Gawker math

By Felix Salmon
August 3, 2009
Zachary Seward has some "very rough, back-of-the-envelope calculations" of the amount of money Gawker pays and receives for a reasonably-successful blog entry like the one Hamilton Nolan wrote about Anne Loehr. The upshot? The cost of the journalism was about $20, while the revenue from the blog entry is about $200. A good business to be in!

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Zachary Seward has some “very rough, back-of-the-envelope calculations” of the amount of money Gawker pays and receives for a reasonably-successful blog entry like the one Hamilton Nolan wrote about Anne Loehr. The upshot? The cost of the journalism was about $20, while the revenue from the blog entry is about $200. A good business to be in!

Do Seward’s numbers make sense? Yes. Ian Shapira reports that Nolan is paid $4,000 a month (which surprises me, I would have guessed he was making more than that). If you divide that $4,000 by the 260 blog entries Nolan writes each month, it comes to about $15; on the other hand, if you reckon that the $4,000 is paying for Nolan’s 2.3 million monthly pageviews, and say that this one blog entry accounted for 12,500 of them, then you get to just over $20. (Gawker’s stats can be found here.)

On the revenue side, Gawker is running three ads on that blog page, with a rack rate CPM of $8 each. If the ads were all discounted by one-third, then Gawker’s getting $16 per thousand pages served, which works out at exactly $200 for 12,500 pageviews.

Of course, Gawker has more expenses than Hamilton Nolan’s $4,000 a month. There’s his bonus, for one — and then there’s the cost of selling those ads, and all of Gawker’s overhead. Plus, it’s the beginning of the month; later on, Gawker might not be selling out its inventory like it is right now.

On the other hand, Gawker has more revenue than just the ads from individual blog entries — it also serves ads on its sites’ home pages, which bring in a lot of money, as well as archived blog entries by bloggers who no longer work for the company. So overall it’s easy to see how Gawker has now grown to the point at which it’s a highly profitable media company.

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Comments
11 comments so far

If Gawker Media is profitable then clearly they have figured out how to make money on the internet, contrary to the opinions of newspapermen who claim that such is impossible.

This leads me to think that the source of newspapers’ demise is not Google and its ilk but all their fixed, legacy costs, such as printing presses, unionized labor, and all the ancillary costs associated with those items. Google et al merely forced a rationalization of costs, the newspapers have thus far failed to rationalize those costs, and competition such as Gawker Media have swarmed in and started to make money.

Why is this a bad thing?

Thanks for checking my math! I always hold my breath after making estimations like that, figuring someone will come along and explain why I’m way off. Maybe that’s why I didn’t show my work. Anyway, a great margin indeed.

All this attention seems to have brought Gawker’s servers to their scrawny knees.

It seems weird that no one is picking up on the fact that a staff writer for Gawker gets stuck as independent contractor. He might be making $4,000 a month but he’s stuck paying all the taxes, and on his own for health insurance and the like.

@Ryan Holiday

> It seems weird that no one is picking up on the fact that a staff writer for Gawker gets stuck as independent contractor. He might be making $4,000 a month but he’s stuck paying all the taxes, and on his own for health insurance and the like.

That’s what’s called the rationalization of costs (see the post by @Dave above yours). Gawker/Denton and his investors make $$ and Nolan gets to share a walkup flat in Greenpoint with two college buddies. Meet the new boss, same as the old boss.

Take a side on the Goldman debate already!!! Or, explain why you haven’t.

Dan said: “the source of newspapers’ demise is not Google and its ilk but all their fixed, legacy costs, such as printing presses, unionized labor, and all the ancillary costs associated with those items. Google et al merely forced a rationalization of costs, the newspapers have thus far failed to rationalize those costs, and competition such as Gawker Media have swarmed in and started to make money.”

No Dan, “newspapers’ high costs” actually stem from the fact that uncovering new information, and the regular monitoring of large corporate and government bureaucracies, costs a lot of money … a lot more than adding snark to reporting. Maybe it costs more than it should (read: entrenched fixed costs) and maybe we’ve made really interesting online enable advances in some forms of reporting (crowdsourcing) but the bottom line is, some work activities are simply more expensive than others.

Ryan is right to draw attention to Hamilton Nolan’s “compensation.” $4000/mo. gross as an independent contractor? $48,000 sounds like a decent living at first blush, but… independent contractors are subjected to some onerous tax rates and paperwork. Health insurance, even for just a catastrophic policy, will eat up a lot of money each month. New York regional rents, even during a Great Recession, will eat up a third of the gross salary by itself. Forget setting aside anything for savings or, heaven forbid, a retirement investment. Considering having a kid? Better move to an entirely different universe.

I’m not up on the details of Gawker media’s policies, but don’t they vary compensation by traffic? I bet there are months Nolan makes a lot less than four grand and is late with the rent.

All the while he has to crank out an average of 8.66 suitably snarky and amusing blog posts every single day? I’m sure its harder than it looks. Good luck moonlighting or working on that book project! [Not that that would provide any real income.]

Bottom line: if this kind of arrangement is the comparatively sustainable media business model of the future, then people need to stop making fun of Chris Anderson for suggesting that journalism will become a “hobby.” It may turn out to be just that–and a very expensive avocation at that, something more like horseback riding or civil aviation.

@Uncle Billy vs. Mont Pelerin : Gawker’s knees are most definitely not scrawny. They’re actually quite bulbous and strapping.

Posted by Hadley | Report as abusive

@Mitch, it seems to me that the new model passes the exploitation from the reader on to the writer. It’s familiar logic, it’s what manufacturers use to justify sweatshop labor and outsourcing. The irony? Gawker gets to criticize the labor practices of other companies. It would take me two seconds to find a handful of snarky Valleywag stories about Google trimming benefits or laying off employees.

I’m not saying this isn’t the way things should be. I’m just saying it’s time to cut the shit and the puff pieces. There is something wrong about pretending your full-time employees are contractors or the Huffington Post hosting parties and roundtables when they can’t cut their writers a check.

@Ryan, couldn’t agree more.

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