Blogonomics: My latest story in New York Magazine

New York magazine asked me to write a piece on the blog economy, and it’s finally online! A copy of the piece is online at their site, but here’s an archived copy below too. I also wrote a sidebar on Chris Anderson’s “Long Tail” theory as it applies to blog popularity.

(Sorry postings have been light lately; I’ve been pounded by work. I’m hoping to do more this week.)

Two years ago, David Hauslaib was a junior at Syracuse University who was, as he confesses, “totally obsessed with who Paris Hilton was sleeping with.” So he did what any college student would do these days: He blogged about it. Hauslaib began scouring the Web for paparazzi photos of Hilton and news items about her, then posting them on his Website, (Sample headline: PARIS HILTON SPREADS IT IN THE HAMPTONS.) “My friends got a chuckle out of it, but it didn’t get really big or anything — maybe a few hundred visitors a day,” he says.

Then one day Hauslaib took a good look at Gawker, a gossip site owned by the high-tech publisher Nick Denton. Gawker’s founding writer, Elizabeth Spiers, had pioneered a distinctive online literary style and earned a large following in the Manhattan media world. What really got Hauslaib’s attention, though, was Gawker’s advertising-rate sheet. According to Denton, the site received about 200,000 “page views” a day from readers. The site ran roughly two big ads on each page, and Gawker said that it charged advertisers $6 to $10 for every 1,000 page views — almost the same as a midsize newspaper. There was also a smattering of smaller, one-line text ads bringing in a few hundred bucks daily. Doing a quick bit of math, he figured that the income from Gawker’s ads could top $4,000 a day. The upshot? Nick Denton’s revenues from Gawker were probably at least $1 million a year and might well be cracking $2 million.

Not bad, considering the blog had no serious expenses other than its writers — first Spiers and now Jessica Coen and Jesse Oxfeld, all working for journalist wages — and Webhosting fees of maybe a few thousand bucks a year. “The rest of it,” Hauslaib points out, “just goes into Nick’s pockets.”

“And I was like, I can do that,” he says, laughing.

So in June 2005, Hauslaib packed his bags and moved to a sparsely furnished sixth-floor walk-up in the East Village, where he parked his massive Dell laptop on his kitchenette counter, installed a flat-screen LCD TV to catch breaking celebrity news, and began working on Jossip in earnest. He’d start each day at dawn, trolling the Web for dirt about celebrities and media stars. (“You gotta have something posted before people get to work,” he explains, “because my audience is people who hate their jobs.”) By the end of the year, Hauslaib’s site was steaming along nicely. He had almost everything Gawker had: He stalked the same celebrities, posted with the same speed and frequency, and wrote prose in the Spiers vernacular.

The only thing he didn’t have was … Gawker’s audience. About 30,000 visitors a day, Jossip’s traffic is a mere 15 percent of Gawker’s. Hauslaib was generating a “comfortable five-figure income,” but certainly not millions. He’d hit a glass ceiling, in a medium where there weren’t supposed to be any limits.

BY ALL APPEARANCES, the blog boom is the most democratized revolution in media ever. Starting a blog is ridiculously cheap; indeed, blogging software and hosting can be had for free online. There are also easy-to-use ad services that, for a small fee, will place advertisements from major corporations on blogs, then mail the blogger his profits. Blogging, therefore, should be the purest meritocracy there is. It doesn’t matter if you’re a nobody from the sticks or a well-connected Harvard grad. If you launch a witty blog in a sexy niche, if you’re good at scrounging for news nuggets, and if you’re dedicated enough to post around the clock — well, there’s nothing separating you from the big successful bloggers, right? I can do that.

In theory, sure. But if you talk to many of today’s bloggers, they’ll complain that the game seems fixed. They’ve targeted one of the more lucrative niches — gossip or politics or gadgets (or sex, of course) — yet they cannot reach anywhere close to the size of the existing big blogs. It’s as if there were 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. “It just seems like it’s a big in-party,” one blogger complained to me. (Indeed, a couple of pranksters last spring started a joke site called Blogebrity and posted actual lists of the blogs they figured were A-, B-, and C-level famous.)

That’s a lot of inequality for a supposedly democratic medium. Not long ago, Clay Shirky, an instructor at New York University, became interested in this phenomenon — and argued that there is a scientific explanation. Shirky specializes in the social dynamics of the Internet, including “network theory”: a mathematical model of how information travels inside groups of loosely connected people, such as users of the Web.

To analyze the disparities in the blogosphere, Shirky took a sample of 433 blogs. Then he counted an interesting metric: the number of links that pointed toward each site (“inbound” links, as they’re called). Why links? Because they are the most important and visible measure of a site’s popularity. Links are the chief way that visitors find new blogs in the first place. Bloggers almost never advertise their sites; they don’t post billboards or run blinking trailers on top of cabs. No, they rely purely on word of mouth. Readers find a link to Gawker or Andrew Sullivan on a friend’s site, and they follow it. A link is, in essence, a vote of confidence that a fan leaves inscribed in cyberspace: Check this site out! It’s cool! What’s more, Internet studies have found that inbound links are an 80 percent–accurate predictor of traffic. The more links point to you, the more readers you have. (Well, almost. But the exceptions tend to prove the rule: Fleshbot, for example. The sex blog has 300,000 page views per day but relatively few inbound links. Not many readers are willing to proclaim their porn habits with links, understandably.)

When Shirky compiled his analysis of links, he saw that the smaller bloggers’ fears were perfectly correct: There is enormous inequity in the system. A very small number of blogs enjoy hundreds and hundreds of inbound links — the A-list, as it were. But almost all others have very few sites pointing to them. When Shirky sorted the 433 blogs from most linked to least linked and lined them up on a chart, the curve began up high, with the lucky few. But then it quickly fell into a steep dive, flattening off into the distance, where the vast majority of ignored blogs reside. The A-list is teensy, the B-list is bigger, and the C-list is simply massive. In the blogosphere, the biggest audiences — and the advertising revenue they bring — go to a small, elite few. Most bloggers toil in total obscurity.

Economists and network scientists have a name for Shirky’s curve: a “power-law distribution.” Power laws are not limited to the Web; in fact, they’re common to many social systems. If you chart the world’s wealth, it forms a power-law curve: A tiny number of rich people possess most of the world’s capital, while almost everyone else has little or none. The employment of movie actors follows the curve, too, because a small group appears in dozens of films while the rest are chronically underemployed. The pattern even emerges in studies of sexual activity in urban areas: A small minority bed-hop, while the rest of us are mostly monogamous.

The power law is dominant because of a quirk of human behavior: When we are asked to decide among a dizzying array of options, we do not act like dispassionate decision-makers, weighing each option on its own merits. Movie producers pick stars who have already been employed by other producers. Investors give money to entrepreneurs who are already loaded with cash. Popularity breeds popularity.

“It’s not about moral failings or any sort of psychological thing. People aren’t lazy — they just base their decisions on what other people are doing,” Shirky says. “It’s just social physics. It’s like gravity, one of those forces.”

Power laws are arguably part of the very nature of links. To explain why, Shirky poses a thought experiment: Imagine that 1,000 people were all picking their favorite ten blogs and posting lists of those links. Alice, the first person, would read a few, pick some favorites, and put up a list of links pointing to them. The next person, Bob, is thus incrementally more likely to pick Alice’s favorites and include some of them on his own list. The third person, Carmen, is affected by the choices of the first two, and so on. This repeats until a feedback loop emerges. Those few sites lucky enough to acquire the first linkages grow rapidly off their early success, acquiring more and more visitors in a cascade of popularity. So even if the content among competitors is basically equal, there will still be a tiny few that rise up to form an elite.

First-movers get a crucial leg up in this kind of power-law system. This is certainly true of the blogosphere. If you look at the list of the most-linked-to blogs on the top 100 as ranked by Technorati — a company that scans the blogosphere every day — many of those at the top were first-movers, the pioneers in their fields. With 19,764 inbound links, the No. 1 site is Boing Boing, a tech blog devoted to geek news and nerd trivia; it has been online for five years, making it a grandfather in the field. In the gossip- blog arena, Gawker is the graybeard, having launched in 2002. With 4,790 sites now linking to it, Gawker towers above the more-recent entrants such as (with 1,549 links) and Jossip (with 814). In politics, the highest is Daily Kos, one of the first liberal blogs — with 11,182 links — followed closely by Instapundit, an early right-wing blog, with 6,513. Uncountable teensy political blogs lie in their shadows.

In scientific terms, this pattern is called “homeostasis” — the tendency of networked systems to become self-reinforcing. “It’s the same thing you see in economies — the rich-get-richer problem,” Shirky notes.

TO SEE JUST HOW PRECISELY RICH BLOGGING CAN MAKE YOU, it’s worth visiting Peter Rojas, the cheerful, skate-punk-like editor of Engadget — and the best-compensated blogger in history. When I meet him one December evening in his bachelor pad on the Lower East Side, he’s sitting at an Ikea desk bedecked with three flat-panel screens and looking relatively fresh, considering he’s just come off another eleven-hour blogging jag. Like most A-list bloggers, he hit his keyboard before dawn and posted straight through until dinner. “Anyone can start a blog, and anyone can make it grow,” he says, sipping a glass of water. “But to keep it there? It’s fucking hard work, man. I’ve never worked so hard in my life. Eighty-hour weeks since I started.”

For Rojas, the toil paid off handsomely. Last fall, AOL bought Jason Calacanis’s company Weblogs, Inc., which includes Engadget, for $25 million. Rojas himself didn’t disclose the precise amount he got from the deal, but he had a good deal of equity in the company and says that, technically, he doesn’t need to work anymore. Nonetheless, he’s still slogging away at Engadget because he’s still obsessed with cool new technology. His idea of a good time is hunting down samizdat pictures of the latest Palm Treo. “I didn’t intend to become a millionaire,” he says, “but I wound up there anyway.”

Very few bloggers have come anywhere close to Rojas’s struck-by-lightning success, of course. But putting that sort of good fortune aside, the blogosphere is slowly developing solid business models, which take roughly three forms.

The first — and most common so far — is the accidental tourist: A lone writer who starts a blog as a mere hobby but then wakes up one day to realize his audience is now as big as a small city newspaper. The liberal journalist Joshua Micah Marshall went this route: He started the Talking Points Memo blog during the November 2000 election recount “just for fun,” and his audience grew slowly, reaching 8,000 a day in the first two years. Then, in December 2002, he broke news of racially charged comments by Senate Majority Leader Trent Lott, and his audience surged to 40,000 daily. The blog was eating so heavily into his paying gigs that Marshall began soliciting donations from his readers; in 2003, he signed up with Blogads, an advertising broker, and by this January he was grossing in the low six-figures. Talking Points Memo has become a small company with three full-time staffers and an office in Manhattan. His daily traffic is 150,000 page views, and he now charges advertisers up to $5 per 1,000 views. “When I started it, I had no idea it would become a source of income,” he says.

A variation on this theme is when a lone blogger teams up with the mainstream media. Andrew Sullivan is the first example of an endgame strategy that may become quite common in the future. In 2000, Sullivan started his blog, The Daily Dish, as a part-time sideline, funding it via donations and ads for five years. Then in January, Time magazine agreed to lease his URL for one year, making it part of its online offerings. Though Sullivan says “I didn’t get rich,” he figures the deal will earn him almost half his income this year.

For advertisers, the whole lure of blogs is that they’re cheaper than regular newspapers and TV. Plus, blogs offer tightly focused niches, which advertisers love. “You wanna reach New York, you buy on Gothamist. You want to reach mommies, you buy on Busy Mom. How does traditional media match that?” asks Brian Clark, an ad buyer who orchestrated Audi’s blogvertising last year. The Audi campaign — which ran online for three months, and got 68 million page views, and cost only $50,000 — was cheap compared with the $500,000 for a Yahoo front-page banner that runs for only one day.

According to Henry Copeland, founder of Blogads, the first big wave of advertising emerged during the 2004 election season, when political campaigners and interest groups realized that advertising on political blogs was more powerful than direct-mail appeals. “It’s really the audience — younger voters who are motivated and interested,” says Michael Bassik, a political consultant who ran online ad campaigns for John Kerry and other Democratic candidates. Perhaps more important, blogs are buzz-creation machines: If an ad campaign appears on the blogs, it’ll often become a subject of conversation among the bloggers. “They’re social connectors,” Bassik says. Yet each blog has a different sphere of influence. To get a message out widely, he’ll buy on Daily Kos because it has the largest readership of any liberal blog (though it’s also the most expensive, at $4,000 a week). If Bassik needs click-throughs — someone who’ll click on a candidate’s ad, visit his site, and perhaps make a donation — he might buy Talking Points Memo instead, which has a smaller audience but a much higher click-through rate.

Since blogs set their own ad rates, each one offers a different value proposition, Copeland explains. A gossip blog like Perez Hilton has a huge readership — 220,000 page views daily — but since the audience is broadly based, the rates are very low, costing $202 to run an ad for one week. Meanwhile, a smaller blog might have only 10,000 visitors daily — but if it’s a lucrative, tightly focused niche, the blogger could charge much higher rates per visitor.

How big and lucrative can an accidentally professional blog grow? The biggest so far is Boing Boing, a pioneering site run by five former Wired editors and writers. By posting wittily, and more voluminously than almost any other blog — up to several times an hour — they built up a devoted audience of 1.7 million readers. (Boing Boing is also the most-linked-to blog in the world, according to Technorati’s rankings.) The site began running ads two and a half years ago, and the expensive ones can currently command more than $8,000 a week, according to John Battelle, whose ad co-op, Federated Media, manages the blog’s finances. Despite those premium rates, the five Boing Boing bloggers still retain their day jobs, blogging only part time. “I always figured my life was fueling my blogging, so I didn’t want to be just a blogger,” says Cory Doctorow, a novelist, copyright activist, and one of the Boing Boing five. “We could make a living at this. I mean, we’ve got the circulation of a good-size magazine — better than a good-size magazine. And our overhead is much smaller.” Or as Shirky puts it, “The Boing Boing thing is, they have more readers than Wired and yet they have a part-time staff of five. That’s the new math.”

The second basic blogging business model is the record-label approach: Crank out dozens and dozens of sites and hope that one or two will become hits. The pioneer here is the new-media entrepreneur Jason Calacanis, who founded Weblogs, Inc., in September 2003 and began rapidly shotgunning new blogs into obscure niches: Tablet PCs, Microsoft Office, “telemedicine,” and the like. It is not, many note, a recipe for quality writing. “What do his bloggers get? Two dollars a post?” jokes Brian Clark, the advertising buyer. Nonetheless, Calacanis scored an enormous hit with Engadget, the second most-linked-to site on Technorati. “AOL basically paid $25 million for Engadget,” more than one envious blogger carped to me.

The third and final model? The boutique approach: a publisher who crafts individual blogs the way Condé Nast crafts magazines — each one carefully aimed at some ineffable, deluxe readership. This is Nick Denton’s modus operandi. Though he set up shop three and a half years ago, making his the oldest blog empire around, he has launched a mere fourteen blogs. They are all, however, in niches that target high-spending, well-educated readers — such as gossip, sex, and politics. The aim is to hit the sweet spot: big readerships, but not hoi polloi. Gawker even claims to turn away advertisers that are too low-rent; the site’s ad manager boasted to Mediaweek that it takes no Ford or Chevy ads because “we hate American cars” and no pharmaceutical ads because “our readers are healthy and beautiful.”

Denton is famous for spending months hunting for writers with the snark and wit that his audience likes. (Obligatory disclosure: Denton sometimes calls to pick my brain, and last year hired somebody I recommended.) He’s also equally famous for being tight with a buck: His bloggers work from home, get no equity, and make salaries that are by all accounts unremarkable, even by the paltry standards of journalism. (Health insurance starts on March 1.) Indeed, before Calacanis sold his company for $25 million, Denton was fond of proclaiming that there is little money to be earned in the blogosphere. “Blogs are likely to be better for readers than for capitalists,” he wrote on his personal site in 2004. “While I love the medium, I’ve always been skeptical about the value of blogs as businesses.”

But as his critics note, this is precisely what you’d say if you wanted to scare other people away from competing with you. “When Nick said you can’t make money at it,” says one of his frenemies, “everyone believed him.” Denton and partners, veterans of the dot-com boom, sold their last company for $50 million, so … why would he need any more money? “But that was just his strategy, and it works.” One terrific way to stay alone on the tall side of the power law is to discourage anyone else from trying to climb the curve.

AMONG BLOGGERS, FEW THINGS PROVOKE MORE RANCOR than the subject of the A-list. Much as in high school, C-listers quickly suspect the deck is stacked against them, and the bitterness flows like cheap wine. No one knows this better than Elizabeth Spiers, the original Gawker girl. She is arguably the most famous professional blogger, since she invented its dominant mode: a titillating post delivered with a snarky kicker, casual profanity, and genuine fan-girl enthusiasm — sonnets made of dirt. Yet no good deed goes unpunished; the player-hater e-mail she received during her tenure at the gossip site was astonishing. “I’d get these e-mails saying, ‘You’re a dirty slut who can’t get laid,’” she recalls. “How can I be dirty slut and not get laid?”

The very subject of the A-list is so toxic that Denton refused to be interviewed for this story and told his bloggers to refuse interviews, too. (Calacanis also refused.) For her part, Spiers argues that Gawker is now so well entrenched that it is virtually unmovable.

“You’d have be a total fuckup to ruin that site right now,” she says. “It’s got so many links, you’re just going to have a positive growth rate.”

If the star system rankles the C-listers, it is partly because they have such a weirdly submissive relationship with A-listers. They envy them, but they need them, too, because one of the quickest ways for an unknown blog to acquire traffic is to feed scoops to an A-lister, in the hopes that the editors there will use the tip and include a thank-you link pointing back to the tipster. Even better is becoming so well loved that an A-lister puts you on his “blogroll,” a permanent list of favorite sites — the blog equivalent of Best Friends Forever. Over at Blogebrity, the gossip blog born out of the original A-/B-/C-list joke site, the writer Nick Douglas told me he’d often used another common trick: posting things about an A-lister — Gawker — to try and catch the editors’ attention.

“Any time I run something on Gawker, even if it’s a little mean, they’ll link to it and send me some traffic. They’re watching. All these bloggers are watching each other.” He laughs. “It’s a tricky balance there, because you’re trying to get a high-profile link but not be seen as a sellout. I get accused of sucking up.” (Indeed, Denton just hired Douglas to edit his new tech-gossip blog, Valleywag.) Less-sophisticated supplicants will simply e-mail an A-lister, begging to be linked to, a technique that’s about as successful as wearing a will you be my friend? T-shirt. “I’ll get these guys who start a blog and e-mail me like every single new post they put up, hoping I’ll link to it,” says Rojas. “It’s not polite! I’m like, ‘Dude, if you send me a really cool news item, I’ll totally link to you. But don’t spam me.’ “

Yet one can understand why the tiny blogs are so hungry for approval. A single mention from an A-lister can provoke “firehoses of traffic” — as John Battelle describes it — that can help pluck a neophyte blog out of obscurity. (This has even happened to me. I run a small science blog — avowedly C-list, a pure vanity project — and the times that Boing Boing or Gizmodo have linked to me, my traffic has exploded.) When Gawker linked recently to a posting at Blogebrity, it nearly tripled the smaller site’s traffic, from 1,200 visitors a day to 3,500. Even a link from a smaller, B-list blog can help a struggling newcomer. In his first two years blogging, Trent Vanegas — the 31-year-old creator of the gossip site Pink Is the New Blog — barely rated 200 visitors a day. Then in January 2005, a few medium-size New York blogs — including Ultragrrl and Thighswideshut — gave him a shout-out, and his traffic doubled. The virtuous cycle began, and today he has 1 million page views a month, VH1 is calling to use him as a commentator, and he’s fielding job offers from E! and Bravo.

“It’s crazy,” he says, laughing. “After a point, you’re like, Where are all these people coming from?

“REGULARITY AND RELENTLESSNESS,” says Arianna Huffington. “That’s how you break through the static of the 5,000-channel universe.”

In May 2005, Huffington, the political columnist and sometime candidate for California governor, started the Huffington Post, a blog where her celebrity friends post their rants about politics and culture. By the end of the year, it was clocking 18 million page views a month and had become the fifth-most-linked-to blog in the world. Its ad rates are at the top of its class, about $10 to $30 for every thousand views. With financing from a slate of investors including Ken Lerer, former executive vice-president at AOL Time Warner, the Huffington Post launched with a full-time staff of four and an office in Manhattan — and the ability to post around the clock.

Huffington also neatly intuited the importance of linking, putting scores of A-list bloggers on her blogroll, realizing they would probably return the compliment. But even more important was the sheer force of the site’s famous names — not just Huffington but the spectacle of her friends Nora Ephron and Norman Mailer blogging merrily away on her site. Mainstream media lavished attention on the site’s every move, giving ever more publicity to the venture.

Huffington showed that it was still possible to quickly move up to the top of the charts. “You think the A-list is the A-list is the A-list,” says David Sifry, the CEO of Technorati. “But I’m telling you, boy, does it shift — and does it shift fast.” Cultural winds can drive blogs in and out of favor: When Sifry founded Technorati in 2002, many of the bloggers on his top-100-most-linked list were computer geeks, such as journalist Doc Searls and programmer Dave Winer. But as blogging grew to encompass politics and pop culture, Searls dropped to No. 96 and Winer to No. 126.

What’s more, a blog is like a shark: If it stops moving, it dies. Without fresh postings every day — hell, every few minutes — even the most well-linked blog will quickly lose its audience. The A-listers cannot rest on their laurels. Federated Media owner John Battelle recently published a book on Google, and while on the book tour, he neglected his own well-trafficked blog (No. 81 on Technorati’s rankings) for several days. “And suddenly I was getting all these e-mails going, ‘If you don’t get your shit together, I’m out of here,’” he recalls. He stayed up late that night frantically adding posts. “If you start sucking,” he says, “it’s through.”

Yet the rapid rise of the Huffington Post represents a sort of death knell for the traditional blogger. The Post wasn’t some site thrown up by a smart, bored Williamsburg hipster who just happened to hit a cultural nerve. It was the product of a corporation — carefully planned, launched, and promoted. This is now the model for success: Of Technorati’s top ten blogs, nearly half were created in the same corporate fashion, part of the twin blog empires of Jason Calacanis and Nick Denton.

“The good news is that it’s still possible to create a top-ranked blog,” says Shirky. “The bad news is, the way to get into the top ten now seems to be public relations.” Just posting witty entries and hoping for traffic won’t do it. You have to actively seek out attention from the press. “That’s how they’re jump-starting the links structure. It’s not organic.” Indeed, when Huffington announced her venture and her celebrity guests, bloggers grumbled that it weirdly inverted the whole grassroots appeal of blogs. Larry David and Danielle Crittenden are hardly what you’d call outsiders to mass media.

Will professionalization turn blogging into media-as-usual? Or will the idiosyncratic voice of the lone blogger prevail? Elizabeth Spiers thinks that both statements are true. After she left Gawker, she learned about the power of the first-mover advantage the hard way, by trying to repeat her success. Last year, she spent three months launching eight media-gossip sites for Mediabistro, a career-development site for journalists. They amassed an impressive 1 million page views a month, a healthy amount, but hardly Gawker-class. Then in January, Spiers jumped back into the blog pool with a splash, announcing that she was launching her own blog empire.

When I call her, she is at her desk in her new company’s offices in Tribeca. She’s being backed by two angel investors — Carter Burden, head of the Webhosting company Logicworks, and Justin Smith, president of The Week, a news magazine. Their first blog, launching in March, will be called Dealbreaker, and devoted to Wall Street gossip. Her advertisers would be? “For Wall Street? Pretty much everybody,” she says. “It’s a high-income demographic, pretty attractive.” The start-up money lets her pay for a full-time blogging staff, which she’ll need since she wants her writers to actually do reporting and break news. And this, she argues, is the future of the professional blogosphere.

“It’ll be more like the mainstream media, really,” she adds. “Blogging is increasingly becoming a survival of the fittest — and that all boils down to who has the best content. The blogs that are going to stand out are the ones who break news and have credibility.” Plus, it can’t hurt that Wall Street scuttlebutt is one of the last truly huge unfilled niches in the Manhattan blogosphere. “This is a business, and we’ll build business infrastructure from the get-go.” The age of the blog moguls is here.

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I'm Clive Thompson, the author of Smarter Than You Think: How Technology is Changing Our Minds for the Better (Penguin Press). You can order the book now at Amazon, Barnes and Noble, Powells, Indiebound, or through your local bookstore! I'm also a contributing writer for the New York Times Magazine and a columnist for Wired magazine. Email is here or ping me via the antiquated form of AOL IM (pomeranian99).

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