Are blogs finished as a business?

Commentary about business and finance.
Feb. 16 2006 5:14 PM

Twilight of the Blogs

Are they over as a business?

Illustration by Robert Neubecker.
Click image to expand.

As a cultural phenomenon, blogs are in their gangly adolescence. Every day, thousands of people around the world launch their blogs on LiveJournal or the Iranian equivalent. But as businesses, blogs may have peaked. There are troubling signs—akin to the 1999 warnings about the Internet bubble—that suggest blogs have just hit their top.

The Magazine Cover Indicator: That's a term coined by Barry Ritholtz, a blogger and hedge-fund manager. Being plastered on the front of a national magazine is fatal for an investment trend. Remember Time's infamous anointing of Amazon.com Jeffrey Bezos as the "Man of the Year" for 1999? More recently, Time'scrack trend-sniffing squad was working overtime to prepare this week's cover package on Google just as the stock began to melt down. New York isn't quite a national magazine, but its recent blog cover story will no doubt be quickly copied by the newsweeklies. (In the article, Clive Thompson concludes that the blog industry has already tri-furcated into an "A-list of a few extremely lucky, well-trafficked blogs—then hordes of people stuck on the B-list or C-list, also-rans who can't figure out why their audiences stay so comparatively puny no matter how hard they work." In other words, a few people will make money—journalist money, not Wall Street money—and the hordes of late joiners will make nothing.)

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The Smart Guys Cashing Out: Remember Bob Pittman? The early head at MTV became Steve Case's right-hand man at AOL and helped sell the company to Time Warner for a huge premium in early 2000. In other words, he's a great market-timer.

In 2003, Pittman paid $3.5 million for a controlling stake in Daily Candy, a bloggish newsletter on what Carrie Bradshaw wannabes should buy, wear, and eat—well, not eat, more like nibble. Less than two years later, Daily Candyhaving expanded to a series of regional editions, Pittman is looking to ring the register. The Wall Street Journal reported on Wednesday that "with traditional and electronic publishers keen to get their hands on Internet-advertising properties, Daily Candy could fetch more than $100 million" (my italics). Twenty-eight times your money in less than 28 months? For a business that takes in less than $20 million a year?

The Excited Dinosaurs: Big, unwieldy media conglomerates—the types whose large-circulation magazines always publish trend stories six months too late, like Time Warner—are enthralled with this hot new niche. Last October, in a deal that put blogs on the map as a business, Time Warner paid a reported $25 million for Weblogs, Inc., a group of blogs cobbled together by tech-culture-Barnum Jason Calacanis. This week, the Wall Street Journal reported that Time Warner is poised to introduce Office Pirates. The bloggy site is run by Mark Golin, the brains behind Maxim's U.S. edition. A spokeswomen for Dodge, the "exclusive automotive sponsor of the site," is calling it a "daily blend of funny videos, strange news and downloads, rolled up in an office-themed wrapper." Apparently, Time Warner executives are not aware that there's a place online where you can go to see pictures of large-breasted women and read dirty jokes, without having to look at Dodge ads—it's called the Internet.

The Gullible Latecomers: In the end stages of any investment mania, the clueless and the greedy flood in. You know things are really poised for a fall when people who have no management experience and feeble business plans somehow manage to raise cash for ventures. Ladies and gentlemen, I give you: Pajamas Media. Last November, the collection of right-wing blogs (with a few lefties thrown in for laughs) grandly announced the closing of a $3.5 million round of venture capital financing. Roger Simon, the screenwriter-turned-blogger who is the CEO of the enterprise, promised "to change the way people report and access news and commentary." I don't know. It looks to me like a bunch of blogs with their own logo.

Daniel Gross is a longtime Slate contributor. His most recent book is Better, Stronger, Faster. Follow him on Twitter.

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