While looking into the market for buying and selling smaller websites (generally with price tags under $1 million) I’ve noticed that there’s a huge discrepancy in valuation metrics that smart investors will take advantage of.

As the founder of YourStreet, an Internet company focusing on the local market, I can sympathize with FatDoor and try to relate some of the lessons I’ve learned along the way:

Create a foundation of content. FatDoor was essentially a blank slate - neighbors came to the site, figured out who else might have signed up, and then did - what? Talk to each other? Not really. Learn about what’s going on in their neighborhood? There wasn’t much information on that.

Here are the services from each company that start-ups can’t live without:

eBay acquires StumbleUpon for $45M. This is a case of two great companies that just aren’t matched well. StumbleUpon allows users to discover new web sites based on their interests - a very simple, well executed idea. StumbleUpon has an active, loyal user base and, as many sites have found, it can generate a ton of referral traffic. But what is eBay going to do with this? EBay’s statement of the time suggested they would use StumbleUpon to expose eBay’s users to new, random auctions they might be interested in. Yeah, and everyone will use Skype to call an auction seller to complete a transaction. Not gonna happen.

American Greetings buys WebShots for $45M. CNET bought WebShots awhile ago, couldn’t make it work, and wisely sold it to American Greetings. Flickr is far and away the leader in photo sharing and WebShots is a distant second or third. The problem with photo sharing sites is they are notoriously hard to monetize. If CNET with their huge online ad sales force couldn’t monetize WebShots, American Greetings stands no chance. This is just good money chasing after bad.

• Stop producing content. As CNET has learned, producing content is expensive and the margins are horrible. Google does not have writers, editors and producers on staff. Google seeks to organize the web’s content, not produce it. Both Microsoft and Yahoo have lots of people generating content and as long as resources are going into this area, MicroHoo’s margins will never get close to Google’s. Instead of producing the content internally, focus on becoming the platform on which users generate their own content. Both Microsoft and Yahoo have jumped on the user generated content bandwagon to a certain extent already, but to compete with Google they need to focus on this.

• Buy a social network. The notion that social networking is just a passing fad, or that social networking users will show no loyalty and jump from network to network, just isn’t true. The biggest social networks have large, growing user bases that MicroHoo needs to tap into. Social networking users spend huge amount of time everyday on their network of choice and MicroHoo must be part of it. So who to buy? Facebook is off the table and now Bebo is gone. But that leaves at least Hi5 and Piczo. While these are second tier networks in terms of users, the marketing might of Microsoft and Yahoo could easily propel either of them to the top three, right up there with Facebook and MySpace.

• Become the center of the blogging universe. At their core, blogs are mini-social networks. They attract engaged readers on a regular basis around thousands of topics. Yahoo recognized this with their purchase of MyBlogLog, but it needs to go further. Instead of playing around the edges, MicroHoo needs to own this space. Step 1: buy a blogging platform like Automattic (the company behind WordPress) or MovableType. Imagine all the services MicroHoo could offer to the hundreds of thousands of bloggers on either platform: ad revenues via the Yahoo Publisher’s Network, automatic MyBlogLog integration, integration with the social network they need to buy, preferential search services on Yahoo. Bundle all these services into the blogging platform itself and watch the usage (and revenue!) take off. Step 2: buy Technorati. Blog content is just not easy to find, especially for newbies. Buying Technorati starts MicroHoo along the path of becoming the central place where people go to find relevant and interesting blog content.

Microsoft and Yahoo have awe-inspiring resources. As long as they don’t try to take Google head-on in search, the new MicroHoo can continue to be a major player on the Internet and give Google a run for its money.

I think rolling up a mega technology blog network makes a lot of sense. Creating a focused group of top-tier tech blogs would give the network enough reach and inventory to go grab big, lucrative advertising deals. You see all those start-ups advertising in the upper right corner of TechCrunch? Imagine if Microsoft or HP took over that slot and imagine how much more they would pay to be there.

But will a dream team tech blog network in the mold of TechCrunch really kill off CNET? No - because most people don’t understand what CNET’s really about and what makes the company the most money. When bloggers talk about taking on CNET, they’re really talking about taking on News.com, one of CNET’s premier properties. An influential blog network could certainly steal users from News.com, but this wouldn’t be the worst thing to happen to CNET. News.com, while an undeniably great brand and service, is also amazingly heavy on the overhead. All those pesky reporters and editors cost money.

Great:

It's been quite awhile since CNET displayed real signs of life. Here are three ideas to kickstart the company:

* Pare down. While CNET has undergone waves of layoffs, it's still not enough. CNET needs to focus on more efficient ways of creating content. The company has to take a hard look at its business lines and ruthlessly cut those that are underperforming. Any division that's not growing revenues by at least 15% year should be axed. Is this easy? Of course not, but trimming the dead weight allows CNET to focus its resources on areas that have the potential for rapid growth.

Netvibes is one of the best designed, most user-friendly and intuitive Web 2.0 sites I have seen. It's so intuituve, in fact, that there's no welcome screen or instructions - it just pops you right into a fully customizable home page. On the page you can read RSS feeds from your favorite blogs, check email from numerous accounts, keep track of your MySpace page - pretty much anything that requires you to keep up with new information can be tracked from your Netvibes page. I find myself checking my Netvibes page throughout the day.

My thoroughly subjective list of the top 10 internet acquisitions took much longer to compile than the worst 10, and maybe that says something about the quality of buyouts over the last 10 years. Some folks have beaten me to the punch with their own top 10 acquisition lists, so here's my take:

So what makes for a really bad Internet acquisition? First, it has to be expensive. No one's going to rake a company over the coals over a few blown $50 million acquisitions. That might sound like a lot of money to you and me, but that's a rounding error to Google.

Second, for an acquisition to be lousy it has to contribute little or no long term growth to the acquiring company. An acquisition that doesn't fit with a company's long term strategy and that is quickly forgotten - that's a bad buy.

Can Yahoo ever regain its pre-eminent position on the Internet? Not if it continues to compete head to head with Google. Google has the financial and intellectual firepower to outgun just about any company that goes at it head-on. Instead, Yahoo! needs to focus its relatively limited resources in a few key areas and make some difficult strategic decisions:

• Concede search to Google. It may sound heretical for Yahoo! back off on search, but the fact is that Google has won the search battle and the sooner Yahoo! realizes this the better off they will be. Yahoo! is plowing untold resources into its long-delayed Panama project in an effort to catch up with Google's extraordinary search and advertising platform. But it seems unlikely that Yahoo! will ever reach parity in this area and the company could redirect those resources into areas where it can win.

• Go vertical. It's easy to forget that Yahoo! is still the most visited site in the world and the way it got there is through strength in applications like email and depth in vertical areas like finance, shopping, etc. Google's attempts at breaking into vertical areas has been their one notable mis-step. With one or two exceptions, Google's entries into verticals like video, finance, email have not been barn burners. Yahoo owns vertical and it needs to extend its lead in this area by making sure all of its categories - from autos to yellow pages - are best of breed. This is a core competency that Yahoo! has and must build on.

• Tap into blog power. Blogs are huge and only getting bigger - 75,000 new ones surface every day - but neither Yahoo! or Google owns this area. Yahoo! should buy Technorati, which has become the default blog search engine. Combining Technorati with Yahoo's recently acquired Del.icio.us social bookmarking site could be the start of a blog portal. Yahoo! started life as a directory of web sites (a quaint notion that you could actually list and categorize all the web sites in the world, back when there were 50 or so), so it knows how to organize information. This is different than searching - with searching you find what you're looking for. By organizing blogs, Yahoo! could help people find what they didn't know they were looking for.

• Power up video ads. With Google's acquisition of YouTube, it's a foregone conclusion that video will be the next - and possibly most lucrative - form of Internet advertising. Yahoo! needs to recognize this trend and get in front of it. Yahoo! should actively work with its advertisers to start deploying video ads throughout its sites. This is an area that Yahoo! must choose to expend resources in a very visible way. Even with the YouTube acquisition, there won't be a clear winner in video ads for some time. Yahoo has lost the battle of text ads - it can't lose the battle of video ads.

* While page views declined, visitors were up. This supports my earlier analysis that CNET's page redesigns were responsible for the page view decline, not an overall drop in visitors. It's also worth noting that CNET's page views declined only 13% year-over-year, not the 50% that was being bandied about the blogosphere last week.

* CNET continues to efficiently monetize its traffic. The company's revenues increased 13% year-over-year even though its page views dropped by the same amount. This indicates that CNET is pumping out more sales leads per page view to its participating merchants - in other words it's getting more efficient in converting readers to buyers.

CNET's traffic decline has been widely attributed to the upsurge of tech-related bloggers, though no one has given any actual evidence that this is the true cause. Yes, there are more blogs than ever, and yes CNET's traffic has declined, but this doesn't mean one caused the other.

At Zillow, users can get an automated valuation of almost any home in the U.S. - a very neat trick that involves the intake of countless different types of sales data from counties across the country.