Is The Blog Bubble Going To Hit Wall Street?

from the can't-be-right dept

If an online poker website with a questionable business model where the vast majority of its customers are probably breaking the law can go public at a ridiculous valuation, then perhaps we are reaching back into the ridiculous bubble years. And, what better type of company to pump up that bubble than a blogging company? Hopefully, something was just lost in the translation on this one, but the Blog Herald points out that a Chinese blog provider is hoping to go public in the US with a $1 billion valuation. There's a lot that just doesn't seem right about this story -- so it would be nice to see what really happens. First, anyone can say they want to go public at a particular valuation -- but actually doing so is a very different story. And, considering the two sources for the article are the company's founder/CEO and its primary investor, you have to imagine they have the incentive to pump up the possibility of a huge deal. Still, almost none of the additional numbers provided make any sense. The article notes that the company raised a seed round of $500 million -- which has to be a typo. If it's true, it's ridiculous. There's no way any blogging software provider would ever need that much cash -- and it's hard to understand why anyone would ever seed a company with that much. To support the idea that this has to be at typo, the company says it's about to raise a second round of $10 million. If the seed was $500 million and the next round is $10 million, you have to imagine that those new investors aren't getting any noticeable amount of equity. Also, if the company actually does go public the $1 billion you have to wonder how much of a return any of the investors could see -- as they already pumped half that in cash into the venture. The next problem with the numbers is they hype up how much money the company is making, shifting over to yuan instead of dollars to make it even more confusing. However, doing a quick currency conversion suggests that the company is making about $250,000/month, which might be a decent small business, but the company is going to need some hefty growth numbers to ever be worth a billion dollars. Finally, of course, there's the general business model question. The company makes its money by putting ads on peoples' blogs. Of course, there are a ton of blogging products out there that won't put ads on the sites, or that will let people put their own ads on their own sites -- allowing users to make money. So, even if this company makes some money, it's hard to see how it's sustainable.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Seth Finkelstein, Jul 8th, 2005 @ 1:26am

    1 million, not 500 million

    "BlogChina received first venture capital totaled almost USD 1 mln from SoftBank for 10% stake in the company during April 2004."

    http://spaces.msn.com/members/seepdan/Blog/cns!1p94sAO4KXUHLgIHnNHKwEsw!235.entry

     

    reply to this | link to this | view in thread ]

  2.  
    icon
    Mike (profile), Jul 8th, 2005 @ 1:59am

    Re: 1 million, not 500 million

    That makes a LOT more sense...

    Though, it still makes me question the $1 billion valuation.

     

    reply to this | link to this | view in thread ]

  3.  
    identicon
    Oliver Starr, Jul 9th, 2005 @ 5:33am

    Blogging Co Valuation



    Darn. Darn. Darn.

    And here I thought they were using all that extra capital just to pay their A-List Bloggers More...

     

    reply to this | link to this | view in thread ]

  4.  
    identicon
    Kevin Wen, Jul 9th, 2005 @ 11:47pm

    Re: Blogging Co Valuation

    Hi, I'm Business director from BlogChina.com, the article from Asia Meida are totally mis-leading the news. Founder of BlogChina.com had a interview with Chinese media last week talked about the future business of BlogChina, and he was saying the words was "make the efforts to build a 1 billion company in the future", not the "$1 billion IPO on Nasdaq". We are on the stage of Series A funding and the amount of investment will announce soon. As you said, the $500 million seed funding were ridiculous, certainly it's fake.
    I didn't know the reporter from Asia Media, but the source of translation was really mis-understanding. If it's possible, I would like you to update some information base on this comments to clearfy the rumors. or if you need any information, please feel free to email me at "wenxin (at) blogchina.com. Thanks very much. :)
    Please take a look the article of Business of Blogchina
    http://wen-xin.net/archives/2005/04/22/the_business_of_blogchinacom.php

     

    reply to this | link to this | view in thread ]


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