It probably isn’t a surprise that of the millions of blogs, the vast majority of active ones generate little to no revenue for their authors.
Yet is “professional” blogging, even at the highest levels, any more compelling a business opportunity than blogging at the lowest levels?
I’ve never really considered the overall economics of blogging in any depth for one simple reason – the income I earn from my blogging activities is not my primary source of income.
I started blogging because I love to write and even though I’ve (unexpectedly) been able to turn my blogging into a source of extra cash, I still blog because I love to write.
For those who rely on their blogging to pay the bills and for and those who have started blog-focused businesses, however, the economics of blogging matter a whole lot.
Earlier this week, I learned that Know More Media, a blog network, is allegedly going out of business and that Jeremy Wright, the CEO of b5media, which itself runs a large network containing several hundred blogs, had offered Know More Media bloggers an out.
“We will ask that you blog for $50 for the first month, while we ascertain the value and advertising potential of the blog. After that month, we will likely need to restructure the network (there’s a reason it wasn’t making any money), redo the pay structure and even let some bloggers go. But, if you let us, we will turn the network around and make it profitable. We are fully committed to doing what’s fair (and in many ways, being more than just fair).”
While he shortly thereafter offered an alternative proposal, I was struck that the CEO of a respected blog network would suggest to any blogger that he or she blog an entire month for the paltry sum of $50.
Frankly, I wouldn’t open up my word processor for $50, let alone roll out of bed.
While I certainly recognize that some bloggers are dependent on their blogs to stay afloat and have to take what they can get, the notion that some might actually work for $50/month as part of b5media’s proposal forced me to consider the economics of blogging a bit more than I was ever inclined to.
Interestingly, I didn’t have to look much further than Jeremy Wright’s own blog to get started.
On July 25, he had published a post entitled “The Problem with Small-Scale Blog Consolidation.“
As the title hints, he looked at the concept of small-scale blog consolidation:
“Now, it sounds like these guys are basically saying ‘if you can put together a half dozen blogs that are all doing mid-sized (150K pages/month) traffic, you have something worth buying’.”
“But lets break this down real quick. 1MM pageviews per month gives you 2MM high value impressions (ie: above the fold). Right now, bloggers are lucky to be making 50c/unit. So that’s 1000$/month. 1K/month split amongst six blogs? That’s nothing.”
“The reality is that small and medium blogs that have real value, great content, solid writers and an engaged community will always, always, always make more money from sponsorships than CPM-based ads.”
“The long and short is that grabbing a half dozen or even a few dozen blogs together won’t net you CPMs of more than 4-5$. And even 5MM pageviews/month only really nets the whole network 5K/month.”
He goes on to discuss the biggest challenge to receiving decent CPMs – selling advertising.
Frankly, the vast majority of people involved with “social media” (blogging included) know nothing about selling advertising. Not only do they lack the resources to mount a dedicated ad sales effort, they don’t know what brand advertisers are looking for, they don’t speak the lingo and they don’t have valuable Madison Avenue relationships.
Wright observes this:
“To get higher CPMs, you need someone to sell that inventory. And that is where the bottleneck is. It’s not in inventory, or even quality inventory. It’s someone that can go to agencies, go to Microsoft, go to Disney, go to P&G, go to Vonage, go to Dell and say ‘here’s somthing of value and here’s why you should pay more for it’.”
“Because without a sales team, you’re stuck in the 1-2$ CPM world or you’re ‘stuck’ selling sponsorships (which I’m a huge fan of for high quality mid-sized blogs).”
He notes that b5media is going to be launching a product that he hopes “will help alleviate this issue.“
After I read this, I couldn’t help but wonder – if b5media, one of the few reportedly “successful” blog networks, initially felt comfortable only offering $50/month to Know More Media’s bloggers, just how solid are the “economics of blogging“?
After all, while I can understand that b5media wants to establish how much revenue the Know More Media blogs it “acquires” can generate before making greater commitments, it’s difficult to overlook the fact that b5media essentially wants “writers” to continue writing for an amount that probably won’t even fill up any of their cars with a single tank of gas.
One would expect that if b5media was swimming in cash and thought that some of Know More Media’s blogs had real value, it would have the ability to take some risk that didn’t require Know More Media’s bloggers to work for next to nothing for an entire month.
Assuming, for argument’s sake, that the average Know More Media blogger puts in only one working day (8 hours) per month (which is probably an underestimation), $50 amounts to a $6.25 hourly wage – $1.75/hour less than the minimum wage worker in California makes.
That’s right – an entry-level worker at a McDonald’s in Los Angeles would earn a higher wage.
Which begs the question – if b5media apparently can’t afford to pay Know More Media’s “writers” a respectable wage while it determines the value of their blogs, just how compelling are the economics of blogging – both for the bloggers and the operators of blog networks?
My answer – the economics of blogging don’t appear compelling at all.
Last week it was revealed that AOL has asked some of its Weblogs bloggers to stop posting temporarily as part of company-wide cost-cutting measures. One of its blogs, Diylife.com, is being shut down completely. Obviously, if AOL’s Weblogs division was outperforming financially, one would expect it to be immune from cuts.
Even Gawker, which pays its bloggers based on the traffic their posts generate and is reportedly highly-competitive with even mainstream news media outlets, earlier this month reportedly cut the pay rate for its bloggers for the third consecutive quarter because of budget issues (“We’ve broken the site budget” are allegedly the words used by Gawker Media owner Nick Denton in a staff email).
Of course, some bloggers might feel happy receiving any pay at all. After all, Huffington Post co-founder Ken Lerer is on record as having stated that paying its writers is “not our financial model.” Instead, Huffington Post writers should be happy with “visibility, promotion and distribution with a great company.“
When looking at the business side of blogging, there too the economics of blogging don’t look so compelling.
Guardian Media’s 8-figure acquisition of PaidContent.org operator ContentNext represented a hefty premium to the company’s revenues of “a few million” in 2007.
Even the ever-popular TechCrunch reportedly generates only 7-figures a year in revenue and it’s worth noting that some of the most popular blogs appear to be making a non-negligible amount of revenue from events they operate – not the blogging itself.
While turning a blog into a million-dollar business isn’t anything to sneeze at, I know individuals who are involved in less-than-sexy businesses who net more each year and they certainly don’t indulge in the kind of hype and ego that is increasingly found in the upper echelons of the blogosphere.
By any measurement, as I looked at all of the available information, I couldn’t help but come to the conclusion that for all of the hoopla, blogging really isn’t the type of business opportunity it is frequently made out to be.
Professional and semi-professional writers who choose to work for a blog instead of a mainstream media outlet are, for the most part, extremely lucky to earn enough to pay the bills, and as I’ve pointed out before, they aren’t going to have access to the resources that mainstream writers do because their employers don’t have the level of capital that a newspaper, magazine or cable network has.
From a 30,000 foot view, all of this really doesn’t seem like it should come as any surprise.
The blogosphere is quite fragmented and most blogs and blog networks have audiences that are too small to make them priorities for ad buyers.
Quality is all over the place and given the limited resources bloggers usually have access to, producing wide-ranging in-depth coverage outside a handful of niche markets (such as technology) is difficult. Much of the “reporting” in the blogosphere is just the regurgitation of commoditized news.
While there is no shortage of entry-level and amateur/hobbyist writers willing to give blogging a try as a “profession” – especially in these troubled economic times – it’s difficult to retain skilled, experienced writers with uncompetitive salaries or risky revenue share arrangements.
In short, it appears that for much of the blogosphere, there is a disconnect between the economics of running a blogging business and the economics of being able to survive as a professional blogger.
As with any other industry, when businesses cannot afford to attract and retain the people required to produce the quality “products” and “services” that make the businesses “go,” it doesn’t bode well for the industry as a whole.