Valley's 'Mr. Web 2.0' seeks next big thing / TechCrunch blog ruffles feathers on the Internet beat

ARRINGTON03 Michael had a party in New York and was given a bobble head of himself he now keeps on his bookshelf in his home. Michael Arrington, is an Internet kingmaker, proprietor of the TechCrunch blog that covers Web 2.0 startups Event on 11/29/06 in Atherton. MANDATORY CREDIT FOR PHOTOG AND SF CHRONICLE/ -MAGS OUT less ARRINGTON03 Michael had a party in New York and was given a bobble head of himself he now keeps on his bookshelf in his home. Michael Arrington, is an Internet kingmaker, proprietor of the TechCrunch blog that ... more Photo: Penni Gladstone Photo: Penni Gladstone Image 1 of / 3 Caption Close Valley's 'Mr. Web 2.0' seeks next big thing / TechCrunch blog ruffles feathers on the Internet beat 1 / 3 Back to Gallery

Michael Arrington's influential blog TechCrunch -- where startups get pimped and big news sometimes breaks first -- has vaulted him into the post of "Mr. Web 2.0," a kingmaker among Silicon Valley entrepreneurs and a figure of controversy in the media world he is disrupting.

Arrington, 36, is a lawyer, an adviser to companies, an investor and an entrepreneur. But the thing that's made him famous in the tight-knit circle of the nascent Internet boom is his TechCrunch blog, which breathlessly chronicles the latest online wizardry.

In the 18 months since he started the blog, Arrington has emerged as a major player in a tech scene that is quickly changing the media landscape. Bloggers, using inside information and posting at all hours of the day and night, are often beating traditional media to big stories and are setting the news agenda from Silicon Valley to Washington.

With that kind of disruptive activity, as well as the lack of any hard-and-fast rules on how to conduct citizen journalism, Arrington has landed in the white-hot center of several storms of criticism. He tussled with the New York Times over journalism ethics and was dinged with accusations of favoritism and conflict of interest for writing about companies he's invested in or whose owners are his friends. Arrington denies doing anything wrong or even all that different from other journalists -- although he's not entirely sure whether to call himself a journalist. After such a meteoric rise, even Arrington is not sure what comes next. All he knows for sure is that he needs a break, if only to dream up what comes next.

For the next month or so, Arrington is giving up the all-nighters that come with his status as a major player in Silicon Valley. He'll be skiing at Mount Baker in Washington, not far from his parents' home in the San Juan Islands. But he's not simply recharging his batteries. He says he's temporarily withdrawing from the hurly-burly of blogging in order to take stock of a homegrown business that is growing quickly. Last month, he said, he took in $180,000, and that was before he threw a party at a trendy New York City nightclub that also will be highly profitable, thanks to companies who paid to sponsor it. TechCrunch has $500,000 in the bank after only 18 months in business, he said. While that's chump change in the world of big media, it's big bucks for a blogger.

Internet entrepreneurs can never disengage completely in the always-on world, however. "Part of the idea is to take a couple of months and really say I'm going to write only half-time and no more," he said this week in an interview in the rented Atherton ranch house where he lives and works. "I'm going to be taking some time and really thinking about the business," including what sorts of new sites to add and what directions the content should go in.

He also needs to hire a general manager after he parted ways with his advertising manager. Having someone who can handle the advertising and sponsorships will help create a church-state wall like those that traditional news organizations have separating advertising from editorial, which Arrington sees as a necessary part of his maturing business.

On his leave, Arrington will depart the Atherton house that has become to the Web 2.0 euphoria what the Industry Standard's San Francisco rooftop was to the dot-com boom of the late 1990s -- a place to party with venture capitalists, intrepid entrepreneurs and executives from Silicon Valley giants. (Oddly enough, while the house is in affluent and leafy Atherton, it's a fairly nondescript one-story place with barely any artwork on the walls, Ikea furniture, tables cluttered with tech gear he is reviewing and an inefficient heating system that leaves it freezing. Even space heaters and a Duraflame log in the fireplace have no discernible effect.)

Most intriguing about Arrington's hiatus is the timing, coming on the heels of two months of nearly nonstop criticism -- what Arrington called on his personal blog "a fresh wave of TechCrunch hate." A San Francisco parenting Web site, Mothersclick, cried favoritism when Arrington ignored it but wrote about a competitor, Maya's Mom, whose founder had worked with him in a previous job. (Arrington initially disclosed his friendship with the founder but later took it off his site, sparking even louder criticism.)

Old-school journalists question Arrington's ethics and potential for conflicts of interest. He even engaged in a high-profile dustup with the New York Times at an Online News Association conference in October in which he accused the Times of ethical lapses but later backed down. Blogger and author Nick Carr charged that while Arrington discloses his investments when he writes about companies, he doesn't always disclose those investments when he writes -- sometimes negatively -- about their competitors. Tech gossip blog Valleywag has a field day with each alleged transgression.

Arrington struck back on his blog, writing that his friendships and his activity as an entrepreneur and investor help him get access to inside information.

"No one should think TechCrunch is objective or conflict-free," he wrote. "We aren't. We never have been. We never will be."

Although Arrington will criticize some companies, he's largely seen as a cheerleader for cool new technology. He has had lunch with Bill Gates, broke the Google-buys-YouTube story and has become a must-read among entrepreneurs who form the valley's lifeblood.

"He's very influential," said fellow blogger and friend Om Malik, a veteran tech journalist who runs the GigaOm blog. "What he's done is gone out and created this uber-property in almost a year, which is kind of amazing. I'm pretty impressed by how quickly he's been able to consolidate his position as Mr. Web 2.0."

Arrington's tale tells a lot about the way Silicon Valley operates and how it's disrupting long-established businesses.

It's a tribal culture with a complex web of connections. Venture capitalists and angel investors sit on boards of directors with entrepreneurs, scratching each others' backs with an almost incestuous fervor. And now they all seem to be blogging.

Blogs like TechCrunch expose a threat to the vaunted mainstream media. Newspapers have seen their financial base eroding as audiences and advertising dollars rush to the Web. And many bloggers, not steeped in the rules set forth in traditional newsrooms and journalism schools, are grabbing eyeballs -- and ads.

Into this environment walks Arrington, already a made man in the valley by virtue of his time as an attorney at Wilson, Sonsini, Goodrich and Rosati, the pre-eminent Silicon Valley law firm, as well as stints at RealNames, a company that died in the dot-com crash, and other smaller entrepreneurial ventures that he led.

He took a year off from work in 2004, living in Southern California with a girlfriend (he is now unattached), surfing and going to movies. He was at a bachelor party in Serbia, of all places, in February 2005, when Keith Teare, his old boss at RealNames, reached him with the idea for a new startup.

The company, which eventually was launched in March, is Edgeio, a system for delivering classified ads online. Arrington turned to the Web to research all the new Internet companies that were popping up. He couldn't find a site that covered the scene, so he started TechCrunch in June 2005. He intended it to be a hobby while he and Teare continued getting Edgeio going. But TechCrunch took off.

According to the site, TechCrunch generates 2 million page views per month from more than 1 million unique visitors and 100,000 online subscribers. Many startups are desperate for him to cover their site, knowing they'll get an elite, tech-savvy audience. He has broken major stories, most notably being the first to report that Google was about to acquire YouTube, a $1.65 billion merger that was announced in October. He is already expanding, with sites like MobileCrunch and CrunchGear.

Buzzlogic, a San Francisco firm that uses complex algorithms to measure Internet influence, crunched some numbers and found that, at least on the subject of "social media" (a key area of Web 2.0), Arrington was the second most influential blogger out there, behind Steve Rubell's MicroPersuasion blog.

The Wall Street Journal labeled him a new "power broker."

"It's a great headline," Arrington said, "but there are 10,000 people in Silicon Valley with significantly more relationship power than I have."

With TechCrunch's success, Arrington has stepped away from any operational role in Edgeio, although he remains a significant shareholder and member of the board. According to his site's disclosure page, he is also on the board of directors of Foldera, a publicly held company in Huntington Beach (Orange County) that provides tools to organize people's digital information; he is an investor in New York news startup Daylife; he's an investor in San Francisco's dog social network Dogster; and he's an adviser to Spotback, an Israel-based personalized news tracker.

For all the criticism, Arrington also has a valley full of defenders.

Michael Eisenberg, a partner in venture firm Benchmark Capital, blogged that Arrington's "position as an insider is beneficial to getting the real insider scoops and pre-announcements that we all want." Eisenberg added: "I actually think that this is a blueprint for bloggers and is what we the readers want: as much information as possible in real time and full disclosure."

Angel investor Jeff Clavier, an Arrington friend who has invested in Edgeio, said Arrington "has to maintain high professionalism and integrity" because in the blogosphere, the masses pounce on any error.

Clavier said he has not received any special treatment because of his relationship with Arrington. "He has shredded a few of my companies," he said, citing Feedster as one example. "I respect him for it."

He said Arrington's break is well-earned.

"The last time I saw him, I said, 'Listen, you really look like crap!' He was really tired," Clavier said. "It's very good he decided to go back to his parents' house."

TechCrunch speaks

In an interview at his Atherton home, TechCrunch blogger Michael Arrington shed some light on how his business runs, how it's changing and why he does what he does.

On how his site could change: "We write posts and people read them and leave comments. There's a lot more we can do ...I'm talking to engineers about new products and thinking about the content direction of the site. ...I plan to come out of this (break) in January with a bunch of new product launches, hopefully a general manager to run the business (side of the operation) and a decision on whether to raise money."

On the site's future: "There's a lot of room for growth. ... We're selling only 10 to 20 percent of our total advertising inventory.... But I might just pull back and make this a long-term small business."

On how his seven-employee operation runs: "We have no costs. There's head count, and that's it. Everything else is basically free. If revenue was 10 percent of what it is, we could still function."

On whether he sees TechCrunch as the Web 2.0 equivalent of the Industry Standard in Web 1.0: "We're not burning money. They had 200 employees. We're more what F -- Company was to the downturn. (Chief Executive Officer) Philip Kaplan kept things small, and he's still making a ton of money. It's still a very profitable business."

On missing a scoop: "We were third on the story of Google Answers shutting down. If there's news like that, with RSS feeds, we should know about that in moments. We should have people waking up in the middle of the night if there's something posted on the Google Blog."

On his newest hire, experienced journalist Natali Del Conte: "We need to bridge the gap between the on-the-fly, ready-fire-aim style of blogging, and traditional parts of the media. People expect us to do more fact-checking than in the past and have more than one source for a story.... Natali is a professional writer. She's going to help teach me that."

On the one person he holds a grudge against (his tormentor, Nick Denton, who runs Gawker Media, publisher of tech gossip blog Valleywag): "Nick Denton is evil."

On the challenge of attending so many Silicon Valley parties: "Once you've heard 30 pitches in an hour, your brain cannot comprehend it, especially if you've had a beer."

-- Dan Fost