Are Blogs Truly Competitive With the Mainstream Media in Terms of Quality of Content?
A very interesting article was published in Crain's New York this morning, both in print and online, titled Prophet of doom. The article was about blogs, and the potential for them to raise capital and compete with the mainstream media. There's also a picture of a devilishly handsome, charismatic, and outright cute blogger there as well.
Here are a few excerpts, combined with my usual commentary...
Mr. Middleton's Boom Bust Blog forecast with stunning accuracy the demise of such real estate bubble blowups as Bear Stearns and mall operator General Growth Properties... Now he's embarking on his next project: Turning his blogging hobby into a full-fledged investment research business, a firm where he says investors will get "realistic" insights as opposed to Wall Street puffery. Mr. Middleton plans to start petitioning venture capital firms, private equity players and established media companies in the coming weeks.
Yes, it's official. I'm going to start building the blog out into something much bigger, more in depth, and more accessible.
"His work is so detailed, so accurate, it's among the best in the world," says Eric Sprott, CEO of Sprott Asset Management, a Toronto firm that manages about $5 billion and subscribes to Mr. Middleton's research. Well, thank you Mr. Sprott! I owe you a good bottle of wine for that one! For those that don't follow Eric Sprott's commentary (or his investment record), this accomplished man tells it like it is. He was just on CNBC and rang the closing bell last week.
Finding investors won't be easy, though. A few bloggers have landed backers recently, including Footnoted.org, acquired by investment research firm Morningstar, and Gothamist.com, by Cablevision. But most media concerns and venture capitalists have steered clear. Many blogs' revenues are scant, with few opportunities to grow and churn out the $10 million to $15 million in revenues that venture capitalists want. "The climate for blogs is almost always lousy," says Roger Ehrenberg, founder of IA Capital Partners, which has invested in BlogTalkRadio and BusinessInsider.com. Many blogs don't generate profits or have a clear or sustainable business model. I plan to be different (then again, I suppose so does everybody else). For one, I realize the folly of attempting to run a business on advertising revenue (notice there are no ads on BoomBustBlog). I also believe (actually, I know for a fact) that people and institutions are willing to pay for real, truly in depth analytical content. This is where the mainstream media is failing. When the paradigm shift into distributed computing and the resultant frictionless media model occurred, the mainstream media fought it instead of embracing it. A typical old school reaction. As was inevitable, it was a fight that they were destined to lose. As they saw they weren't winning, the MSM pared back the resources in its press room, slimming or eliminating investigative journalism and in house expertise at the very time when they should have been adding to, and building up those resources. Long story short, they gutted their profit engines when they were most needed. Now, they are starving from trying to subsist off of volatile and diminishing ad revenue models, while at the same time throwing their arms up in bewilderment at their inability to charge directly for content. The reason why most of the MSM can't charge for content on the web is not because content is given away for free. It is because much of the content is not worth paying for. Instead of breaking truly original, groundbreaking stories born from vigorous investigative journalism, media entities are repackaging AP and Reuters content. Instead of thorough rigorous analysis of the issues, media entities are serving as the mouthpieces of special interest groups, simply distributing soundbites and media clips toting the party line. While the public seems to consume that fodder en masse, those with two synapses close enough to carry a spark will not pay for it. It is that very same proximal synapse crowd that you should be targeting with real meat, and it is that very same crowd that will cough up a few pennies to consume your content. And no, it is not available for free over the Web. It is too expensive to produce, and too valuable to have, to be disseminated as freely as the latest review of "Dancing with the Stars". Until the MSM get's it, they will continue to be eaten by the Web while sticking their forks into the carcass of the rotting ad model, instead of feasting off of the ability to reach more people, more inexpensively than ever before. The key is that once you do reach them, you have to have something worthwhile to offer!
Such words fail to discourage Mr. Middleton, even though his bearish blog faces other challenges as the stock market recovers. Traffic is only a quarter of its 2008 high, according to Quantcast research. Mr. Middleton blames the drop on fad-chasing investors jumping on the bullish bandwagon, and insists his remaining audience is loyal and sophisticated. Well, while no one actually wants less traffic, I now have a much higher quality of traffic. In addition, traffic means a lot less to my business model. I am not reliant on ad revenues and eyeballs, thus who comes by is much more important to me than how many people come by. Unbeknownst to many on the blog, your fellow commenters, subscribers and readers include many of the swifter members of Congress and the Senate, strategy and prop desks from the largest global banks (yes, the very same ones that I am so hard on, no one gets cut a break here - even subscribers), analysts from prominent central banks (I'm not going to mention which ones, I'll let you guess), and some very bright family office and investment managers such as Mr. Sprott and Mr. Riley quoted above. Some of the retail investors from a year or two ago confused me with James Cramer, looking for hot tips and trading advice in lieu of deep analytical research. Hey, Cramer has is place in the investing world, it is just that we don't share the same space. The positive news is that traffic is building back up, and is building with a prime audience. On the subject of traffic, I very recently realized that I was shooting myself in the foot by not have nearly as optimized a site as I could have, hence offering traffic that I should have received to other sites that would syndicate my content. It is being rectified, along with a heavy dose of cell phone and portable device friendly interfaces and complete integration with the social media favorites, Twitter, Linkedin and Facebook. Let me know how the stuff is working.