Thursday, March 27, 2008

Are Blogs Over- or Under-Valued?

An article by 24/7 Wall St is making the rounds through cyber circles today in which it uses several metrics to try and estimate the value of the most popular blogs in existence. Topping the list are Gawker Properties at $150 million, MacRumors at $85 million, and the Huffington Post at $70 million, with almost two dozen others topping at least $1 million. Many of these blogs get web traffic galore, but, like the Huffington Post, have yet to turn a profit. Do these valuations mean that blogs are over-valued, or under-valued?

This issue is soon to become more prominent in the mainstream public's consciousness as blogs have lately begun luring investors and raising serious amounts of money. Michael Arrington, creator of PaidContent.org (estimated on the list to be worth several million dollars itself) has actually called for independent bloggers to band together for commercial purposes.

"If they pool their resources into a single company, they can roll up all of their blogs 'into a big fat CNET crushing $200 million/year in revenue business'."

Are blogs the next internet gold rush? Probably not. Take a close look at the 24/7 list and it's pretty clear that only the absolute most astronomically popular blogs even hit a million-dollar valuation, relegating the small-to-mid-sized bloggers to the land of "just-praying-to-get-enough-money-to-buy-my-girlfriend-a-nice-dinner". So starting a blog, even of high quality, is still not close to being a realistic money-making opportunity.

That said, are some of these top blogs on the list good investment opportunities? Perhaps. Using a traditional advertising-based business model, the cream-of-the-crop have already built strong revenue bases which are only likely to grow as their brands become more established and their web traffic continues to rise. If the Huffington Post, for example, were to offer a modest IPO tomorrow, it'd probably be wise to buy a few shares.

Despite the Probloggers and CopyBloggers of the cyberworld which offer advice on how to better commercialize your blog, the truth is that the overwhelming majority of bloggers are fiercely independent and consider the activity a labor of love, rather than a business opportunity. Don't get me wrong, everyone would be thrilled to cash a sizable check for their efforts. It just doesn't typically happen. Small bloggers' best bets are to focus on interesting topics and on writing well, and maybe they can hope to earn a few extra dollars through Google AdSense, or ideally, actual paid sponsors.

As for the top blogs, to determine if they're over- or under-valued, just ask yourself this question: Do you believe their web traffic will go up or down in the next few years? If you think they'll go up, recognize that advertising revenues will be sure to follow. Would you invest a few dollars into them yourself?

For that matter, do you think The Nerfherder's readership is more likely to increase or decrease over time?
  

3 Comments:

At 8:11 AM, Anonymous Sucharith Menon said...

I think its more an estimate than the actual value.

 
At 1:21 PM, Blogger Rob said...

definitely true. however, even as an estimate, it's quite amazing.

 
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