Flippant Calacanis strikes a typical pose.
Search Central Mahalo's headquarters in Santa Monica, California, is currently home to 40 "guides" who build search results by hand.
Related StoriesIt didn't take long for Engadget to double Gizmodo's traffic. Weblogs Inc. went on to launch blogs covering cars, video games, parenting, and food. Within 18 months, Calacanis sold it to AOL. He wouldn't confirm the $25 million figure, but admitted it was "not inaccurate."
"I learned from my past," he says.
After offloading Weblogs to AOL, Calacanis became general manager of the company's Netscape division, where he took a hard look at AOL's search engine. Calacanis was hardly an expert on search, but pretty soon he felt he understood why AOL's engine was so poor from a user's perspective: It was powered by Google, but there was too much clutter in the form of "sponsored links" between the search box and where the results began. Cramming the page with ads might be good for the bottom line, but it alienated users in the long run. Calacanis told AOL it needed "to love" its users more, causing a stir inside the company and a shouting match over the phone between Calacanis and one of AOL's search-team members.
After a year as an executive, he quit corporate life, determined to do something big. The way to do that, he reasoned, was to pick something people use every day on the Web: email, instant messaging, or search. He chose search. Much of the inspiration for Mahalo came from Calacanis's wife, who had put together a short email for friends and family with links to places to stay and things to do in Kauai, Hawaii, where she and Calacanis had their wedding. The list was neat, organized, informative. Calacanis wondered why search results couldn't look that way too.
Late last year, he set up a meeting with Michael Moritz of Sequoia, the Menlo Park VC firm, and walked in with printouts for "iPod" and "Kauai vacation" taken from Ask.com, Google, Technorati, Wikipedia, Yahoo, and a few other sites. He taped them to the wall, where some unfurled for 16 pages or more. Next to them, he placed his own single sheet of handmade results. "Which ones are the best?" he asked.
His plan was devilishly clever: He would create a human-powered search engine that builds out prefab responses to the most popular search terms. He would shoot for the top 30%, or about 15,000 terms, to effectively skim the cream from the entire search business. Mahalo would deliver results for searches like "Paris Hilton," "iPod," and "Bill Gates," but not for your local high-school football team or childhood sweetheart. And because those results would be prepared by humans, sifted and sorted and condensed for maximum relevance, users would no longer be faced with 10 million hits, as they are with Google, but with a few dozen. Mahalo would be a search engine for people who don't like to search.
It took Calacanis all of 10 days to close his first round of financing with Sequoia, Musk, Cuban, Ted Leonsis of AOL, Fred Wilson of Union Square Ventures, and Matt Coffin, who founded LowerMyBills .com. "What I love about the idea," Coffin says, "is that it's so simple. It's something my grandmother would use." Musk, who sits on Mahalo's board, says if he were going to do another Internet company, it would be like Mahalo. "Search is the major category on the Internet. If Mahalo is even slightly successful, it will be worth over a billion dollars. That puts it in the league of a PayPal, at least at the time that we sold it [in 2002]." By May, Calacanis closed a second round of financing, adding News Corp.; CBS; David Bradley, owner of The Atlantic Monthly; and Burda Media, a German publisher. The total: $20 million, good for about five years of operations given his current expenses. Calacanis then laid out $11,000 for the domain name Mahalo.com, which, at one point, had been a nude-celebrity site.
The rumors started to fly a month before Mahalo's launch last spring, so Calacanis decided to have some fun with his archnemesis. He leaked fake tips to Nick Denton's Valleywag blog. The first claimed he was doing a private-equity roll-up with 20 companies. Then Calacanis fed Denton a lie about trying to hire fallen shock jock Don Imus to headline a new podcast company. That sent Denton into conniptions: "Even for Jason Calacanis, this is opportunism taken to a dangerous extreme," he blogged. "The loudmouthed blog mogul has, we're hearing, been bragging to colleagues that he's about to sign the disgraced radio host." Eventually, Denton figured out he was being played, but by then he had posted plenty of misinformation.
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