Artful blogger: Weblogs founder finds payday in sale to AOL.

WORKING out of his two-bedroom apartment 20 blocks from the ocean, Jason Calacanis seems every bit the blogger, with his fondness for beach casual and his trusty English bulldog Toro always at his side.

The similarity stops there.

Even with the explosive popularity of Web logs on virtually every subject known to man, blogging remains mostly a hand-to-mouth proposition--but not for Calacanis.

America Online paid an estimated $25 million for his Santa Monica-based Weblogs Inc., capping the fledgling company's two-year rise from a spare bedroom start-up in a tale that reads like the glory days of the first Internet boom.

"We've been successful because we were pretty early in the game and we had high focus," said Calacanis, 34. "We didn't try to do everything at once."

Weblogs provides a one-stop destination for 90 blogs on interests ranging from surfing and films to parenting and tech toys. Its Engadget blog, which offers reviews and discussions of tech equipment, is said to be the Web's third most popular blog, based on how often other sites link to it.

Analysts say AOL parent Time Warner Inc. has been looking to boost the portal's advertising revenue and shrinking customer base. Most AOL users still connect via the slow dial-up service.

The availability of new software that can match ad content to editorial subject matter could make Weblogs a cost-effective targeted venue for advertisers. "This is a barebones, trailblazing operation in many ways," Standard & Poor's analyst Scott Kessler said.

Road to success

Neither Calacanis nor AOL will confirm financial terms of the deal. About a dozen people work at the company, not including the bloggers.

"AOL understood the blog," said Calacanis, noting that he has been promised a significant level of autonomy. "They understand that the key to blogging is unfiltered content. I agreed to this deal because the bloggers retain their editorial freedom. All AOL is going to do is send more traffic to the blogs."

Calacanis intends to keep his soon-to-be AOL subsidiary as much a virtual company as possible. The Internet and telephone enable him to stay in touch with New York-based president Brian Alvey, the company's co-founder and his high school friend. An accountant and some support staff set up shop at the dining room table a few times a week, but for the most part Weblogs' dozen or so staff work where they want.

"Our bloggers don't want to work in an office either," said Calacanis, noting that his 130 bloggers, generally experts in their fields, are paid based on the frequency of posting. "Most of them are doing this part time and that's by design. For a lot of them, this is like a hobby that pays."

Calacanis paid his own way through Fordham University in New York, earning a psychology degree in 1993 after concluding that the computer science program was a decade behind the times. "I grew up blue collar--I don't believe in spending money on expensive things," he said.

His business training has been on the job. After a computer programming stint at Sony Corp., he became part of AOL's new media incubator, Project Greenhouse, and built an online community that AOL later acquired. In 1996, Calacanis co-founded the widely followed Silicon Alley Reporter, which showcased New York's tech community. By 2000, he said, the publication had grown to 300 pages and brought in $11.6 million in revenue.

As the stock market began its fall the following year, revenue plunged to $3 million, and Calacanis had to start laying off staff. He revamped the Reporter to broaden its venture capital focus and sold it to Wicks Business Information for an undisclosed amount. Wicks was later acquired by Dow Jones and Co.

"I learned a lot more about running a business on the way down than on the way up," Calacanis said. "Having all the training doesn't help if you don't have the passion, the hustle and the hard work."

Calacanis, who moved to Santa Monica in 2003 to be with his girlfriend (now fiancee), began pondering business possibilities of the blogosphere when he learned that two former Silicon Alley writers were making more from their blogging gigs than they had writing for him.

With funding from the Reporter sale, Calacanis and Alvey formed Weblogs Inc. in September 2003 and spent the next four months developing software, lining up bloggers and contracting with a New York server farm to host the site. They went live on January 1, 2004.

A few months later, Dallas Mavericks owner Mark Cuban, who Calacanis has known for years, became an investor. "Jason understood where blogs were when we started and where they could go and how his aggregation model would work," wrote Cuban in an e-mail. "What was better was his focus on sales, differentiating the site from others, and working however hard it took to be successful."

By the 18th month, Weblogs was past month 30 in its business plan and on track to bring in at least a couple of million dollars in revenue. "We decided it was time to scale the business," said Calacanis, who began exploring additional financial partners, such as Google, Yahoo and MSN before sealing the deal with AOL.

Not all of Weblogs' blogs will be making the move. In order to not have its style crimped, HackADay, where the technically savvy swap tips on how to "improve" brand-name computer and consumer electronics gear, will stay independent.

"Brian and I felt it would only be a matter of time before someone posted: "How to hack your 'insert AOL' product here," Calacanis wrote readers on his personal blog last week, noting that HackADay readers have, on occasion, taken down not only the blog, but the entire Weblogs site just for fun.