Tuesday, October 25, 2005

Which Revenue Streams For Blogs?

Business Blogging

It is a well-established fact that there can be large cost benefits to publishing information in an electronic format.

The World Wide Web acts as a facilitator for those people with similar small niche interests who are widely distributed geographically. Through the web they can gain access to information which can quickly and easily be shared with others.

A.J. Liebling said that, "Freedom of the press is limited to those who own one." Because of Blogging software, anyone with an Internet connection and minimal understanding of computer software can now publish on the Internet.

One of the most important points to understanding Blogs is that they are by nature conversations. That is what separates them from websites and all other forms of media, Blogging is not broadcasting a message and it is not truly a medium, after all it's part of the Internet. It's a conversation or at least a venue for a person, the Blogger and his thoughts.

This is one of the reasons why many advertisers shy away from Blogs, because not all Blogs deliver content as this is associated with traditional media, but they are a place where the Blogger can voice to his/her opinions, so these opinions may not be censored or edited or be made politically correct. However, if enough people like what the Blogger has to say they will keep listening, and if allowed, join in the conversation.

As the number of visitors to the Blog increases, so does the advertiser's desire to have their products seen on the Blog. Many people who Blog do not do it for money, but rather to express themselves, or as a hobby. However, there are some Bloggers who use their Blogs as money-making endeavors, as well as to gain expert status in their field.

Their goal may not be to make money directly from Blogging , but their Blogs have enabled them to obtain new clients and generate revenue beyond a local geographic area.

Most Bloggers work by themselves, whether they Blog full-time or part-time.

This is mainly because of the available technology through Blogging software, so that no one else is needed. The software has enabled people with little technological know-how to start their own Blog. In addition, Blogging software has automated many features so the Blogger does not have to be concerned about maintaining a website.

There are some Blogging services that are offered free, others cost under $100.

These factors: ease of use, features automated by the software and the low cost of starting and maintaining a Blog; enable people who can write well, or may be experts in a specific field to focus on writing, with the hopes of building up readership.

Creating a financially successful Blog is not as easy as setting up the Blog. With 12,000 new Blogs a day being created, there is a lot of competition to get potential readers attention.

More must be done, traffic must be brought to the Blog, advertisers must fill ad space, the Blogger must write in a manner and have information that makes readers want to return.

Writing a Blog is not as easy as it may appear. There have been many cases of Bloggers suffering burnout. On top of all this, there has to be some level of buzz that spreads about the Blog, especially if there is no budget for advertising; and for many Bloggers, advertising is not even an option.

Despite the afore mentioned obstacles, and there are others, some Bloggers have managed to generate revenue with their Blogs, in fact there are some who have taken the business of Blogging to another level.

Nick Denton is an entrepreneur and the publisher of Gawker media, a media company that publishes 13 Blogs. The Gawker business model is not like most Blogs. Denton thinks up the topics for the Blogs and then hires the Bloggers to write. The Bloggers get a salary and must post a specific number of entries a day. Gawker media also has employees in advertising sales, business development and production. It is not a one person show like most Blogs. Gawker attracts bigger advertisers and sponsors; the Blog LifeHacker is sponsored by Sony and the Blog Jalopnik is sponsored by Audi. There are a number of Blogs in the Gawker network, when a new Blog is launched it can get traffic from the already established Blogs.

Gawker was mentioned in the media countless times in 2004, and rightly so, there Blogs are well written and receive amazing traffic for Blogs. The Blog Gawker, which is about gossip receives on average of 111,905 hits per day, Defamer, also about gossip, receives on average of 101,974. These are substantial numbers for what would be considered micro-publishing.

Recently there has been media coverage on Blogs joining together to form networks. One reason for doing this is so that advertisers can reach a larger segment of the audience they are trying to send a message to. This direction appears to be a step in the maturation cycle and developing into full-scale business ventures.

Furthermore, many companies have been reluctant to advertise their products on Blogs since Bloggers have a reputation of being a writer sitting at home in their pajamas with no editors, no one checking facts and no one to answer to.

Forming networks is one way for Bloggers to become more credible to advertisers.

The following are a few different methods, that have been established for creating revenue with a Blog. This is only a general overview of some of the possibilities that are available to Bloggers. They are by no means the only way of generating revenue, Blogs are constantly evolving and so are the possibilities to create revenue with them.

Revenue Streams for Blogs

For now, it seems many of the Blogs that are generating revenue have based their business models on something similar to other forms of publishing.

Generally they create revenue by offering advertising. Fortunately for Bloggers there are a number of different ways advertising can be used on their Blogs. For most Blogs, this means teaming up with a company that will either sell advertisements for the Blog and take a portion of the sales, or the Blogger can designate a certain space on the Blog where advertisements can automatically be placed without the Blogger having to sell, post or update the advertisements.

These kinds of services are extremely valuable for Bloggers because Blogs typically consist of one person who is not backed up by a team of sales people, marketers, IT staff, business developers nor do they have financial funding.

A number of people publishing Blogs are only able to do so because of the ease of use of the software, unfortunately handling advertisements may fall out of the realm of the capabilities of what the software is capable of, hence the reason for teaming up with other companies that offer advertising systems.

For one person, working alone, to have to change ads regularly can be time consuming. Few Bloggers create a databases of potential advertisers or, solicit them to advertise on their Blog. A lack of skill, desire, funds or time to take on that responsibility may be the reason.

The advertising options that will follow allow a Blogger to focus the bulk of their time and energy on creating content, rather than deal with ads. There are advertising options as simple as putting a few lines of code in the Blog and the ads will appear, and update on their own. There are other options that offer the Blogger the ability to approve the advertisement before it appears on the Blog. However, it is because of the available technology allows Bloggers to offer advertisements and to create revenue.

Google AdSense

Google AdSense is a program that places text ads on Blogs or websites in which the publisher of the Blog gets paid every time a viewer clicks on the ad.

They are simple text ads, the Blogger does not have to do anything but sign up and in a few days the ads will appear on the site, what makes the Google ads so powerful is that they are targeted to the specific audiences.

For example, if you have a Blog about dogs, Google AdSense will deliver ads that pertain to dogs, they structure the ads to be relevant to the content that is on the Blog. The Blogger can take it a step further and add a Google search box to their site. If a visitor searches for dog food, using Google's search tool for example, then all the advertisements that will appear for that search will be relevant to dog food. This system is an effective way to advertise because the ads capitalize on what is known about the searchers interests.

Although some have argued that not every ad is always relevant to the information that is on the Blog, I have never found that to be the case.

There are some drawbacks with Google AdSense: issues with leaks in the revenue stream model.

I have read stories of people with bad intentions who are taking advantage of the pay per click advertising structure, nightmare stories of people in India spending all day clicking on Google ads or programs that have been written to do automated clicking. This would cost the advertiser money and the ads would not send any traffic to the advertiser's website.

Another drawback is that the Blogger is not able to decide which ads will be placed on the Blog; they automatically appear.

While Google AdSense is easy to set up, it requires putting some code in the Blog, then Google takes care of the rest. Yet as with most things in life a small effort produces little results. To use Google AdSense effectively they need to be in harmony with the overall design of the Blog.

AdSense must be used as a design element, otherwise it will appear as nothing more than a couple of lines of static text that may not catch the viewer's eye and will only take up valuable space on the Blog.

Some Bloggers are using AdSense ads quite effectively and they are paying off for a small number of websites that have AdSense. In an Investor's Business Daily article, Pete Barlas said,

"A few years ago, advertisers paid an average of 50 cents to $2 per click for key search terms like 'drug rehabilitation' and 'conference call.' Those days are long gone. Today, advertisers that want to get the very top listing on the results page for the term 'drug rehabilitation' can expect to pay $25 per click for the privilege...So if 10,000 unique Web visitors (See glossary) click on that ad, that drug rehab advertiser will be paying $250,000. Clicking on an ad, a link to a firm's Website, does not mean that a clicker is buying anything. The pay per click structure has certainly come a long way."

As search continues to play a growing role in finding the information we are looking for, AdSense will continue to grow in importance because it delivers the eyeballs to the advertisers, with the knowledge that such ads are relevant to the information that is being sought.

BlogAds

BlogAds is a company with its own advertising system which is also easy for a Blogger to set up and maintain. The way BlogAds works is by putting the BlogAds HTML code in the Blog and a BlogAd strip will appear on the side of the entries. As with Google AdSense, the Blogger does not have to tediously update the Blog with new advertisements, nor does the Blogger have to go out and sell advertising for the Blog.

The way BlogAds works is that potential advertisers go on the BlogAds company website, where they can browse through hundreds of Blogs that may target an audience they are looking for. Once an advertiser chooses a Blog to advertise on, then they also choose how long they want to advertise. The third step is simply to upload a graphic and type in the text they want to appear on the ad, pay for their ad via PayPal and the advertisement is ready to go.

The BlogAds company gets 20% of what the Blogger charges for advertising space, with the Blogger setting the price for the ads. Once an ad has been placed on the Blog, all the Blogger has to do is approve the ad. If the Blogger does not want the advertisement on the Blog, the potential advertisers have their money refunded.

One of the drawbacks to BlogAds is that the Adstrip is a vertical column on the side of the Blog and the images that are used for the advertisements can only be submitted as jpeg (See glossary) or gif (See glossary) files, at a relatively small file size. This also makes the advertisements in the BlogAd strip similar in size. However, the advertisers can change the ads as frequently as they would like to see what ads work better. Unlike AdSense, BlogAds allow for graphics as well as text. These are obviously more aesthetically pleasing. Advertising rates run from $4,500 a week on highly trafficked Blogs like "DailyKos.com" to as modest as $5 a week on Blogs with smaller amounts of traffic like "velorution.biz."

AdBrite

AdBrite is similar to Google AdSense in that it is text based advertising, however, with AdBrite the advertisers pay a set rate for the link, regardless of whether it is clicked on or not; and the advertisement does not have to be relevant to the information that is on the Blog.

Google AdSense is a couple of lines of text whereas an AdBrite advertisement looks like a regular hyper-link. Some Bloggers have AdBrite ads on their sites and refer to them as sponsored links. On AdBrite's home page there are websites whose cost range from $7.00 a week for an ad on pajiba.com to $1,500 dollars a week ads placed on big-boys.com.

On the Blog, BlogHouston.net the AdBrite advertisements are labeled as"SPONSORS." They are located in the column that is furthest to the right, below the search button.

AdBrite can fill a niche for Bloggers and advertisers alike. The Blogger can offer a form of advertising for companies with smaller budgets, the trade off being that the advertisement doesn't take up too much space. On most Blogs, the AdBrite's normally appear on the bottom of the Blog. The reasons for that could be aesthetic or the fact that the Blogger doesn't want to give prime real estate on the website away for text ads. Companies may also use this form of advertising because of the way ranking works on search engines.

Websites get higher ranking on search engines on the basis of at least two factors: the number of incoming links, and the number of visitors to the site. Furthermore, the higher the site is ranked on search engine results, the more visitors the site will get. A website that ranks #5 on the first page of Google for a certain key word like "Treo 600 phone" will receive many, more visitors than a website that is ranked #7 on the tenth page of the Google search results.

The higher a website ranks, the more importance it receives from the search engines. This has a snowball effect. Consider a site ranked on the first page of Google that has 300,000 hits a day is linked to a Blog. This link alone could boost the Blog's ranking on the Google search. Contrast this with some obscure website linking to the Blog that ranks on the 300th page of Google and has 20 hits a day.

Realizing this is the way search engines work, some people may feel that it is worth paying money for a link from a highly-ranked site; because it may artificially boost the ranking of the site that it is linking to. In turn, this will result in more traffic on the site, which lead to more potential sales.

Fast Click and Burst Media

Fast Click and Burst Media are two different companies that offer similar advertising options. However, they are different from those already considered. Both companies supply a Blog or website with advertisements, and in turn take a portion of the profit. Burst Media gets 50% of the profit from the advertising with the caveat that the Blog must sign up for a year-long contract. Fast Click gets 45% of the profit and does not require the Blog to sign year-long contracts.

Both Burst Media and Fast Click offer a variety of advertising formats from banners to pop-unders, as well as text links. The difference between BlogAds and these two companies is that BlogAds only supports Gif and jpeg files in the AdStrip, and is a website where advertisers can go to look at Blogs as possible sites to advertise on. Burst Media and Fast Click actively supply the Blog with multiple forms of advertising.

With Fast Click and Burst Media, the Blog can have a variety of sizes of ads positioned in different places, some even offer a variety of rich media as opposed to static jpg's and simple gif animations. The draw for Bloggers is that they would not have to be involved with selling advertising or maintaining and updating the ads.

Another major difference is that any Blogger can sign up for BlogAds and put a BlogAd strip on their Blog; however, the Blog will not show up on the BlogAds website for advertisers to see until the Blog has had at least 3,000 hits. With Burst Media, the Blogger must contact the company and apply to have it run advertisements on the his Blog. Burst Media will determine if the Blog qualifies. As with other forms of publishing, the more reach the publication has or in the case of the Blogs, the more hits or traffic the Blog has, the higher the price they can charge companies that are interested in advertising.

Affiliate Programs

The way affiliate programs work is the Blogger reviews, recommends or writes about a product and posts it on the Blog. For example the Blogger links to Amazon.com and for every purchase that is made through the link, the Blogger will get a percentage of the sale. Blogs drive traffic to other sites through a specially formatted, link enabling companies like Amazon to track revenue producing niches. In the case of Amazon they offer the "associates or affiliates" 10% of the sale. There are many companies that offer affiliate programs. (See figure 2.7)

One advantage of an affiliate program is that it doesn't require any additional space on the Blog; it is a link within the entry. For many Bloggers it is common to write about and recommend the books they are reading, music they are listening to and products they like. With affiliate programs, Bloggers can build revenue by recommending products or services to people who read their Blog.

The above screen-shot is an entry from the Blog kottke.org. The Blogger is reviewing the Book Electric Universe, if the reader clicks on the link they will be taken to Amazon.com. If they purchase the book from Amazon, the Blogger will receive 10% of the sale.

Contribution or Donations

Some Blogs offer readers the options to donate or to contribute financially to the Blog; there are Blogs that accept contributions in addition to advertising while others offer it to keep their Blog advertisement free. There are Bloggers whole feel the whole concept of offering advertisements on their Blog corrupts everything that Blogs stand for. Some Bloggers feel that Blogs should not be used to make money at all.

To donate to the Blog, there is a link where visitors can contribute money. Many Blogs accept the contribution of donation via PayPal. For someone to use PayPal, they must sign up for an account and PayPal allows them to send money to anyone with an email address who also uses PayPal.

Recently, there was some media coverage about the Blogger Jason Kottke, who left his job as a web designer to focus full time on his Blog which is exclusively funded by donations.

Selling merchandise via Cafe Press

Selling merchandise is another way Bloggers can create revenue. Cafe Press is a company that allows the buyer, in this case the Blogger, to personalize various items, such as clothing, stationary, stickers, posters, books, etc, and sell them through Cafe Press. The Blogger would design a graphic, logo, photo, etc, and Cafe Press will put it on it on any of the items the Blogger wishes to sell.

All the Blogger has to do is supply the art they wish to use and pick the products that they would like to have the art applied to, and Cafe Press does the rest. Cafe Press charges the Blogger a set price for an item and then the Blogger can mark up the cost of the product to make a profit. For example, Cafe Press charges the Blogger $10.00 for a shirt, and the Blogger can set the price of the shirt at $15.00.

Cafe Press provides an end-to-end solution. They keep the inventory of the items, do the printing and the shipping. They also offer an option so that the products the Blogger is selling appear as though it is an actual store on their Blog and not a separate site. There is no investment on the part of the Blogger to work with Cafe Press. Simply sign up, pick the products, send Cafe Press the art and the Blog has its own store to sell merchandise.

Figure (2.9) The Blog BoingBoing.net has a store via CafePress.com. The Blogger sends in the art work, picks which products the art appears on, sets a price for the products and Cafe Press does the rest.

Online Advertising Projections for 2005

Most profit making Blogs have a revenue structure similar to printed magazines where advertising accounts for the majority of the revenue. As usual there are somewhat differing views on how much companies are going to spend on online advertising.

With this caveat in mind, the following are a few projections for 2005.

According to Merrill Lynch's recently released monthly report on advertising and publishing, "online advertising will account for 4.6 percent of all U.S. advertising this year, up from an estimated 3.7 percent in 2004."

According to Jupiter Research, "Online advertising revenue is expected to reach $16.5 billion by 2005... Jupiter analysts believe that the rapid growth will lead to explosion in clutter, with users receiving in excess of 950 Internet-based marketing messages per user, per day, in five years. To outpace the growing clutter, advertisers must diversify their use of online tactics and advertising models. Successful publishers must expand their offerings and develop their sales strategies to address the advertising sprawl."

According to Advertising.com Inc, research, "Key revenue growth areas for 2005 include text links, large rectangles and small banners... Additionally, publishers identified rich media, streaming content and behavioral targeting as advertising channels that will have the greatest impact on their 2005 ad revenue."

According to clickz.com, "Online ad spending --excluding paid search--will increase 11.2 percent this year over 2004, according to a forecast by TNS Media Intelligence."

According to an article on mediapost.com, Wendy Davis states, "Almost 9 out of 10 marketers--84 percent--plan to increase their online ad spending in 2005, according to report by Forrester Research." The study, "US Marketing Online Forecast: 2005-2010," was based on a February survey of 99 national marketers, interviews with 20 vendors, and in-depth conversations with Google, Yahoo!, MSN, and America Online. Overall, Forrester predicted that online advertising would reach $14.7 billion this year--a 23 percent increase over 2004 estimates. By 2010, Web advertising will reach $26 billion, or 8 percent of all advertising spending, predicated the report.

Internet advertising was more effective that traditional advertising when it came to driving traffic to a website, delivering promotions, or generating leads:

91 percent of respondents said Web advertising was more effective for driving traffic

62 percent said the same for delivering promotions

60 percent said online advertising was more effective for generating leads.

The above information makes it seem likely that some companies will apportion more of their advertising budgets for online campaigns.

Although advertising on the Internet may be on the rise, an article in the Wall Street Journal by Jessica Mintz, claims

"Many companies are wary of putting their brand on such a new and unpredictable medium. Most Blogs are written by a lone author; they are typically unedited, and include spirited responses from readers who can post their own commentary at will. Some marketers feel that Blogs will criticize their products or ad campaigns."

The article goes on to say that when Gawker Media launched a travel Blog called Gridskipper, the Blogs sole sponsor was Cheaptickets.com. However, after a few days all of Cheaptickets advertisements were removed from the site. Apparently Gridskipper had written posts about "eating psychedelic mushrooms in Amsterdam at the Van gogh Museum and the pricing policies of an escort service in Prague.

A screen-shot of the Blog gridskipper.com. Many Blogs are viewed by companies as unpredictable.

Excerpted from Chapter Two - The Business of Blogging
Blogs - A GLOBAL CONVERSATION
A Master's Thesis on the Social Phenomenon of Blogs
By
James Torio
B.A. SUNY Stonybrook, 1999

Submitted in partial fulfillment of the requirements for the degree of Master of Arts in Advertising Design in the Graduate School of Syracuse University.

August 2005

Download the full thesis. (PDF - 4.3 MB)

Robin Good and Chiara Moriconi - James Torio - [ Read more ]