, which I totally agree with in an unflashy sort of way, to practise a little of it himself.

Darren at Problogger take note, you have serious competition.

If all the words expended on Fatblogging were reflected in results, we’d now be debating the horrors of Size Zero bloggers.

How is it, we would complain, that these skinny wretches can be allowed to practise Fatblogging when they look like matchsticks on stilts?

Well, the answer lies in human nature. Words are rarely turned into reality. The Tao Te Ching says : “He who speaks, does not know. He who knows, does not speak.”

Wise words indeed. It’s the motto of us Thinbloggers.

This is just a preamble to tell you that my Fatblogging efforts lost two whole pounds, only for one of my knees to give out. The result has been three days of keyboard bashing with virtually no exercise. Outcome? It’s all back on again.

Prospects : I still have 7 lbs to lose in 9 days. Will I succeed?

He who knows, does not speak.