The article, defensively titled "Yes, some blogs are profitable -- very profitable," focuses on TechCrunch, a blog site run by Michael Arrington that covers the startup scene in Silicon Valley.
TechCrunch generates $240,000 in revenues from advertising, chirps Sam Zuckerman, "reporter" with the Chronicle (was it Bring Your Kid to Work Day?). "Most important of all, TechCrunch is in the black," he gushes.
Wow. A profitable online tech publishing business? Making almost a quarter of a million dollars a month? Really? I guess the rest of us should just pack up and go home, because from the way this article is written you would think Michael Arrington has cracked the secret to successful online publishing -- perhaps even the secret to eternal youth.
Apparently it's too much to expect the Chronicle to provide a little perspective on these facts, so let's insert some of our own. Assuming that TechCrunch is really making $240,000 a month (as a private company there's no way to tell, other than to take Arrington's word for it... Go on, you first) that amounts to $2.88 million a year. Less than $3 million. From a company that's been around for three years.
In comparison, Light Reading, the company I co-founded in 2000, made $6.5 million in its third year, covering one industry (telecom) that was in freefall, as part of another (Internet publishing) that had just been through a total meltdown. And we were profitable from day one.
After staff, Web hosting, other expenses, and taxes, the money left from that $3 million obviously makes a nice living for Mr. Arrington. But this is hardly big business. For technology publishers (a.k.a. "businesses") like CMP, IDG, or Ziff, it's a teeny weeny amount of money. And for mega corporations like UBM (the company that owns CMP) it doesn't even move the needle.
The really noteworthy thing about TechCrunch is not how much money it makes, but how little, and also the fact that the blog-based publishing market as a whole is so pathetically feeble that this profitable company making a couple of million buckeroos a year is held up as some sort of miracle of Web publishing.
TechCrunch, its revenues, and the SF Chronicle's article are all facets of the thunderous storm of bloviation hovering over Web 2.0.
Addendum:
When did the San Francisco Chronicle become such a dire newspaper? Great American cities are supposed to have great American newspapers. Hell, even some of the not-so-great American cities have great newspapers. But the Chronicle is absolute crap -- a potpourri of syndicated spume, and poorly researched, style-challenged, typing (not writing). I suspect the reason the SFC can continue to churn out this garbage is that many of its newer citizens work in the Web 2.0 startups and are all too eager to guzzle at the spigot of unfiltered Web 2.0 hype.
hmm... but where in the SFGate article (or my comments), does someone declare "TechCrunch is better than [insert fave bigger publisher here]"? isn't the article just pointing out that even though companies based around blogs are much derided by traditional publishers for their lack of money-making business sense, some actually do make money?
the SFGate article seems to point out that TechCrunch is actually diversifying it's revenue model much as Light Reading did (carefully growing advertising, then events, then attempts at sustainable micro-revenue streams like paid job listings). is TechCrunch unique in walking down this path? um, no, but that doesn't mean there's nothing to admire there.
i think the most important thing that successful online publishers (like Light Reading) have done is diversify and maximize revenue appropriately as their initial businesses mature. super-high-traffic can definitely provide the basis for anyone to be initially "successful" on the Internet, but succeeding after that initial shine has rubbed off is the nut.
folks who declare TechCruch to be the bestest money-making idea ever are obviously dolts. it's remarkable that so many Internet businesses have failed to use common sense as they grow. but it looks like TechCrunch (so far at least) is keeping its head as it grows. if they announce tomorrow that they've taken over sponsorship of the Goodyear blimp, i'll eat my words. in any case, it will be interesting to watch whether they can scale their business up as they mature.
It's definitely a success, for one person. But the issue is the scale of that success, and, in turn, its scalability.
It's small -- tiny, actually. No getting away from it.
The business model is very different to Light Reading's -- we employed a diversified revenue model based on everything from research to Webinars to video to live events, all wrapped around (spawned by) ultra high value proprietary content written by editors and analysts. Techcrunch is blogs n' wee conferences. And that's it.
Big difference, and goes to the lack of scalability and revenue.
i'd have to agree with srwellman1. the devil for this story really is in the details... it looks like TechCrunch does have an office... if they really only have 8 employees, even some pretty conservative guesses about expenses for their normal operations (salary, rent, benefits [although maybe they don't offer them... many startups i know - ahem - don't offer those in the early days], snacks, fancy chairs, etc.) plus a few hundred large for setting up events, throwing parties, etc. leaves my estimated balance sheet with over $1 million in profit.
while that's not massive on any large business's scale, none of them would kick it out of bed if it was a stable revenue (and profit) stream.
for the much ballyhooed but rarely ducat-growing blogosphere, that sounds like financial success. given that weblogs started as an outlet for folks to write about their personal interests (be that comic books, celebrity gossip, knitting, or tech companies), i think that hitting that sort of revenue (again, if it's real and stable and isn't predicated on a ginormous marketing budget) is impressive for a company that started just under 2 and a half years ago.
if there's a business model here (again, there aren't enough details from the SFGate article to know if there are) and Time Warner doesn't start trying to buy companies like TechCrunch for hundreds of millions of dollars (ruining that model and spawning tons of useless imitators), it seems this model could be applied to lots of topics and lead to a nice little cottage industry of folks covering niche topics in ways that major publishing companies can't or won't. isn't the point here that there's the potential for hundreds of little companies pulling in this kind of revenue vs. a few giant companies pulling tons of money, losing focus, and leaving readers to find something new again.
i think that's pretty cool.
p.s. - what little bit of information the SFGate article has about the "business model" in question actually sounds a lot like the aforementioned Light Reading's model.
If you drill down on TechCrunch, I think it looks a little more interesting inside.
Now, I am willing to bet that they do not pay more than $10,000 a month for Web hosting. I suspect they pay less than $10,000 a year for the blog software license and the rest of their online software.
Since Federated Media handles all their ad fullfilment -- well, I suspect Arrington does a far amount as well -- they do not have to worry about an ad sales team.
They use Feedburner for their RSS and e-mail newsletter fulfillment, so zippo for newsletters and marketing e-mails. They use the power of their dedicated audience, RSS, and search to generate their traffic. They also use the blog itself to promote all their live events and other goings on.
If you also factor in that TechCrunch only has 8 full-time employees -- with the majority of that cash going to Arrington -- and that they appear to be a virtual company with their bloggers working from home or the road -- that's very very little overhead.
So $240k a month with few expenses split over just eight full-time employees, no bad. Considering they outperform online sites in terms of traffic with three and four times their staffing, it's impressive. Is it collosal? No, but it is not a bad business.
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