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The word on the street is that the traditional newspaper and news magazine are on the way out. Their successor is, of course, supposed to be internet news in general and blogs in particular. Since the business of news is the business of making money, there is the question of whether or not the rising blog system will be able to make money. I am tempted to manufacture a term like neblog (for “News Blog”) or IN (Internet News), but will resist that temptation and just misuse the term “blog” to cover all that sort of stuff.
Individual blogs are generally not moneymakers in any significant sense. Most folks make nothing (or even lose money on what they pay for hosting and internet access). A few folks do make it big with a somewhat ironic book deal and many more pull in a bit from various ads. However, the individual blogger is something of a side note here. What matters, it can be argued, are the big players. To use an obvious analogy, while individual authors of books do matter, it is the book publishers that are the big players.
Blog sites that are part of traditional media companies can subsist on the profits garnered via the traditional media aspect of the business. As such, there is less need to worry about the blogs themselves generating income for the company. In fact, there is the concern that the blogs might actually be the cause of lost revenue. As one might argue, there seems to be little sense in subscribing to Newsweek when the content is available for free on the web.
When it comes to blog sites that lack a revenue stream from a supporting company, there seem to be two main options for making money. One is to charge for content. This runs into numerous problems. First, people are conditioned to expect free content. Getting over that conditioning is not impossible, but it remains a formidable hurdle. Second, the web is awash with high quality free content. Since sensible people will not be inclined to buy milk when they can get equally good milk for free, this is also a serious problem.
Companies might be able to deal with these problems by transitioning from the free model to the paid model, provided that enough companies make this transition. This, of course, is a classic scenario. The media companies all gain if all of them switch to this model. This is because people will have to pay for the top content and there will be little in the way of free alternatives of comparable quality. This means more revenue for these companies, which is the goal of business. However, companies that switch early run an obvious risk-if they charge for their content while other companies provide free content of equal quality, most people will go for the free content.
It might be wondered what good this will do the companies that stay with the free model. After all, getting more “customers” who pay nothing is hardly a win. However, it can be an advantage in two (or more) ways.
One is that the company with free content can make some money through advertising revenue. While selling internet advertising is not currently nearly as profitable as traditional media advertising, it is a source of revenue. More visitors means more income. As Google shows, making a few pennies here and there can add up when there are many heres and plenty of theres. Of course, if there are not enough heres and theres, then such ad revenue will be rather meager. The challenge is to generate enough traffic so that those pennies are dropping in by the millions.
A second way a company can do well with free content is to use at as a way to beat the competition in the long term. Companies that start to charge will lose much of their audience to companies that do not and eventually many of these sites might simply fail. The companies that have the resources to endure the income drought of the free content phase can then switch to charging after their competition has been eliminated or severely weakened. So staying free for now and soaking up losses can be a way to win in the end, provided that the competition has less endurance.
Another way a company might be able to make money with free content is to find ways to mine their audience for data to sell. This can be done the obvious way by making use of tracking. It can also be done by examining the content of audience comments for useful information. While this is rather questionable, I suspect it can be a rather nice source of income.
As such, while a collective switch to the paid model would be good for all, being able to use the free model to bleed the competition might prove even better for some. Of course, this might end up in disaster-companies that keep the free model going in the hopes of making a profit in the end might find that they cannot survive this process.
