Is your blog one in a million? If so VCs may want to talk to you

Paul Kedrosky nailed it! This is exactly the point I was trying to make about VC investment in individual blogs. See Dr. Kedrosky's comment in my previous post. Bloggers are like Open Source projects in that there are millions of them, and a very small number of them attract enough attention and contributors to be interesting. However, unlike open source software, blogs don't have a services model to support them. Advertising is the game, and you need HUGE numbers to make that work.

Robert Scoble suggests that maybe Om and Arianna are building out blog networks. OK, that might be a big payoff, but I didn't know they were going after a blog network. If so, great, it might be a good investment. Jason sold Weblogs for a tidy sum, but I don't think there are too many of those deals around. Pretty risky bet if you ask me.

There will be a few brand name bloggers that can make money. I said these top bloggers would get 95% of the attention and advertising dollars.

Jason Wood, remember there are 50 million blogs, so the top 5% is still 2,500,000 blogs that are getting most of the attention and advertising dollars. That is a lot of blogs to be in the top 5%. Even the top 1% of all bloggers includes 500,000 blogs. If your blog is one in a million, or one of the top 50 blogs in the world, the VCs will probably be happy to talk to you.

Om Malik and Arianna Huffington are in the top .001% of all blogs and will do well on a cash flow basis. But, as Dr. Kedrosky says, I don't see this as a solid VC investment with 10X returns.

If Om Malik wants to pay me $1,000 a month to write for his network...great!! Sign me up. But even if Om signs up a 100 bloggers and pays them $1,000 a month, that is only $100K per month or $1.2M per year. What do you do with the rest of the $5M?

Blogging can be a great business for a select few A-List bloggers. Om and Arianna are definitely A-Listers. If anyone can do it they can. But it is a risky bet indeed. Good cash flow? Absolutely. But, will they generate the huge growth and profits necessary to generate 10x returns for their investors? Time will tell.

Comments

[Peter Abilla]

Sifry's Craposphere might be 50MM blogs strong, but those numbers are highly optimistic. Splogs proliferate Sifry's Craposphere and we best withhold assent on the numbers until we get better data.

[Kevin Burton]

Hey Don.

I'd recommend not quoting that 50M number.

I did some more research here on the blogosphere numbers...

http://www.feedblog.org/2006/08/technoratis_num.html

Your argument still makes sense but you're off by an order of magnitude.

[Hugh MacLeod]

I still think it's a little early for advertising on blogs, except for a tiny few [boingboing, techcrunch etc]. I mean, my blog is in the Technorati 100 (or just outside it, depending on what day you look)and I doubt I could make a living from just selling ads.

That being said, being a relatively well-known blogger does make me a good living, indirectly.

[Don Dodge]

OK guys there has already been one raging debate this week about the definition of a blog, and how many of them there are. Some argue there are far more than 50M blogs, others argue that when you count the "active" blogs there are far less.

My take? Whatever your definition there are HUGE numbers of blogs and they are growing rapidly. Secondly, despite the huge numbers the top 1% (actually less) attract most of the attention and ad dollars.

Your blog needs to be "one in a million" to attract VCs and probably in that range to make significant money from advertising.

Hugh MacLeod is one of those "one in a million" bloggers. See his comment above. I don't know, but I suspect his "indirect" income is from increased business for his day job. His humorous cartoons and illustrations are really good and I'm sure people are willing to pay money for them.

Advertising will increase on blogs in the future. Heck, only something like 6% of all ad dollars are spent online today...most of that going to Google and other popular web sites. More ad dollars will move online in the future and blogs will get their share.

[Robert Scoble]

We do live in a Google world. The unfair thing about that world is that networks of Web sites will grow faster than if those sites remained separate. Why? Because Google's algorithm works off of links.

So, if we got together and added each other to our blogrolls, we'd grow faster in traffic than if we only occassionally linked to each other.

The trick, then, is to get the top 1,000 (out of 50 million) bloggers to join a network. That'd make for a powerful advertising platform.

That's exactly what networks like B5, Weblogsinc, Federated Media, Podshow, Huffington Post, TechCrunch, my PodTech, Om's network, are doing.

At least one of these will get big enough to make some serious cash and build a brand that'll have huge value.

Note: none of these are simple "individual blogs" anymore. They all have employees, revenues, and growing traffic bases.

[Robert Scoble]

Kevin, how DARE you try to define what a blog is! Hell, we should be counting all 70 million Microsoft Live Spaces. Even the ones who haven't posted anything and those who are behind a private firewall so they can't be verified. At least that's what my readers tell me and I'm not gonna argue with them. No sirreee.

[Vic Berggren]

why would any serious blogger even be interested in $1000 per month. Not questioning you but the rational... wouldn't that blogger have a better go of it by securing their own ads via google or microsoft?

[Robert Scoble]

Vic, many bloggers tell me they are interested. $1,000 is a significant source of income for many many people (more than half the world's people live on $2 a day).

From what Jeremy Wright, co-founder of B5 Media, one of the blogging networks that's forming tells me is that Google Ads pay far less than other forms of advertising right now. On his blogs he's seeing about $.50 per CPM (thousand page views) from Google's ads, while with other kinds of ads he's getting around $15 CPM.

Depending on the audience you can get a LOT more than that, too! Heck, Demo Conference charges each company $10,000 to talk to 700 attendees (and they usually have around 40 companies who pony that up!)

Now THAT is CPM!

[Vic Berggren]

>>more than half the world's people live on $2 a day

Thanks for reminding me that I'm not thinking globally. You make a good point.