Lots of people seem to like dumping on Mahalo and Jason Calacanis. For example, Andrew Baron recently posted about Why Mahalo is Fundamentally Flawed.

Try Googling Mahalo sucks and you’ll get about 232,000 hits. Take your pick of the highly critical coverage.

Some of the negative commentary on Mahalo is probably due to professional and personal jealousy. Some of it is due to the fact that it’s early days yet. And I think some of it may be due to Jason happily telling people to look left while he goes right.

How can Jason raise money for Mahalo at valuations north of $100M? Surely there must be a revenue plan that holds water? If you want to argue that Mahalo is a failure and that Jason is simply a ceaseless self-marketer full of hot air, you’ll need to argue that some of the same things are true of Mahalo’s investors. Or maybe we’re in a bubble and they’ve all simply lost it.

Here’s what I think is going on.

Firstly, I think Jason is using a little smoke and mirrors when he calls Mahalo a search engine and frequently compares Mahalo’s “search” results to Google’s. With few exceptions, everyone seems to be buying it! With few exceptions, people compare Mahalo with Google – presumably because Jason tells them to and because he talks about being a search engine. And, with few exceptions, the technorati tell us that Mahalo is a pretty crappy search engine.

I agree, because Mahalo is not a search engine. Putting a box labeled “Search” on your web site to dig hits out of your own content does not make you a search engine – if it did, millions of sites would qualify. Passing queries off to Google and showing the results does not make you a search engine, either. Telling people to compare your content with Google’s results does not make you a search engine. Nor does putting the words “search engine” in your company’s strapline.

Mahalo will never be a search engine, and almost certainly does not want to be a search engine. That would be suicidal.

I believe their strategy is entirely different and that the relevant comparison is not with Google, but with Wikipedia.

Mahalo is a rapidly growing collection of carefully curated content. Mahalo is Wikipedia with a different model of control, ownership, and content creation. It’s a benevolent dictator with a purchase agreement instead of a loose anarchy with the GNU Free Documentation License.

If you want to compare Mahalo to something, compare it to Wikipedia. Jason is a huge fan of Wikipedia. And here he is begging Jimbo Wales not to leave $100M/yr on the table. Interesting.

Right now Mahalo has roughly 25K pages. Google has information on, let’s say, 10 billion pages. By this simplistic measure, Google is about 400,000 times bigger than Mahalo. You’re not going to catch or compete with Google using people to make content. Yes, you can use Google for things you don’t have static pages for, as Mahalo does. But Mahalo is not a search engine. Never will be.

Now consider Wikipedia. Wikipedia has 1.2M English pages. That means that, in English, Wikipedia is a mere 48 times larger than Mahalo! Now we’re talking. Mahalo are currenly adding something like 1,000 pages a week. Suppose Jason manages to double that quite soon. That would be 100K pages a year, or about 8.3% of Wikipedia annually. So I think it’s conceivable that Mahalo could catch Wikipedia. Even if they keep a steady ship and only gain linearly they could easily be 35-40% the size of Wikipedia in 4 years’ time.

But sheer number of pages is only part of the story. Because the distribution of search requests will follow some kind of power law, you can pick up (say) half of all search requests by only covering a small number of them, and, as always, leave the long tail to Google.

So with a small finite amount of work, you can cover a very large chunk of Wikipedia. And I think that’s exactly what Mahalo are aiming to do.

A few weeks ago I pulled down all of Mahalo’s URIs for another project. Here’s a tiny sample – and I really did pick this out at random:

http://www.mahalo.com/Valerie_Plame_Affair http://www.mahalo.com/Violence_on_Television http://www.mahalo.com/Violent_Crime_Rate http://www.mahalo.com/Virginia_Tech_Report http://www.mahalo.com/Voting_Machine_Controversy http://www.mahalo.com/Walter_Reed_Army_Medical_Center http://www.mahalo.com/War_Wounded http://www.mahalo.com/Washington_D.C._Lobbying_Scandal http://www.mahalo.com/Abdullah_Gul http://www.mahalo.com/Alan_Garcia http://www.mahalo.com/Alex_Salmond http://www.mahalo.com/Angela_Merkel

So what? you might ask. Well, let’s replace www.mahalo.com with en.wikipedia.org/wiki in the above. We get:

http://en.wikipedia.org/wiki/Valerie_Plame_Affair http://en.wikipedia.org/wiki/Violence_on_Television http://en.wikipedia.org/wiki/Violent_Crime_Rate http://en.wikipedia.org/wiki/Virginia_Tech_Report http://en.wikipedia.org/wiki/Voting_Machine_Controversy http://en.wikipedia.org/wiki/Walter_Reed_Army_Medical_Center http://en.wikipedia.org/wiki/War_Wounded http://en.wikipedia.org/wiki/Washington_D.C._Lobbying_Scandal http://en.wikipedia.org/wiki/Abdullah_Gul http://en.wikipedia.org/wiki/Alan_Garcia http://en.wikipedia.org/wiki/Alex_Salmond http://en.wikipedia.org/wiki/Angela_Merkel

And guess what? All those URIs actually work! See below for a possible reason for this uncanny coincidence.

Research question: what percentage of Mahalo URIs work as Wikipedia URIs with the above simple substitution? I may do this test when I get a little more time. I bet the answer is high.

Ask yourself again: does Mahalo look more like Google or more like Wikipedia?

The idea of Mahalo-as-search-alternative-to-Google is just Jason operating Mahalo in stealth mode in broad daylight. “Hey, Rocky, watch me pull a search engine out of my hat! Oops! That’s not a search engine. I swear there was a search engine in there somewhere.”

How is Mahalo different from Wikipedia?

A big one is that Mahalo owns all its content. If Mahalo puts one of your pages on its site, you’ll first sign a purchase agreement in which the

Seller hereby irrevocably sells, grants, assigns, conveys and transfers to Mahalo, exclusively and forever, Seller’s entire right, title and interest in and to the SeRPs

and in which you warrant that the content is legit, in which you fully indemnify Mahalo, and in which you agree to let them be your agent and attorney should they need to take some action to obtain or protect the content.

In consideration you get $10-$15 which you can have in cash. Or, in a wonderfully ironic and masterful gesture, you can have your earnings donated to the Wikimedia Foundation! That’s just brilliant, I love it. How can you not be in awe of that? The guy’s a genius.

Talking of genius, just look at the language on the payment details page at Mahalo: “A Greenhouse Guide begins their career in the Greenhouse…”. You see? Writing articles for Mahalo is the beginning of a career. George Lakoff would probably count that as a classic example of framing (also see here).

Unlike Wikipedia, Mahalo owns every word of its content. That means they can sell it. That they can be acquired. But who would want to acquire Mahalo? Wait.

What other differences are there between Wikipedia and Mahalo?

Another big one is the millions of links on the internet that point to Wikipedia pages. Those little tubules that make up the internets, with Google’s PageRank worming its way down each and every one, assigning and passing on credit.

There are two things here: 1) the links themselves and 2) the high consequent position Wikipedia’s pages have on Google.

Can Mahalo get large numbers of people to link to their pages? If the pages are any good (and they are), then why not? Plus, it may be that Mahalo can catch Wikipedia in terms of how many people link to them.

According to the Netcraft October 2007 Web Server Survey, the number of servers on the net has been growing at an amazing 5% per month!

That’s just the rate of increase of new servers, not the rate of new pages being put onto existing sites. Let’s assume the Netcraft server number isn’t too far from the overall growth, and that the web roughly doubles in size every two years. That means if the size today is X, then in 4 years, towards the end of Jason’s horizon, it will be size 4X. If so, there are 3X pages yet to come into existence. The creators of these will have a choice to point links at Wikipedia or Mahalo. If popular momentum can be shifted to Mahalo, it can grab a large chunk of the link pie graph.

All of which brings us, inevitably, to Google.

Quick survey question: when you need to find something that you know you’d be happy to read in Wikipedia, do you first go to Wikipedia, find English (or your language), find their search box, enter your query, and click on the link? Or do you go to Google and take its Wikipedia link?

I thought so – you use Google. It’s a uniform way to get to things, it’s likely integrated into your browser, and they generally do a better and faster job of indexing sites’ content than the sites do themselves. So the existence and massive popularity of Wikipedia drives traffic to Google. And Google of course drives traffic to Wikipedia. The two of them are dating. But Wikipedia is not the perfect lover: they stubbornly refuse to put ads on their pages, to share the love. Along comes Jason Calacanis, then at AOL, to whom this is all very clear. He tells Wikipedia in no uncertain terms that with all that traffic they could make $100M per year from ads on just the home page. He points to a conservative estimate of the worth of Wikipedia at $600M, and his own estimate is $5B. Hmmmmm. What’s an entrepreneur to do when he sees someone leaving that much value on the table?

Back to Google. They would like to have more content. Traditionally, when you got back a page of their search results, you wouldn’t see links to pages on Google – that wouldn’t make sense: there were no pages on Google, after all. Google was supposed to point you to other pages. It was an index to help you find the things you actually wanted to look at. That was the old model. These days, Google is buying content (e.g., YouTube) and pointing their search results at their content, neatly taking the ad revenue in both places. All the better if the content comes with indemnification.

You can see where I’m going. Mahalo already does advertising with Google. In fact, they’re already a premium adsense publisher to the surprise of some. If ads on the single front page of Wikipedia could generate $100M annually, what could ads on all Mahalo pages generate if Mahalo grows to rival Wikipedia?

And… who weighs the importance of links (and other unknown factors) in Google’s results page? Yes, of course, Google does. According to this Fast Company article, Mahalo gets 65% of revenue Google makes when it sends its users into Google. And Google makes money when it sends its users into Mahalo.

If there’s really (say) $1B of value to be had by building a successful commercial version of Wikipedia, you can see why Google might have some interest in nudging links to Mahalo a little higher in its results. Maybe even higher than the equivalent page for Wikipedia. Now would be a good moment to remember that I illustrated above just how trivial it can be to match up equivalent Mahalo and Wikipedia pages… Got it? User enters a query, Google does the search and finds a highly-linked Wikipedia page, then in an instant they can make and instead display a link to the equivalent Mahalo page, optionally displaying the Wikipedia page below the fold. Would that qualify as evil?

All of which leads to a very clear answer to my “who would want to acquire Mahalo?” question. Interestingly, Google will want to wait until Mahalo is big (they will know exactly when, supposing Mahalo keeps using adsense). They want Mahalo to be independent and with strong momentum before they turn the corporate intake valve in the Mahalo direction.

Can Jason build a viable alternative to Wikipedia? I bet he can. He has the lessons of Wikipedia. He doesn’t have the anarchy factor. He has no spam. He knows what he’s doing, and he’s in control. It’s a content play, and Jason is a content guy. An editor with a track record of building valuable content in this way. He’s playing to his strengths. The engineering is not nearly as daunting as building a Google. He has the money. As he ramps it up he’s going to have more money.

Who’s going to stop him? Certainly not Google – that’s not in their interest at all. Almost certainly not Wikipedia – unless they start putting up ads and funneling large amounts of money back to Google. And Jason is unlikely to shoot himself in the foot either – quite the reverse.

So if that’s the strategy, and if he’s on track with content (as he seems to be), and if the content is passably good, or better (which it is), and if he has a good understanding with his “friends at Google” (which you can bet he does — let’s not forget the Sequoia factor either), and if the revenue numbers are about right, then a $175M valuation for an upcoming round to accelerate things might look like a steal.

Along the way, Jason gets to have a quiet inner smile at all the people whining about how Mahalo is a crap search engine. He feeds the fire all the while, telling them to go ahead, make his day, and compare Mahalo’s results to Google’s (but not Wikipedia’s). Misdirecting attention towards Google and having people write him off probably suits him just fine. Meanwhile, they’re getting on with the real mission.