Unless you have been off the grid all of last week, you are probably aware that AOL has purchased the Huffington Post for $315 million in cash and stock.
Nate Silver, of fivethirtyeight.com fame, provides his usual excellent analysis in a post on his New York Times blog discussing both the deal and the economics of blogging.
Of particular interest is Silver’s discussion of the difference between HuffPo articles (which it pays for) and blog posts (which it does not pay for). When the AOL-Huffington Post deal was announced last week, there was some discontent among the (unpaid) HuffPo bloggers, who felt as though Ariana Huffington had just made $315 million on the strength of their writings.
Not so, says Silver. Using the available data on the HuffPo’s page views and assuming that comments on articles and blog posts are correlated with the number of page views, Silver convincingly makes the case that the HuffPo’s traffic is largely driven by the articles, and not by the blog posts, in which case the HuffPo’s unpaid bloggers do not have much of a case. And if my own experience is indicative of anything, of the 48 RSS feeds in my Google Reader, none of them are HuffPo blogs (and I’ve stopped following the HuffPo on Twitter because I felt it was increasingly becoming an online version of People or Us Weekly).
Of interest to the students in my law and economics seminar, Silver also discusses ways in which Arianna Huffington could have remunerated the bloggers on her site. A small flat fee (say, $10 per month), he says, would have led to an adverse selection problem because it would have only drawn bloggers worth $10 per month or less. A revenue-sharing scheme (say, $0.10 per page view) would have eliminated the adverse selection problem, and Silver identifies it as a potential vulnerability of the HuffPo’s model.
Silver also discusses the choice of platform for would-be bloggers and offers very good advice:
“I’ve also done a fair amount of uncompensated or undercompensated writing — there is certainly a time and a place for it, particularly if you’re trying to establish or re-establish your brand. But look beyond a site’s traffic numbers and consider how it presents your material and how prominently it is featured, as well as the sort of audience it is likely to attract. Being a small fish in a very, very big pond isn’t always the way to build up a name for yourself, much less to make money from it.”
For what it’s worth, this is why I chose not to put this blog on Blogger and decided to have my own domain name. It required a bit more effort, but at least I have something which, successful or not, is entirely mine.