Saturday, January 31, 2015

The Brutal Economics of Blogging

I've found that much of the advice about how to make money blogging suffers from survivorship bias.

I was surprised to read that Andrew Sullivan was closing down his blog and subscription service, as his site was apparently making a lot of money. By a lot I mean enough to have three employees, i.e. a lot in sole proprietor terms, but not in tech start-up terms, where young guys sell their ventures for $26 million and then go back to college because they want to play soccer on a college squad.

This was one story I overheard while waiting for a BART train the other evening; the fellow was relating his excitement at meeting this young tech guru who'd just sold his start-up for $26 million. The BART commuter was confident this young guru would be able to help him launch his own start-up.

A bicyclist who boarded our car at the next stop was carrying a copy of The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses which is something of a bible for youthful entrepreneurs seeking to cash in on the tech gold rush.

The tech gold rush offers about the same odds as the Yukon and California gold rushes in the 19th century. 100,000 strivers with little knowledge of what they were getting into headed out to grab some of that gold, and a mere handful found enough gold and kept enough of it to live large in San Francisco or back east.

The advantage of the tech gold rush is it's a lot easier, cleaner and safer to sleep on a sofa in San Francisco and code your dreams on a laptop than it was to clamber up mountains, dig the ore out of hard rock with a pick and avoid getting shot in the back if you did strike a vein of gold.

The problem with finding gold is that much of the process boils down to luck and being first. Those who stumbled on the easy wealth could write an account of how they located the gold, but the account would not be as useful to those coming after as we might imagine, due to survivorship bias, a topic I've covered several times: The Unknown Unknowns and Survivor Bias (June 15, 2013)

Blogging, on the other hand, holds little prospect for wealth on the scale of $26 million. In fact, some bloggers can't even afford an office or a cubicle--they have to work outdoors. Some of these poor devils can't even afford a shirt on their back. Yes, blogging is a brutal business; look at this wretch, stripped to the waist and tapping out some foolishness:

OK, so your heart isn't bleeding for this shirtless fool (actually, me).

Tongue-in-cheek aside, blogging is not on anyone's list of get-rich-quick schemes. The primary revenue streams are adverts, affiliate sales, direct sales and subscriptions. Even sites with audiences in the millions that are going full bore on all these fronts might generate $50,000 a month or more--very substantial over time but not $26 million.

The average income-producing blog generates a few hundred or perhaps a few thousand dollars a month for the writer/owner, roughly (so I've read) 1% of the site's page views: by this rule of thumb, 40,000 page views/month = $400 in revenue.

I have no idea if this is accurate, but I reckon it's a fair description of the long tail distribution of blogging income: a few sites collect most of the revenue, and the rest is distributed over thousands of blogs with smaller audiences.

I've found that much of the advice about how to make money blogging suffers from survivorship bias: a new writer could follow all the advice and not generate the income that was supposed to result from doing all the things that presumably created success.

I don't presume to know what makes a blog acquire an audience, but if pressed I would offer these six quotes as potentially useful guidelines:

"You do not merely want to be considered just the best of the best. You want to be considered the only one who does what you do.” (Jerry Garcia)

"He who will not risk cannot win." (John Paul Jones)

"All fixed set patterns are incapable of adaptability or pliability. The truth is outside of all fixed patterns." (Bruce Lee)

"It is not the strongest of the species that survives, nor the most intelligent, but the ones most adaptable to change." (Charles Darwin)

"Success consists of going from failure to failure without loss of enthusiasm." (Winston Churchill)

"We must believe in luck. For how else can we explain the success of those we don't like?" (Jean Cocteau) 

Get a Job, Build a Real Career and Defy a Bewildering Economy(Kindle, $9.95)(print, $20)
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Are you like me? Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible. And like most of you, the way I've moved toward my goal has always hinged not just on having a job but a career.

You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.

Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.

So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.

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I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.

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"I want to thank you for creating your book Get a Job, Build a Real Career and Defy a Bewildering Economy. It is rare to find a person with a mind like yours, who can take a holistic systems view of things without being captured by specific perspectives or agendas. Your contribution to humanity is much appreciated."
Laura Y.

Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 

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