Through a variety of sources we’ve confirmed that Technorati is making plans for a major shift in its going forward strategy, and is also considering a number of corporate development transactions.
First, they’ve been pitching venture capitalists on another round of financing. That’s not surprising – their last round, $10.5 million, was in June 2006. The company has raised a total of just over $20 million, and given that they have 25 employees, it’s time for another round. But we’ve also heard that they’ve hired Montgomery & Co. to shop the company to buyers, simultaneous to their funding pitches.
That change foreshadows the upcoming shift – which places the Technorati site itself as an anchor in a new blog advertising network.
Advertising networks are popular right now – Glam recently raised $85 million after transitioning, seemingly overnight, from a small web property focused on women to selling advertising for a variety of similarly-focused publishers. And John Battelle’s FM Publishing, an advertising network focused on technology blogs, recently hired investment bank Savvian to help them raise money or sell after turning down a $100 million buyout offer.
Technorati will certainly be competing head to head with FM, although sources say they’ll focus on the long tail of the market as well (FM only takes larger sites). The network will be a self-serve exchange for bloggers (and other publishers) as well as advertisers. Ad units will include both display and text ads, and will allow units to be charged on both a CPM and CPC basis. This self-service model looks a lot more like Adbrite than Glam or FM.
Technorati tags, which are very often used to describe blog posts with keywords selected by the author, would also be a natural way for Technorati to target advertising more effectively.
Technorati has also considered other strategies recently, including a blog rollup. But our understanding is that they’ve gone with the ad network idea, and are currently focusing engineers on finalizing the product.
Will the strategy work? As we’ve argued many times, ad networks suffer from fickle customers. Glam offers partners revenue guarantees based on page views (and lost $3.7 million last year on $21 million in revenue). FM has resisted guarantees to date, but lost high profile partner Digg last year to Microsoft. Others, including us, have simply sold advertising directly while continuing to work with FM. With Technorati entering the market, publishers will have yet more choices. That’s good for everyone except the ad networks competing for their business.