Having declared newspapers (and most of the rest of the mainstream media) dead, what do we do now?
This isn't an idle question to be bounced around the blogosphere, but a very real and immediate concern that could have a profound impact on how all of us get the news, the reliability of that news, and ultimately, the First Amendment and the freedom of the press.
A few months back I noted that the greatest challenge facing blogs and related Web sites is the lack of an effective revenue model. Even the most popular blogs are still light on advertising -- and what advertising they do have is pretty low-grade stuff like political T-shirts, books and exercise programs. Most of this advertising isn't even up to the grade of late-night cable, despite the fact that many blogs enjoy readerships larger than some major metropolitan newspapers.
Because of that, I also predicted at the time that the search for revenues would have two effects over the next couple years. First, the majority of the world's millions of blogs would fade away, as their authors either abandon their entrepreneurial dreams of turning weblogging into a new career, get distracted by job and life changes, or just get tired of writing copy to a miniscule audience. Hundreds of thousands will remain -- mostly people who blog for their own reasons, like modern day diarists -- and hundreds of thousands of new bloggers will arrive, late to the scene … and interestingly, because they've learned from the failures of their predecessors, they will have a greater chance of success. But the bloom will be off the first blog revolution.
Meanwhile, a second cohort, much smaller than the first, will survive, and even thrive. We already have a pretty good idea who they are -- you've no doubt bookmarked many of them -- and we can expect a few more to appear in the months ahead. Nevertheless, the search for real revenues, I suggested, would force many of these popular sites to begin to consolidate in hopes of finding economies of scale, interested mainstream advertisers and, ultimately, investors, employees and infrastructure.
It is interesting to note, then, that this prediction is already coming true. The talk of the blogosphere this week was the announcement, by blogger/mystery writer Roger L. Simon, Little Green Footballs, and others, of the creation of the Pajama Media, an aggregation of blogs from around the world designed specifically with the goal of attracting advertising. The response has apparently been extraordinary, with more than 200 blogs from everywhere on the planet already signed.up. There are other aggregators out there as well, from the comparatively venerable Tech Central Station to the new Hollywood-based site put together by Arianna Huffington to the still hush-hush citizens' reporting project for which noted tech columnist Dan Gilmor quit the San Jose Mercury-News.
Does all of this seem familiar? It certainly does to me -- and I feel a bit of fool for not noticing it before. Ever since the dotcom bubble popped, we in the tech industry have been awaiting the next boom. Two years ago, when I first returned to writing this column, I confidently predicted that we would see just such a boom right about … now. So where is it? I can assure you that everybody in Silicon Valley has been looking for the next breakout for months. For a while we thought it would be PDAs, then desktop game machines, then the next generation of cellphones, and most recently, the iPod/MP3 breakout. The most imaginative predicted something out-there like nanotech or biochips.
Some of these new businesses have been big, others just fizzled. But none (except perhaps for music downloads) have had that kind of deep impact, culturally transforming, smell-the-Zeitgeist effect of a true technological boom. And yet, even as we have been peering towards the horizon, scanning for the Next Big Thing, it may be peaking right under our feet, right now. The blogosphere is not just a media revolution, but the tech boom of our time.
So why haven't we noticed? Because it came disguised as a cultural trend, not an industry. We've become accustomed to tech booms following the paradigmatic model of minicomputers, microprocessors, calculators, PCs and even iPods. That is, a small number of start-up companies chase a new technology, and in the process develop an important new product. That product, in turn, so perfectly fits the needs of customers that it becomes a phenomenon. The skyrocketing growth of the industry this product creates -- and the huge wealth earned by the pioneering companies -- quickly draws armies of competitors, backed by mountains of venture capital money.
For a brief period, every one of the competitors in this new industry enjoys impressive growth -- and even more impressive valuations. A few manage to go public, making their founders unbelievably rich -- and thus stirring even greater competition. A bubble forms, the market cannot hold that many competitors … and pops, almost overnight killing hundreds of companies and depositing thousands of people on the street. The stock markets slump, awaiting the next boom.
That's the standard model, and you can see it working through the usual cycle right now in MP3 players. But what if it isn't the only model? After all, the other great trend of the last half-century is the increasing democratization of high-tech entrepreneurship. You had to be physicist to start a semiconductor company in the 1950s, a technologist to build a computer company in the 1960s, and a marketing genius to start a PC company in the 1970s. What made the dot-com boom of the Roaring '90s interesting was that, for the first time, you didn't even have to be a businessperson to start a Web content company. The dot-com boom was run by people who had likely never met a payroll, had no real product, and little prospect of ever seeing profits. And if the shakeout was bloody, with perhaps a 95 percent fatality rate, in retrospect we have to say that it worked. The dot-com world is bigger than ever, producing immense revenues and profits, and filled with billion-dollar companies.
So, why can't the next (or more accurately, the current) tech boom be Internet diaries? Why can't the user base precede the business model? We all laughed when Amazon went quarter after quarter, growing its customer rolls, but never showing a profit. Like the old joke, Jeff Bezos seemed to be claiming that, while he was losing money on every sale, he would make it up in volume. We aren't laughing now.
So, let's say the blogosphere is the tech boom we've been waiting for. If true, we can probably assume that most of the larger trends that affect all tech booms will obtain here.
One of these is the 80:20 rule. That is, 80 percent of all blogs out there will likely die in the next 18 months. Of the 20 percent that remain, the 80:20 rule will again apply, with just 20 percent actually becoming viable, profitable businesses, while the others limp along. I'll go one step further: of that 20 percent, only 20 percent will survive as stand-alone enterprises, while the majority will merge into a handful of consolidated enterprises. Do the math: if there are an estimated 10 million blogs in the world, only 2 million will be around a couple years from now. Of those, 400,000 will become real businesses; and of those 80,000 will become viable businesses. I'll go even further: of those, 16,000 will survive the next 10 years; 3,200 will become corporations with annual revenues of $100 million or more, and -- and I'm really getting out there now, 100-200 will someday go public. Of those much-evolved blogs that do one day go public, many will have been among the first to start down the path -- booms really do confer advantages on first movers.
If all that sounds nuts -- I mean, we're talking about blogs here -- you weren't around for the early meetings of the Homebrew Computer Club. Andrew Sullivan, Glenn Reynolds and Kos have a lot more going for them than those nerds clutching homemade motherboards in 1976.
But the crucial first step is finding the money. New structures like the Pajama Media are interesting, but they are still missing something. Take it from a guy who used to run an 800,000 circulation magazine: the advertising agencies for Johnson & Johnson, Ford and Heineken are only marginally interested in raw numbers. What they want are "qualified" potential customers. It's not enough to announce that you have 100,000 unique visitors each week to your blog; you have to characterize them. What do they buy, how old are they, where do they live, how much money do they make? Real advertisers want real results.
Getting that information will require asking blog readers to give up some of their anonymity. It will also take money -- the kind of money that only comes with a business plan, spreadsheets, a hearty handshake with a venture capitalist, and betting everything you've got.
Are the leaders of the blogosphere ready to take that risk?
[As long as I'm on the subject, I've been helping Oxford University, Forbes, Yahoo Search, and the Financial Times (among others) put together a summit on business and the blogosphere this autumn in New York City. If you'd like to learn more, visit http://www.oxford-york.com.]
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
Michael S. Malone, once called “the Boswell of Silicon Valley,” most recently was editor at large of Forbes ASAP magazine. He has covered Silicon Valley and high-tech for more than 20 years, beginning with the San Jose Mercury-News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist and Fortune, and for two years he was a columnist for The New York Times. He has hosted two national PBS shows: "Malone," a half-hour interview program that ran for nine years, and in 2001, a 16-part interview series called "Betting It All: The Entrepreneurs." Malone is best known as the author of a dozen books. His latest book, a collection of his best newspaper and magazine writings, is called "The Valley of Heart's Delight."