Doomed tech: Calacanis talks 'Recession 2.0'

Is the technology sector doomed at the hand of a global recession? Serial Silicon Valley entrepreneur Jason Calacanis talks to CNET UK to set the record straight

Nate Lanxon Special to CNET News
4 min read

Despite the vast recession the US and UK is fast plummeting into, Yahoo, whose stock this week hit a five-year low of little over $12 per share, is rumoured to be looking not to shed unprofitable little companies from its portfolio, but acquire a massive one riddled with as many issues as itself: AOL.

"Two dysfunctional individuals getting married doesn't make for a great marriage," Jason Calacanis told us of the mooted Yahoo/AOL merger, during his visit to CNET UK last week. "If I was on the Yahoo board of directors I would vote against it; I would resign if they did it, to be honest."

And he should know. After founding Weblogs, Inc -- the parent company of Engadget -- and selling it to AOL, Calacanis even abandoned writing his own blog in favour of sending periodic emails to subscribers using good old-fashioned mailing lists.

Is Mahalo recession-proof?
Calacanis now runs Mahalo -- a search engine that hand-writes search results using employees, not algorithms. Despite our own reservations over 'people-powered search', the site is apparently pleasing its creator. "In August we had a record month of 4.6 million unique users, 100,000 published pages, 100 full-time employees and 200 to 300 freelancers."

But we wondered if this equated to the site actually being successful, particularly as stocks are plummeting, banks are failing and advertisers are nervous. Mahalo has experimented with republishing its content with Google's Wikipedia competitor, Knol, which lets contributors profit from their additions. We asked whether this was a result of Mahalo not making money.

Even Google hates its own product
Apparently, the truth is much more innocent. "That was more of my way to sort of have fun with the fact that Google is doing Knol," Calacanis laughed. "I was being a cheeky monkey. I actually think it was really stupid of them to launch the product."

More interesting still, apparently even Google's own employees share similar views. "I think they're going to downplay it and probably get rid of it. I've had people at Google tell me they don't understand why this product was launched. They don't agree with it and they think it's too overarching. I've heard from multiple people at Google that they regret the product launching."

Major companies to shrink
Perhaps Knol will be one of the many products the company tosses into the grinder as Yahoo and Google deal an implosive economy. "You're going to see a bunch of these groups inside of companies either be sold or shut down," Calacanis said. "We're seeing it already with eBay [selling] StumbleUpon and Skype. I would look for Yahoo to sell off five or ten companies, as might Google."

Google acquiring Twitter
But it's not all doom and gloom. A short while ago we suggested Google forget about Jaiku, the microblogging Web service it bought earlier this year, as a result of its tiny market share in comparison to Twitter, and acquire Twitter before a competitor does.

"I would agree with your assessment. Look at what they did with Google Video: they said it would crush YouTube. It didn't. So they bought YouTube. Google doesn't have a problem in trying, failing, then buying the lead competitor. I think they tried with Jaiku, but will wind up buying Twitter. If I was Google I wouldn't let Twitter go to anybody else."

Perhaps if Twitter's founders read Calacanis's blog just weeks earlier, in which he predicted "50 to 80 per cent of venture-backed start-ups currently operating will shut down or go on life-support within 18 months", they'll be even more eager to be acquired by cash-rich Google.

Twitter, Digg, FriendFeed safe from implosion
Or perhaps not. Quizzed about this tear-jerking claim, Calacanis explained it wasn't Twitter, Digg or FriendFeed, for example, that would suffer, but rather the sites imitating them. "It'll be the 'me too' companies; the fourth and fifth versions of Twitter, the third, fourth and fifth versions of FriendFeed, the sixth, seventh and eighth version of Digg -- the ones the world doesn't need. They won't hit critical mass and they won't get advertising."

It's not so much a pending apocalypse for all start-ups and tech firms, then, but rather a genocidal cleansing of the ones the world doesn't need.

The future
The bottom line for the cash-rich companies during the economic downturn is that industrial panic isn't the solution. Rather, a quick syphoning off of less profitable parts of the business, along with the speedy acquisitions of potentially lucrative ones, will keep companies such as Google and Microsoft at least afloat in the violent waters of falling stock and failing investments. And the top start-ups should just bide their time.

Finally, to counter most peoples' fears that advertising will just dry up, Calacanis suggested Google's ad sales could even increase as a result of the economic disaster. Simply put, instead of pumping a million dollars into a billboard, advertisers could instead buy clicks with measurable and immediate returns.

We're in dark times for sure. But if you're not planning on acquiring massive and troubled companies, or building a business based on an existing idea, you may well be thrown a lifeline by one of the larger tech companies looking to stabilise its own business. -Nate Lanxon