There is no doubt that the current financial situation is hitting the web as well as the rest of the media industry. This is certainly one of the reasons why we’ve seen blog networks close, cut costs, or rationalize their portfolio. So is the blog network business model in trouble, and what does the established blog network hotshots thing about these things?
I decided to find out, in the first roundtable discussion here on the Blog Herald. That’s why I invited these fine blog network heavyweights to participate in the discussion.
So let’s get started and see what they have to say!
The past 6 months we’ve seen blog networks close, and others slash their costs, yet some are acquiring and/or launching new sites. How is the health of blog networks as a business model these days?
Jeremy Wright, b5media:
3 years ago most people saw blog networks in a very simple way: if you could run one blog profitably, running 100 would mean oodles of money. While some still think that way today, hopefully the recent challenges facing the blog network model make it clear that it isn’t simply 100$/month profit * 100 blogs = 10K/month in profit or something. Blog networks today are, fundamentally, media businesses. And media businesses today have 3 fundamental goals if they want to survive: get more readers, grow the engagement level of your readers and maximize revenue by growing the number of revenue streams you have.
For blog networks who aren’t at scale (which I’ll arbitrarily define as more than 20K/month in revenue) this creates a very challenging environment, especially if they’ve been traditionally very reliant on AdSense, text links, etc. So for that type of blog network that doesn’t have revenue, scale, growth the current environment is going to be devastating.
For smaller blog networks that are run by 1-2 people with 3-10 blogs the biggest challenge will be diversifying revenue streams by having more products, events, premium services, etc. Basically maximizing the existing value they have.
For the largest networks the challenge is basically: cut costs, get profitable (or grow profitability), focus on your core strengths and outsource the rest. A classic example of this would be that maybe a smaller network has a sales person help sell, but they’re having a hard time. The network would probably be better off cutting that cost, working with a sales partner and netting the difference (which can sometimes be substantial).
Basically: networks with low costs should continue to do well, networks with moderate costs and moderate revenues will truly struggle (and most will either close or sell to larger networks like us) and for the largest networks it’s about surviving whatever gets thrown at us to emerge on the other side of this situation first and foremost alive but ideally thriving.
Collis Ta’eed, Envato:
I think that like at any time a blog network is successful if you have good traffic which you are converting into a solid revenue stream and you aren’t overspending on the costs to keep it that way. Nothing about site traffic has changed recently, it seems to be a continuous climb on the whole, so if there are any weaknesses in the blog network business model it would be in revenue and spending.
I think with the economic hit, one of the first places to suffer a drop in spending is going to be in advertising. Over here we’ve been watching carefully how our ad revenue has fared. To date it seems to have fallen a little but been reasonably steady, and it’s been similar in our other revenue streams. However we’ve been having a long period of consistent growth so even just holding steady may be worse than it sounds.
It’s always better to brace for a bad economic time than to be caught unawares. I suspect some of the networks that have been closing sites / slashing costs are preparing for the worst. We have drawn up a plan for serious cost cutting in case things go south, fortunately only a few parts of the plan have had to go into effect. I think it’s a good idea though always to have an emergency scenario.
Another possibility to keep in mind is that when things get bad, there are usually bargains to be had. So if you cut costs now and cash up, there is a good chance that down the road you’ll be able to pick up new acquisitions at a lower price due to the unfavorable economy.
Mike Rundle, 9rules:
Sites that produce great content will always have their place in the web business world, whether you call them a blog or not, and whether they’re in a blog network or not. The blog networks that are thriving seem to be the ones that put an emphasis on the quality of their individual sites above all else, perhaps above the health of the overall network. Focusing on one site at a time, making sure that site has great content on a subject that’s interesting, publishing the heck out of that content, that’s always been the way to start a successful website. Some blog networks have wrongly put the emphasis on quantity above quality, cranking out site after site without doing 1 site really well prior to starting more. Gawker expanded with a small staff because they’d focus all their effort on 1 or 2 sites, making sure they were stable before starting others. I think that’s the way to go if you want to stay in the blog network game for a longer period of time.
How hard do you think the current financial situation (or crisis if you will) will blogs in general, and blog networks in particular?
Beyond what I’ve said above, the average blogger will almost certainly start to drop ad units in favour of affiliate stuff, will then almost certainly move onto pay per post type situations and will, hopefully, eventually get back to just blogging because they love it. It’s my sincere hope that the worst thing that happens to blogging out of this is that we all (and I put myself firmly in this group as well) get back to blogging for the love of blogging – not just to make money. The more we do things because we love it, the more social media loses the media and redefines the “social”, which can only be a good thing for everyone.
It’s pretty hard to tell, there’s certainly not much in the way of experience to draw on. My instinct says that ad spending is going to drop, but it could be that offline advertising drops off and ad buyers shift their attention to the relatively cheaper online market which would actually benefit bloggers. With a bad economy people are going to spend less, so affiliate programs may drop in conversion, on the other hand if there’s less advertising that may in fact make affiliate programs more potent.
Another aspect to look at is the state of currency exchanges. My company is based in Australia where we have seen our USD-AUD exchange drop to record lows as the Australian Dollar loses value. This translates to our effective revenue jumping up as the conversion magnifies it. As it happens a large part of our costs are overseas anyhow so it hasn’t been of much help. But certainly solo bloggers living in countries where the USD is now worth a lot more will reap benefits when their advertising/revenue is in that currency. If there is a drop in ad spending the fact that the effective revenue per ad is going up will surely soften the blow.
Advertising on social media sites and blogs was popular when large companies were first exploring the space, but when the sheen wore off, they were just as concerned about ROI as any of their other investments. Websites, blogs, and blog networks that have large audiences in key demographics will continue to do well as they can demand higher CPM rates. If your site or group of sites is doing over 1M pageviews per month, then the downturn will tighten your ad revenue but won’t turn off the faucet. Blogs and blog networks that haven’t cracked that barrier (aka, the majority of blogs and blog networks out there) will continue to have a harder time pitching advertisers. Ad budgets are tightening and the spenders want to get the most bang for their buck and unfortunately, that means they’re going with larger and more established avenues which may not mean spreading it around amongst 20 smaller blogs.
What’s the ideal setup for a blog network today’s climate? A smaller amount of blogs, or a large amount? Very niched, or as wide as possible? In short, if you were doing it all over again, how would you do it (and don’t say “just the same” without a great explanation!)…?
Just the same ;-)
Seriously though, I’m a believer in 3 models for blogs (cause I am ALL about the 3s): 1) a small number of HUGE blogs within a couple of verticals, but focused on one audience type (ie: gawker model), 2) a medium number of medium blogs within ONE vertical (ie: the sugar model) and 3) a medium number of blogs in a handful of verticals, with a brand (or two) unifying them (ie: the b5media model).
Any of these can work, but the commonality is a “thing” that ties the blogs together, either audience or content or branding. So yeah, if I had to do it all over, it would probably make more sense for us to launch our branded portals in one vertical first, build the blogs in that vertical and then “tackle” similar audiences until we have a depth of content for “women”, another for “men”, another for “moms”, etc. Ultimately we’ll still get there, we’re just rebranding ourselves to get to that point. :)
My inclination is always to specialize and then extend vertically to hit many areas of a single niche because it means you can cross pollinate sites to grow them. Given the financial climate I would certainly advise to grow incrementally. That is build one solid product at a time so that you keep costs down and don’t overextend. I definitely don’t think this is the time for taking big risks – and given that I am not exactly risk-averse, that’s saying something :-)
I think working very hard on a blog having a unique voice is important. Not just someone who is writing for 5 other blogs looking to make another buck, but someone who has that spark of creativity, a huge passion for their topic. Someone who will post constantly as if they were just discovering the most interesting thing they’ve ever found. A good example of a small blog network that just oozes great content is Anticlown Media, the folks behind The Superficial, one of the largest celebrity blogs out there. They have three blogs, but each one is outstanding, not your typical blog network fare. They weren’t created to be just another title in the network’s stable, each was created so that it could stand on its own. I think that’s the way to go — create blogs that can stand on their own, are outstanding, and have a small number of them to focus on. I think if a blog network publisher can’t name all the blogs they own off the top of their head, they probably have too many to concentrate on.
Be sure to share your own point of view regarding blog networks and what’s in store for them in the comments!