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.

Entrepreneurship in Perspective

It’s pretty easy to be self-obsessed when you’re in a startup, or immersed in the world of startups. Tune in to TechCrunch50, the Silicon Valley startup pageant that wrapped earlier this week — sparring with DEMO, running simultaneously down in San Diego, and you’d think nothing much else was going on in the world — “More on hurricanes, war, election year, and trillion-dollar bailouts . . . later in today’s program.”

Seven years ago yesterday, things got put in perspective real quickly. I was attending a morning panel session on raising capital at Accenture’s Reston, VA headquarters, organized by the Greater Reston Chamber of Commerce. The details of the panel have long since faded from memory. I remember local VC Don Rainey was on the dais — at the time running the VA office of Durham, NC based Intersouth Partners — because I was in the middle of asking him a question, when my wife Cecilia interrupted me (happens at home a lot; in public, not so much). She was managing the event, and stepped up to the mic to let everyone know “there’s been some kind of attack on New York,” and everyone had best just go and check on their families.

My recollection following that moment remains quite vivid. Very first thought (after the interrupting thing): what presence of mind Cecilia had, to quickly transition the context of the meeting to the important one — family — without causing panic. Then she and I immediately devised our plan: she would continue to try to reach our daughter in DC, while I would drive down to pick up our son at school. Come what may, our family would be together.

I remember how details of the attack were just trickling in over the radio — a plane or planes, one or both of Twin Towers — as we sat anxiously in our cars, crawling through the crush of cars trying to exit the multilevel parking garage. I remember the constant beeping of failed cell-phone calls from an overloaded system. I remember getting my son with me in the car, trying not to alarm him. I remember finally hearing that our daughter was okay.

I remember my heart going out to the thousands, and their families, who would never be okay.

What I was not thinking about were the consequences the terrorist attack would have on my startup at the time — client/server systems providing music and information in hotel rooms. (The hospitality industry sank like a stone after 9/11, as did our prospects for success.)

Then, at some time, days or weeks later, I remember an oddly comforting feeling of being united with people I’d never met.

Things had really gotten into perspective, for a while anyway.

The Business of Openness

Over the weekend, a big stink was raised over AP News attempting to squash the use of material by bloggers, even flying in the face of fair use. As backstory, the Drudge Retort, a parody site of the Drudge Report, used a very small excerpt of an AP story as part of a larger story published on Drudge Retort. AP served a takedown notice claiming infringement of copyright law.

The repercussions of that action were felt far and wide and caused the AP to sorta, kinda back down off their “heavy handed” approaches.

Last week, Startup Nation served us with a takedown notice of sorts claiming that the excerpt used on Steve’s 6 Steps to Successful Small Business PR was illegally used when the reality was clearly fair use and included a link to the original Startup Nation story. We declined to take down the excerpt but did correct the omission of

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tags.

That’s one business tactic to prevent infringement of intellectual property rights. Most larger blogs respect copyright and trademark laws and make every effort to follow good practice, as we do here. Most larger blogs recognize the hard work that goes into creating content and wish our own IP rights to be protected and respect that line with others. It’s not an issue with us.

The New York Times has taken a completely different approach to business and intellectual property rights. Instead of assuming an antiquated approach to content preservation, they have flung the doors wide open almost begging people to use their content. See, the Times has figured out the magic rule of distributed authority where, regardless of content consumption, the authority always trickles back to them.

This is a winning strategy in an increasingly open world with data exchange being valued highly.

According to the Programmable Web story, not only has the Times invited people to use their content – for free – but they have created a robust API for doing so. Developers love APIs and no better way to make people want to use that content but to make the API fun by producing data in lots of formats, including my favorite, JSON.

End of the day, the Times will win the battle of business openness, if only in principle. They are making data easy to access, fun to access and useful to access. Winning Recipe.