Pligg for sale, Searchmob, and Arabian Horse Breeding

TechCrunch reports that Pligg is up for sale.   The clone of the Digg project was a great way to easily and effectively set up a user community where people could submit, review, and rank articles.    John Battelle used it nicely over at SearchMob  in an attempt to enhance his excellent search news coverage at Search Blog.

Unfortunately at SearchMob it seemed to me that the reviews became more of a breeding ground for SEO tactics than a clearinghouse for quality search news.    Several participants would primarily list stories at their own sites that were referencing *other* source stories.   This is not necessarily bad but I found at SearchMob that only a fraction of the stories were “high quality”.    That said I’m not a big fan of Digg either because my interests still don’t seem to match the normal onliner demographic very well.

Pligg may not be the best example of how to make money on Web 2.0 because it was an open project and an advanced concept used by tech-savvy folks more than mainstream people.   Mainstream is where the numbers are and therefore, usually, where the money is.   Still, Pligg had buzz, traffic, and a community.   This should be enough to do well enough to keep building the project.   It’s possible the owners really *could* keep running the site and quit their jobs but want to try for a big payoff now while VC money is still flowing briskly into startups.   In fact this makes a lot of sense and if true it means my analysis here is probably flawed – ie they are selling at opportune time rather than for the stated reasons of “too busy to run it”.

Pligg’s founders suggest that they are selling because they have real jobs and don’t have time to manage the growing and thriving Pligg community.    I find this very interesting because they clearly have done Web 2.0 “right” – they created a useful service, got lots of people actively involved and developing for it, and have a powerful community of users.   So why can’t they quit their jobs and just work on Pligg and rake in lots of money?    Don Dodge’s mini-analysis of some time ago has part of the answer.   Even most VC funded startups don’t appear to return enough for the average VC to break even on the investment.    If true this is a really provocative notion – rich people are funding companies and losing money.   Like Arabian Horse breeding or Casino gambling it may be that playing the startup game is so enjoyable – and the potential deceptive enough for many wealthy folks that they continue to fund companies that, on average, will only return a portion of their investment over time.   Are Startups , on average, a bad investment?

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