HuffPo economics shows that Digital Newspapers are still unsustainable

Interesting article on the economics of the Huffington Post in the NYT - apart from (as you'd expect) having a strong power law relationship between post and popularity - see diagram above - a few nuggets emerge:

Early on Friday morning, I counted the number of comments in two types of Huffington Post articles — those, respectively, in its news (paid) and blog (unpaid) feeds. The count covered articles that were published over a three-day period from Tuesday, Feb. 8 through Thursday, Feb. 10, and which the site had labeled as politics pieces. Over the course of these three days, The Huffington Post (I have abridged the text to pull out The Numbers):

- published 143 unpaid blog posts. Collectively, they received 6,084 comments, or an average of 43 per article.

- published 161 articles in its politics news feed. The articles in its politics news feed received 133,404 comments: more than 800 per article, and roughly 20 times as many as its blog posts

Not all of these reflected original reporting, like that of Sam Stein or Howard Fineman, but they were all articles that The Huffington Post was paying for in one way or another: whether to reporters, or to editors who curate and repackage content (sometimes brushing up against fair use guidelines) generated at other Web sites, or to news wires like The Associated Press.

That means that there were about 50 page views per comment on average.

At this 50:1 ratio, the average blog post, which received 43 comments, got about 2,150 page views.

The top-performing blog post — one by the former Secretary of Labor, Robert Reich — had received 547 comments (tantamount to about 27,000 page views) as of Friday morning.

By contrast, more than 40 percent of the blog entries received 5 comments or fewer.

So far so good, now for the economics:

The Huffington Post had revenues of about $30 million last year, they’ve reported, almost all of which was from display advertising. This revenue was generated on roughly 4.8 billion page views over the course of 2010, according to Quantcast data. That means the average page view was worth a little more than six-tenths of a cent, or that 1,000 page views were worth about $6.25.

Do the multiplication, and you find that the average blog post — which we estimate generated a couple thousand page views — was worth about $13 in advertising revenue (Demand Media pays about $15 an article for comparison, but I can't tell the diference in input costs to produce). The median blog post, with several hundred views, was worth only $3 or $4. Even Mr. Reich’s strongly-performing post was worth only about $170, by our estimates.

So assuming the average blogger churns out say 8 stories a day, 6 days a week (round that up to 50 posts) they can earn (assuming 2 weeks a year vacation) a maximum of about $10,000 per annum gross at $4 per annum. You clearly therefore want to be one of the Median bloggers, who get a few big hit stories - that's a whopping $33,000 per annum.

Of course, the HuffPo is going to take quite a lot of that (all of it in the case of the Free Bloggers).

And yet, and yet, I hear you say - how could AOL value the Huffpo at $315m, ie (at 4.8bn pageviews) 6.6 cents per pageview, or at c $140 per Median Post, so your heroic Median Blogger actually created c $350,000 of value to the sellers (ie the owners) for the total potential payment of $33,000 - a 10:1 ratio (and that's assuming they got all the value paid to them, which was extremely unlikely).

There are 3 main lessons from this:

1. What Nick Carr called the "Digital Sharecropping" nature of user generated content is alive and well in online newspapers. At those sort of numbers you are daft to do anything except write your own blog unless you are one of the top performers or a total newbie.

2. If the Huffington Post (and by extension, the Digital Newspaper industry) had to pay anything like the economic value of the workers' content produced, (or even enough for a decent living) the industry wouldn't exist (and these sort of pay to value ratios make anything Marx was protesting about look positively insipid). This business relies on people working for subeconomic wages.

3. It's worse - the only reason there is that amount of Ad revenue is because of vigorous curation and SEO maximisation to get Google hits. What happens if Google et al start to respond to increasing user clamour for cleaner search results?

The rest of the article is about economic models for how journalists may get paid, but I think that's a pipe dream as long as others are prepared to work for free. The real lesson from social media businesses remains, from MySpace on - be an owner, get other sucke....sorry, valued contributors - to contribute content for whuffie and change, and sell the f*cker to some dumb mon...strategic investor before you run out yourself.

On that note, Broadstuff get about 3/4 million views a month on average, so at Average HuffPo value it's worth about $56,000 per annum in revenue term, and thus by extension (Revenue to Purchase Price) that makes us worth c $600,000 to buy.

Anyone want to buy this f*cker, going cheep