Update 2: Felix now has his own response to Blodget’s tirade, in which he makes many of the same points that I tried to make, including:
Blodget should remind himself on a daily basis that publishers make money by selling readers, not adspace, and that if he’s going to make money, he’s going to have to do so by getting high-value readers that companies want to reach. At the moment, both Blodget and his advertisers are stuck in an increasingly out-of-date paradigm wherein pageviews serve as a proxy for readers, but today, unless you’re Demand Media or the like, that paradigm is doomed.
Update: Elizabeth Spiers, founding editor of Gawker, has come out in favour of Henry Blodget on this one. As she puts it in her Tumblr post:
I don’t agree with everything Henry Blodget has been saying, but between Blodget and Felix Salmon, Blodget sounds like someone who runs/has run a new media business before and Felix sounds like someone who’s never been anywhere near the business side.
She also said that while Felix was a “smart and agile writer,” she thought he was “very naive about the granular economics of an online biz.” In case anyone is keeping score, that makes one Gawker founder and one former Gawker editor on Blodget’s side.
Not content to respond to Felix just once, meanwhile, Henry has responded a second time in this post. Among other things, he says that Salmon’s criticism is unfair because “We’re publishing a huge amount of content that is exactly what this particular critic thinks we should be producing — long, text-heavy analysis, original reporting, and commentary.” And he says he loves slideshows.
Interestingly enough — once again reinforcing his argument about the economics of online publishing — Blodget’s post doesn’t have a URL packed with keywords, but it does have another money-making feature (one I personally loathe): double-underlined pseudo-hyperlinks under certain words that trigger popup advertising windows from a company called Kontera (this kind of gimmick isn’t specific to new media entities, incidentally; the paper I used to work for uses them all the time as well, although I did my best to eradicate them from the website).
Original post: There’s a certain sense of the Roman Coliseum to a good Twitter fight, which typically features two combatants (although others can throw in comments from the sidelines) and an invisible mass of spectators, taking in every uppercut or knife gash and cheering the participants on. Plenty of people crowded around on Friday when a Twitter fight started brewing between Henry Blodget, founder/editor of The Business Insider network of blogs, and Reuters media writer Felix Salmon, and the resulting skirmish was written up by Vanity Fair magazine and The Atlantic, who called it an “epic Twitter tussle” (although Choire Sicha dismissed it as a “snippy little girl-spat”). But beneath the sniping and 140-character witticisms was a real question: What does a successful online media business model look like?
Salmon appears to have started it with a tweet mentioning @hblodget’s business model thus: “Take a story about M&A fees associated with AIG. Illustrate with 2 hot babes kissing. http://bit.ly/dexECw.” (Salmon also took a shot at Blodget and his business model after Blodget fired former Clusterstock editor John Carney). For the full back-and-forth, you can check out the post that Blodget later wrote summarizing his view of the debate (just to rub it in, he turned the back-and-forth tweetstream into a slideshow). During the skirmish, Gawker Media head honcho Nick Denton even waded in with a tweet, saying: “Of course @felixsalmon has such animus to commercial web media: the online audience is so measurable and his so small.”
Blodget’s response itself is like a microcosm of his argument: a careful reader will notice that he stuffed as many potential keywords as he could into the URL of the piece, which uses his name, the word “furious,” the word “attack,” the name of the blog and the term “twitter” (check out this TMZ link on Corey Haim for another example). Both of those features — the slideshow and the URL stuffing — are designed to build traffic, either by boosting pageviews (slideshow) or by improving the likelihood that someone might find the post by searching, or that it would turn up in an aggregator such as Techmeme (in other words, search-engine optimization). So even with his summary of the debate, Blodget was making a point: as far as Business Insider is concerned, pageviews rule.
Salmon also wrote about the Twitter debate, but he stuck to the business issues behind what he was arguing about: namely, whether the model defended by Blodget makes any sense or not. That defence came in a stream of tweets following Blodget’s debate with Salmon, in which he tried to explain how online media works. In a nutshell, he said, such businesses live or die based on CPMs (cost per thousand, the price paid by advertisers per thousand pageviews). If a writer is paid $60,000, Blodget argues, then they have to generate 1.8M pageviews just to pay their salary at a $10 CPM. Hence, presumably, the slideshows and girls kissing.
Salmon argues that this model would work if the site charged the full rate for its ads, but says Business Insider (like many sites) discounts its rates in order to fill all of its pages — for which he blames the ad-sales staff. But is that fair? Not really. For one thing, lots of sites discount from their published “rate card.” But the reality is also that there is so much inventory on the Web that it’s virtually impossible to sell it all, and there is more being produced every day, thanks to places like Demand Media and Associated Content (the latter produces several thousand new pieces of content every *day*). That’s just one reason why relying solely on a bog-standard pageview/CPM-based model is an inherently flawed model.
Later, however, Felix nails it when he says that there are other monetization strategies that can apply apart from just advertising, including “syndication, conferences, stock indices, e-commerce, brand franchising opportunities, wine clubs… you name it.” Of course, there’s also the monetization strategy of selling dedicated terminals with financial data to traders, brokers and bankers, which — as Blodget notes in a tweet — is part of what pays Salmon’s salary. That’s about as old media as a business model can get, and Reuters (like Bloomberg and virtually every other traditional media entity) is also having to confront the disruption of its business model by the Web.
So what are smart online media outlets doing? Two things: One is focusing on building businesses such as conferences and events, as well as subscription-based, proprietary content (something Business Insider is also experimenting with). The other — and this is what I think Salmon was driving at — is thinking about traffic and pageviews in a different way. Not all pageviews are the same, and as a result not all CPMs are the same. Does forcing readers to click through multiple pages to view a slideshow add any real value? No. This is the digital equivalent of newspapers throwing extra copies into a ravine (or dumping them at a taxi stand) to boost circulation.
At some point, online publishers have to decide whether they are pursuing a lowest common denominator strategy of raw pageviews at some bargain-basement, remnant-priced CPM, or a higher-value strategy that focuses on building relationships with readers around content and enhancing that relationship in as many ways as possible. Felix (in Blodget’s view at least) may have the luxury of the Reuters infrastructure and terminal business behind him, but that doesn’t make what he’s saying any less accurate. And I think one of the reasons Henry reacted the way he did is that he knows Salmon is right.