Gawker Media and some harsh lessons for FreeConomists

Gawker Media is a live laboratory for Blogonomics - in an interesting restructuring announced today, they are cutting some areas and redoubling their assets in others:

Here's the heart of it: we are cutting 19 of our 133 editorial positions and suspending bonus payments at the start of next year. With the savings, we are increasing base pay and hiring 10 new people on the most commercially successful Gawker sites.

In essence, they are going where the money is, ie where the big PR & Ad budgets are. Consumer service based enterprises, who nobody with an Ad budget wants to fund, are getting the chop. So blogs such as Valleywag (the Private Eye of the Silicon Valley Scene) and Consumerist are on the skids:

Sites such as Consumerist, whose success has been measured more in traffic and recognition than in revenue, now need to cover their costs. I can't underline enough that this harsh commercial judgment is no reflection whatsoever on the editorial teams that are being cut.

Each of these sites performs a vital function. Consumerist provides an outlet for disgruntled consumers that exists nowhere else on the web; Valleywag has given puffed-up Silicon Valley the prick it's long needed.

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In other words, if the punter ain't paying, and the pied piper don't want to play, then the music stops.

If you ever needed a clear sign that the "Neutral Net", that claimed the Blogosphere was a community of colleagues, was a complete chimera - well, this is it. If you've ever read Animal Farm, this - along with Matthew Ingram's earlier post - is the point where you notice the New Media is wearing decidedly Old Media trousers.

As we have noted before in our essays on the Limits to FreeConomics (start here), at some point the consumer has to pay up for services run mainly in their interest, because (i) commercial enterprises are not charities and (ii) the content producers by and large do not vote for the "starving in a garret" option if they have an eye on their longer term survival.

But the other big lesson here is "Don't rely on Online Ad growth" either. As Gawker CEO Nick Denton notes:

But now the credit crisis is clearly going to affect every sector of the economy. Advertising buys typically plunge after the Christmas shopping season, and 2009 is obviously going to be exceptionally difficult. We have to prepare for the worst, now, rather than when the worst comes upon us.

He's just being a smart businessman. But it's a strong signal to the the Web 2.0 community that Ad based biz models are not going to float many (most?) of their boats, its time for a rethink of that biz model.