Blogonomics: making a living from blogging
This is a reposting of a post that appeared on May 28, 2002 at Pressflex.
Self-organized networks of bloggers offer advertisers access to previously unarticulated demographics
Martin Nisenholtz claims that the “weblog phenomenon does not represent anything fundamentally new in the news media”. He’s right, of course. We’ve had OpEd pages for more than 100 years, Xeroxed family Christmas newsletters for 50 years, home pages for a decade. A blog, seen on its own, does no more than mix these old ingredients in a new pot. Bloggers have thrashed the likes of Nisenholtz with arguments that blogs are better, faster and cheaper than “old” media. But the point, I think, is that blogs don’t just excel existing media, they are beyond media. Blogs aren’t nu-media but unmedia.
Blogs are not rewired Daily Bugles, they are a ferocious crossbreed of Wal-Mart’s cost-efficiency, distribution, and coordination with the Shakers’ passion, patience and craftsmanship.
(Update 2/16/03: the service that grew out of this essay is live at Blogads where you can buy blog advertising or keep abreast of news on nanopublishing, textads, blog ads, thin media and blogonomics.)
Blogs don’t just push the media envelope, they fly out of orbit on new trajectories.
1. Entrepreneurship Blogs will enable millions of new idea entrepreneurs (aka freelance journalists.)
2. Capillarity The networks of these bloggers, the blogosphere, powers knowledge-sharing far more profound than anything offered by current media.
3. Blogonomics The blogosphere is spawning “blogonomics” so bloggers can profit from delivering commercial information to the communities they inform.
1. Entrepreneurship In framing their $1000 bet about whether blogs will overshadow the NYTimes.com by 2007, Dave Winer and Nisenholtz essentially bet on a contest between amateurs and professionals, “people writing… for the love of writing, without any expectation of financial compensation” versus “private parties.” This is a false dichotomy. The blog battle is not just between amateurs and pros, it is also between entrepreneurs and news organizations. Yes, Dave is right that there will be millions of amateurs and that much of what they write will be more compelling and useful than what is written today by “professionals.” But, at the same time, the blogosphere will enable hundreds of thousands of new idea entrepreneurs to carve out local, ideological or conceptual niches and make a living. Bloggers are the ultimate speculators! At least 80% of any media organization’s revenues are spent on “overhead” — the executive parking garages, broadcast towers, helpful distribution unions, wood pulpers and stolid German makers of printing presses as big as the Super Dome. Take these costs out of media and you slash the tax on writing — the number of writing jobs and the amount of quality content will rocket.
2. Capillarity If the soloists outnumber the orchestra, who conducts? James D. Miller argues that a blogging boom will self-destruct. “The proliferation of blogging sites makes it especially difficult for consumers to know which bloggers they would find interesting,” he writes. But Miller’s Malthusian view of blogging focuses exclusively on the blogger’s role in producing words, which is obviously only part of the equation. First, each blogger reads five to 25 other blogs, more than offsetting any word-supply she generates. Second, she evaluates the blogs, recommending a few, ignoring most. So a new blogger is a net contributor of order rather than noise to the blogosphere.
This hand-sorting gets short shrift from many technophiles. But I agree with Bill Quick (coiner of blogosphere) that “word-of-blog” comes naturally. In offline dealings, we regularly evaluate phenomena using word-of-mouth knowledge — judgments passed along by friends and friends of friends and judgments inferred by counter-trading the people we think are idiots. The same strategies work well online. Long before I read Margo Kingston, Tim Blair told me all I need to know. But can word-of-blog cope with the awesome scale of, say, all 500 million Internauts blogging at once? What happens when we have 73 blogs about Wooster, red blogs, prose blogs, gun blogs, ska blogs, braless blogs, blog blogs, bong blogs, 29,471 Boston blogs, when we have three blogs for anyone who thinks for a living or lives for thinking: a blog for work, a blog for play and blog for family? What happens when Laura Bush, Zonker Harris, Bill Gates, Britney Spears, Homer Simpson, John Edwards and Tiger Woods all blog?
Well, if we assume that each blogger reads an average of 15 blogs, and that (since we are not yet clones) each blogger reads five blogs that are not on everyone else’s hit parade, we can bet that no matter how big the blogosphere grows a) there will be plenty of eyeballs to go around and b) we will all be within a few clicks of any pertinent piece of news and c) valuable information should quickly and efficiently percolate to any reader who might want it. Think capillary action, the magic that defies gravity to suck water molecules to the top of a redwood. Sure, opinion pages, online diaries, Christmas newsletters, commonplace books and blogs are old news. What is new is the blogosphere, the endless and (physically) effortless networking of conversations. This is the exponential leap. We’ve had the leaves; now we have the twigs, branches and trees that can connect us all together into a real-time forest of minds. The blogosphere is a social fractal, a network that scales up and down with equal facility. As an information processor, the blogosphere superfluizes old media’s expensive and carefully constructed infrastructures and franchises. Suddenly, Vivendi, AOL-Time Warner, EMAP and Newscorp are factories whose economies of scale are swamped by infinity, networks that have come unplugged, refrigerator salesmen trudging into the next ice age.
3. Blogonomics From the blogosphere grows blogonomics (coined by Matt Welch.) The old economics of media – he who controls distribution wins the most readers and serves advertisers best – will be plowed under by a new economics – she who relates best attracts the most valuable audience. (Since relate means connect and tell.) The metrics do not yet exist to describe the blogosphere’s commercial potential. Anyone who blogs knows we are operating in a new dimension beyond brand or marketing footprint. The newspaper or TV station with 10 viewers has, um, let’s count them, 10 connections. The blogger read by nine other bloggers participates in a network of up to 45 direct human relationships. (I don’t know the formula — draw ten dots in a circle, connect each dot to every other dot, then count the lines.) 1,000 bloggers generate more communication value than 100,000 readers. (Sure, a power law distribution may result, but the possibility of 500 million bloggers boggles traditional media — 10 blogs each may serve 100 million unique users a day, 1000 each will serve 10 million readers a day, 100,000 each will serve 1 million readers a day, 10 million will draw 1000 readers a day and 489,898,990 will serve 100 readers a day.) Blogs serve passionate, activist citizens who eat, drink, drive, argue, influence and buy more voraciously than their couch-potato neighbors. (The blogger’s energy is a cause and effect of blogging, I think.) Blog readers, wired to value peer knowledge over brand, are a prime audience for new messages.
The blogosphere’s self-organized networks offer adventurous advertisers the opportunity to target unique and previously unarticulated demographics. Advertising in a blog or blogset will enable an advertiser quickly to communicate with a critical mass of thinkers. As Virginia Postrel noted recently in the New York Times, “advertising to large markets where audience members are unaware of each other isn’t as valuable” as advertising to people who share “common knowledge” of each other. She outlined goods that benefit from advertising around events or media that serve as “common knowledge generators”:
Some are goods whose value increases as more people adopt them (or, in the case of computers, as more people adopt the same operating system). That’s one reason the famous Super Bowl ad for Macintosh in 1984 was so important. It’s also why the Discover card was introduced with six ads during the 1986 Super Bowl. A credit card is good only if enough retailers accept it, which will happen only if enough consumers use it, which in turn depends on how many retailers accept it — a “network externality” that depends on common knowledge. Other products, like cars, sneakers or soft drinks, use ads to create brand associations, adding symbolic characteristics to their products. Those characteristics may be valuable if only the buyer knows about them, but they’re worth more if they’re widely understood.
In the long run, the blogosphere seems like the perfect “common knowledge generator” — a dream advertising medium for innovative companies.
3.1 But who will advertise? I agree with Reid Stott’s view that traditional advertising agencies won’t quickly learn how or why to advertise on blogs. They’ll keep flogging the horse they rode in on. In any case, while a few big companies may have the vision to sponsor bloggers or blog communities, I’m afraid that most ad agencies and corporate advertisers will not understand the blog’s unique power. Clayton Christensen wrote in his amazing 1997 book Innovator’s Dilemma that “rational managers can rarely build a cogent case for entering small, poorly defined low-end markets that offer only lower profitability.” It is a safe bet that blogs will serve “small, poorly defined low-end markets” for some time to come, and that advertisers just won’t know what to do with them. The good news is that we don’t need ads from name brands like GE or Enron, and probably don’t want them — business history says that most of today’s biggest companies will be dust in 50 years and that some of today’s motes are tomorrow’s supernovas.
In the beginning, blog advertising will likely be P2P. Ken Layne could sell Dot.con. Glenn Reynolds could sell baseball hats. Tony Pierce could point to his E-Bayed molars, or whatever other teeth he loses. Amy Langfield may promote the 9/11 book. Matt Drudge could sell autographed photos or Tshirts. Many Blogads may be traded gratis among friends. It will be a long haul. Slowly, critical mass will build. New ad classifications will emerge. New demographics will cohere. Companies will be invented to fill new niches.
3.2 Will advertising bust the blogs? Matt Haughey, who has done great things for blogging and textads at metafilter, thinks commercialization is inevitable. But he worries that blogging will be tainted by:
writing entries to please your readers and advertisers, not yourself, posting entries because you have to, to get paid, lazy fact-checking to push things in under deadlines, conflicts of interest, and lack of disclosure of who is paying you and why…
Yes, some bloggers may not to display ads. No problem. But ads can help, I think. First, markets do a better-than-average job (over the last 5000 years, at least) of allocating resources, rewarding good work and punishing the slipshod. Bloggers are idea entrepreneurs, living in a clickocracy, risking their time and passion on writing. Bloggers who inspire large or passionate audiences can be rewarded for this by advertisers. There are, beyond money, other benefits to creating a blog advertising idiom. Establishing a clear space and format for advertising will clarify what is flogging and what is blogging. No more need to plug for your friend’s book between paragraphs about Arafat. Second, blog readers may be pleased to have a chance to buy goods and services from companies or individuals who appreciate blogs, who support their beliefs, who value their values. Ads are themselves interesting and useful content. I will be fascinated to read who or what advertises on Mr. Layne’s site.
3.3 Our contribution: Next month, Pressflex will begin public testing of Blogads, a service to help individual bloggers sell and display classified ads. Each blogger will set his own prices and approve his own ads. Each ad may include graphics and can link to outside sites or to a larger ad. We will host the service and take a small fee on each ad sale. Classifieds play an important role in communicating commercial information within communities and happen to be the source of most newspapers’ profit margin. But, in the early years, our service will likely not serve the mainstream classified niches – cars, real-estate and jobs – because each blogger’s audience is too widely dispersed. A reader of James Lileks’ site may love his blog, but she probably won’t advertise her house there. But she may want to offer legal services, sell a book or announce an E-bay auction of Weezer tickets. James himself may want to promote his favorite businesses. (Who does not already talk up their favorite restaurant, barber or digital camera, hoping that the vendor’s quality will be rewarded and reinforced?) Eventually, a sufficient density of local blogs could make Blogads an effective tool for selling local goods and services. Some publishers (I know of one already) may embrace Blogads and decide to use the service to network with local bloggers and democratize their markets. They are welcome to join us. Likewise, we look forward to collaborating with blog technology peers to grow blogging’s crumb-in-a-slice of the media pie into its own wedding cake.
HTTPads is a great idea, if you like banners. Textads need classification and more flexibility for both buyer and seller. (Although omitted in the first edition of this article, I admire Blogsnob’s name, elegant simplicity and network-boosting power.) Pyrads is a strong offering, but seems to be in hibernation since Blogger’s growth accelerated. Userland, Movable Type, Pitas, Greymatter – we are eager to talk. In recent weeks blogger friends from Los Angeles to Budapest have made suggestions. Their ideas have been very helpful. Five bloggers have volunteered as beta testers. We would appreciate help from a couple more passionate, tech-adept bloggers. Anyone who is particularly passionate about this idea should write email@example.com. Or if you would like to hear when Blogads goes mainstream, sign up here.
To move this thing forward, we’ll have to tweak and evolve and scramble. It will take us a year to get 95% of the way, another two years to go the next 4% and another decade to go the final 1%. Our company, which provides web sites to print publishers, is profitable and can sustain a long slog. (In fact, we won’t mind a slog, since it will scare off the VC-fueled fast-buck artists.) To close, I will wager $1000 that on May 25, 2007 there will be more Blogads than NYTimes.com classified ads or that NYTimes.com will be using Blogads. Ready to bet, Martin? (Yes, the winnings will go to the Blog Foundation.)
Henry Copeland in Budapest, Hungary