Earlier today at John Battelle’s Web 2.0 Summit, Federated Media and Automattic issued a joint announcement that they were now able to offer publishers of WordPress.com’s free blogging service the ability to run advertising on their blogs.
This is a break in tradition for Federated Media, since as an organization, they’ve never wanted to even open discussions with a blog unless they’ve been at a certain threshold of pageviews, usually in the hundreds of thousands. While WordPress.com has around 15 million pageviews a day, the average blog on the site receives just over 4 pageviews a day (yes, just four, as those 15 million pageviews are spread across 62 million individual blogs).
The advertising program will be completely opt-in, so no worries on whether or not it will be foisted upon unsuspecting bloggers.
FM Wins while Bloggers Lose
Still, this program and announcement has a ring of selling out, and for what?
When Blogger.com integrated AdSense all those years ago, folks like me were quickly excited by the prospect of financial reward for democratized media. As time wore on, it quickly became obvious to me and most of the rest of the world who tried that the only way to make serious money blogging was to gain “critical mass,” and mount up the pageviews.
Granted, this was with Google’s CPA model, which only pays when an action takes place (something advertisers love and publishers sometimes tolerate). Federated typically works on a CPM model (most of the time), and thus may give slightly higher payouts to publishing partners, but only when inventory is filled.
It’s also important to know that CPM means cost per 1000 pageviews – and that cost to the advertiser will in a perfect world go only as high as $40 on a great blog, and generally hovers between $4 and $7 CPM on your average blog. Federated Media’s standard contract takes at least 50% of the revenues, and we have to assume Automattic is taking a piece of the pie here, too (for the sake of argument, let’s say it’s only 25%, a conservative estimate).
Assuming (and this is highly unlikely) that FM sells 100% of the ad inventory, this puts the average WordPress.com publisher’s yearly salary between $2.26 and $3.09.
Meanwhile, Federated Media could potentially make between $10-19 million a year from the deal.
Automattic Sells Out Seven Years Late
After the announcement was made, John Battelle retook the stage and made a strange noise of excitement, apologized, and stated, “Sorry, it’s just good news. I’ve been working this for seven years so it just feels good.”
This would have been an attractive move for Automattic to make, if it were seven years ago. Unfortunately, the blogger math has been worked out for at least half that, and anyone with more than a month’s experience trying to monetize quickly realizes how insurmountable this is.
“Banner ads are not the future of the web, and is frankly the antithesis of what True Ventures should be investing in,” said SiliconANGLE Founding Editor John Furrier of the announcement. “The only people who make money from banner ads are blogs with volume. For everyone else, it’s a pyramid game.”
The overall theme from the Web 2.0 Summit up to this point had been one of deriving great value from big data. What Automattic has in it’s WordPress.com databases is a great deal of data with an immense amount of value – value they’re selling short by going with the second worst blog monetization strategy on the planet: CPM (what’s the first? Competitor Blogger.com’s CPA strategy).
“What would I love to see from Automattic? An innovative new ad model that rewards high quality content,” said Furrier. “Ad networks only work for the ‘big guys,’ and incentivize bad content models.”