Felix Salmon

The economics of non-profit newspapers

Felix Salmon
Mar 30, 2010 14:25 UTC

Alan Mutter is a genuine expert on newspaper economics, which is one reason why his bizarre blog entry today on the economics of non-profit newspapers is so puzzling. This has to be one of the most innumerate things he’s ever written:

The math, as detailed below, shows that it would take $88 billion – or nearly a third of all the $307.7 billion donated to charity in 2008 – to fund the reporting still being done at America’s seriously straitened newspapers.

The good news is that he does indeed detail his math, making it easy to see where he goes wrong.

Rick Edmonds, the estimable media economics expert at the Poynter Institute, calculated that American newspapers are spending $4.4 billion today on news-gathering…

If you wanted to sustain the current level of newspaper coverage by replacing for-profit funding with non-profit dollars, the typical approach would be to raise an endowment that would be invested conservatively to produce an annual return of 5%. The investment income would be distributed each year to provide the operating budgets for non-profit news organizations.

The endowment necessary to provide $4.4 billion in annual newsroom funding would be $88 billion.

There are two huge errors here. The first is the way that Mutter confuses stocks with flows. The $308 billion donated to charity in 2008 is an annual figure; he should therefore compare it to the annual figure of $4.4 billion, rather than applying a multiplier of 20 to that $4.4 billion first in order to convert it from a flow to a stock.

But even the $4.4 billion figure is far too large, since a non-profit needs to cover only a newspaper’s losses, not its total newsgathering expenditures. After all, it’s not like anybody’s suggesting that newspapers stop carrying ads the minute they get bought by a non-profit.

What’s more, a non-profit which owns a newspaper can, in theory, fund those losses out of future profits, in the way that for-profit newspaper owners find hard. In a capitalist system designed for the efficient allocation of capital, it only makes sense to fund short-term losses if the long-term profits will more than make up for them. If the long-term return on investment is lower in newspapers than it is anywhere else in the economy, then you should invest your money somewhere else, rather than covering near-term losses.

A non-profit, on the other hand, is interested foremost in the perpetuation of the institution, rather than the maximization of profits. Of course, the more profitable the newspaper is, the longer it will be able to survive. But if the non-profit sees a path to a sustainable model of small-and-steady profits in the future, it just needs to get the newspaper there from here: it doesn’t need a massive endowment.

Newspapers, just like websites, are in the business of monetizing readers. Historically, they’ve done that by selling advertising; in the future, they’d be well advised to develop other revenue streams as well. Their total readership is generally higher than it’s ever been, thanks to the internet, even if their print readership is down. And their readers are often well-heeled and very loyal to the newspaper brand: that’s a relationship which should be worth a lot of money, somehow.

If you found an inventive, business-savvy, and optimistic non-profit, then, I think it could in theory run a newspaper with a pretty modest sum in the way of up-front costs. Of course, it might fail — but any newspaper might fail. Non-profits should be allowed to fail just like anybody else. Which is another reason why raising a full endowment up front is not only unnecessary, but is also arguably counterproductive.

So while the non-profit route is probably not going to happen very often, it’s certainly an intriguing one which can make quite a bit of financial sense. It’s not remotely the impossible money-pit painted by Mutter.

Update: David Cay Johnston weighs in, along similar lines.


There is a good chance that the L3C structure could solve the UBI problem mentioned in the first post.

the “L3C” — a low-profit, limited-liability corporation.

http://www.rjionline.org/projects/densmo re/stories/info-valet/stories/l3c/index. php

Posted by sinergi | Report as abusive


Felix Salmon
Mar 30, 2010 01:44 UTC

Mark Roe expands his excellent FT column on derivatives superpriority into a fully-fledged paper — SSRN

The NYT, with all its troubles, is vastly outperforming CNN, which has no good reason to be imploding like this — NYT

2 days. 70 painters. Bushwick. Oh, and did I mention the Germany vs USA angle? — Tom Sanford

Superman comic sells for $1.5 million — AP

“When given a choice, more people log in to comment with their Yahoo accounts than with Google, Facebook or Twitter” — PaidContent

Your random NYT story of the day — NYTimes Roulette

Good catch by Michael Wolff — VF

Are you worried about a huge earthquake in Seattle? You should be — NYT

Is Geithner really a “powerful ally” of John Dugan? That’s bad if true, but I haven’t seen a lot of evidence — NYT

Yves Smith criticizes Michael Lewis for not writing the book that she wrote. You’d think she’d be happy about that — Naked Capitalism

Advertisers who buy 8 pages of ads one issue of Wired magazine will be able to lace video in the iPad version — WSJ

The problem with dropping money from helicopters: if people trouser it, they risk being prosecuted for grand theft — Dispatch

The $149 Walmart singlespeed — Walmart

Watch a diamond burning on a pool of liquid oxygen — PopSci

Photoshop content-aware fill. My jaw is on the floor — YouTube


Check out the first review for that bike… priceless.

Posted by MarkC123 | Report as abusive

Trading Citigroup

Felix Salmon
Mar 30, 2010 00:11 UTC


With trading in Citi accounting for 25% of the volume on the NYSE, there’s only one game in town for stock traders — even if the price of the stock ended the day within 13 cents of where it started it. Zero Hedge puts it pungently, noting that trade is being increasingly concentrated in Citi, BofA, and the QQQQ Nasdaq index fund:

The entire market will soon consists of exactly two companies (both of which are wards of the state) and one ETF, as liquidity finds the path of least resistance.

This is not good for the market, and it’s long past time, I think, for that reverse stock split at Citigroup. It’s beyond silly for any company to have 28.5 billion shares outstanding; a one-for-10 split would overnight bring Citi volume down to sensible levels, bring the price into line with other Dow components*, and prevent some of the crazy speculation going on in Citi stock, where a swing of a few cents per share can mean massive P&L for the day-traders.

The idea is hardly original: Citi first proposed the reverse split back in March 2009, when there were a mere 5.5 billion shares outstanding, but it took until the fall for the idea to get shareholder approval, and the bank is still dragging its feet as the June 30 deadline gets ever nearer. Can somebody explain to me why this is taking so long? It really is getting in the way of efficient equity capital markets elsewhere.

I can’t believe that the delay here is due to pressure from Citi’s largest shareholder, which has just tapped Morgan Stanley to sell its 7.7 billion shares in an orderly fashion over the course of 2010. It’s about time that Treasury got out of this trade: now that its stake is in the black, it’s essentially just speculating if it holds on to those shares for longer than it has to.

And yes, as I said on BNN today, the fact that Treasury’s equity stake in Citi is now worth a good $7 billion more than was paid for it is indeed vindication of the don’t-nationalize strategy. It was still a bailout of Citi’s bondholders, of course, with all the moral hazard that implies. But, thanks to the broad-based equity rally, it’s worked out well so far.

That said, Citi is still too big to fail, and therefore still has an implicit government guarantee on top of all the explicit guarantees which are still floating around. The government might make a nominal profit on the sale of its stock, but that means effectively ignoring the enormous value of those guarantees to Citi, which is still the shakiest bank in America from a systemic-risk perspective. And every little thing helps: psychologically, a share price of $40 would surely make it seem a bit more solid than a share price of $4. Hell, it worked for AIG.

Update: As commenter lahar points out below, Citi is no longer a Dow component. I’d forgotten that. Sorry.


Trading Citi is certainly not for the faint of heart.

On any given day, the Federal Government might

a) ban shorting on banks

b) buy up another 30 billion of crap off the Citi balance sheet.

c) buy another stake in Citi

d) sell their stake in Citi

e) force a common/preferred deal , complicating things

f) Announce something they intend to do, but never do

g) Announce something they intend to do, and really do

h) anything else I can’t think of.

At any rate, Citi shares ARE equity shares in something – but I am not sure what…

Posted by SCHARFY | Report as abusive

Setting rules for capital and liquidity

Felix Salmon
Mar 29, 2010 18:45 UTC

Kevin Drum and I had a thrilling discussion about liquidity risk and capital ratios over lunch on Friday. He sums up:

Getting Congress and the Fed to impose higher and more rigid capital requirements on big financial institutions is important, but what’s even more important is getting an international agreement in place to make sure everyone else does it too. However, there’s really no one who does a good job of reporting on this. Largely this is because the discussions are all held behind closed doors, so we only hear about the status of negotiations when someone like Larry Summers or Mervyn King drops hints in a speech. It’s like reporting on the intelligence community, except worse.

And no sooner do we ask for good reporting on this front than along comes Bloomberg’s Yalman Onaran, with a 1,600-word story on the national and international rules and guidelines governing liquidity risk management. In typical Bloomberg style, however, it’s sometimes hard to see the wood for the trees, so it’s worth backing up a bit here and looking at the three different places that rules governing these things can come from.

Firstly, there’s legislation — and it’s pretty clear that Congress isn’t touching these issues in its financial-reform legislation. It would be nice if it did: simple legislative bounds on how much leverage financial institutions are allowed, and how much liquidity they need to have, can be useful in preventing regulators from loosening things up too much during boom times. But it’s not going to happen.

Part of the reason, I think, is that the executive branch in general, and Treasury in particular, doesn’t want it to happen. They just released their own Interagency Policy Statement on Funding and Liquidity Risk Management, which is about as hard-hitting as you’d expect, but still useful at the margin. If all financial institutions had followed these guidelines to the letter in the run-up to the credit boom, we’d be in a better place than we are now — but the problem of course is finding regulators with both the ability and the inclination to force such behavior. After all, the utterly ineffectual Office of the Comptroller of the Currency has its name at the top of the new guidelines, and there’s no chance of John Dugan baring any teeth to ensure they’re enforced.

On this front, at least, the financial legislation wending its way through Congress might well help, by consolidating regulators and abolishing the OCC: if there’s one regulator who cares about enforcing extant guidelines and who has authority over all systemically-important financial institutions, that’s a clear improvement on what we’ve got right now.

But the real progress on this front, if it happens at all, isn’t going to happen in Congress, and isn’t even going to happen within Treasury. Instead, it’s going to happen in Basel. Onaran explains:

Looming over discussions about liquidity are rules proposed in December by the Basel Committee on Banking Supervision, a 35- year-old panel that sets international capital guidelines. The new framework would require banks worldwide to hold enough unencumbered assets to meet all of their liabilities coming due within 30 days. That amount, called the liquidity coverage ratio, could be used to offset cash outflows during a panic.

Banks would also have to maintain a “net stable funding ratio” of 100 percent, meaning they would need an amount of longer-term loans or deposits equal to their financing needs for 12 months, including off-balance-sheet commitments and anticipated securitizations.

The Basel committee, which is collecting comments on the proposed rules through April 16, would establish clear definitions of liquid assets and funding needs, rather than leave those determinations to the banks. It would also set new capital requirements. The committee expects to complete its work by the end of the year and implement the regulations by the end of 2012.

These are the rules which we should really be caring about, and they’re the ones I was talking about with Kevin: they’re hammered out slowly, behind closed doors, by mid-level central bankers you’ve almost certainly never heard of. They’re people like Nigel Jenkinson and Marc Saidenberg, the co-chairs of the Working Group on Liquidity, or Hirotaka Hideshima and Richard Thorpe, the co-chairs of the Definition of Capital Subgroup.

The Basel rules are important, and they take a long time to coalesce into something acceptable to all the main players — especially the US, whose abundance of small banks makes it wary of rules which are generally designed for much bigger institutions. It’s entirely foreseeable that the Basel committee’s self-imposed 2012 deadline is going to come and go. But if and when the rules go into effect, they’re going to have much more force than anything coming out of Congress or Treasury. So keep an eye on them: if they get diluted significantly from their present form, that’s a bad sign.


Good one Felix,

The US landed the whole World in trouble, it must get it out of the hole, I am sure their is enough intellectual capital on Wall Street to figure that one out, because it is certainly not nested at the Feds, IMF, BIS and World Bank.

I hope Basle considered the dreaded Worldwide carry trade liquidity.

Posted by Ghandiolfini | Report as abusive

Where’s the Politico of finance?

Felix Salmon
Mar 29, 2010 16:54 UTC

Add another name to the list of naive editorial-side people without business-side experience: John Harris, the editor-in-chief of Politico.

Our fundamental model is not driven by traffic. It’s trying to be as essential to the conversation of Washington insiders, people who live and breathe this, whose careers depend upon it.

That’s a rather small audience. Our core audience is kind of at the center of the circle. That’s the one we care about.

And that’s not chasing traffic. That’s not chasing a huge number. But for the readers who matter most to us, does our content matter to them? Is it indispensable?

If we can answer that with a yes, then we’re succeeding. If not, or somebody else beats us to it, then we’re not.

It’s occasionally remarked upon that there really isn’t a Politico for finance, and there should be. At one point, it seemed that Henry Blodget might have aspirations in that direction, but those seem to have been abandoned in a quest for cheap pageviews: ZeroHedge breaks more news than Clusterstock does, and Clusterstock is definitely more an analysis aggregator than a news originator.

I have no problem with a business model of adding value through aggregation, but the barriers to entry are much lower than they are for a news site staffed by smart, experienced, opinionated and well-sourced journalists. Creating that kind of thing might be prohibitively expensive: it would probably cost at least as much as Lex or Heard on the Street or Reuters Breakingviews, all of which have editorial-side payrolls running into the millions of dollars per year. But a Politico-of-finance could carve out a franchise at least as valuable as that of Politico itself, and could I think become very established surprisingly quickly, if it had a critical mass of name-brand journalists at launch.

Update: Spiers weighs in, calling Harris “disingenuous”. But I think she misses his point. If you own Harris’s “center of the circle”, by providing essential content, then all manner of monetization opportunities are likely to emerge — including high traffic. Going for quality first, and getting traffic as a consequence, is doing things the right way round. Going for traffic first, never mind the quality, is liable to backfire.


Felix: “Going for quality first, and getting traffic as a consequence, is doing things the right way round.”

Yes, but nowhere does Harris talk about quality. He talks about catering to a small group of insiders. Or is there an assumption that these insiders care more about quality than the unwashed masses? Seems to me this is a recipe for journalism that focuses on catering to the vanities and political interests of their sources and readers.

Posted by TSTS | Report as abusive

When bloggers examine the Treasury market

Felix Salmon
Mar 29, 2010 14:16 UTC

This is how the blogosphere glosses the news: first the WSJ runs a slightly overheated article about the most recent Treasury auctions, talking in the headline about “Debt Fears” in the market for US government bonds. It’s one of those spectacularly meaningless headlines onto which all manner of rank speculation can be piled: a market went down, so you can talk about “fear” (although for some reason when a market goes up you get many fewer headlines about “greed”), and yes, it’s a debt market, so you can talk about “debt fear”.

This is not helpful, and Paul Krugman pointed out as much with a handy little chart showing that Treasury bonds have been pretty flat since the end of 2007, but for that sudden flight-to-quality at the height of the crisis. Brad DeLong had much the same post, with a bit more added snark.

Steve Waldman then responded to Krugman with a few more charts of his own, this time looking at the yield curve rather than nominal yields. The basis for doing this is simple:

The US government’s cost of long-term borrowing can be decomposed into a short-term rate plus a term premium which investors demand to cover the interest-rate and inflation risks of holding long-term bonds. The short-term rate is substantially a function of monetary policy: the Federal Reserve sets an overnight rate that very short-term Treasury rates must generally follow. Since the Federal Reserve has reduced its policy rate to historic lows, the short-term anchor of Treasury borrowing costs has mechanically fallen. But this drop is a function of monetary policy only. It tells us nothing about the market’s concern or lack thereof with the risks of holding Treasuries.

This is true, but at the same time it feels naive to me: I think it’s fair to say that the historical connection between the Fed funds rate and Treasury bond yields is largely lost when the overnight rate is at or near zero. Indeed, that was one of Alan Greenspan’s big mistakes: he dropped rates so far that he lost control of long-term interest rates. If the Fed funds rate is at 5%, you can turn the steering wheel and see an effect at the long end of the curve. If it’s at 1%, that mechanism becomes much squishier.

James Hamilton adds a useful chart of his own, showing that TIPS have been rising in yield even more dramatically than Treasury bonds. Yields on TIPS are real, not nominal, remember, so that chart alone does a lot to debunk any notion that an increase in bond yields is related to an increase in expected future inflation.

Ryan Avent, attempting to adjudicate, can come up with little more than to conclude that “the data bears watching closely, but that’s about the most one can say for now”. I wouldn’t even go that far. If you stare long enough at bond data, you can conclude just about anything you like — you can even start kidding yourself that you’re looking at the market pricing in default risk on Treasuries. My feeling is, looking at Waldman’s charts, that it might be time for the curve-steepening we’ve seen over the past 18 months to start coming to an end and reverting to the mean. But that said, concluding anything much from looking at lines on charts is always a fool’s game, unless your conclusions are independently derived from much harder empirical analysis.


The Fisher Effect eats up nominal returns, that is why interest related instruments is not worth writing about.

On the other side of the fence, when APR’s become EAR’s, it is a fishy story altogether.

Posted by Ghandiolfini | Report as abusive

Blogonomics: Monetizing readers

Felix Salmon
Mar 28, 2010 17:51 UTC

At this point, even I’m bored of the Salmon vs Blodget wars. But Henry has decided to grossly misrepresent my views, so it’s worth explaining in a bit more detail what I actually think about blog content and how it can and should be turned into money.

One of the first rules of blogging is to link a lot, especially if you’re writing about someone who has made their views freely available on the internet. For instance, my post on Wednesday about Blodget firing John Carney has seven external links, three of which are to Business Insider; my post on Friday about Business Insider’s economics had eight external links and one internal link, with six of the external links going either to Blodget’s site or his Twitter feed.

If you look at Henry’s post about me, however, it includes the word “Felix” five times, but he doesn’t link to me — or to anybody else — at all. Instead, he larded his post up with lots and lots of internal links. It’s easy to get from Henry’s post to somewhere else on his site; it’s impossible to get from his post to anywhere else on the internet, unless it’s someone who’s paying him for the privilege of advertising on TBI.

This is important, because Henry talks about how I “seem to feel” and about how “Felix’s criticism of our content is grossly unfair”. It’s simply wrong to blog such things without linking to the criticism in question and allowing your readers to make their own minds up about whether you’re characterizing it accurately — especially when Henry doesn’t even bother to quote me directly in his piece.

Now because Henry doesn’t quote me or link to me directly, it’s not clear exactly what he’s talking about. But the one thing that’s pretty clear is that he thinks that I think that TBI is failing to produce “long, text-heavy analysis, original reporting, and commentary”. Well, for the record, I don’t think that. But his tweetifesto does make it pretty clear that he judges such content in exactly the same way as he judges a dashed-off blog entry illustrated with a picture of two hot babes kissing: by how many pageviews it generates.

If you’re going to judge all stories using that particular yardstick, then it’s pretty obvious that you’re going to end up with lots of cheap posts with provocative headlines and/or photographs, and lots of slideshows which can generate dozens of pageviews per reader per post. And you’re going to end up firing people who are better at more thoughtful, longer-form content.

TBI’s lead developer, Ian White, left a comment on Henry’s post saying that TBI has published 2,547 stories in March to date — all with an editorial staff of 15, plus three interns. Ignoring weekends for the sake of simplicity, that works out at 8.5 posts per person per day. It’s the more-is-more sweatshop model: never mind the quality, feel the quantity. If you throw enough stuff up there, something’s bound to be a hit. And if you spend too much time and effort on any one post, the opportunity cost of doing so is large: you could be generating more pageviews by writing more, shorter pieces, or — better — putting together a slideshow instead.

This is a model which works until it doesn’t. It’s undoubtedly true that the more posts you put up, the more pageviews you get, and when you’re selling ads on a CPM basis, every extra pageview means extra revenue. It’s also true that if an airline charges a passenger $25 for checking a bag, that’s $25 of revenue it wouldn’t have had otherwise. But charging money for checking bags can result in lower revenues overall, and chasing pageviews can do likewise.

The fact is that while chasing pageviews like this worked well in the early days of the blogosphere, when Nick Denton asked his editors for at least 12 posts per day, it’s much less sustainable today — and the Gawker post quotient has been reduced to 6 abolished*, with layers of editors on top of the writers who bring the average number of posts per editorial employee per day lower still. Today, if you want to compete on who can produce the most SEO-honed content per day, you’re going to lose, and people like Demand Media are going to win.

Henry is proud of the fact that his RPMs (revenues per thousand pageviews) are much higher than RPMs at more generalist sites. But in an era of essentially unlimited inventory, creating vast amounts of new inventory in order to increase CPM-based revenues is not an obvious road to riches — I’ve called it “a junk-mail paradigm which benefits no one”, and no, that’s not just the view of a naive editorial-side person without business-side experience: it’s also the view of Jim Spanfeller. If your pageviews become less valuable, falling RPMs can mean lower revenues even on higher traffic.

Blodget should remind himself on a daily basis that publishers make money by selling readers, not adspace, and that if he’s going to make money, he’s going to have to do so by getting high-value readers that companies want to reach. At the moment, both Blodget and his advertisers are stuck in an increasingly out-of-date paradigm wherein pageviews serve as a proxy for readers, but today, unless you’re Demand Media or the like, that paradigm is doomed.

The job of the editorial side at TBI, then, should not be to maximize pageviews. Instead, it should be to create the best-quality content for the readers that Blodget wants: to build a large and loyal readership base which feels that it has a strong relationship with the site. Once the editorial side has built that readership, then it’s the job of the business side to monetize it. Yes, banner ads are one way of doing that — but they’re only one way of doing that, and they shouldn’t be allowed to determine the editorial mix to the detriment of editorial quality more generally.

How else can an online business monetize its readership? AllThingsD makes lots of money from its conferences. And conferences don’t need to be huge events sold months in advance, either: smaller salons can also be very profitable, especially if they come pre-seeded with name-brand TBI talent like Carney and Blodget. The Daily Telegraph, in the UK, is a large retailer in its own right. As real-money prediction markets become legal in the US, there’s surely going to be a lot of money in writing about them and driving rich readers to them. If you have content which is so great that other people want to run it, you can make money syndicating it, or give them the option to embed it on their own site in a way that benefits you both. You can copy Wall Street research shops, which while nominally selling research reports are really selling access to the people writing them. That kind of business model benefits everybody: the kind of person willing to spend money to have phone access to a TBI reporter is probably exactly the kind of person that the TBI reporter wants to talk to in any case. And if you get a good amount of penetration within a certain financial community, there are some pretty interesting ways to make money by putting your readers in touch with each other. Finally, it’s almost impossible to underestimate the value and profits that can be found in a good email product, in a world where financial executives spend much more time on their BlackBerries than they do surfing the web.

If I was a venture capitalist backing TBI, I wouldn’t be asking Blodget for his pageview numbers: instead, I’d care much more about other metrics of reader quality, reader engagement, and reader loyalty. That’s where the big long-term money lies, since high-value readers are hard to find, and will always be worth a lot. If TBI puts too much effort into chasing CPM revenues, it’s likely to find itself firing exactly the employees who were doing the best job at building the reader relationships it most needs.

Now TBI is not, actually, bad at serving readers and building up a high-quality audience. I liked their experiment with embeddable content, I like their full RSS feeds, I especially like the way that they’re now including the full content of slideshows in their RSS feeds, and I think they do a very good job on the aggregation/curation front, finding and linking to the best financial news and commentary from around the web. They also know that they need high-quality original content of their own, and they have historically been good at supplying that, too. If their aim is to pick a set of readers and then give those readers everything they could want or need in terms of original content and external links, then up until now they’ve been doing a pretty good job — although, as I say, Blodget has always been a bit parsimonious on the external-link front when he’s writing his own blog entries.

But some things work against readers: reading a blog entry in a web browser shouldn’t turn into a game of Frogger where you have to make sure not to mouse over any word which has been underlined twice, for fear that it will open up an intrusive pop-up video ad. And when you’re lucky enough to have hired a name-brand journalist who is admired by your readership, who understands the medium, and who gives you desperately-needed credibility, don’t fire that journalist just because his paycheck is more than one-third of the direct CPM revenue he brings in. It’s absurd to assume that your own overhead should be somehow apportioned between journalists on the basis of how much they’re earning, and in fact it’s even more absurd to think of journalists as profit centers in the first place. Journalists are cost centers: you spend money on them in order to attract a high-quality readership. If a journalist does that but you’re having difficulty monetizing that readership, then don’t blame the journalist, and don’t try to get him to chase pageviews instead.

Traffic can be bought. Loyal reader relationships need to be earned, and that’s where stars like Carney are invaluable.

*Update: Nick Denton emails to say that Gawker now has no post quotient at all, and that his writers are now judged only by the new visitors that their pieces bring in, rather than the number of pageviews they generate. And Blodget responds — on the version of this post he excerpted on TBI, natch. In what I’m pretty sure is his first comment about Carney since he fired him, Henry says “he’s a good writer and a great guy, and we’ll miss him“.


I agree with your post, Felix. I believe that Blodget is trying to become the Gail Wynand of the internet by building a populistic attention-grabbing tabloid for the lay masses. In the process he will lose me and the rest of his viewers that want informed and well-written articles which will coincide with a decline in the value of his site. But that’s just my opinion.

Posted by jdanielwright | Report as abusive

Blogonomics: Revenue per page

Felix Salmon
Mar 27, 2010 01:09 UTC

In the wake of the debate we had earlier today, Henry Blodget took to Twitter to explain the numbers behind ad-supported blogs. The most interesting tweets, to me, were these:

Ad revenue for a general news site tend to range from $3-$6 per thousand pages. Ad revs for a business or premium site can run $10-$20… [does a bunch of math] And that’s at $10 per 1000 pages, which is actually a good monetization rate (business sites are higher, thankfully). If you work for a gossip or general news site, the revenue per thousand pages can be far lower, requiring vastly more pages per journo.

If $10 is “a good monetization rate”, then let’s be generous and say that Blodget is making $15 at TBI. And then let’s look at a typical TBI page — say, this one. You’ll probably see different ads than I do, but I see a MetLife banner across the top, a FedEx box in the right-hand column, a big Amex/OPEN ad underneath the post, and a Monster.com text ad just before the comments start.

Now check out TBI’s rack rates. The MetLife banner is $20, the FedEx box is $25, the Amex/OPEN ad is $30, and the text ad is $3. Or something like that, anyway. Add them all up and it comes to $78, but let’s call it $60.

If Blodget is running $60 worth of ads but getting only $15 of revenue, then either he’s discounting massively, or he’s not even coming close to selling out his inventory, or some combination of both. And the same is true even if he’s making $20 or even $25 per thousand pageviews.

But here’s the problem: when Henry starts talking about the number of pageviews that a journalist needs to generate in order for the site to make money, he’s working on the assumption that every marginal 1,000 pageviews produces $10 (or whatever) in marginal extra revenue. Whereas in reality what tends to happen is that the ad sales team either fails to sell out the site’s inventory, or only does so by discounting so deeply that it’s really only their own fault that the revenues are so low.

This is one area where I think that Henry could take a leaf out of Nick Denton’s book, and refuse to run deeply-discounted ads. Doing that helps to improve the value of the brand among advertisers, and it also creates interesting opportunities for rewarding staff. At such a website, there will always be unsold inventory; at Gawker Media, that inventory is given over to the Gawker Artists program. At TBI, the inventory could be given over to staff journalists, in proportion to their pageviews the previous month, to donate to whichever organization they think could make best use of some free advertising on the site.

But for the time being I think it’s actually quite hard to say that a journalist with underperforming pageview numbers is being uneconomical for the site, especially when the ads you’re running on his pages are nominally worth four times what you’re being paid for them. That looks much more like a problem with the ad-sales team to me. The editorial team, after all, is clearly already producing way more content than the ad-sales team can manage to sell at decent rates. Maybe they should be the ones being fired.


I’d like to see those studies. I think the devaluation of online ad sales has more to do with providing the buy side with so much tracking detail that they will pay next to nothing for what isn’t interacted with.

Meanwhile they sell television ads for hundreds of thousands of dollars to an audience they assume is watching, while they pay far less for guaranteed viewers because the video was delivered over IP rather than cable, broadcast, or satellite. Did I mention you can’t skip through a Hulu ad like you can the one on your DVR?

Digital ad sales need to wake up and stop devaluing their product.

Posted by Soup | Report as abusive

What kind of image should a community bank project?

Felix Salmon
Mar 27, 2010 00:00 UTC


I’m very happy that the Lower East Side People’s Federal Credit Union made it into the photomontage the NYT used to illustrate an article on switching bank accounts — even if there was no mention of credit unions in the article itself. I’m on the board of LESPFCU, and we’ll take all the publicity we can get.

But looking at this montage, I do wonder whether our friendly-local branding might not make us the most attractive place to move one’s money, compared to all the slick alternatives, especially since we don’t offer perks for people opening new bank accounts, and we certainly don’t offer things like 4% interest on checking accounts for heavy debit-card users.

I’m not a fan of people switching to a bank because of some gimmicky here-today-gone-tomorrow promotion: switching bank accounts is hard, and I’m sure the idea behind a lot of these promotions is that once the 4% interest rate or whatever goes away, the customer will still keep the account.

But I’m also very much a fan of doing anything which can persuade people to move their money to LESPFCU, so long as it ultimately serves the predominantly low-income owners it’s my job to represent in board meetings.

When I asked Twitter whether they thought the LESPFCU branding in the montage was good or bad, Kat Aaron had nothing but nice things to say about us — but that was based on her real-world experiences there. Alea, by contrast, going just on the pictures, said LESPFCU would absolutely be his last choice.

I do think that while people like the idea of community banks in principle, they also want a certain degree of slick professionalism at the same time. Wonky hand lettering might be humanizing to those of us devoted to the credit union, but it can also make us seem amateurish to outsiders.

The good news is that our members come overwhelmingly through word of mouth, and always will do; once they get to know us, they understand why our signage is like it is. But it does stand out among other banks — and not necessarily in a good way.


Aesthetically, perhaps it’d be a bit neater if the word side was on the same line as lower and east.


The street art motif suits the neighborhood and recalls the signage of nearby community art center ABC No Rio. But I’m perplexed by the content of the art. From what little I can make out, the foreground slightly resembles a lunar landscape.

Posted by Sandrew | Report as abusive