Posts tagged with ‘uneconomics’
The problem with taking about for-fee versus free writing on the internet is that it has become strongly biased by those who are most interested in making money into being only about making money. AOL’s acquisition of the Huffington Post has set off a wide-ranging discussion, often based on financial analysis like Nate Silver’s at FiveThirtyEight, where he calculates the value of a post (very cleverly), and discovers that even the most popular of writers there wouldn’t get paid much:
The Economics of Blogging and The Huffington Post
At this 50:1 ratio, the average blog post, which received 43 comments, got about 2,150 page views. This distribution, however, was highly inequitable. The top-performing blog post — one by the former Secretary of Labor, Robert Reich — had received 547 comments (tantamount to about 27,000 page views) as of Friday morning. By contrast, more than 40 percent of the blog entries received 5 comments or fewer.
This distribution reflects a classic power law relationship, with 20 percent of the blog posts accounting for about 80 percent of the comments (and, we are assuming, the traffic). The median blog post, on the other hand, received just 11 comments, which equates to only about 550 page views.
Next question: how much are those page views worth? The Huffington Post had revenues of about $30 million last year, they’ve reported, almost all of which was from display advertising. This revenue was generated on roughly 4.8 billion page views over the course of 2010, according to Quantcast data. That means the average page view was worth a little more than six-tenths of a cent, or that 1,000 page views were worth about $6.25.
Do the multiplication, and you find that the average blog post — which we estimate generated a couple thousand page views — was worth about $13 in advertising revenue. The median blog post, with several hundred views, was worth only $3 or $4. Even Mr. Reich’s strongly-performing post was worth only about $170, by our estimates.
I’d imagine there are occasional instances in which blog posts hit the jackpot and generate thousands of comments and hundreds of thousands of page views. For the most part, however, they do not move the needle very much.
But even if The Huffington Post makes relatively little money from these blog posts, could not they pay their bloggers something? Of course they could — and maybe they should. But the mechanics would get a little tricky.
If they were to pay a small flat fee, for instance, they might run into some problems with adverse selection. An amount like $10, for instance, would provide more of an incentive to people who were producing relatively low-quality posts than to someone like Mr. Reich, who could probably command several hundred dollars for a freelance article if he were so motivated. The presence of well-known writers like Mr. Reich, also — along with the armada of politicians and celebrities that blog at The Huffington Post on occasion — brings up the group average. The expected figures for a typical piece from a typical freelancer, instead, is probably closer to the group median: a few hundred page views, worth just a few bucks in advertising revenue.
The Huffington Post could instead compensate writers based on a revenue-sharing scheme; perhaps they are vulnerable to a competitor that might elect to adopt such a business model. Still, even if The Huffington Post were to lose most or all of its unpaid bloggers, this would have a fairly negligible impact on its bottom line. Those posts make up only about 4 percent of the traffic in their politics section, according to our estimate.
One of the omissions in this analysis is that the impact of a post, nowadays, is much greater than its page hits or the number of comments on the website might indicate. Tech savvy users might be reading Reich’s post, excerpts, or commentary about the post on other websites, or through tools that pull a copy of the post once, and distribute to many users. So the social impact of a post might be much larger than the raw numbers indicate.
And the gorilla in the room is ‘why does Robert write?’ Not just at the Huffington Post, but anywhere? He is a successful person, working in academia these days, probably with millions invested from his books and public speaking. Even if HuffPo would pay him $170 for his post — or even $1700 — his motivations must be extra-market oriented: his goals lie beyond the financial incentives that might influence some of the contributors at HuffPo.
From the perspective of a participant in open social discourse, Reich is confronted with the challenge of being heard, of making an impact, pulling society in some direction. From this viewpoint, HuffPo is one of many alternatives where his thoughts could be published and distributed. His motivation to contribute to the Huffington Post run in a completely different dimension than a paycheck.
Reich is picking the Huffington Post for extra-market reasons: it is not an economic choice. He is making a choice based on utility and his desire to make a difference by swaying others to his arguments.
So, part of the HuffPo valuation is about the perceived value of the site as a locale in which valuable and open social discourse can and does occur. Yes, for every Reich post there are 100 repackagings of breaking news, or summaries of important articles elsewhere, all of which lead to page hits and ad clicks. But that is just like the litter and noise in the plaza, where on the podium a great voice is making a case for us to care about something and take action. The value of the plaza to the city shouldn’t be measured by the number of cigarette butts or candy wrappers on the ground, or the cost of the timbers in the bandstand, except to the degree that they indicate that the needs of the community are being met. And even if 80% of what gets posted in HuffPo is banal and bland, the other 20% that matters justifies it.