Business

Online ads net billions, but most bloggers starve

People hoping to make a living from advertising-supported blogs probably won’t be able to quit their day jobs any time soon – if ever.

That was the reality check BlogAds founder and CEO Henry Copeland delivered at a Networked Journalism Summit hosted by the City University of New York this month.

After first saying mere “dozens” of the 1,500 bloggers affiliated with BlogAds earn their keep solely from advertising, Copeland later told PaidContent.org the number’s closer to 100.

But even then, he’s talking about less than 7 percent of a fairly sophisticated sample set of bloggers – which includes those behind DailyKos.com and PerezHilton.com – generating significant ad revenues. And the ratio of high-revenue blogs is even lower in the overall blogosphere.

A few entrepreneurs have scored megabucks from blogging. Jason Calacanis sold Weblogs Inc. to AOL in 2005 for a reported $25 million. Laurel Touby peddled Mediabistro.com to Jupitermedia Corp. for $23 million this past summer.

Meanwhile, Nick Denton has built a successful Gawker Media empire – although a post at NickDenton.org notes media estimates of the company’s annual revenues have ranged from $3 million to $52 million. (He didn’t respond to a request for comment.)

Speaking of breathtaking estimates, ex-Wall Street analyst Henry Blodget suspects the Huffington Post could be sold for $60 million. That’s even though HuffPo’s not yet in the black and co-founder Ken Lerer recently promised the site would never pay non-staff bloggers who generate much of its content.

Most headline-grabbing valuations have been given to blog networks. As Calacanis once told the Wall Street Journal, “the best model for making money from blogs is by ‘curating’ and grouping them like we did at Weblogs.”

But with U.S. online ad spending leaping 27 percent to $10 billion in the first half of 2007, according to the Interactive Advertising Bureau and PricewaterhouseCoopers, it’s worthwhile for many solo bloggers to chase the crumbs.

“There are hundreds of folks who make good money” from blog ads even if they can’t rely on them as their sole income source, Copeland of BlogAds said via e-mail.

And bloggers who produce buzz-worthy content can sometimes affiliate with major media outlets. Freakonomics.com, based on the best-selling book of the same name, was recently acquired by the New York Times, for instance. The URL now redirects to a Freakonomics blog at NYTimes.com.

Many bloggers make money indirectly from their sites. Professionals launch blogs to burnish their reputations (which comes in handy when seeking a raise or new job) and bring in clients. Entrepreneurs often use them to sell products.

In fact, the Freakonomics guys started their blog to generate sales for the book, which grew out of an article in the New York Times Magazine, whose parent company liked the site’s content so much it brought it in-house. Sometimes it’s profitable to end up right back where you started.

But Copeland doesn’t believe the percentage of bloggers who earn a living from their sites will increase in the near term. “The number of blogs [will] continue to rise faster than the number of ‘profitable’ blogs for quite a while,” he said.

However, “I think blogging will continue to grow in importance within the publishing marketplace but can’t predict at what point it ‘tips’ out of niche into mainstream,” Copeland added.

And financial sustainability isn’t just an issue for blogworld. All ad-supported online media creators should be worried about market over-saturation. Thanks in part to improved search algorithms and the proliferation of peer-to-peer content hosts such as YouTube and MySpace, “the number of page impressions… is rising far faster than the supply of online ad dollars,” Copeland said.

The vast majority of blogs will never generate significant revenue. But for those that do, it appears the competition for ad dollars will grow increasingly fierce.



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