The blogosphere is abuzz over Six Apart’s acquisition of Danga Interactive, the operators of the popular LiveJournal blogging service. Amid the debates about blog culture and whether online diaries will be “monetized,” little has been said about a key driver of the deal - the hosting backend, where Six Apart hopes to leverage LiveJournal’s experience scaling a Perl-based hosting architecture to maximize revenue-per-server.
Six Apart publishes Movable Type and operates the paid blog hosting service TypePad. LiveJournal is a free blog service based on open source code with more than 2.5 million active accounts, with the majority of its users between the ages of 14 and 22. About 860,000 of those blogs are updated at least once a week.
The deal comes amid growing interest in blogging’s commercial potential, and comes a year after Google purchased Blogspot, LiveJournal’s chief competitor in the free blogging space. LiveJournal’s services will remain free and its code will remain open, which was a concern in light of Six Apart’s rocky free-to-paid transition for Movable Type last May.
The first priority for Six Apart appears to be allaying LiveJournalers' fears of a cultural divide between the free and paid worlds. "Our plans do not include removing the free level, plastering the sites with ads, owning user content, etc.," Six Apart said in its FAQ about the deal.
So how does Six Apart benefit? LiveJournal has 93,000 paid accounts, which are priced at $25 a year - around $2 a month, or about $190K in monthly revenue. That number is more impressive when infrastructure costs are included. LJ's revenue stream is focused in 3.8 percent of its active accounts (which number 2.44 million, rather than the oft-quoted 5.6 million figure, which includes inactive accounts). Those paid accounts essentially subsidize the other 96 percent of users - thus the importance of LiveJournal's experience in scaling its architecture, which is based on Perl, as are TypePad and Movable Type.
A recent overview of LiveJournal's backend said it was serving 50 million pageviews a day from "100+" Linux servers running Apache. Even using the low-end figure of 860,000 weblogs updated weekly, that suggests thousands of active accounts per server.
Most hosting services allocate a set amount of disk storage space per account - TypePad, for example, offers 50MB of space with its $4.95 a month account. LiveJournal doesn't state bandwidth or storage minimums beyond a limit of 15 photos per account. That makes it possible to house a much larger number of accounts on each server than traditional hosting companies. In that environment, even a modest number of "free will" upgrades from free to paid LJ accounts will boost the bottom line.