Phil Sim

Web, media, PR and… footy

Blog networks – Worth the money?

UPDATE: Squash feedback suggests a $10 mil valuation is pretty unlikely and $4 to 5 mil is probably more realistic.

So 2 mill for the B5 boys and girl?

Unfortunately, that figure would be much more useful if Rick Segal of JLA Ventures let us in on the stake they and BrightSpark got for their pound of flesh. But with those nice round figures lets take a punt and guestimate a valuation around the $10 mill mark, which would pretty smart multiples for a business model that the jury is still out on…

I go back and forth on blog networks. I do believe blogs have a lot of evolving to do and will become more complex and richer and gradually incorporate more social media functions and value-added functionality and so aggregating the technical function is going to be useful. Probably more importantly, Blog networks can also invest properly in SEO which is something your independents struggle to have the time or resources to do and its this that in many cases makes or breaks a blog.

The issue I question with blog networks is the margin-factor. B5 blog guru Darren Rowse reckons it takes a year to put a blog on the map. That’s got to mean your looking for a 2-year turn around before you get a positive return on each new blog you’ve invested in. You then have to hope that a) your blogger hasn’t run out of steam b) they haven’t got so successful that it now makes sense for them to go out on their own.

You hear increasngly around the traps of blog and podcast networks who are locking their talent into really, tough contracts – ‘we own you mofo’ – and with these kind of economics vs risk you can see why.

B5 have said the money will help them put on a VP of sales and I hope they get a good one. Coming from a media background, its impossible to understate how important it is to have an effective sales function and its no difference with blog networks. Problem is this kind of talent ain’t cheap. That’s going to hit your margins too….

Rick also riffed a bit about Doc Searl’s Intent economy. Not sure if I buy it. B5’s biggest traffic generators by far are its celebrity blogs, which don’t exactly fit this model. If I see a future in blog networks, I think its probably going to have to do a lot with reader profiling. As a single-site publisher I may not be able to build up enough of a profile on you to do some serious ad targetting but if I publish a couple of hundred blogs and you might visit 5 of them I can then start to develop a pretty neat profile…

Filed under: Blogs

33 Responses

  1. […] with del.icio.us   |   Email this entry   |   TrackBack URI   |   Digg it   |   Track with co.mments   |     |   Cosmos Click here forcopyright permissions! Copyright 2006 Mathew Ingram […]

  2. Phil, this is really about the value of niche content, the value of passionnate authors and the value of community. We’re seeing a growing realization amongst the business community and advertisers in particular that models like ours – which value these 3 areas – are of increasing interest.

  3. decloned says:

    It’s a lot easier to not burn out when you write about what you are passionate about. I’ve recently learned that this is the core of b5, passion & community.

  4. […] Phil Sim thinks he knows the inside skinny as to why this was a bad investment. Sorry, Phil, you’re wrong. […]

  5. […] with del.icio.us   |   Email this entry   |   TrackBack URI   |   Digg it   |   Track with co.mments   |     |   Cosmos Click here forcopyright permissions! Copyright 2006 Mathew Ingram […]

  6. Phil Sim says:

    Hi Jeremy, congrats on the funding. I’m quite passionate about all three of those factors you mentioned but being a part of a blog network doesn’t necessarily make any blog, any more, any of those things.

    Just to make clear for Technosailor’s benefit, I didn’t say it was a bad investment, just making the point that blog networks still have a lot of growing up to do and the model is still immature. I’m sure B5 has plans to go well beyond the current model…

  7. I would have thought that the value of a network is in it being a stamp of quality on content and that it would thus drive traffic. What would be interesting to look at is how effective a particular blog network is in driving traffic to one of their blogs, how that is promoted and how well having a central network works (ie. how many people go to b5media.com and then find a blog they are interested in). If a blog is more successful because it is in a network rather than an independent blog, then the network has a value. If the difference is marginal, then all you have is a group of blogs and a link orgy.

    From an investors point of view, they would have wanted to see a formula of creating successful blogs that B5 could then apply to topic areas and use the network to drive readership. At Techcrunch we have a formula and it has worked very well, I don’t think it would scale to 100 blogs though.

    I don’t buy the other benefits of a network being central administration, advertising etc. since there are so many 3rd party providers out there that make all this easy for individual bloggers anyway. The writers take care of that, which is the beauty of blogging as a platform.

    One other thing to keep in mind is that you take investment to make things happen faster, I don’t know how effective more money is in making a blog more successful, other than to allow writers to commit themselves fulltime during the period where revenues are zero or low.

    All-in-all though the B5 investment is probably a good one, one downside would be that B5 doesn’t have a clear driving blog such as how Weblogs Inc. had engadget but they might not need that.

  8. Ed Lee says:

    I think you make a great point about the blogger needing to be good enough to attract an audience big enough to impact ad sales; but at the same time, not good enough to go out on his own…

    After a day when the TalkCrunch guys had a real pop at Pay-Per-Post for not encouraging true innovation or remarkableness in its clients, should blog networks be given the same sort of analysis?

    Sure, the amount of bloggers who can go it alone is very slim, but that’s why they’re remarkable.

    Ed

  9. Nic makes two interesting points, one I agree with, the other not.

    A network has to be able to drive traffic from the centre, otherwise structurally it’s little better than a group of individual properties. At Syntagma, we’ve adopted a magazine format to help that along; b5media lacks a strong brand or image that would allow a centrifugal force to operate.

    The point that selling advertising space from a single point isn’t much of an advantage because third-party agencies will do this for you, fails to make the distinction between small-time blogging and a serious business model. Third-party people charge from 40-50pc to sell ads. If you do it in-house, you reduce that cost to 15-20pc. A significant advantage.

    B5 – in my view – needs a stronger brand and a central, popular, hub driving traffic out to supplement the efforts of its writers.

  10. Rick Segal says:

    Jaded hack? Naaah, yer much better, don’t be so hard on yourself.

    To your point about my Intention Economy thinking and the Paris Hilton blogs, let me say this.

    I’m sitting here listening to my partner take a pile of nonsense off her daughter (12 year old) wanting to get some gizzmo that Lindsey somebody is currently dealing with. A blogger that somebody views as an authority on Paris Hilton (yeah, this is the worst business example ever) is going to be looking at targeted offers that the reader will be looking for, won’t be turned off of, etc. Be careful not to get too hung up on the narrow focus on the intention economy thesis, it was the start for me.

    Techcrunch is being successful in doing their thing and I respect Nic/Mike, etc, for it. We’ll have a little fun along the way as well.

    Three Aussies bagging some VC coin, com’on, that’s gotta be worth something!

    Rick Segal

  11. Actually the story of Aussies bagging VC coin (as Rick puts it) is an interesting story on it’s own – VC isn’t big down under and I am sure this is the first ‘new media’ deal

  12. Blog Bloke says:

    I would like to pose the question out there… do the Blog Networks offer any real value to the blogosphere? (I’m speaking about the blogosphere in general here — not just the networks).

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  28. […] Phil Sim questions if blog networks are worth the money, and my answer for this will always be “it depends on what you’re trying to create.” Don Dodge was miffed after Om Malik took a few hundred thousand to build out his new media empire and I think it was definitely a smart move. The key to pay-for-your-writing blog networks is to build up brand recognition where the author and blog popularity eclipses that of the network — Darren Rowse’s ProBlogger.net has a gigantic following and if I were in b5’s shoes I’d build out services that leverage the ProBlogger audience and capture a larger segment of that industry. Weblogs, Inc. was purchased (essentially) for Engadget and Autoblog even though WIN has dozens of other blogs besides those but AOL wanted to individual brands since they are the most valuable. b5media could take their funding and build out some of their more popular blogs into their own verticals, similar to what Om is doing with his GigaOm Network. […]

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