One thing I glossed over in my previous post on business models for blogs, now that I think about it, is that Nick Denton and Jason Calacanis do provide one service that individual bloggers trying to monetize their readership don’t have easy recourse to: By owning the revenue stream of multiple blogs, Denton and Calacanis spread their risk, and so can offer their talent a measure of job security. Denton pays a salary, while Calacanis lets you keep the first $1000 profit your site makes from the ads he sells and 50% beyond that, if I remember the NY bloggers talk correctly.
This is similar to how venture capitalists operate, except that real VC projects involve large sunk costs. With blogs, the only non-negligible costs are bloggers’ wages and the effort expended trying to sell readerships to advertisers. Depending on how aggressive Denton and Calacanis are in weeding out underperforming blogs, the cost of failure can be quite low, and hence also their overall risk, leaving them with a generous upside. It’s the size of this upside we’re all wondering about.
Felix points out it’s easy for Denton to fire a blogger. But the same is true for Calacanis. Should he decide to jettison a blogger, I believe all he needs to do is mail him a CD with his aggregated content and restart the blog with a new faceSo, Felix, basically you’re wrong.. I don’t think either venture blogger (VB?) could or should do this without good reason, though, lest the stable get antsy. Their talent musn’t live in fear that a stale patch after a good run lands them out on the street.
I said “much more difficult”, not “impossible”. I’m sure all of us can come up with dozens of ways in which Calacanis could fire a blogger if he really wanted to. But that’s not Calacanis’s business model: since the blogger receives nothing if there’s no advertising on his blog, then Calacanis will be perfectly happy with dozens of bloggers toiling away sans revenue until they give up — it’s no skin off his nose.
Also, as Andrew Sullivan likes to remind us, there are non-negligible costs associated with popular sites. Stefangeens.com doesn’t need a lot of bandwidth, but other sites do, and pay for it.
Felix, the total number of visits to Sighs.com (MemeFirst, stefangeens.com and the rest) sites in a month now lies around 2,500 a day or 6.5 GB a month. For $60 a month my web hoster Spry.com gives me 100 GB a month throughput. Back-of envelope math gives me an upper limit of about 40,000 visits a day on average, which just about covers a Denton’s site. That’s still non-negligible in my book, especially given the revenue estimates for his site.
You are correct that a blogger can leave our network, and we can ask a blogger to leave our network, at any time. My belief is to keep the market open and let writers go with the best deal. Nick is forcing people to sign a six-month noncompete (not that I’m thinking of partnering with any of his current bloggers—really).
You are also correct that our model is like a VC portfolio or mutual fund. One bad blog doesn’t sink us, and a good blog just throw traffic to the other ones.
At the end of the day Nick is doing great things with a great group of bloggers, and we are doing great things with a great group of bloggers. It will take two or three years to figure out which model works better, and I’m sure we will both changes our gears several times over that time period.
For example, I thought we would only be b2b when we started the Weblogs, Inc. Network. However, after seeing Engadget.com take off like a rocket I’m thinking about b2c and political blogs.
It is goind to be a lot of fun… and my hope is we can keep blogs pure while helping bloggers made a living–or half a living. 🙂