Silicon Insider: The Great Hidden Tech Boom

So, why can't the next (or more accurately, the current) tech boom be Internet diaries? Why can't the user base precede the business model? We all laughed when Amazon went quarter after quarter, growing its customer rolls, but never showing a profit. Like the old joke, Jeff Bezos seemed to be claiming that, while he was losing money on every sale, he would make it up in volume. We aren't laughing now.

So, let's say the blogosphere is the tech boom we've been waiting for. If true, we can probably assume that most of the larger trends that affect all tech booms will obtain here.

One of these is the 80:20 rule. That is, 80 percent of all blogs out there will likely die in the next 18 months. Of the 20 percent that remain, the 80:20 rule will again apply, with just 20 percent actually becoming viable, profitable businesses, while the others limp along. I'll go one step further: of that 20 percent, only 20 percent will survive as stand-alone enterprises, while the majority will merge into a handful of consolidated enterprises. Do the math: if there are an estimated 10 million blogs in the world, only 2 million will be around a couple years from now. Of those, 400,000 will become real businesses; and of those 80,000 will become viable businesses. I'll go even further: of those, 16,000 will survive the next 10 years; 3,200 will become corporations with annual revenues of $100 million or more, and -- and I'm really getting out there now, 100-200 will someday go public. Of those much-evolved blogs that do one day go public, many will have been among the first to start down the path -- booms really do confer advantages on first movers.

If all that sounds nuts -- I mean, we're talking about blogs here -- you weren't around for the early meetings of the Homebrew Computer Club. Andrew Sullivan, Glenn Reynolds and Kos have a lot more going for them than those nerds clutching homemade motherboards in 1976.

But the crucial first step is finding the money. New structures like the Pajama Media are interesting, but they are still missing something. Take it from a guy who used to run an 800,000 circulation magazine: the advertising agencies for Johnson & Johnson, Ford and Heineken are only marginally interested in raw numbers. What they want are "qualified" potential customers. It's not enough to announce that you have 100,000 unique visitors each week to your blog; you have to characterize them. What do they buy, how old are they, where do they live, how much money do they make? Real advertisers want real results.

Getting that information will require asking blog readers to give up some of their anonymity. It will also take money -- the kind of money that only comes with a business plan, spreadsheets, a hearty handshake with a venture capitalist, and betting everything you've got.

Are the leaders of the blogosphere ready to take that risk?

[As long as I'm on the subject, I've been helping Oxford University, Forbes, Yahoo Search, and the Financial Times (among others) put together a summit on business and the blogosphere this autumn in New York City. If you'd like to learn more, visit http://www.oxford-york.com.]

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

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