Is This the End of Blog Networks?
Something has been nagging away at me for months about the nature of online original content publishing. I’ve expressed it in many ways on this site, not the least in our conversion to a portalized, network magazine format.
At our end of the market — so-called blog networks — we are about a third of the way up the octave of scale … a bit above individual blogs, but below the aggregators and the mega-rich print publishers now streaming into the internet.
As Gurdjieff pointed out that’s a dangerous place to be because it’s where you hit the first half-interval in the octave, the project equivalent of Beecher’s Brook.
The initial rush to big blog networks was prompted by Weblogs Inc, both its ambition — to be a $10m business — and its eventual sale to AOL for a reported $25m. Did it ever get to a $10m valuation prior to the sale? I don’t think so.
Blog networks are publishers of original content. As I’ve been saying for a while, their scale and the distributed nature of their niches, make them more like online, atomized magazines, than any other comparison. And this places a glass ceiling above their expandability.
Recently Syntagma Media hit that ceiling with our wish to attract serious retail advertising by launching two massive network magazines, one in the US and the other in the UK. I’ve documented the problems in making that decision, here and here.
There are three choices for a network at the point we are :
1. Stick with the blogosphere and its useful, but small-scale rewards.
2. Scale up massively into a cut-throat market dominated by the giants of mainstream media.
3. Rely more on selling content directly, i.e. in print or eprint formats.
Syntagma has one foot in #1, another in #3, and waning ambitions in #2. At any rate diversification is the way forward.
Scott Karp has a great crack at understanding this conundrum on his blog, Publishing 2.0, today:
Can anyone think of a content business — meaning a company that produces original content — that has scaled dramatically in recent years? I can’t. Look at the businesses that have scaled — Google, MySpace, YouTube — all platforms for content, but not producers of content. Compare those to original content businesses like Weblogs, Inc., Gawker, TechCrunch, Paid Content — they are successful at their scale, but that scale is still tiny compared to the scale of the aggregation businesses. Even portals like AOL and Yahoo are much more aggregators of content than original producers of content.
That’s the essence of the problem I’ve been trying to articulate on Syntagma for most of this year. My friendly warnings to other owners seemingly going for broke, have been misinterpreted as “jabs”, or jealousy.
The Blog Herald
Now we hear that The Blog Herald has been sold by Matt Craven of BlogMedia Inc, now Problogging Inc, to follow the first route of relying on blog consultancy, mainly to Fortune 500 companies. Apart from the fact that only 3pc of F500 bigcos indulge in business blogging, it’s not easy to get access to these companies unless you have goldplated contacts within them.
The short golden age of the blog network is over. Does that mean that original content provision is over too? No, you just have to accept yourself as a small-to-medium business that will never attract the buyout checkbooks of a Google or a Yahoo.
Is that so bad? Not at all. It’s what the vast majority of businesses do all the time. Having once worked close to the boardroom of a major telecoms company, I would say : it’s a far, far better thing you do than facing Madame Guillotine twice a day.
I think you overestimate the amount of scale required to attract those types of buyers. 4-5M uniques will get you there, or 15-20M ad impressions.
By Jeremy Wright on December 4th, 2006 at 3:24 pm
It’s not quite that simple on the retail side, Jeremy. You need the right kind of visitor, the right ambience and technical proficiency in the inventory, be a recognizable local brand (UK or USA, e.g.) and a weighty sales force to sell your space.
The cost of all that is far more than you would expect, and you’d need it duplicated in each market you aim for.
By John Evans on December 4th, 2006 at 3:38 pm
You only mentioned retail once in your post John. The rest was about blog networks and how they couldn’t scale to hit a certain kind of advertiser.
If your point was to say that growing retail is hard, no argument from me. Having done retail, yeah it’s hard. But the scaling challenges are entirely different.
By Jeremy Wright on December 4th, 2006 at 3:42 pm
Well, OK, I was being a little parochial in concentrating on our particular problems, but Scott Karp’s point is surely right : which content business has scaled to that extent in recent years?
By John Evans on December 4th, 2006 at 3:46 pm
To which extent? 4-5M uniques? 15-20M pages? Hundreds…
You said:
“No, you just have to accept yourself as a small-to-medium business that will never attract the checkbooks of a Google or a Yahoo.”
My response to which is that you’re likely overestimating the amount of reach required to do direct-sold brand advertising - whether it’s Google, Yahoo, Gucci, Microsoft, Vonage or any major brand.
Yes, you need reach. But probably not as much reach as you’re thinking. Again, 4-5M uniques. That’s it.
By Jeremy Wright on December 4th, 2006 at 3:48 pm
I didn’t mean advertising by Google or Yahoo, I meant being bought out by them, which is the exit strategy of most 2.0ish businesses.
As Steve Rubel pointed out tech advertising is limited, and going beyond that (wherever) requires a lot more that 4-5M uniques. It needs a completely new business approach.
By John Evans on December 4th, 2006 at 3:52 pm
It’s not our exit strategy.
And, no, tech advertising isn’t limited. Tech *content* is limited. There is a huge lack of content, not advertising. A lack of advertising would see tech ad rates falling. And they’re not. They’re rising. Very, very fast (double-digit per quarter growth).
And, no, going beyond tech advertising doesn’t require more than 4-5M uniques. It doesn’t need a completely new business approach.
Feel free to cite data to show this, but from both experience and 2 years in the online ad business and talking to every major network and ad agency I’m telling you that in north america and globally 5M uniques is the magic number that will have everyone knocking on your door.
Including Google and Yahoo
By Jeremy Wright on December 4th, 2006 at 3:57 pm
Let’s look at it this way, then : you have 150 blogs, lean, mean machines for content production. But each one is hardly the kind of inventory that’s going to attract the big, stable kinds of advertisers that Jeff Jarvis wrote about recently. Can you imagine BMW doing a one-pager on any of your sites — or mine, for that matter?
OK, you may get a car dealership putting an ad for a second-hand BMW on an autoblog, but that’s a on a much smaller scale. My information tells me that Marks and Spencer wouldn’t even glance at my sites, or your’s. TV or print mags are a much better option for them. That’s the problem.
By John Evans on December 4th, 2006 at 4:05 pm
Why would we sell on a per-site basis? That’s the point of our channels (and your magazines) John. We’d sell a channel, a vertical or a specific demo. If we can guarantee 1M unique women, advertisers are lined up.
It’s not about 4-5M uniques per site John. Anyone who’s telling you that is off their rocker. It’s about the reach a content provider can provider an advertiser for a given demo at a given ROI that justifies whatever ad rate (rate card or discounted).
You don’t need hundreds of millions, or even tens of millions of units to appeal to major brand advertisers, agencies or premium ad networks.
Again, 4-5M uniques across any content network is enough to get any of them interested. It might only be Run of Network rates, but it’s more than enough to getthem interested.
By Jeremy Wright on December 4th, 2006 at 4:23 pm
That’s not what I’m hearing, Jeremy. The ads have to be very big ticket to justify the sales effort of getting them. I’ve taken a lot of soundings, including contacting major agencies who operate online, and, those that reply stress the quality of the platform, as well as its reach.
The perception is that most people online on blogs and similar, are young kids and tech geeks, none of which would dabble in big-ticket purchases.
I grant your point on mid-rate advertising, but that’s not the kind of scaling up I — or Scott Karp — had in mind.
By John Evans on December 4th, 2006 at 4:30 pm
Well define the scaling up then. You said none of those folk would talk to mid-level publishers. And that Google or Yahoo would never be interested.
The truth is that at 4-5M uniques there’s more than 50M impressions to sell. Even at 3CPM that’s still 150K in revenue at the lowest end.
And, sorry, but having been to ad:tech and established relationships with every ad network and most high end agencies, the “magic number” is 5M uniques. You get that and you’re well into the 5-10CPM ranges and then 10-30RPM ranges, ie: millions of dollars per month.
If you dont’ believe me, look around at the industry. Grab a comScore report, look at the folk in the 4-5M uniques range and then find a press release on that site’s earnings.
You’ll be surprised.
And, if agencies are actually saying the word “platform” what they’re talking about isn’t the publishing platform. It’s the ad platform. What they’re really saying is “are you serious enough to run DART, or are you some small-time shop running phpAdsNew?”
Again, 4-5M uniques is the magic number. All you need to do is look around at other sites doing this number and the kinds of ads they’re attracting to confirm that your sources are dead wrong.
By Jeremy Wright on December 4th, 2006 at 4:35 pm
Jeremy, when Macy’s, Bloomingdales or Wal-Mart run decent ads on one of your channels, I’ll concede this argument to you.
By John Evans on December 4th, 2006 at 4:41 pm
We’ve already run Wal-Mart ads. And Vonage. And Microsoft. And IBM. And, and, and…
But you’re missing the point. We aren’t at 4-5M uniques, so the strawman doesn’t stand up.
Find someone at 4-5M uniques, and you will find them running dozens of major brand advertisers.
And then concede the argument.
The point is that you’re overstimating the amount of reach required to entice those advertisers. That was the point at the beginning of this, and in spite of all your dancing around it is still the point.
And if you think the point of Scott’s articles was that nobody but Yahoo and the MSM are attracting major brand advertisers you’re reading it wrong.
By Jeremy Wright on December 4th, 2006 at 4:45 pm
Well, if we accept your 4-5M uniques, and I’ve no doubt you have a point, there’s still the question of what you have to do (the investment, size of business etc.) to scale up that far. The investment required is massive and, in my opinion, not worth the effort if you want to retain some sort of life and independence.
That’s probably another reason many choose not to go the VC route that you have. The best way is still to be bought out.
Wired Digital is now owned by Conde Nast — just imagine the goodies they can bring to the table.
By John Evans on December 4th, 2006 at 4:56 pm
Wired Digital took capital. 5 separate times. Bad example.
If your argument is that it takes time and money to scale to the point where you can attract brand advertisers, I’m not arguing with that. But the investment isn’t “massive”. Unless you consider 1-3M$ “massive”.
And, if your goal is “life and independence”, then running a startup is the wrong job for you John. As is going after brand advertisers, being a publisher, getting into retail, etc.
Also, how in the world will you get bought out without scale? Who’s going to buy a network with 20-30K in monthly revenue and 1-2M uniques? There are thousands of those out there.
People who are buying are looking at mid-range pickups, ie: 10-50M$. And small companies simply don’t fall into that unless they are truly exceptional.
Again, my core point was that you don’t need to be a giant to attract giant advertisers. You just need to be visible enough to provide them enough value within their budgetary constraints.
By Jeremy Wright on December 4th, 2006 at 5:00 pm
So, bottom line : name one independent blog network that’s doing 5M uniques — apart from WIN, which isn’t independent, and Gawker, which benefited from a Financial Times journalist with a lot of capital.
By John Evans on December 4th, 2006 at 5:08 pm
I said you’re overestimating the requirements. You’ve basically agreed. Now you’re saying prove it by showing networks that are doing that kind of traffic? Why?
Both WIN and Gawker prove the point. Saying they aren’t independent doesn’t make the point any less valid.
Because I *know* you aren’t asking why more blog networks aren’t doing 4-5M uniques. That’d be just silly. If you are, I’ll answer, but I’m hoping you’re not that daft.
By Jeremy Wright on December 4th, 2006 at 5:18 pm
Let’s take a hypothetical network, then : c6media Inc. It builds to 2-3M uniques on the back of VC funding of $2-3M. Then the dreaded ad bust happens, web 2.0 crashes on the coat-tails of a major Google stumble. How vulnerable would c6 be?
By John Evans on December 4th, 2006 at 5:25 pm
That’s like saying “how vulnerable would an airline be to terrorist attacks”. The answer is both “it depends” and “fairly vulnerable”.
What’s the point of this exercise? Also, if you think that a major Google stumble is going to hurt c6media, then that would intimate that c6media relies heavily on Google income. Which would be foolish. Any online publisher who puts more than 10-20% of their revenue in one partner basket is asking for trouble.
Again, what’s the point of this? You’ve gone from “no advertisers who matter would work with blog networks” to “retail is hard” to “only funded blog networks get big” to “an online ad crash makes blog networks vulnerable”.
I’m just not following your logic here John. Are you just so dying to take pot shots at the content creation business and anyone who doesn’t do it the exact same way you do (and who doesn’t use the same internal vocab) that you feel the need to just paint broad, baseless red across healthy businesses (fictional or otherwise)?
By Jeremy Wright on December 4th, 2006 at 5:31 pm
Jeremy, I’m learning from your excellent tutorial in how to run a mid-sized original content business online, not trying to out-fox you.
BTW, Dave Winer believes Web 2.0 will die when Google’s share price crashes. With a PE ratio of 18/19:1 that’s going to happen.
No, I’d say you know your business, and I’m not doing this just to show you up. You’ve made a great contribution to the debate here, which, as you know, is going on at the top tier of the blogosphere. I’ve never doubted your competence.
BUT, there are problems for a British-based online publisher who aims at a specific sector, rather than the tech blogosphere for income. I’ve been a publisher all my working life, at the top end, and the mid-level. It’s a tough business, and, while I concede your point that the scale can be underestimated, I think the path to it, can also be underestimated.
By John Evans on December 4th, 2006 at 5:42 pm
Dave Winer’s an ass. Web 2.0 only dies if Google dies if Web 2.0’s income relies on Google. Which is a false premise for 2 reasons. 1) most smart Web 2.0 companies don’t rely solely on Google advertising and 2) even those that derive a great percentage of their traffic from Google wouldn’t be hurt that much since the traffic wouldn’t evaporate it would only go elsewhere.
In terms of your publishing challenges, I can’t speak to those.
However, forthe record, we aren’t a tech-focussed company. Less than 10% of our traffic comes from our tech blogs.
But lots of people do really well in the sector. Because there’s lots of ad money, and a complete lack of quality content on which to advertise (according to Microsoft’s ad agency).
By Jeremy Wright on December 4th, 2006 at 5:46 pm
I think Dave’s point was that Google is the canary down the Web 2.0 mine, but … whatever.
My own belief is that network magazines, with small leverage, i.e. debt-free, can slowly build to a level where taking on a complementary partner who really knows what they’re doing, may just be able to make that leap of scale.
That’s the underlying current of Syntagma Media over the next year.
And thanks for all that wonderful information, Jeremy. You are a star.
By John Evans on December 4th, 2006 at 5:54 pm
[...] Read More on Syntagma [...]
By 21st-century Phi » The End of Blog Networks? on December 4th, 2006 at 6:52 pm
John - I think you should pay Jeremy a small consultancy fee for the time and effort and insight he put in here.
By Martin Neumann on December 5th, 2006 at 12:29 am
The point of blogging is to share info. I just rarely have coherent or cohesive thoughts on my own blog lately (not sure why). I guess that’s what podcast interviews are for
By Jeremy Wright on December 5th, 2006 at 12:37 am
Martin: In most media interviews the interviewer gets paid more than the subject
Jeremy: in my limited experience it takes more effort to do a podcast than it does to write a post … but everyone has their idiosyncracies.
By John Evans on December 5th, 2006 at 9:20 am
Oh, and Martin, I just heard the test result. Unbelievable!
By John Evans on December 5th, 2006 at 9:21 am
Hey John - watched every minute of the final day - and all I can say is Wow!!! What a turnaround. This test should have been a draw - your batsmen really did crumble. Not sure why after they scored 551 in the 1st.
I could have got 15/1 for an Aussie win before the start of day 5.
By Martin Neumann on December 5th, 2006 at 1:30 pm
Sure. Warnie did it again. He’s the man everytime, England’s nemesis.
Remember though, in 1981 England lost the first two gaes then won the last three. Botham’s Ashes it was called.
By John Evans on December 5th, 2006 at 1:40 pm
[...] Is This the End of Blog Networks? The short golden age of the blog network is over. Does that mean that original content provision is over too? No, you just have to accept yourself as a small-to-medium business that will never attract the checkbooks of a Google or a Yahoo. (tags: blog blognetwork) [...]
By 美味饻 Blog Archive » links for 2006-12-07 on December 7th, 2006 at 3:17 pm
[...] Scott Karp, who wrote something similar a week ago, believes platforms are the new portals. [...]
By » SYNTAGMA - the home of Syntagma Media on December 11th, 2006 at 11:14 am