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.

Update 11:00 PM: One point that I did not make clearly enough above, which is that the $15,000 to $18,000 a month, from everything I can tell, is the tip top level AND achieved by only a very few. The numbers in some cases may be higher, but I am leery of self-reported results; the things that people lie most freely about are money and sex. And even though Felix Salmon was kind enough to e-mail and point out some examples, like pvrblog, which did well from Google Adsene, the Apple rumor sites, boingboing and Daily Kos, the fact remains that it is a very few names that do reasonably well out of a universe of well over a hundred million blogs (just as when McDonalds quit counting after it reached “100 million burgers sold,” so too the official count of blogs has been “over 100 million” since October 2005).

The comparison to Tom Cruise was quite deliberate: these top bloggers are as rare in this industry as multi-million-per-movie actors are in their field. The $15,000+ per month isn’t top 1%; it’s more like the top 0.001%.

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  1. burnside

    Yves, it’s a problem for any literate/numerate site, as you point out, and I don’t see any obvious resolution while the market is dominated by algorithm-driven placement services.

    Blogs like yours are properly the object of spot advertising, but the relevant agencies are asleep at the switch. No reason Atlantic/Harvard Bus Rev/MIT Tech/NYer wouldn’t benefit from banners here.

    An omnibus buy – yourself, CR, Cassandra, Thoma, Setzer et. al. might carry enough weight (enough hits) to make sense to agency types.

  2. tselliott

    Unfortunately, you seem to have a clear understanding of the problem. A problem for which I have no useful answer.

    That said, I do appreciate your blog and the work it takes you to produce it. It wouldn’t amount to much, but maybe a donate link would help a little. I’ve done so at several other blogs I read regularly.

  3. Anonymous

    Did you write “15k-18k monthly” (gross, I presume)?
    My heart really goes out to you top-10 percenters.

    Great blog though.

    (Mind you), watch Hupert Sauper’s “Darwin’s Nightmare” one rainy Sunday and think about the question of what’s worth what.


  4. Trainwreck

    Well I hate to admit it, but the fact that you provide an email subscription service cuts down on your blogsite traffic. I often find myself bypassing your website and simply reading the emailled blogposts instead.

    Something to think about…

  5. Anonymous

    I guess Im confused with your ads, as I thought they were here because you placed them here; if that is the case, why not just carve out a space for them to all live, like at the very bottom of the page, where they can be ignored.

    Maybe Im being naive here, but these do produce revenue dont they? Thus the matter gets back to aesthetics, and in that narrow case, there is a cluttered look that hinders flow — but in reality, people jump from one story to another, so its fairly easy to ignore this clutter and just bypass ads. The other day I clicked on something about a new movie, and I kept waiting for some economic relationship, and now I know to not click on those time wasters.

  6. Dave Raithel

    Hyman Minsky would often observe, in the one course I had with him many years ago and so I paraphrase: The thing about a thing like a phone company is that once you’ve recovered your capital and maintenance costs, the marginal cost of the next phone call made is next to nothing. So how do you price that?

    I take that as an object lesson in your case this way: If not for content of sites like yours (not exclusively, but I seek news and information much more than porn), I’d have little or no use for the “series of tubes.” So then, why shouldn’t you be getting a cut of the pile of coins I and others cough up to our ISPs and carriers, as inefficient as they may be?

    I suspect this may bump against “net-neutrality”, and I certainly don’t want to pay more than I already do for what I now get, but the fact is this: Some of us, whether by temperment, or parsimony, or nearly empty pockets, or all three (like me) hardly ever buy anything over the net or respond to advertising there (here.) (I did recently buy a copy of Tjalling Koopman’s “Three Essays…” from a Dutch site that was much cheaper than Amazon, but this is very much an exception and not a rule.) We’re the same people who, even if we watch commercial TV, never sit through commericals – that’s why the remote was invented. We grew up reading Thorstein Veblen and Vance Packard and Herbert Marcuse. We’d throw things at the TV when Friedman & Sowell did their Rowan & Martin… We suspect, always, that somebody is trying to dupe us. I, on the other hand, admit to being a free-rider on your blog..

    In short, Mr. Smith, you suffer the contradictions of capitalism, as quaint as that phrase may seem in these times. Check out Alvin W. Gouldner’s “The Dialectic of Ideology and Technology” and his following book, “The Future of Intellectuals and the Rise of the New Class” for predictions about your predicament…

    But hey, what do I know? I’m just a wage slave marxist with a Ph.D. who tends a vineyard – literally, there’s nothing figurative about it.

    That said, I very much appreciate what you do. I have learned more about finance capitalism from your posts and references and associated blogs and links than I would ever have believed I would had someone told me years ago that this is now on what I spend most my free time. I spend a few hours here trolling and linking and I get this sense of …”schadenfreud”…? conjoined with horror. I don’t believe there’s anything I can do about anything I’ve learned, but it sure is exhilerating when not exhausting. It’s kind of like watching a trainwreck, where all I can do is point and gawk and marvel and cringe… and fear for my children, and try to find more work…Anybody who can make someone feel like that is an artist….

  7. doc

    Im just shocked, the more I learn, the more shocking this becomes, as Im just one of the puppets used on a stage full of more complex puppet masters that have large spools of thread, and sharp scissors waiting to chop off more lines to attach to more puppets that will be connected to a very large and ugly capitalistic play that is driven by insane megalomaniacs that seek to control the world, one pixel at a time, word by word, ad by ad:

    Just filthy: http://www.tribalfusion.com/channels/sitelist.html?adPropId=124&dataId=124

    I can not believe Calculatedrisk is part of this, and now you…you.you.you

    Im so pissed Im gonna start my own thing, but I will link to your thing ….

  8. doc

    Another comment:

    There really is no paradox in the fact that a blog with business content has an association with advertising or revenue related opportunities. Business is about exploiting opportunities, but the paradox with blogs like yours is in the balance between focusing on quality content or to become a slut and just prostitute yourself to more Johns in an all out effort to turn more tricks for the man — which of course results in a worn out bag that has very little future value or utility.

    Your concern therefore relating to aesthetics can go towards extreme makeovers which also takes away time from your content, much like an older hooker that needs to put on more makeup. The joke at Calculatedrisk is related to putting lipsticks on (mortgage) pigs, thus IMHO, your situation seems to be a matter of coming to terms with becoming the proprietor of a well run cathouse, which offers nice content and revenue, but allows you to focus on your focused primary area of expertise — and then let the other things fall into place.

    Perhaps one should study cathouse economics and look at statistics related to traffic flow patterns, i.e, do these ads at your cathouse attract more business, or do they impair it. One must study relationships on why cutomers are coming to your cathouse; there must be attractions which drive people in a sustainable, meaningful way, versus becoming lazy and hoping advertising will result in future cash flow. Your customers IMHO, are coming here for your content and thus one should be careful to not drive them away to other cat houses which offer less noise.

    As is, your house here is fine place to drink vodka and enjoy synthetic derivative show explode, we need more fireworks, more vodka, more content….screw the advertiser pigs, but I see no conflict or paradox if this is kept in balance!

    Na zdorovje

  9. The Prudent Investor

    IMHO blogging is about non-commercial, non-mainstream information on which topic ever.
    Once a blog is written for profit, I consider it as just another web service disguising as a blog.
    I blog for free and so do many million more bloggers, and this way we each share the rich knowledge of all.
    Blogs have led MSM about the housing bust and are ahead of the curve on so many other issues by sometimes several years. As a European I get contrarian insights into global markets and spot trends much earlier. Without political blogs there would be no information about the growing fascism under Bush.
    Disclosure: My Google AdSense balance is $85 and 12 months with a donation button earned me $10.

  10. RE


    I believe that blogging only makes sense within the context of a larger site.

    No single blogger can sustain him/herself over time. The effort involved in proving timely, pertinent insight is simply too much for a single person or even a duo as in the case of Tanta and CR.

    As you know very well, every time you don’t blog for a day or more, your blog traffic drops precipitously. Don’t even contemplate a real vacation.

    If you would like, I wouldn’t mind sharing some of my ideas, however modest, with you in a different forum.

    Also note that your RSS feed does not contain any ads and is therefore definitely a lost revenue source.

  11. Yves Smith


    The $15,000-$18,000 a month is for what appears to be the most successful blog, which claims to get 1.5 million unique visitors a month. That’s the very top, not the top 10%.


    Yes, the subscription service is a problem I am well aware of. It turns out that a full subscription (RSS) allows bots to scrape the the entire site easily, which is a real negative. I may switch to a partial subscription (you get the first couple of paragraphs in RSS).

    Anon 0f 12:04 PM,

    The placement of the ads in under our control; what the services put there is another matter. I put up an article that analyzed how the Republicans had painted themselves in a corner ideologically. We then got Anne Coulter ads showing up! Yikes!

    The problem is that the obnoxiously placed ads get more clicks. Intrusive is more successful.

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