On Blogging Economics and Aesthetics

Readers may have noticed that this site has gotten what one can most politely call visually busy. I'm not happy with the awkward adolescent ad-cluttered look. That in turn leads to a broader discussion of aesthetics, not just in terms of appearance but also positioning.

The visual issue is pretty obvious: I'd like this to be a reasonably serious, thoughtful blog, but at this stage, most of the ads are the sort where payment depends on the number of clicks. And (unfortunately) visual clutter leads to more clicks. Higher traffic sites can do well with more attractive banner ads, but even at a reasonably good level of traffic (over 10,000 page views/day) we don't yet have the volume to attract advertisements more in keeping with the image I'd like to project.

But there is an open question as to what the payoff to blogging really is. Most bloggers are not motivated solely by monetary results (they'd need their heads examined if they were). The returns to blogging resemble those in fields like sports, acting, and writing that have many people dabbling in it for non-financial or indirectly-financial motives. The payoff curve looks hyperbolic: most make nothing or very little, and there is a steep vertical ascent to the small number who do make a decent return on the time invested.

One reason for the steep payoff curve is that very high traffic blogs enjoy network effects. Readers come to chat among themselves, which takes some of the load of the blogger. And they often point to breaking news and interesting stories, reducing the research burden.

But even then, a top blogger makes a teeny fraction of what J.K. Rowling or Tom Cruise earns. The oft-repeated example of a successful blog is monghabay.com, which reportedly earns $15,000-$18,000 a month, which is a nice level of income for a stay-at-home job that one could pursue out of a low-cost location. But if that is as good as it gets, it is hardly an exciting number.

But many bloggers, the measure of results may not be ad revenue or number of hits, but raising one's profile with a target audience. But in my case, the spillover benefits aren't as great as say, for a money manager or lawyer who might get new clients. There are few blogs by management consultants, in part because (truth be told) there are hardly any new ideas in that field, and partly because the news doesn't provide much grist for commentary (companies are skilled at not showing their dirty laundry in public). Ditto corporate finance deal advisors.

Other bloggers seek to monetize their traffic in a more direct way: The Big Picture and RGE Monitor both have paid premium services; Calculated Risk has recently launched a paid newsletter.

Another complicating factor in the finance/economic space, is any blogger is effectively competing with many incumbents and standards are very high. And a significant proportion of the top-notch participants are blogging solely for non-financial reasons. Take the large number of academics who have sizable followings: Paul Krugman, Tyler Cowen, Mark Thoma, Brad DeLong, and Greg Mankiw. Some who post less frequently maintain high visibility due to the quality of their output, witness Dani Rodrik, Menzie Chinn, Brad Setser, James Hamilton, and Willem Buiter.

And then we have the MSM bloggers, the flotilla of blogs launched by the Wall Street Journal, FT Alphaville, Felix Salmon (a bit of a hybrid, since he had an independent reputation before joining Portfolio), Andrew Leonard at Salon, Justin Fox at Time, Colin Barr at Fortune, to name just a few.

It's enough to make one decide to stay in bed.

Back to the economic issues. One of the blog gurus, Yaro Starak, says that there is a period when blog ad revenues double every month, and we are in that phase now. A few months of that and hey, the blog would pay a nice base level of income. And 27 more months like that and we'll be bigger than the US GDP. (Note I also get some syndication revenue which is growing also, but not as dramatically).

But even in this seemingly narrow space, there are tensions between commercial considerations and image, less stark but fundamentally no different than when an actor decided between doing an art-house movie with a great, demanding part versus a big budget flick with a role that is lucrative and typecast.

Others may have different dilemmas, but in my case, somewhat sensational stories (usually malfeasance in banks) not only bring more traffic, but those readers seem more inclined to poke around the ads. By contrast, I will also get high traffic when I blog repeatedly on a topic of interest (the tsuris in the bond insurers being the latest example) but even though that too produces more traffic, ad revenues decline. And this is with readers e-mailing to tell me how much they appreciate these posts. It seems that doing a good job for the sophisticated readers I'd like to cultivate is not a winning proposition, revenue-wise. They're too focused to look at, much the less click on, those busy ads.

Now some of the stories spilling out of Money:Tech suggest there may be other revenue sources for bloggers. One is that Gerson Lehrman is trying to get hedge funds that buy their channel checking service to also hire bloggers that the hedge fund has taken note of through them. Why anyone with an operating brain cell would go through Gerson Lehrman is beyond me. Aside from paying an unnecessary markup, Gerson Lehrman is the in the business of collecting information, and they would almost certainly own any IP the blogger produced for them. If you want proprietary information, contract directly, and if you want to keep you identity secret, have your attorney be the go-between. Hedge funds are perfectly happy to pay well for useful information; its value is diluted rather than enhanced by going via a middle man who does better by trying to sell it multiple times.

I wouldn't work for Gerson Lehrman in any event, because I question the business practices of a company that in a fair number of cases gets employees to trade on expertise and information gained through their employer.

A pet idea of mine is whether ad agencies could be persuaded to include packages of bloggers in their Internet ad strategies. The analogy takes place in the print world: some companies will place advertisements in multiple small-circulation magazines that reach a specific and otherwise hard-to-access audience (think the Harpers/Atlantic/New Yorker/New Republic crowd). While a single blog is unlikely to command enough traffic to interest a big-budget advertiser, a well selected package of blogs might.