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Is This The Only Sustainable Blogging Business Model?

By Yaro Starak
34 Comments

It’s taken four articles to get here, but at last the final chapter in the series on sustainable business models that use blogs. If this is the first time you have read this series please read the articles in sequence. Here are links to the previous articles -

If you have stuck with me and read all the articles in this series you are probably eagerly awaiting my recommendation for professional blogging business models that ARE sustainable. I have compiled my suggestions below and I offer one main method for using blogs as the focus of a business, but the picture I paint is not an ideal business model in my opinion.

It is still very early days in the blogging world and there are not many people currently using a blog or several blogs as the main focus of their business model. Thousands of people use blogs to augment an existing business, but not many focus on blogs as the business and of course there are many successful professional bloggers, but that’s not a business as I have explained over the course of this series.

In order to become a professional blog business owner you must establish a small business model that uses blogs, but does not require you to always blog. In order for this to work for you, as I hinted in previous articles, you need to learn how to create something that is not dependent on your own input for success and adjust your preconceptions of how to build wealth.

The Blog Network

The first successful and most prolific business model based on blogs is the blog network. Jason Calacanis may not have been the first to build a blog network, but he was, and still is based on how much money he made after selling his network, the first entrepreneur to truly tap blogs in a sustainable business model, and earn big bucks doing so. His network is called Weblogs, Inc and still operates today.

As Jason reported as far back as July 2005, his business was making more than one million dollars a year just in AdSense clicks and I don’t think AdSense was the main revenue driver at the time, so only represented a proportion of total income. In late 2005 Weblogs, Inc was sold to AOL and although I don’t think it was ever confirmed, it was reported that the final sale price was around the 25 million US dollar mark.

Jason built his blog network using the content = traffic = money model. The income came from advertising placed on the hundreds of blogs in the network, which each blog written by one or several paid bloggers.

Jason hired bloggers using contracts, which ensured each blogger agreed to write a certain amount of content and perform community building roles like interacting via comments, in exchange for a paycheck. Since there are no restrictions on how many blogs the network can add or how many bloggers can be hired, network growth was not restricted by any one person. Weblog’s Inc leveraged people to produce content, build traffic and make money, in a sustainable blogging business model.

There are literally hundreds of blog networks in existence today, each with their own system for generating revenue, but all based on the principle of multiple bloggers writing to multiple blogs. Some are profitable, some are generating revenue but are cashflow negative and others are attracting millions of dollars in investment backing.

Should You Start A Blog Network?

On the surface it may seem the logical step for a professional blogger to become an owner of a blog network, thus securing a sustainable future without the constant need to produce content all by oneself. In fact Darren Rowse did exactly that becoming part of the b5media blog network founding team along with several other high profile bloggers.

Although Darren is the best example of a one-man-show blogger, you can see that he realized the need to become involved in something bigger than himself, something sustainable and not dependent on the monster workload he was putting into his own blogs, something not as reliant on Google for traffic (and thus money), which spreads the risk across hundreds of blogs. Darren diversified his income sources to reduce his risk and secure a more stable future in the blogging industry.

Did he end up working less and creating greater freedoms in his life? Well, not yet at least.

Every time I speak to Darren or any member of the b5media team or any blog network owner I’m hit with the same story – it’s a lot of work. I’d dare say it may be even more work than publishing as a solo professional blogger.

The difference is the shared responsibilities, the tighter focus on specialized roles for each individual – no longer is the owner the blogger, tech person and ad sales guy all wrapped in one. The potential for exponential growth using people as leverage points – and that’s hundreds of people when it comes to networks the size of b5media – is a key benefit.

One of the considerations most bloggers don’t think about is an exit strategy. When you build a blog network you build a business that doesn’t depend on any one person to function. This means the owner or owners create a sellable asset that a buyer can purchase without fear of the network falling apart once the owner leaves. If the network is large enough the exit payout may be in the millions of dollars, like Jason Calacanis’s exit was, and that sort of money certainly creates a lot of freedoms.

In Darren and b5media’s case they are working hard on growth and stabilization, building systems and hiring specialists to take over important business positions. They are still building their sustainable system and consolidating cashflow – and working very hard as a result – but if they keep going as they are they will eventually have an asset that functions without their direct involvement and may one day decide to sell it. Of course for the guys involved they love the blogging industry and their company, so that motivation can carry them far despite the long hours and hectic work schedule.

If you decide a blog network is the way you want to go, bear in mind that you are building a true start-up company including the long hours and taking on the multidisciplinary role of entrepreneur, especially before you have cashflow. Without cashflow managing a blog network by yourself can very easily be more work than remaining a solo-professional blogger, even if you have a full team doing all the blog writing for you.

If you are already a blogger, to make the switch to blog network owner you will suddenly find yourself wearing more hats, none more important than the role of people manager. Your new start-up blog network will live and die on the bloggers you bring on board and if you can’t motivated them, educate them, remunerate them to their satisfaction it won’t matter how well you do everything else.

The Blog Magazine

Starting a blog network is a huge responsibility and may be daunting for a person new to business. If you enjoy some success blogging by yourself now and you have built at least one popular blog, you may consider the path of creating a blog magazine business model.

A blog magazine is like a blog network but only at one blog. It’s a slower growth method that doesn’t place quite as many stresses on you since you only need to control one blog and bring on board good bloggers to write for you. Some of the most popular blogs use this model, utilizing several writers at one blog to keep content fresh.

Engadget, listed on Technorati as the most popular blog based on links (as I type this), is structured like a blog magazine. Multiple articles are posted each day from multiple authors. The content stream comes thick and fast and is only remains fresh thanks to the talents of many people. Engadget is essentially an online magazine updated daily.

By itself Engadget is a huge blog and no doubt brings in significant revenues. Interestingly enough, Engadget is actually part of the Weblogs, Inc network, which I mentioned previously was started by Jason Calacanis. Many blog networks have blog magazines as their flagship blogs, which bring in the lion-share of revenues to the network.

If you create just one flagship blog, written by multiple authors, which becomes stable and independent of your own input, you will have yourself a “cash cow”. From there you can leverage the reliable cashflow to branch out into other areas and build an entire network of blogs, increasing revenues and building a bigger business. This is a good way to grow slowly, if your game-plan is to create a blog network business model.

Right now if you have one blog that has some traction – you have solid growth, a regular readership and some income – that’s the ideal foundation for a blog magazine. Your next step is to bring on one other blogger to reduce your writing commitment, then two, and three or as many good writers as you can find with the goal of producing more content of a high quality.

From there sever yourself from the writing role and go to work maximizing the traffic and income you earn from all that content. Reward your bloggers well to ensure the content only gets better and you will truly understand how powerful leverage can be as the foundation of a sustainable business model.

The People Problem

You might be pretty excited right now. You’ve realized the potential of building a real business based on blogging and can see a light at the end of the tunnel. You can create a system that no longer requires perpetual blogging on your behalf. You may even get rich when your blog network is acquired one day for millions. Yeehah! …Right?

Before you run off and start planning to launch up-teem blogs and hire bloggers, let me slap you in the face with one reality -

Finding and retaining good people is very hard.

Human resources is a key ingredient in every successful business and the same goes for blogging. This is not an area you can quickly “solve” over night. You will need to build relationships, foster talent and let go of people who don’t share the vision or provide the necessary output.

One reality you are going to have to accept is that no one person can replace you at your blog. Many of the most popular blogs were built on the foundation of one great writer. It could be his or her personality, or style, or dedication or savvy – something that cannot be replicated. Darren Rowse calls it “mojo”. The process of converting an established blog written by one person into a group blog, is not smooth, and success is not guaranteed if the key blogger is replaced by a handful of new recruits.

The likely outcome is the death of what the blog used to be and the birth of a new blog under new authors. The theme may be the same, the topics discussed are still interesting to the same audience – but if the mojo is gone the site will not grow.

Would Problogger.net be the same without Darren Rowse even if there was a team of great professional bloggers writing? How about my blog here – could I replace myself at Entrepreneurs-Journey with a team of similar young entrepreneur bloggers and maintain stable growth?

While researching for this article I reviewed some of the top blogs as ranked by Technorati and many – I was actually quite surprised – are run by one VERY prolific blogger if we are to believe the name tag applied to each blog article is really just one person.

Techcrunch is mostly the work of Michael Arrington. Boing Boing, while having a five person team listed at the top as writers, seems dominated by Cory Doctorow, or maybe I just happened to review the site on a unusually prolific week for Cory. Whatever the case, it’s clear that the blogosphere is held up by the work of a few top bloggers and as blog business owners, it’s these kind of people we need to locate and cultivate in order to build a sustainable business.

Advertising As A Monetization Method

Blogs are just like offline magazines. We publish information for education and entertainment. The monetization model for magazines has long been advertising, and without new content published regularly the income stream dries up. Magazines need talented writers to keep content coming. The key is to retain talent, increase readership and provide value to advertisers ensuring that the revenues generated are above the costs involved to meet those goals in order to turn a profit.

Can you see the similarities there?

The publishing industry is cut-throat – it’s hard to make a profit – and as such only a few magazines survive to their first birthday and beyond. If we blog for profit, do we not face the same challenges as magazine publishers?

Blogging has a few distinct advantages compared to old-school publishing thanks to technological enhancements, including:

Despite all these advantages, blogging is still publishing and if you intend to build a business based on blogs you have selected a very challenging business model. It’s not an easy way to get rich online.

Not An Ideal Business Model

I racked my brain to come up with other business models that use blogs in a sustainable manner but nothing I could think of works without hiring other people to produce content. There’s nothing wrong with the blog network and blog magazine business models, or any derivation of them – in fact I may end up in charge of one myself if I keep going the way I am, adding more blogs and bringing on people to help me manage the blogs and produce content – I just can’t see the margins ever becoming significant enough to make someone a millionaire. The exit strategy is the only point where real wealth is created.

The problem lies in the components of the points of leverage. A blog is complex and people are complex. These two elements are the leverage points which you use to multiply earnings. The costs of managing people and blogs are significant and complex, hence each new blog and blogger you add to your system erases much of the gains made in content, traffic and ultimately revenue they produce. It’s a leveragable formula that happens to be complex and intensive to implement.

To put it simply – while the core formula for a blogging business is simple, the implementation is complex – which I believe stems from the aforementioned people problem. The net result is a business that is difficult to systematize to a high degree. It doesn’t permit efficiency and scale to occur seamlessly with little cost. Without systems to reduce cost you may have leverage but you grow your costs almost at the same rate as you grow your revenues.

This may change over time – remember it is early days – but unless you truly love blogging and managing people, I don’t see it as a very lucrative business to enter into.

That’s not to say some people aren’t doing it well right now. Assuming the current big blog networks are profitable or will be profitable soon, we may one day see the first blog network float on the stock exchange, but for now I certainly believe it’s a challenging model to make profitable.

The End?

I’m going to end the series here, however I feel I owe you an additional article – an addendum perhaps – that outlines how blogs are having an impact on business and how they are making it easier for the individual to create exposure and make money online. Blogs can make you a ton of money, but it depends on what you expect from them and how you use them.

I believe the area where blogs are really creating a huge impact is in marketing, in particular viral and persuasive marketing. While they may not be ideal as the foundation of a business model, they are beautiful tools for tapping a niche in a short period of time in a very natural way. I look forward to discussing this more in the near future.

Yaro Starak
Business Blogger

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34 Comments

  • Great series Yaro. Now that I’ve realized that I’m not interested in monetizing my own blog, but getting paid to write other blogs, the only question is, where are the blog jobs to be found?

  • @Alex
    http://jobs.problogger.net/

    Good series Yaro.

  • Yaro – This is your best article yet.

    But shouldn’t you just be doing things because you enjoy doing them? Isn’t that how you eventually break through. So you sell a business. Big deal. Then what? Sit on the beach? I supposed that would be fun for a few days ;)

    Keep up the great work.

    - Bryan

  • Bryan – We can’t go all self developmenty when talking about business or our profits might suffer ;)

    Seriously though – of course yes, we should do what we enjoy, but if we have goals in life, it helps to adjust what we enjoy doing to maximize our potential to meet goals.

  • [...] Over at Entrepreneurs Journey, Yaro Starak has recently concluded his five part article series which examines blogging as a sustainable business model. Lots of interesting points to note, especially if you aspire to make lots of money online as a professional blogger. Starak’s final piece offers a solution to what he considers to be a sustainable professional blogging model that one should possibly adopt as a means to generate long-term personal income. [...]

  • Mark

    Well-done Yaro. I have to commend you on this excellently written series I have been constantly checking to see your feed for updates. I think that to a large degree people build a trust relationship with the author of a blog. Generally we see so much made for Adsense Splogs around trying to target high PPC values that as readers we become jaded. I can’t wait to see what comes of your Traffic School.

    I am of the opinion that people should be looking at new ways of marketing and look for new opportunities. I am sure you are probably are aware of using traditional media and a unique idea to not so much build a business but make a name for themselves and earn quite a bit of money:

    http://oneredpaperclip.blogspot.com/

    Another unique promotion involves the brother of the one red paper clip idea auctioning off his legal name for a year. The bidding is up to USD$37, 000.
    http://www.choosemyname.blogspot.com/

    Finally and my favourite of all is the Million dollar homepage.
    “The idea is simple: to try and make $1m (US) by selling 1,000,000 pixels for $1 each. Hence, ‘The Million Dollar Homepage”. The main motivation for doing this is to pay for my degree studies, because I don’t like the idea of graduating with a huge student debt. I know people who are paying off student loans 15-20 years after they graduated.”
    http://www.milliondollarhomepage.com/

  • Awesome post, definitely my favorite so far
    If anyone’s interested in getting involved in a mini blog network hit me up at my website

  • This is a thoughtful and interesting article. However, there is another business model for blogs. In fact I think this is the most important model. Blogs are quite simply the best way to enhance reputation and establish expertise. Since starting my blogs three years ago I have become better known and been able to charge more for my services as a result. In other words, blogs people should stop focusing on blogs themselves as a business and look at how blogs should be a central feature in improving their existing business by enhancing reputation.

  • [...] Another excellent post from Yaro Starak on Entrepreneur’s Journey in his sustainable business models series.  This final article describes two business models – the blog network and the magazine blog – and discusses the benefits and problems associated with each. [...]

  • First rate post – Thanks.

    Has helped me focus on the longer term growth plans for my blog.

    Do you have any insight’s as to successful contracts between the owners of blog networks and their hired bloggers ?

  • Hi, is there any other way than adsense making money out blogs?
    and what advertising plan is more efficient for bloggers? I’d be glad to have your advices.
    regards

  • well done on the series, well put together and researched but positive and helpful at the same time, found yourself another subscriber

  • Again, the best article of your serie Yaro. I think you earned me as a hungry reader starting from today.

    I put your blog in my Firefox toolbar!

    Blog Magazines and blog networks totally make sense to me. While I am more involved in affiiate marketing than adsense, I’ve noticed the power of blogs in 2006, and I am going to leverage this.

    Blogging should be used by every kind of business, and those who are not blogging yet are missing big time.

    You’ve just proved that you need excellent copywriting skills to keep readers coming back.

    I’d like you to teach us and show us the best ways to find bloggers to hire for setting up a Blog Magazine to start.

    In business, I always prefer to start small, then grow steadily. A “How to set up a blog magazine serie” would be great.

    Let me know what you think.

    P.S: Just a last thing. I’ve noticed that you are not blogging every day (Like me). Most of the other bloggers pros or not pro see blogging everyday as an important factor for your readership and blog credibility.

    However, I don’t see that. Can you let us know what you think on the subject as well?

    Your advice on the question will be useful for my blog publishing endeavor.

  • What a wonderful post Yaro – easily your best thinking post ever (and you’ve done some beauties, mate). :-)

    I’ve come to this post and haven’t read the rest in the series so I’ve got some reading to do.

    I’m really interested in the Blog Magazine model you talk about (I have a love of publishing and I don;t mind growing slow … but big). I have been researching this for a while now and believe it to be a good business model. I’ve settled on the ideal for my liking: 3-5 bloggers on the roster (finding and keeping them is the real hard part) with me doing an editorial once a week.

    The human factor is the biggie (finding them, paying them, managing them). That’s a big time consumer.

    What’s your view on blogger payment? Would love to see one of your long posts on this issue. :-)

    I’ve seen a few blogs go magazine-style or group blog and it does take away some of the “mojo” as you say. The Blog Herald has gone through two changes over the years (with many bloggers in and out) and they’ve had their tough times.

    I see Darren slowly going down that same route – that;s going to be a tough one because he has such a presence at that blog. People read him.

    Problem is with the original blogger. He’s the one that made that blog what it is, so he has to manage the change to multi-author. My view would be the original blogger doing an editorial piece or two a week to keep his hand in it.

    The ideal when planning a blog magazine is to totally focus on the brand and not the person/blogger. It’s the only real way of getting a decent chance at an exit strategy down the road. I know blogging is very personal but this is business and blogging has to move with it.

    The best part of the blog magazine is that then the owner has more time to work on advertising and monetization deals, work on promotion/publicity, co-venture deals and manage his roster of bloggers – ie: working on the business and not in it.

    Keep up the great thinking posts Yaro.

  • Don

    Great series Yaro! Nuts & bolts stuff without all the fluff!

    I read Darren’s site nearly every morning. I have pages of his blog (and yours) bookmarked for reference.

    I’m afraid at some point, he’ll burn out. They guy can’t keep it up forever…right? LOL

    Keep crankin’ out the helpful info!

    Don

  • Thank you for all the comments everyone. I’ll just quickly address some of your questions…

    Martin – Regarding blogger payment – that’s a tough one really because each person is in a different situation and each blog requires a unique writer.

    Generally I think if you want someone serious for a long term commitment you need to pay money or offer capital ownership in the blog.

    How much money is something that needs to be tested since the going rates will depend on supply and demand.

    Franck – No I don’t blog everyday for a few reasons. Sometimes I wish I had the time to, but even then I doubt I would everyday because I just don’t feel like it. I admit I feel a bit stressed if I haven’t posted at least a couple of times a week though.

    I have a newsletter issue about whether you need to blog full time to have big success. I suggest you have a read of that if you want my take.

    It’s one of the earlier editions of the newsletter so if you sign up at http://www.blogtrafficking.com you should receive it in a few weeks.

    Yaro

  • Hi Yarow

    Thanks for the great articles on professional blogging – they have given me a lot to think about.

    I can share the sense of depression, burn-out and frustration that you alude to.

    I have been blogging for about 18 months now and my affiliate marketing blog is now ranked 4/10 in Google but I have not successfully monetarised it.

    Here’s the blog in question:
    Affiliate Marketing Coach

    I have learnt heaps through the process and have been paid over the last 18 months to write a professional blog on e-learning for teachers throughout Queensland. This latter blog is below:
    Partnering For Professionalism

    I think the contract for this is about to finish so I am at a crossroads. Your articles have given me some light ahead. One thing I need to do is create a WordPress blog so that I can start stroing posts under categories.

    I love your resources and will visit often!

    BTW. We met about five years ago when you ran a Crisis Communication workshop for an ALARPM (action learning) Conference I was organising.

    Ron Passfield
    Brisbane Australia (about 20 minutes drive away at Bulimba!)

  • I subscribed to your newsletter a long time ago, but I don’t know why, I never received a sinle email.

    I will resubscribe.

  • Ron – I think you might be confusing me with my Dad – he is the social worker/group facilitator and has the same name.

    Thanks for your comment!

    Yaro

  • [...] Divya’s perspective on Social Media and the Reduced Importance of Search Engines I am going to link to Rob, because it looks like he has a great MyBlogLog tracking tool that he is working on. Here is a great post from Eric detailing how he has built up his blog traffic in just a couple of weeks… great content and social networking I am going to link to Chris because he has a good long post all about linking with lots of examples. I agree with a lot of it other than my pet hate.. blogrolls. I am going to end with Yaro Starak, who has written an excellent series of posts on blogging business models. [...]

  • [...] Yaro Starak’s series of posts on sustainable blogging got me thinking. The only way I’m going to get this site to see more rapid growth is an [...]

  • Yaro, I want to ask you a question, I agree that we must learn how to hire someone to blog for us and release ourselve for freedom. However, don’t you think that we must start and write the blog on our own? From what I know, before you build any system on a particular business, you must test it on your own then you only know the strength and weakness of your current business model. From there you start building your business system to enhance the strength and cover the problem.

  • Harrison – Yes, I agree with you that it’s a good idea to first become a good blogger then start your blog network by bringing on others.

    That’s how I would do it, in fact that is how I AM doing it.

    Some people prefer not to do the hard work creating their own blog and want to fast-track the process of creating a blogging business. That’s okay too, but I do think those who have created a great blog first stand a better chance of success once they start building a network.

  • Yaro,

    Great series, truly enjoyed the information and thought process. A few added thoughts, especially on this last post.

    One, with regard to the comparison to bloggers inevitably struggling with the same challenges that have shut down so many printed publications, there are some major differences that throw the analogy off a bit.

    In fact, traditional publishers face two major challenges that are at the heart of much of that world’s failures that bloggers don’t, which makes the likelihood of of success that much more possible in the blogosphere, given the will to endure ramp-up.

    On the cost-structure-side, traditional publishing takes a huge risk in committing resources to print runs based on a “best guess” of demand and, often times, that guess is way off, leading to large inefficiencies and, often, expense structures that don’t scale well and exhibit massive amounts of waste. Bloggers don’t have the same issue.

    Also, traditional publishing not only relies upon revenue from advertisers/sponsors/partners, but from the readers, too. This serves as a strong limiting factor in not only growth of the direct readership, but growth through organic-referrals.
    Because blog-readers do not have to pay for the access to the content and can freely pass that content on to friends without asking those friends to endure any costs, these economic and social barriers to growth are eliminated.

    So, while the world of blogging has its own built in challenges, some of the major factors that have led to hard times in the traditional publishing realm don’t serve as analogous limiting factors in blogosphere.

    Final thought, too, on the importance of refocusing on leading with meaning. A recent study of 3,000 pentamillionaires ($5 million), showed that the vast majority of those people made their huge jumps in wealth AFTER they stopped chasing money and reallocated their energies to the creation or solution of something deeply meaningful, something capable of fueling the type of efforts needed to push through to success on a massive scale.

    Does that mean we shouldn’t strive to be wealthy? Not at all. But wealth should come as the by product of effort driven by genuine, content-based passion and applied within a field where the massive opportunity lies in waiting.

  • Jonathan – Great comment and good points. The underlying cost structure of running a blog makes it appealing and certainly it’s the reason why individuals like myself can set-up and maintain a popular blog and produce enough revenue to live off, where publishing a magazine by myself for a living is out of the question.

  • Hi Yaro,

    I’m a new reader to your blog and I just read all 4 installments of this series…..just excellent. I love your writing style (very easy to digest) but also these are new ideas that I hadn’t thought of or read about until now. I have been in the thought system that if I wanted to support myself in blogging that I needed to create more blogs, all of them written by me.

    Thanks, I also signed up for your Blog Mastermind course last night, which is how I ended up reading this series. BTW, I first heard of you from Wendy at eMomsathome.com…..you come highly recommended by her.

  • This is very great series. Very useful. THank you, Yaro ! :)

  • Dan

    Thanks, very informative!

  • [...] one of those“? I’ll let professional blogger Yaro Starak explain all about this blogging model and how it could potentially be [...]

  • Thanks Yaro for the insightful article on professional blogging. At Indimoto we too are in the process of building a team of paid bloggers.

  • I recently started a blog…. I seem to have lack of subjects to write about

  • Thanks so much Yoko for your interesting articles. I really love to read your articles. Once again, thanks for spending your valuable time to produce these articles.

  • Great, great article. The best I have read on the subject. I am giving my notice at work on Monday actually to run my blog network full time. I run 5 blogs which get 5,000 hits/day and I’m earning 2-3k/month now. I’m excited to jump into this and can’t read enough articles like the one above. My best advice to someone just starting is work your A$$ off to build high quality relationships with bloggers, 100 posts, and blogroll links until you get over 1,000 hits/day then the opportunities to make money will reveal themselves as the emails start pouring in.

    Richard
    Richard C. Wilson
    Hedge Fund Consulting Blog
    http://richard-wilson.blogspot.com

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