The Problem
When Sifry founded Technorati in San Francisco in 2002, he knew that if blogging became big, he'd almost certainly face competition from major players like Yahoo (NASDAQ:YHOO) and Google (NASDAQ:GOOG). So he worked hard to take advantage of his early lead, investing in search technology designed specifically to stay on top of the fast-moving blogosphere. Still, after Google Blog Search made its debut in September 2005, Sifry wasn't about to sit back and do nothing. During the next few months, he and his team scrambled to keep their edge by launching new features, including a tool that provides constant updates on the most-discussed books, movies, and news items on the Web.

What the Experts Said
Stephan Spencer, president of Netconcepts, a Web consulting firm in Madison, Wisconsin, said that Technorati's best bet was to try to get acquired. Sifry, he said, should focus on creating online communities of loyal users, which would make Technorati a "sweeter acquisition target." Peter Rojas, a daily Technorati visitor and co-founder of Engadget, a blog about tech gadgets, said that Technorati's blog search service was not unique. "Sooner or later, somebody's going to get it right," he said.

What's Happened Since
Sifry is sticking to his original plan. Site traffic, he says, increased by 185 percent last year. In November alone, the site boasted 3.8 million visitors. Meanwhile, the company's staff doubled, to 40, and annual revenue jumped 175 percent, to about $5 million, thanks in part to licensing deals with the Associated Press and Paramount Pictures. That said, the site is struggling to keep up with Google's rapid growth. By late December, Google had taken 25 percent of the blog search market in terms of visitors, compared with Technorati's 23 percent share, according to Internet traffic monitor Hitwise. Still, Sifry believes in his technology. Unlike Google, Technorati enables bloggers to customize their blogs with features like podcasts and profile information. The site also packages information to make it more accessible. "We make sense of the chaos," Sifry says.

What's Next
Sifry plans to launch an "aggressive blogger evangelism program" that will promote the use of Technorati technology on individual blogs. Sifry is also on the lookout for acquisition targets--and new competition. "We'd be stupid not to keep a close eye on Google," he says. "But what keeps me up at night are the upstarts, the guy working out of his garage who has the potential to reshape the market entirely."

Published on: Mar 1, 2007