Archive for Consumerist

Online Communities: Financially Dubious

Posted in Business with tags , , , , on February 12, 2009 by zolthanite

Today is a sad day.  Jalopnik is losing one of its regular weekly writers to weekends.  And it’s because of money.  This isn’t the first time this has happened on the Gawker domain.  Valleywag went from five people to a single editor merged into Gawker, Kotaku lost Maggie, Deadspin lost pretty much its entire weekend crew of good natured commenters and live-bloggers that would do posts, and god knows how many people the other domain sites had to let go.  Hell, Consumerist had to lay off all but two people, almost all of whom were rehired once they were bought by Consumers Union and left the Denton Empire.

And herein lies the problem:  The people that get axed are loved by people who only pay attention to those unique, individual voices.  Take Kotaku:  Leigh’s monthly post on culture in gaming is the only consistent source of real-world engaging, game-related articles.  Maggie would frequently bring in the study of Chinese history, cross reference posts from BrainyGamer, and actually provide some non-journo, intellectual posts.  Not to say Kotaku is bad, but they lost a fairly unique voice in a roughly homogenous group of people.  Jalopnik is no different with Murilee, who is pretty much the only source of older car articles (Down on the Street and Project Car Hell) in an otherwise modern car trend blog thing.  And now that is looking like mostly a weekend-only gig with the other editors filling in as best as Wert can manage.

The problem as I see it is this: You have a set of blogs that are only as good as the people writing them.  The strength of those sites is not the readers, its the bringing those readers together under the collective of different banners for the same goal.  The unique quality of all of these writers is the same thing that makes Top Gear special: snarky writing with a group of fairly heterogenous people who love what they do.  Everyone who watched Top Gear probably has one presenter they would totally nail for free (Although I love Clarkson, mine would probably have to be Captain Slow).  If you were to replace Hamster with Jay Leno, you would completely break Top Gear.  The fanbase would shatter, because then you’d have a guy that is pretty much an American James May, and the chemistry would be gone.  The Gawker Media sites are no different.

For celebrity gossip blogs like Gawker, the impact probably isn’t that large.  But for semi-niche enthusiast sites like Jalopnik, you have a problem.  The fanbase isn’t based on appealing to some lowest-common denominator, it’s appealing to a very specific subset of people who care about whatever is going on.  This set of people is not that large, and ripples in the pond cause major percentage changes in population, and subsequently page views.  People who live in the SFBay would read Valleywag, but it probably doesn’t matter to the average housewife.  For a financial model based on ad revenue, you are basically asking for trouble here.  You need to maintain high, daily page views, but you can’t do so without having more editors to have your readers check the site more than once daily.  More editors mean more money.  But with those editors comes new people, new voices, new contributors.  And cutting those new voices out is going to cut into the people that found that voice worth listening to.  It’s an evil Catch-22, because you ultimately need the community to grow and thrive to make money, yet you can’t do so without forking over even more money to maintain a cache of writers that appeal to as broad of a demographic as possible within your enthusiast niche.

By numbers:  Gawker Media had a round of layoffs in October, firing 19 people across all of the websites and a few internally.  Consumerist was forced to lay off half its staff, except for Ben and Meg, a month before being put on the auction block.  It was sold in January to Consumers Union, which was immediately followed by hiring another four editors, two of them coming from the prior layoff (extremely popular editors too).  The result is a fairly substantial increase in monthly page views, with February looking to at least match December’s numbers.  Contrast that with Valleywag, which fired 3 of the 5 members on staff in October, released the 4th after Thanksgiving, and merged the last with Gawker while still keeping separate stats, so as to gain the Gawker community on Valleywag for free, as it were.  Even though the numbers are ridiculously small, especially compared to the page views of the site it merged with, the impact of the merger doesn’t seem like it will affect the numbers of Valleywag all that much.

The problem of monetization is a serious one for people who YouTube, Twitter, Facebook, and run all other forms of social networking/communication-based web services: How do you get money from people talking to each other?  IMVU is doing a fairly good job at that, but it isn’t reliant on ad revenue.  Facebook, as much as any other website, is completely unsustainable without having a massive user base to pull ad revenue from, and all it needs to do is have more people add more friends who will use it.  If you’re Gawker, you have the same problem as Facebook, but now you need to bring people in.  And that takes much more money than you’re probably going to get for some of the audiences you would be trying to attract.

Will Gawker go down in flames?  Hardly.  The websites are (supposed to be) largely self-sustaining, so that wouldn’t be too much of a problem.  But when it comes to large-scale growth, the current city-state model probably won’t allow such a thing to happen in a meaningful amount of time.  And that is a problem, because Gawker Media is a business, it is expected to grow, and it probably won’t be able to do it effectively.