When Will Yahoo Acquire Technorati?

Yahoo’s recent acquisition binge is the topic of a Red Herring print article this week called “Hungry Hungry Yahoo”. Liz Gannes, who wrote the article, discusses Yahoo’s recent acquisitions and speculates on a few likely candidates for future Yahoo shopping sprees. The article lists 37 Signals, MeasureMap, Digg, YouTube and Technorati as the ones to watch. (Note: Liz interviewed me for this article last month and I am quoted in it)

Liz goes on to write that Technorati is the most likely to be bought:

But most of all, Technorati would perfectly align with Yahoo’s recent espousal of tagging. Technorati created the de facto standard for introducing tags into blog posts; it uses teh tags to improve its searches.

CEO Dave Sifry’s response?

When Red Herring called Technorati CEO David Sifry to confirm the revelation, his response was…”No comment.”

Well, “no comment” be damned, I believe that Yahoo should, and even may, acquire Technorati in the near future.

First of all, Yahoo has already acquired the “fraternal twins” of tagging – Flickr and Del.icio.us. Both were pioneers in their respective markets, and relatively cheap ($20 – $30 million each). Flickr made tagging of pictures popular; Del.icio.us did the same with bookmarks.

But Flickr and Del.icio.us are not twins. They are tagging triplets along with Technorati, which created and popularized blog tagging in 2005. Today, the majority of blogs use tags and categories to label their posts.

Second, Technorati should be just about out of money. They raised a speculated $14 million in the summer of 2004 from Draper Fisher Jurvetson, Mobius Venture Capital and August Capital. If they’ve raised more since then it has not been announced (or leaked). I know of a few unannounced financings, but I have not heard anything about Technorati raising additional venture capital. Technorati may need money.

Third, Yahoo’s blog search isn’t great. Technorati’s blog search is the best on the web right now after much needed upgrades over the last six months.

So, in my opinion, an acquisition makes sense. Stephen Baker at Business Week thinks Microsoft will be the suitor. But it’s got to be Yahoo.

Why won’t it happen? Given today’s funding environment Technorati may be (or have already) raised additional funds to take them to the next level. And given an approximate $30 million valuation even back in 2004, it would take a much larger acquisition than the $30-$50 million we are seeing in deals today to get them. Technorati’s VCs just wouldn’t pull the trigger, and they certainly have veto rights over an acquisition.

In the end, I just want this to happen. The tagging triplets need to be under one roof.