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Is This The Only Sustainable Blogging Business Model?

It’s taken four articles to get here, but at last the final chapter in the series on sustainable business models that use blogs. If this is the first time you have read this series please read the articles in sequence. Here are links to the previous articles –

If you have stuck with me and read all the articles in this series you are probably eagerly awaiting my recommendation for professional blogging business models that ARE sustainable. I have compiled my suggestions below and I offer one main method for using blogs as the focus of a business, but the picture I paint is not an ideal business model in my opinion.

It is still very early days in the blogging world and there are not many people currently using a blog or several blogs as the main focus of their business model. Thousands of people use blogs to augment an existing business, but not many focus on blogs as the business and of course there are many successful professional bloggers, but that’s not a business as I have explained over the course of this series.

In order to become a professional blog business owner you must establish a small business model that uses blogs, but does not require you to always blog. In order for this to work for you, as I hinted in previous articles, you need to learn how to create something that is not dependent on your own input for success and adjust your preconceptions of how to build wealth.

The Blog Network

The first successful and most prolific business model based on blogs is the blog network. Jason Calacanis may not have been the first to build a blog network, but he was, and still is based on how much money he made after selling his network, the first entrepreneur to truly tap blogs in a sustainable business model, and earn big bucks doing so. His network was called Weblogs, Inc and operated until 2011.

As Jason reported as far back as July 2005, his business was making more than one million dollars a year just in AdSense clicks and I don’t think AdSense was the main revenue driver at the time, so only represented a proportion of total income. In late 2005 Weblogs, Inc was sold to AOL and although I don’t think it was ever confirmed, it was reported that the final sale price was around the 25 million US dollar mark.

Jason built his blog network using the content = traffic = money model. The income came from advertising placed on the hundreds of blogs in the network, which each blog written by one or several paid bloggers.

Jason hired bloggers using contracts, which ensured each blogger agreed to write a certain amount of content and perform community building roles like interacting via comments, in exchange for a paycheck. Since there are no restrictions on how many blogs the network can add or how many bloggers can be hired, network growth was not restricted by any one person. Weblog’s Inc leveraged people to produce content, build traffic and make money, in a sustainable blogging business model.

There are literally hundreds of blog networks in existence today, each with their own system for generating revenue, but all based on the principle of multiple bloggers writing to multiple blogs. Some are profitable, some are generating revenue but are cashflow negative and others are attracting millions of dollars in investment backing.

Should You Start A Blog Network?

On the surface it may seem the logical step for a professional blogger to become an owner of a blog network, thus securing a sustainable future without the constant need to produce content all by oneself. In fact Darren Rowse did exactly that becoming part of the b5media blog network founding team along with several other high profile bloggers.

Although Darren is the best example of a one-man-show blogger, you can see that he realized the need to become involved in something bigger than himself, something sustainable and not dependent on the monster workload he was putting into his own blogs, something not as reliant on Google for traffic (and thus money), which spreads the risk across hundreds of blogs. Darren diversified his income sources to reduce his risk and secure a more stable future in the blogging industry.

Did he end up working less and creating greater freedoms in his life? Well, not yet at least.

Every time I speak to Darren or any member of the b5media team or any blog network owner I’m hit with the same story – it’s a lot of work. I’d dare say it may be even more work than publishing as a solo professional blogger.

The difference is the shared responsibilities, the tighter focus on specialized roles for each individual – no longer is the owner the blogger, tech person and ad sales guy all wrapped in one. The potential for exponential growth using people as leverage points – and that’s hundreds of people when it comes to networks the size of b5media – is a key benefit.

One of the considerations most bloggers don’t think about is an exit strategy. When you build a blog network you build a business that doesn’t depend on any one person to function. This means the owner or owners create a sellable asset that a buyer can purchase without fear of the network falling apart once the owner leaves. If the network is large enough the exit payout may be in the millions of dollars, like Jason Calacanis’s exit was, and that sort of money certainly creates a lot of freedoms.

In Darren and b5media’s case they are working hard on growth and stabilization, building systems and hiring specialists to take over important business positions. They are still building their sustainable system and consolidating cashflow – and working very hard as a result – but if they keep going as they are they will eventually have an asset that functions without their direct involvement and may one day decide to sell it. Of course for the guys involved they love the blogging industry and their company, so that motivation can carry them far despite the long hours and hectic work schedule.

If you decide a blog network is the way you want to go, bear in mind that you are building a true start-up company including the long hours and taking on the multidisciplinary role of entrepreneur, especially before you have cashflow. Without cashflow managing a blog network by yourself can very easily be more work than remaining a solo-professional blogger, even if you have a full team doing all the blog writing for you.

If you are already a blogger, to make the switch to blog network owner you will suddenly find yourself wearing more hats, none more important than the role of people manager. Your new start-up blog network will live and die on the bloggers you bring on board and if you can’t motivated them, educate them, remunerate them to their satisfaction it won’t matter how well you do everything else.

The Blog Magazine

Starting a blog network is a huge responsibility and may be daunting for a person new to business. If you enjoy some success blogging by yourself now and you have built at least one popular blog, you may consider the path of creating a blog magazine business model.

A blog magazine is like a blog network but only at one blog. It’s a slower growth method that doesn’t place quite as many stresses on you since you only need to control one blog and bring on board good bloggers to write for you. Some of the most popular blogs use this model, utilizing several writers at one blog to keep content fresh.

Engadget, listed on Technorati as the most popular blog based on links (as I type this), is structured like a blog magazine. Multiple articles are posted each day from multiple authors. The content stream comes thick and fast and is only remains fresh thanks to the talents of many people. Engadget is essentially an online magazine updated daily.

By itself Engadget is a huge blog and no doubt brings in significant revenues. Interestingly enough, Engadget is actually part of the Weblogs, Inc network, which I mentioned previously was started by Jason Calacanis. Many blog networks have blog magazines as their flagship blogs, which bring in the lion-share of revenues to the network.

If you create just one flagship blog, written by multiple authors, which becomes stable and independent of your own input, you will have yourself a “cash cow”. From there you can leverage the reliable cashflow to branch out into other areas and build an entire network of blogs, increasing revenues and building a bigger business. This is a good way to grow slowly, if your game-plan is to create a blog network business model.

Right now if you have one blog that has some traction – you have solid growth, a regular readership and some income – that’s the ideal foundation for a blog magazine. Your next step is to bring on one other blogger to reduce your writing commitment, then two, and three or as many good writers as you can find with the goal of producing more content of a high quality.

From there sever yourself from the writing role and go to work maximizing the traffic and income you earn from all that content. Reward your bloggers well to ensure the content only gets better and you will truly understand how powerful leverage can be as the foundation of a sustainable business model.

The People Problem

You might be pretty excited right now. You’ve realized the potential of building a real business based on blogging and can see a light at the end of the tunnel. You can create a system that no longer requires perpetual blogging on your behalf. You may even get rich when your blog network is acquired one day for millions. Yeehah! …Right?

Before you run off and start planning to launch up-teem blogs and hire bloggers, let me slap you in the face with one reality –

Finding and retaining good people is very hard.

Human resources is a key ingredient in every successful business and the same goes for blogging. This is not an area you can quickly “solve” over night. You will need to build relationships, foster talent and let go of people who don’t share the vision or provide the necessary output.

One reality you are going to have to accept is that no one person can replace you at your blog. Many of the most popular blogs were built on the foundation of one great writer. It could be his or her personality, or style, or dedication or savvy – something that cannot be replicated. Darren Rowse calls it “mojo”. The process of converting an established blog written by one person into a group blog, is not smooth, and success is not guaranteed if the key blogger is replaced by a handful of new recruits.

The likely outcome is the death of what the blog used to be and the birth of a new blog under new authors. The theme may be the same, the topics discussed are still interesting to the same audience – but if the mojo is gone the site will not grow.

Would Problogger.net be the same without Darren Rowse even if there was a team of great professional bloggers writing? How about my blog here – could I replace myself at Yaro.Blog with a team of similar young entrepreneur bloggers and maintain stable growth?

While researching for this article I reviewed some of the top blogs as ranked by Technorati and many – I was actually quite surprised – are run by one VERY prolific blogger if we are to believe the name tag applied to each blog article is really just one person.

Techcrunch is mostly the work of Michael Arrington. Boing Boing, while having a five person team listed at the top as writers, seems dominated by Cory Doctorow, or maybe I just happened to review the site on a unusually prolific week for Cory. Whatever the case, it’s clear that the blogosphere is held up by the work of a few top bloggers and as blog business owners, it’s these kind of people we need to locate and cultivate in order to build a sustainable business.

Advertising As A Monetization Method

Blogs are just like offline magazines. We publish information for education and entertainment. The monetization model for magazines has long been advertising, and without new content published regularly the income stream dries up. Magazines need talented writers to keep content coming. The key is to retain talent, increase readership and provide value to advertisers ensuring that the revenues generated are above the costs involved to meet those goals in order to turn a profit.

Can you see the similarities there?

The publishing industry is cut-throat – it’s hard to make a profit – and as such only a few magazines survive to their first birthday and beyond. If we blog for profit, do we not face the same challenges as magazine publishers?

Blogging has a few distinct advantages compared to old-school publishing thanks to technological enhancements, including:

  • You can reach a very geographically disperse market yet target a very refined niche.
  • Your previous content is accessible over time and thanks to the power of search engines, may produce revenue long after the content is removed from your “current issue”.
  • The methods of advertising available online to make money from are very diverse, and the everyday blogger can access and implement campaigns with just a few clicks.
  • The metrics used to control advertising campaigns are tight and with some practice can be refined and improved over time to a high degree.

Despite all these advantages, blogging is still publishing and if you intend to build a business based on blogs you have selected a very challenging business model. It’s not an easy way to get rich online.

Not An Ideal Business Model

I racked my brain to come up with other business models that use blogs in a sustainable manner but nothing I could think of works without hiring other people to produce content. There’s nothing wrong with the blog network and blog magazine business models, or any derivation of them – in fact I may end up in charge of one myself if I keep going the way I am, adding more blogs and bringing on people to help me manage the blogs and produce content – I just can’t see the margins ever becoming significant enough to make someone a millionaire. The exit strategy is the only point where real wealth is created.

The problem lies in the components of the points of leverage. A blog is complex and people are complex. These two elements are the leverage points which you use to multiply earnings. The costs of managing people and blogs are significant and complex, hence each new blog and blogger you add to your system erases much of the gains made in content, traffic and ultimately revenue they produce. It’s a leveragable formula that happens to be complex and intensive to implement.

To put it simply – while the core formula for a blogging business is simple, the implementation is complex – which I believe stems from the aforementioned people problem. The net result is a business that is difficult to systematize to a high degree. It doesn’t permit efficiency and scale to occur seamlessly with little cost. Without systems to reduce cost you may have leverage but you grow your costs almost at the same rate as you grow your revenues.

This may change over time – remember it is early days – but unless you truly love blogging and managing people, I don’t see it as a very lucrative business to enter into.

That’s not to say some people aren’t doing it well right now. Assuming the current big blog networks are profitable or will be profitable soon, we may one day see the first blog network float on the stock exchange, but for now I certainly believe it’s a challenging model to make profitable.

The End?

I’m going to end the series here, however I feel I owe you an additional article – an addendum perhaps – that outlines how blogs are having an impact on business and how they are making it easier for the individual to create exposure and make money online. Blogs can make you a ton of money, but it depends on what you expect from them and how you use them.

I believe the area where blogs are really creating a huge impact is in marketing, in particular viral and persuasive marketing. While they may not be ideal as the foundation of a business model, they are beautiful tools for tapping a niche in a short period of time in a very natural way. I look forward to discussing this more in the near future.

Yaro
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