Google killer?

The former New Yorker turned Los Angeles resident talks a mile a minute, is known for his strong opinions and was once described by The New Yorker magazine as “The Connector”. Calacanis has managed to convince investors to part with tens of millions of dollars (the exact amount has not been disclosed) to see if his search engine, Mahalo, can fly. However, this is not his first foray into the internet.

“I always wanted to do something big,” says Calacanis, 37, who initially trained as a journalist. “I always knew that. I just didn’t know what it was and how it could manifest itself.”

In the late Nineties, Calacanis was CEO and founder of Rising Tide Studios, which gained prominence with its flagship monthly publication Silicon Alley Reporter about New York’s internet and new media industries. The company was eventually purchased by Dow Jones. In January 2004, he co-founded Weblogs Inc, a network of blogs that included the popular Engadget blog among others. At the time, Calacanis recognised that although a single well-read blog could influence a big audience, a network of blogs would provide even more leverage. ”When you put together a couple of hundred people with expertise in different areas – and passion for those areas – you can get a lot of work done,” he says. “We were getting 12,000 blog posts a month done with 300 people. It was pretty amazing.”

AOL also recognised the power of his blogging network and bought Weblogs Inc for a reported US$25 million in November 2005. Calacanis stayed with AOL for a year, then moved on. Mahalo, which is Hawaiian for “thank you”, was founded May 2007.

While visiting Sydney in May this year to speak at CeBIT, he admits that turning Mahalo into a viable business is not a walk in the park. “It’s a very big, intimidating project, except I did it already on a smaller scale,” he says.

When Calacanis was looking at what to sink his teeth into after his time at Weblogs and AOL, he wanted to create a company that would be “a contemporary to Yahoo or Ask or Google or eBay or Microsoft”. In order to do that it had to fit two categories: “It had to help people a lot,” says Calacanis. “And it had to be something people could use multiple times a day.”

With goals like that, Calacanis says this narrows down the field considerably. There are a handful of things that people use multiple times everyday online: email, instant messaging, social networking, Wikipedia, Google, Yahoo.

With search becoming an essential function in people’s work and personal lives, the idea for Mahalo was born. “That’s how it wound up happening and it’s been a whirlwind since we started it,” says Calacanis.

The difference being offered by Mahalo is that it’s a human-powered search engine. Engines such as Google rely on complex algorithms to power search function, sometimes returning bizarre or unrelated results. Mahalo’s results are entirely created by real people, who determine the “best” results for specific search terms. It sounds like an expensive, labour-intensive exercise. However, Calacanis says the numbers stack up.

He initially thought each page would cost about US$25 to build. This has turned out to be more like $8.

“We found there are people working from home who actually are happy to get any amount of money for doing this and the same people who love blogging or love building Wikipedia pages, and they’ll do it for free just for the recognition,” says Calacanis, adding that he feels obliged to pay them something.

Calacanis says it works out to be about $10 an hour and people can work from home. The result is that Mahalo now has 50,000 pages built and in May 2008, it had 4.3 million unique visitors. “In another year or two it might be 10, 20, 30 million uniques. And that’s when you really have significant business, once you break 10 million uniques,” he says.

“For $10 [an hour], you have an unlimited supply of people working from home in the United States with a college degree,” says Calacanis. “People who are … stay-at-home mums or dads. And that was exactly what happened at Weblogs, Inc. We had consultants, we had students, we had moms, we had dads and they wanted to work on something that they were passionate about. Make a little money, maybe pay for that car payment, maybe pay for their mortgage or half their mortgage.”

However, in May this year Mahalo opened up their page-building to follow the lead taken by Wikipedia. Users can add what they think are relevant search results to each page. But, unlike Wikipedia, suggestions will be reviewed first for relevance by editors at Mahalo. If users embrace this collaboration in the same way many have done with Wikipedia, this means the number of pages being built can increase at a dramatic rate.

In promoting his venture, Calacanis is taking advantage of all mediums the web has to offer. He has created his own podcasts, on and off, over the past few years. He is a regular on US technology journalist Leo Laporte’s podcast This Week in Tech. Calacanis has his own blog at calacanis.com and a steady Twitter stream, where he has almost 30,000 followers.

Twitter is form of micro-blogging, where users post “Tweets” to a maximum of 140 characters. Calacanis posts everything from insights into what he’s doing (“Spent the day at friend’s Malibu beach house… Taurus and Fondue LOVED it. their first day at the beach… so much fun. Resting at home now”) to updates on the goings-on at Mahalo (“We’ve got some vandals coming through Mahalo because we opened up anonymous–but checked–editing. page was fixed instantly.”)

He also uses Ustream, a web application that allows you to stream video from wherever you are. For example, when Calacanis was in Sydney, he streamed everything from his conference presentations to general conversation with bloggers over breakfast.

One might wonder why people would tune into Calacanis’s life. He has even streamed – through Qik – himself driving in the car, doing nothing but … driving. No talking, just shifting gears and staring at the road ahead. Amazingly, about 70 people tuned in.

“I like to engage the audience,” he says. “I like to engage people who are fans or who hate me. And now this whole social persona that’s happened with Twitter and Facebook … it’s happening to Robert Scoble and it’s happening to Kevin Rose, it’s happened to Leo Laporte and John Dvorak and Veronica Belmont, who worked with us on Mahalo Daily for a while. You know, we’re all becoming these mini web celebs and it’s fun. And it’s fun to have a fan base where there’s no distance between us.

“That’s the cool part… And, you know, you just don’t take it too seriously. I know I’m not a real celebrity. I’m not Bono you know. I’m just a guy who makes websites.… So I do it because it’s fun and I enjoy it…. I like sharing my life.”

While Calacanis may have a fan base, he can also polarise opinion. “I think I’m honest and blunt and I have strong opinions about things,” he says.

At his keynote at CeBIT, Calacanis told the audience to “fire the good people” in order to get a competitive advantage.

“When I started this company I said: ‘No good work. Anybody who does good or average work… we have to get rid of quickly. I only want very good and excellent.’ And now, after a year of doing this we are moving our corporate philosophy to excellence only,” he says. “We’re telling the people who are doing a very good job, you have to get to excellent. Here’s how to get to excellent and if you don’t want to get to excellent, I will write you a recommendation letter to go work at another company – but do not stay here.”

A workaholic who has two full-time assistants working split shifts from 8am until 10pm, Calacanis believes that for a start-up to succeed, staff have to share this kind of obsession.

“So what I try to do is scare them during the interview and say: ‘What if I asked you to work all weekend because we’re on deadline?’” he says, explaining how to weed out the good people from the excellent ones. “[If] they go, ‘Oh, well, I have band practice on the weekend’ or… ‘I’d kind of like to work 40 hours a week’, I say, ‘You know what; it’s really not the job for you’.

“You don’t want people with balance in their life. You want people who are responding to email at two in the morning…. People with balance in their life can work at the post office.”

He dismissed books like Timothy Ferriss’s The Four Hour Work Week as “a gimmick”.

“The fact is, if you’re going to do something epic in this world it’s going to take every ounce of your energy. I’m talking about doing epic things, not doing average things or normal things.”

If you want to take on Google, you need big goals. Calacanis says companies don’t succeed if they only make a product of service incrementally better than an existing one. He points to the JND – the just noticeable difference – as a guideline.

“Nobody’s going to switch off of Google for something that’s 10 percent better,” he says. “Just like nobody’s going to switch from their favourite restaurant if a restaurant on the same block is 10 percent better. It’s not enough. It’s below the just noticeable difference, the JND, the psychological term for your perception.

“[Let’s say] I were to change a colour from orange to red. If I changed it 10 percent more red you wouldn’t notice. But somewhere around 15 or 20 percent, most people would notice and that’s the just noticeable perception difference.”

He also says in order to do something truly revolutionary it has to be perceived by the masses as impossible or stupid. “If you pitched YouTube to people, most people would say: ‘That’s a dumb idea. People have tried video; it’s stupid.’ If you pitched Digg to people, ‘Oh yeah, people are going to vote on stories… that’s a dumb idea’. If you pitched Wikipedia, people will be like, ‘That’s the stupidest idea I ever heard. You’re going to have a bunch of stupid users write encyclopaedic pages? Encyclopaedic pages are the hardest pages in the world to write.’

“The test I’ve always done for myself is… whatever your idea is, imagine it growing 10 times bigger, then imagine 10 times bigger than that. So it’s at 100 times what you think is possible, then soon it will happen. And that’s what we’re doing with Mahalo. We’re assuming that we can get to a million pages. We’re assuming that 50 million people will come to the site. We only have four million [now] but, a year ago when I said what we’re going to do, people said: ‘It’s the stupidest thing I ever heard.’”

Calacanis admits that he rarely turns “off”. In his spare time, he plays a lot of poker. “I don’t like doing nothing,” he says. “I’m not a mellow kind of guy so I don’t go on vacations and sit on the beach. I find that incredibly boring.”

It’s no surprise that the seed for Mahalo was sown during his honeymoon, after his wedding in Hawaii. His wife had compiled a list of top restaurants, attractions, hotels, airlines and activities for their 50 wedding guests.

It took her about four hours of research. “Four hours of research… if you paid somebody 10 bucks an hour that would be 40 bucks,” Calacanis calculates. “Fifty people saved four hours each, that’s 200 hundred hours of leverage, 200 hours for $40. Wow, that’s a pretty good deal. What if 50,000 people saw this page that costs $40. And that’s when you start to realise there’s leverage in a business.”

The site was originally going to be called www.20.com, referring to the top 20 links for each search result. “I paid $75,000 for that domain,” he says. “Then I kept hearing Mahalo and I just thought: ‘It’s such a beautiful name, I wish I could buy that’. I didn’t think it was available but I wound up buying it for $11,000.”

Calacanis says he’s lucky that his lifestyle and work are the same thing. “You know, I’ve been very blessed,” he says. “When I was a journalist I loved writing so it wasn’t like work. And doing a blog company… I would do blogging at night if I was flipping burgers during the day and, for this company, it’s the same type of situation. It’s like a dream come true, you know. My passion is building media properties on the internet. I like it. I think it’s fun, I like building companies, I like building teams, I like seeing them grow.”

To build his company, Calacanis can rely on his insomnia to giving him more hours to work. “I suffered from insomnia for a while but now I’m sleeping better because I gave up caffeine,” he says.

His work ethic was instilled in Calacanis at a young age. His father was a bartender, his mother a nurse. “My first job was sweeping up,” he says about working in his father’s bar. “I was probably seven or eight years old. Then when I got older, I did all the porter work so Saturdays and Sundays I would arrive at 6am. My dad would still be at the bar with a bunch of drunk guys playing poker. And I would come with my grandfather and I would wash glasses and sweep up, clean all the bottles of alcohol, wash every dish in the place. [This was] before there were dishwashers, all by hand. And then every day after school we would go to the bar and we’d shine the silverware every day. By the time I was 12 to 13 years old I was a busboy making $100 a weekend.”

While his friends were on $10 allowances, Calacanis spent his earnings on computers, printers and hard drives.

Calacanis remembers himself as being an awkward child and says he gained confidence after taking up tae kwon do. “I was a little bit awkward. I didn’t fit in to many groups and then I started practicing martial arts – tae kwon do – when I was 15 years old,” he says. “I became a black belt when I was 17 or 18. I became an incredibly disciplined, confident person because it’s not easy to get your black belt. It takes a long time and you have to practice four or five days a week for a couple of years. Then I became a leader, so the martial arts was what taught me to be a leader. And then I found out that when you’re successful people want to be associated with you.”

It takes more than vision and bravado to be the next Google. And we all need to check back in four years to see if Calacanis achieves his goal. In the meantime, it’s obvious he’ll be working hard to turn his epic dream into reality.

“I have an epic thing in mind probably every two or three days,” he confesses. “My biggest disease is that I have too many ideas. I think that intelligent people have a million dollar idea every week or two, but I meet a lot of intelligent people who are not millionaires … And it’s because people don’t execute, they don’t take the chance to do something.”

Calacanis is taking the chance. “My thought is that if we could build something the equivalent of Yahoo, or Ask, or Wikipedia, or some major site like You Tube with 30, 40, 50, 60 million uniques coming a month … If we do that, then we don’t have to sell and be part of something else. We could be a sustainable business and we could buy companies. So that’s what I’m going for this time.”

Audacious goals mean the opportunity for huge success – and magnificent failure. It’s a risk he takes seriously. “Anything short of being a Yahoo, Google, eBay … to me would be personal failure,” says Calacanis, laying it on the line. Then, while simultaneously checking his smartphone, giving his assistant instructions and checking the next item on his schedule, he smiles and adds: “But I’m delusional.”