Payola, Extortion and Market Correction

For the last two weeks, I’ve been mulling this concept of market correction as it pertains to the web. There are a variety of stories that have been related, in addition to signatory bubble characteristics that I have observed for some time, but it’s all coming into a lot more focus as time has gone on.

A market correction is an economic term describes a natural occurrence when a certain market sector becomes “over sold” or hyperinflated, or when a sector becomes irrelevant to the market and is put out of its misery, or re-capitalized. It is a “coming to center” that occurs naturally when there is an imbalance in the system.

We’ve seen macro-economic market corrections in the form of the housing and financial market implosion last year or the dot-com bust of the late 90s. Last year, around this time, the stock market gave up half of its value in a correction that wreaked havoc in every market sector. Even the startup market based largely in Silicon Valley felt the effects as leading venture capital firms started informing portfolio companies of looming doomsday scenarios.

Right now, I’m seeing another kind of market imbalance looming larger as a bubble seeking market correction and that is in the area of payola. Bloggers and social media people, anchored largely, but not at all exclusively, by the mommy-blogger sector, have taken and accepted “bribes” (let’s face it, that’s what these things are) from corporate America to provide coverage of their products. These things come in the form of reviews and can include anything from household cleaning supplies to all expense paid trips to New York, Los Angeles… even London.

There seems to be no limit on what corporations will do because they feel they have to win the favor of a small, but vocal minority group. So corporations, thinking this is the way to do business in the new world, and not understanding that the same principles that have always guided their PR efforts should apply to bloggers as well, willingly open their pocket books to garner that good will.

In a vacuum, the idea that the world has changed due to blogs and social media and thus the way to do business has changed too, makes some sense. But because nature abhors a vacuum, we must look at the economic principles that will force a market correction and will assist corporations back to center for the better of the entire market.

111286829_c24b4c7b31This will not go on because at some point, companies will have to realize the ROI involved in “buying off” bloggers and how they represent themselves and the companies they get paid off by, are not worth the dollar drain that will come from it. Bubble burst.

When this happens, and it will happen soon, the ship will return to center. This does not mean bloggers won’t get to do reviews, but the reviews will not be because of payola, but legitimate business-minded ethics guidelines that have roots in traditional journalism.

The New York Times spells out their guidelines on review material:

76. Staff members who borrow equipment, vehicles or other goods for evaluation or review must return them as soon as possible. Similarly, items borrowed to be photographed, such as fashion apparel or home furnishings, should be returned promptly.

77. Automobile reviewers should carry out their testing expeditiously and return the vehicle promptly. Any period longer than two or three days must be approved by a responsible newsroom manager. A reasonable amount of personal use is permissible if that use contributes to the review.

78. Staff members may keep for their own collections ““ but may not sell or copy “” books, recordings, tapes, compact discs and computer programs sent to them for review. Such submissions are considered press releases. But no one may request extra copies of review materials for personal use. Local management may impose a ceiling on the value of review copies that journalists may retain. If not retained by the reviewer, recorded or digital media, such as tapes or disks, must be destroyed or returned to the provider; they may not be given away or left where they could be carried off for illicit copying.

79. Photographers, camera operators, picture editors, film editors, art directors, lab personnel and technology editors and reporters may not accept gifts of equipment, programs or materials from manufacturers or vendors. They may not endorse equipment, programs or materials, or offer advice on product design. (This guideline is not meant to restrict our technical staff from working with vendors to improve our systems or equipment.)

Of course, the Federal Trade Commission (FTC) has already weighed in on this stuff (a bit late, but hey, they are now getting involved) updating their disclosure requirements to include bloggers with “material relationships” with any company. Clearly, the beginning of a market correction.

Where the whole bubble gets bizarre is in the strong arming practices of bloggers who believe that they have authority and leverage to for a company to provide freebies for them (believe me, it happens). Somehow, some bloggers believe that by threatening a company, they can get what they want because they are a blogger or personal brand. Let me make it real simple…. that’s illegal. It’s extortion. If the companies don’t stop buying your crap first, you could end up in jail. Just saying.

Takeaways on this idea are this: Companies face a new world of online public relations and community management and they have, so far, played the game that puts bloggers completely in the drivers seat. At some point, the game is going to change and I think that time is very soon. When the game changes and the market corrects, the bloggers who are in the business for free stuff are going to end up on the outside looking in as the market correction takes business back to business, centers, and all industries involved grow up. At that time, the quality of journalism will increase and the effectiveness of blogger-company partnerships will also increase and mature.

Until then, start the clock ticking. The bubble is about to pop.

Sucks to be a Blog Network These Days

Having come from the blog network space, I have a mostly unique understanding of the difficulties encountered when running a content business. There is always a war between traffic and community, profitability and loss, long term projections and short term realities. It’s not an easy business.

It’s even more challenging when you’re a blog network. Unlike more traditional style content companies like Newscorp (owners of MySpace, AskMen.com and FoxSports.com) or the New York Times, blog networks attempt to take a relatively new medium, a blog, and lump it together with other relatively new media – blogs. There’s no counter-balance of strengths and weakness. They are all blogs, possessing the same inherent strengths and weaknesses.

One of the core problems with the “traditional”, if there is such a thing in the space, blog networks – and really any online media – is that the business model almost always comes back to advertising models of revenue generation. Historically, the advertising market has come and gone in a predictably cyclical way.

As expected, the advertising model is taking somewhat of a hit during these difficult economic times and only in the past two days, two major media players in the blog network space have had to cut pay, create layoffs or otherwise cut costs due to an impending, or in some cases already present, decline in online ad revenue.

Gawker Media, the second largest blog network and home to industry favorites Gizmodo, Gawker, Valleywag and Lifehacker has announced a restructuring of staff – laying off 60% of Valleywag staff, as an example, and increasing the staff on their flagship properties. Consolidation is the name of the game in this case.

Likewise, b5media (with whom I worked for several years), had an internal memo leaked (and TechCrunch published) describing a complete revamp of their compensation system “to reduce costs”. Many bloggers are taking significant pay reductions as the company streamlines their burn rate.

This on the heels of AOL/Weblogs Inc layoffs and pay reductions a few months ago and the very public walk-out of Profy staff when pay was to be reduced shortly thereafter.

Let me be clear. If you’re in the content space, you are dealing in a non-tangible asset. Therefore, the economic rules of asset valuation do not apply. There is no “market price”. There is no assessment value. There is no depreciation. If anything, content can appreciate over time. Typical rules do not apply and in a market where investors, advertisers and publishers are trying to identify concrete ideas and assets that they can count on as a sure investment, non-tangible assets will always take a hit.

Publishers, particularly publisher networks, have to look around and identify means to continue to generate non-tangible assets cheaply (yet fairly), and I imagine some models might end up looking to non-tangible compensation (such as community benefits) to acquire new publishers and content.

Problem is, bloggers have this idea that they can be rich by blogging. Some are smarter and think they can simply “make a living” by blogging, without ever uttering the rich word. Truth is, unless you’re a few important people in the world, it’s not happening. It won’t happen. There are other meaningful ways to benefit from blogging, and most of them are non-monetary.

Apples and Oranges, the Rise and Fall of Women Bloggers

I have sat on this post for the past few days because the last thing I want is this post to offend. I’ve tossed around the best way to approach it constructively and in an encouraging way. I’d like to consider myself a “friendly” for women bloggers, so with that context, I hope it is taken constructively.

Melanie Notkin, aka Savvy Auntie has built a fantastic site that is a non-mommy blogger mommyblog. It’s actually an AuntieBlog, as the name suggests. I got the scoop from Melanie when I was in Detroit a few weeks ago. SavvyAuntie.com is all about women who do not have kids of their own, but have incomes and tastes that they wish to lavish on their nieces and nephews.

It’s a fantastic idea, and her growth has been profound jumping from a paltry 5k unique visitors a month to 35k last month. Still not a dominant site, unless you realize that she has an average of 5 pageviews for every visit to the site. I guarantee most of you are not that lucky.

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Valleywag wrote a piece the other day doing their best to spin the SavvyAuntie effort in a negative light. But even the Valley-based gossip blog that excels at making people look really bad, couldn’t write a compelling piece about Melanie’s site. In fact, the story was so positive by Valleywag standards that it might go down as a huge FAIL on their part.

Which led to a little kerfuffle among mommybloggers, led by Stefania Butler (aka CityMama) who led a spirited charge against Valleywag with lines like “‘let’s take a big huge dump on mommybloggers’ while backhandedly praising a non-mommyblogger for her internet success”.

So let me reinforce that both Stefania and Melanie are friends of mine. One I’ve had the distinct pleasure of meeting in person, and the other who I will one day. Let me also reinforce that Valleywag is a gossip rag and nothing more – certainly nothing that warrants a response, especially when the article was a “backhanded compliment”. IT’s just the game.

Now, this incident in isolation would probably not spur this post, however it is not in isolation. It’s pretty common for women blogger, mommy bloggers and otherwise, to get all up in arms about something a male blogger said about women bloggers. I understand the background behind it. I understand that for years, women have been at a disadvantage. I understand the BlogHer gives women a conference directed entirely toward them. I get it. Really.

However, ladies, you’re playing an away game. You’re comparing yourselves to another industry, and one far more established, and taking the battle on the road. This is a losing proposition.

First of all, male bloggers are generally not thinking in terms of men vs women. We are territorial beasts. We build our own properties and screw everyone in the process. It’s the nature of the game. You, ladies, band together and riot (or something). Again, it’s part of the game and I understand it.

Attacking Valleywag for a negative article, though, is ho hum. Attacking Mike Arrington for his actual or perceived biases is a losing proposition. Being loud and obnoxious on Twitter “so you’re heard” is playing the game on the road.

Road games suck. Oddsmakers in Vegas always give the home team a 3 point spread to start with when setting lines on football games. The 12th man always has an effect. You don’t want to play on the road, when you can play at home (no pun intended).

Women have an opportunity to dominate their niche. Because they band together, they have an opportunity to own the entire demographic in blogging. Advertisers like Glam are looking actively to prop up female-oriented sites, and BlogHer just received direct investment from NBC Universal.

Women in technology have a way to dominate in tech… if they aren’t trying to make it a men vs. women game in the process! That’s an away game.

I’m encouraged by the amount of women blogging and am amazed by some of the really incredibly successful bloggers who are women and building amazing properties. Sites like Celebrity Baby Blog, the Sparkplugging marketing blog network and SheGeeks are demonstrating that it’s very, very possible to build a successful, and respected property without playing an away game.