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“Revenue share blows”, says Andy Hagans. Here’s 5 good reasons why it doesn’t.

By Barry Bell on April 9 2006

Andy Hagans from BizNicheMedia has spoken about the first nine months of his spam… um, I mean ‘niche’ blog network.

Through our often stupid mistakes, the occasional lucky break, and a great many man-hours we have learned a great deal about what it means to run a blog network.

Ho hum. Lots (and lots) of stating the obvious ensues. However, one point that really stuck out was this one…

…we have adopted a bonus structure which adequately encourages writers to continually push themselves towards improvements. [note- we still don't do rev-share... in our opinion that model blows.]

Revenue share blows, huh? I don’t agree. And here’s why…

1) The revenue share model allows networks to grow, who wouldn’t otherwise have the chance.

If you’re planning on starting a blog network, the chances are that you don’t have buckets of cash to throw at writers. It’s also more likely than not that you’ll have a hard time getting angel or VC money behind you, because the pure content business has always been a risky investment – especially when you’re driving a start-up content business. So therefore, for the first 6-12 months – while you’re building up an attractive platform for advertisers, you’re not going to be able to pay your writers in the traditional manner.

So what’s the alternative? Yep. A share of all revenue. True, it won’t be for everyone, but I bet you’ll find some good writers who are willing to take a chance on you. And anyway, you can start paying as soon as you start selling ad space. And in many cases, that amount you do pay could be more than the amount your writers would pick up via traditional payment models.

So, a revenue share model removes the biggest start-up barrier a network has – staff costs.

2) The revenue share model encourages – and rewards – a passion for a subject.

If a writer knows that the more they put in, the more they get out, then it stands to reason that they’ll put much more effort in. That’s easy when your writers are passionate about a topic, and again, the rewards can potentially be much higher than what you’d expect from a pay-per-post model.

3) The revenue share model focuses on quality, not quantity.

The general consensus on monetising content is that quality counts, not quantity. As Hagans says above, the days of spam content being lucrative are numbered. With a pay- per-post model, you might find that your writers will jack up the volume and frequency of posting, simply because they know that their earnings will be higher. It means you need a robust quality checking system in place to ensure you hit any quality standards you set for the network.

With a revenue share model, your writers will know that their earnings will depend on the sustained quality of the content they create.

4) The revenue share model can still offer a bonus structure.

How about an increased percentage share each month if a certain number of posts are achieved? Or, if a traffic target is met? Or if a higher Technorati ranking is achieved? Or if the blog is linked by an A-lister (ack!)? The potential is definitely there.

5) The revenue share model reduces the risk.

After 9 months, BizNicheMedia is close to breaking even, and in a few months will probably cut a profit. On the other hand, the wurk network – which offers a revenue model – has never been anything but profitable.

Now, I’m not talking huge numbers here, but during the first six months, wurk has never had a loss-making month – and it probably never will, either. The only physical expense has been hosting (the other big expense is time, but it’s my own, and not chargeable just yet), and the small amount of advertising across the network has adequately covered that.

Currently, each of the wurk writers keep 100% of their Adsense earnings, together with $50 of any further revenue from the blog they write. The next couple of months will see two or three further initiatives come into play across the network which should bump up blog-specific revenue a lot.

And yes, there have been a few writers who have left the network, or who have chosen not to join, simply because of the initial lack of revenue – and if you’re going for a revenue share model, they you have to expect that. You’ll also need to consider that building up the business may be slower than if you were burning cash, but that’s just another (not insurmountable) trade-off.

But what you’ll find is that the guys who stick around will benefit much more in the long term from spending a few short months building up a strong brand, than they would have done if they’d picked up $5 a time writing a handful of lightweight, throwaway posts each week.

The result: virtually no financial risk to anyone.

So a revenue share model is a good idea then?

Definitely – it’s a fantastic way to get off the ground if you’re on a tight budget, and you’re lucky enough (as I was) to find some great people to work with. And as I said, it removes the biggest barrier to starting a content network – the initial cost.

It’s working for me, make no mistake. And contrary to Monsieur Hagans, I can honestly say that it doesn’t blow at all.

And no, it doesn’t suck, either.

Contributor: Barry Bell

I'm a freelance writer and designer with over 10 years’ experience of creating award-winning recruitment and consumer marketing communications, together with a wide range of other creative marketing colateral. ... more »

WURK profile: http://WURK/profile/admin
Contributor website: http://barrybell.com

COMMENTS

By John Evans (Syntagma)
April 10, 2006 7:46 am

Barry, I agree with that assessment. At Syntagma we use a mix of high revenue share (75%), with bonuses for good effort in the early stages of a blog, plus a 10% return on any sale price, should the network get sold. The latter sets the blogger’s sights to a longer-term perspective than just this month’s paycheck.

It has to work in context, though. The network has to have a cohesion obvious to all, especially advertisers. Fizzing out in all directions is just daft and leads to chaos.

I see b5media is looking for VC finance. This now limits them to either selling up or going public at some stage. It will probably mean an expensive CEO — an Eric Schmidt character — who will have to be paid for, and an expectation of 40% return on capital invested. I’m not sure they’re ready for that at this stage. I hope I’m wrong.

Yep, good piece. It helps to keep the basic message in focus.
By Barry Bell
April 10, 2006 10:13 am

Yep, I saw the b5media thing. I don’t have any personal experience of VC funding, but from gut feeling, and based on advice I’ve been given, I don’t think that they’ll find it at all easy to land VC cash.

As someone else pointed out, there’s no real ‘banker’ property like Engadget – b5 is just a huge collection of much smaller titles with limited, and pretty segregated, advertising revenue potential. I think VCs will consider it a bit risky if their whole model rests on ad revenue.

Dunno, though. I have a sneaky feeling that they’re already halfway to doing a deal. Why would Jeremy announce something like that if there wasn’t already something on the table.

I wouldn’t. ;o)
By John Evans (Syntagma)
April 10, 2006 10:30 am

He didn’t really announce it, though. It sort of crept in as part of a post on a Toronto conference on his personal blog. There was no Jeremy-style whizz-bangery. My gut feeling is that they’re struggling to pay their 70-odd bloggers and costs are beginning to run away from them.
By Barry Bell
April 10, 2006 10:42 am

Well, mentioning it twice in one post is enough of an announcement for me. ;o))

Interesting you should say that about struggling to pay their bloggers though. I was thinking along the same lines, albeit from the point of view that maybe some of the bloggers are getting restless because the anticipated revenue share isn’t coming through.

Did they overpromise on revenue, I wonder?
By John Evans (Syntagma)
April 10, 2006 10:49 am

Well, if $500 a month after six months is overpromising, it’s more underperforming. I’m aiming at $750 at nine months, but only certain blogs will reach that: i.e. digital cameras, sailing tackle, specific high-end product areas. Blogs based around TV shows will just fade away as the show comes off air. It’s not a sustainable model.
By Barry Bell
April 10, 2006 10:56 am

Totally agree. I’ve been thinking that some of those topics are questionable at best, but I guess they had their reasons.

Incidentally, was the $500 a month the total rev for each blog, or the blogger’s share of the rev?
By John Evans (Syntagma)
April 10, 2006 11:06 am

It was an aspiration for bloggers within a reasonable timeframe which I would put at six months. It’s definitely reachable, but needs the cooperation of a range of advertisers, which doesn’t seem to have materialized. Contextual ads are not going to deliver that regularly on the vast majority of blogs under 18 months old.

They desperately need a big blog, owned by the business, that can subsidise the newbies with bonuses for a year. But even Problogger is a slim earner for its traffic levels and remains under Darren’s ownership. Hard to see where they go from here.
By Barry Bell
April 10, 2006 11:14 am

Yep, but those ‘big blogs’ are more elusive than ever now. You can’t just create one out of thin air like you could 24 months ago. ;o)

I think a key thing to manage is the writer’s expectations of what they’re going to get out of it. If they’re only spending an hour or two a week putting entries together then they can’t expect huge returns on their efforts. If they’re writing like the clappers then they also need to know that an acceptable level of revenue won’t happen overnight, either – just as if they were going it alone.
By John Evans (Syntagma)
April 10, 2006 11:21 am

Agreed. If I were them, I’d weed out the unproductive blogs and bloggers, cut down the undergrowth of frothy topics, and set to work to cultivate a range of unspectacular blogs in tight, boring product areas known to deliver value over time. These would be the cash cows of the business and would eventually subsidise the new entrants. Running a network on “bloggers passions” and “community” is just running it on empty.
By Barry Bell
April 10, 2006 1:11 pm

That would be the sensible thing to do. But I remember reading at the start about how b5media wanted to be the biggest blog network in the world, and I get the feeling that lots of these blogs are simply padding to boost the numbers. A 100 strong network sounds more impressive than a 50 strong network, even if half of your blogs aren’t pulling their weight in terms of revenue.

Maybe they’re simply chasing that ‘biggest’ title?
By John Evans (Syntagma)
April 10, 2006 1:20 pm

They won’t be the first, Barry.

Jeremy’s refusing to talk about it over on Syntagma, and he denies they need the money.
By Jeremy Wright
April 10, 2006 2:48 pm

I’m a little surprised, John, that you’d bandy about internal figures on profit expectations, since those were shared under a non-disclosure agreement. Really, really surprised actually.

Second, we have no cash-flow problems. Quite the opposite in fact. If we were a public company, the auditors would be happy to sign off on that.

On the blog front, we launch blogs for one reason and one reason only: a writer is passionate about it and is *asking* to write the blog. If that passion stays, the blog stays. We have always maintained that we would launch blogs even if we felt they wouldn’t generate income or traffic.

As far as writer’s expectations and “not” meeting the 500$/month mark… We’re only 6 months old. How many blogs could we possibly have missed this mark on? Seriously.

Again, we’re not even seeking funding. Opportunities became available, and we’ll pursue those opportunities. If they don’t happen, we’ll still succeed, we’ll still grow, writers will still get paid, new tech will still get launched.
By John Evans (Syntagma)
April 10, 2006 2:59 pm

Jeremy, “an aspiration” to pay $500/month “in a reasonable timeframe”, which “I would put at six months”, is scarcely betraying an NDA. I also said that “it was reachable”, and that my own assumptions are for $750/month in nine months for some blogs.

I was not quoting directly from your accounts and, as I remember, a lot of this went out on b5media.com in the early days. I’m merely discussing general ideas about blog networks, including my own, in the light of your posting.

My point about “passion” etc is my own value judgement, which I’m entitled to hold. I still hold fond memories of b5 and particularly of the founders. I wish you every success. But a half announcement is worse than a frank one, because everyone thinks you’re hiding something, and will discuss it.
By Barry Bell
April 10, 2006 2:59 pm

And that, people, is how rumours start! ;o))

Heya Jeremy – when you say “we would launch blogs even if we felt they wouldn’t generate income or traffic”, how can you integrate that sentiment into a solid business plan?

And I know you’ve said that you’re not actively looking for funding right now, but don’t you think that sentiment might turn a potential investor off in the future?

Why would someone want to pump cash into a company who would launch online products that “wouldn’t generate income or traffic”?

Just thinking out aloud.

B
By Jeremy Wright
April 10, 2006 3:07 pm

John: The 500$ figure was never publicly posted. Also, I find it completely inappropriate that you would attack our model without disclosing that you’re in direct competition with us, while offering commentary. That strikes me as odd. Especially when mixed with your hyperbole.

Barry: Sure it could turn an investor off. But it would likely turn off the kind of investor interested in a quick return. Which, if that’s their only focus, isn’t the kind of investor we’re interested in.

Note: Response seriously edited, so I don’t “get into” this ;-)
By Jeremy Wright
April 10, 2006 3:10 pm

ps: I’m well aware that I didn’t answer your core question Barry. I’d be happy to tackle that as part of a separate discussion on b5 and our strategy, I just feel it’s a little out of place as part of a thread on revenue sharing.
By John Evans (Syntagma)
April 10, 2006 3:17 pm

Jeremy, as I keep repeating, I’m not in competition with you. My blogs are very different from your’s. It’s only in the Microsoft area that we have similar blogs, and I left behind at b5 a PR7 Vista blog which I started from scratch — 6 months work.

The $500 figure is pretty general around the space. As I remember, your figure was $200-$500, so my “disclosure” flattered b5 a bit.

Let’s not be silly about this. The blogosphere is about conversations. Those of us in the network business will discuss other folk’s aspirations. If someone gets defensive, we assume the worst. Put up your spinnaker, Jeremy, that always signifies an optimistic attitude :-)
By Jeremy Wright
April 10, 2006 3:24 pm

John, when you compare and contrast one model as based on a solid foundation and another as frizzy, that makes you a competitor. The size of the space, and differences in approach, don’t change that.

This is the end of my conversation with you on this John. If you can’t see that you’re spreading rumors (out of funds?), mis-characterizing things (“frizzy” and “unfocussed”?) and offering opinions on a competitor without any disclosure whatsoever, then that’s your bag – not mine.

All the best John, in your radically different, totally uncompetitive venture that uses the same tech, practically the same model, and many of the same authors.
By John Evans (Syntagma)
April 10, 2006 3:27 pm

Ha ha, nice reprise, Jeremy. Have you ever thought of a fencing blog? :-)
By Martin
April 12, 2006 7:32 am

Geez, Jeremy … I don’t quite understand the defensive attitude over this “conversation” – seem totally out of character.

The discussion is about blog network business models. Questions are being discussed about b5’s model – which in my view isn’t very strong, and your comments here show that you are struggling with settling in on a good model – (“We have always maintained that we would launch blogs even if we felt they wouldn’t generate income or traffic.”)

The fact is you have no marquee blog and it would appear from an outsiders view that instead you’re going down that quantity road – biggest blog network etc..

You should sit back and take note of the discussion going on rather than fanning the flames with a shitty attitude.

Just my 2 cents – hint: bloggers are notorious for giving their 2 cents worth ;-)