Rise of the Unicorns

unicornIt’s been something of a running theme over the last ten years, particularly in the blogosphere and social media, to declare that blogging is doomed. With the closure of Andrew Sullivan’s iconic blog, this debate has been spun up once again: Ezra Klein bemoaning the decline of the blog in the era of the social web, and Ben Thompson pointing out that his own recent success with Stratechery is a counterexample of “Blogging’s Bright Future.”

I think the rise of Stratechery actually provides some interesting lessons to anyone paying attention to the future of business models in journalism, blogging and the web generally. But as so often with new media, the medium is often confused with the product. Talking about the success or failure of blogging itself is a little like arguing about whether the smartphone “works” for whatever one wants to use it for. Blogging actually works pretty well for some goals, and less so for others.

Rather, a more interesting question might be – what will blogging be used for in the future, and importantly, who (if anyone) will pay for it? These are the kinds of questions that cleave blogging away from the future of journalism, I believe, and more towards… whatever you want to call what Ben is doing. Indeed, I’m inclined to agree with Klein: blogging is still a pretty crappy business model, and it’s certainly not a viable future for journalism.

But then, who ever said blogging has to be about journalism?

Scale and focus

The advertising-based business model that large news organizations rely on lead them to cast as wide a net as possible in recruiting an audience. That is probably as antithetical a model to blogging as you can get. Blogs are a naturally intimate space – sometimes even a conversation – between a reader and author, and that relationship is based around some value the audience finds in what that author has to say. Often, that value is centered on some topic of interest – like the bazillion tech blogs, political blogs, food blogs, fashion blogs, book blogs, mommy blogs and more out there. Occasionally, an audience forms around a blogger’s performance of personality – Scott Adams does this, as does Heather Armstrong – but this is far harder to pull off, or to predict.

Making money through ads on a blog requires attracting a huge readership, which is incredibly hard to build and sustain with a general-interest focus, even as a full-time job. This is likely what tempted Andrew Sullivan to pioneer the direct user-supported subscription model when he went independent in 2013.

Though I have enormous admiration for the guts and bravery it took to try, it’s far from clear to me that Sullivan’s experiment was a success. He raised just shy of a million dollars last year from around 34,000 subscribers – which sounds terrific, until you remember that he also had to pay for hosting an 8 million pageview-per-month blog, operations, possibly office space, and salaries and benefits for seven other people on his staff – not including Sullivan himself, who didn’t even take a salary. His recurring revenue and subscriber growth had plateaued, even declined, by mid-2014, and I doubt the operation was sustainable.

Sullivan probably retired mostly because he was exhausted after blogging full-time for fifteen years straight. But the financial difficulty of running such a site without institutional backing was surely also a factor. Perhaps he underpriced subscriptions to his site, or allowed his costs to remain too high, but I think the key flaw in Sullivan’s business model was his fundamental lack of topical focus on a customer segment that was willing to pay.

Profitable Blogging Segmentation

When you look at audience segments, one of Ben Thompson’s best observations about markets bears out: markets are not monolithic. Willingness to pay for quality content varies dramatically by subject area (and demographic, and other things), which has contributed greatly to the unbundling of traditional media.

This is just an imaginary chart, of course, but I imagine that if you break down audience interest areas versus willingness to pay for content, it would look something like this:


True enthusiasts in each category are somewhat more willing to pay for higher quality in the content they consume, based on the amount of unique value they perceive between competing products. This is why it’s hard to get people to pay for a food blog, for example – in that niche, most people are looking for recipes or advice, which are freely available elsewhere, not in-depth analysis of some sort.

The scale of the internet does makes niches like the foodie community, crafters, mommy bloggers and others quite large addressable markets, of course, but the subject area still materially affects willingness to pay. Many people digitally subscribe to general interest news outlets like the New York Times or Wall Street Journal because of the breadth their coverage offers (which a blog really can’t). They mostly ignore the niches, because creating unique value that people will pay for there is actually a pretty tricky problem.

“I think we’re getting better at serving a huge audience even as we’re getting worse at serving a loyal one.”Ezra Klein

Sports and politics are probably other obvious niches where strong allegiances mean people will pay for unique content. Hot tips, insider info, smart analysis – politicos and sports nuts love this stuff, either because it helps validate their tribal loyalties or it benefits them competitively. The explosion of fantasy sports itself has created a whole industry of companies and individuals serving that niche profitably. It’s probably no coincidence that the founder of one of the web’s biggest liberal political blogs, Markos Moulitsas of DailyKos, also went on to found SBNation, a hugely popular sports blog community. (He’s also now one of the founders of Vox Media.) Erick Erickson, the editor in chief of RedState, has similarly translated the conservative online community he helped create into an enormously successful media personality career.

The Stratechery Model

I’m a happy subscriber to Ben Thompson’s Stratechery blog. Ben has become something of a phenom in technology circles over the last few months, and rightly so: his is certainly one of the top three or four technology blogs on the web. But I would venture that Stratechery’s success is also due to a classic principle of product management (which Ben and James Allworth discussed here): product/market fit, with a laser focus on making his product (not just his blog) something worth paying for.

Stratechery is written for and marketed to technology professionals, and offers a unique, consistent voice on technology market strategy that is hard to find elsewhere. The “Stratechery product” goes well beyond the blog, though. Ben posts a couple of really good posts each week, sends out a well-written daily email, does a weekly podcast, tweets extensively, and offers a member forum for subscribers to hash things out. While the blog is part of it, Stratechery is better understood as a media enterprise communicating Ben’s technology insight.

In today’s tech community, particularly in the U.S. (and egregiously in Silicon Valley), being “in the know” has developed a premium like never before. I think this has a lot to do with the somewhat silly VC-industrial-complex scrum of recent years (best profiled by HBO’s Silicon Valley) that has led some to warn of a new bubble; but whatever it is, it has spawned a renewed interest in technology content. The same tide that has raised Re/code has also allowed Stratchery to thrive.

As an individual project, I think focused coverage like that put out by Stratechery or Neil Cybart’s Above Avalon are promising business models. (Above Avalon is free, but given the huge time commitment of everything Neil has been doing, I strongly suspect he hopes to monetize his efforts soon. Otherwise, I want his day job.) Not as “blogs,” but more like independent analyst coverage. Indeed, these guys don’t compete against Re/code or even Farhad Manjoo – if anything, I’d put them in the same category as Gartner or Forrester. That’s the market they threaten to disrupt. Not only is their content at least as good (I would argue better) than these legacy competitors, but their costs are a small fraction. (Interestingly, I noticed that Ben has updated his “Consulting” page…)

But that’s the thing: does the success of individual projects like these constitute a new “model?” Do they scale beyond one really smart person, doing their thing in a home office? I don’t think so – as Sullivan’s experience demonstrated, keeping costs low is critical. And how much room in the market will there be for projects like this? That cohort of technology enthusiasts who are willing to pay something for unique content is larger than in many other segments, but it’s still finite. How many $10/month subscriptions will even an avid follower of the tech market buy to before s/he decides that there’s just too much for them to read?

I think our segment – I’m a member of it, after all – can sustain several such unicorns, but not a lot. Being one of those unicorns, however, is probably going to be a pretty sweet ride. As their readership grows, I expect that both new and traditional media outlets – Re/code? The Atlantic? The WSJ? – will try to convince them to come on board, drawing in their highly valuable audience but also inevitably changing those bloggers’ business models. Alternatively, perhaps several of them will form their own analyst group. (I would definitely pay for that daily email.)

In the meantime, I’ve decided I like this new form of analyst coverage, which doesn’t ask me to pay $1,000 for a report that tells me nothing new. I look forward to seeing how many other bloggers decide now is the time to do something similar. If you have any suggestions of other folks to check out, leave links in the comments below – I’d love to check them out.


So, what do you think ?