The Long Term Reality of a Blog Exit Strategy?

I recently wrote about giving some consideration to your blog exit strategy which stirred up quite a bit of debate elsewhere (Blogspotting - Blog Exit Strategy? We're just getting started) about whether we’re actually trying to walk before we can crawl here? In my view there is a yes and no answer to this:

Yes - There is a lot of euphoria creeping into the blogosphere over deluded valuations and unrealistic short term objectives, but much of it I am glad to say is tempered by sensible perspective from many quarters.

No - Because I believe in the following things:

Growth In Commercial Blog Networks

Whilst there maybe negligible value in most blogs/blog networks as it stands (the market dictates at the end of the day), I can see a time in the next 3 – 5 years where there might be some really quite valuable blog real estate out there.

Yes we’ve seen the likes of Weblogs Inc and Gawker pioneer the mount Everest of commercial blogging if you like, but is it not churlish to think that others will not follow in their footsteps at some point. A bit like other pioneers, they maybe the first and last to achieve that level of commercial blogging success for some time to come, but who is to say some of you starting your own blogs today may end up with a flourishing network on your hands 2 years hence. If that’s the case, is it not prudent to give some consideration in your business plans as to how you want to position yourself, should there be a wave of blog/blog network consolidation further down the track. For me that’s just a plain sensible footnote in my business models.

This is not to say that exit strategy should in anyway be the focal point of your thoughts as I sit firmly with Jason Calacanis on the importance of sustainable, organic revenue growth. In spite of some recent speculation (Om malik says eyeballs are regaining there luster) about eyeball values, I believe those sentiments are the remnants of a bygone era. Venture capitalists in the 90’s may have got excited about quick flips based on nothing but traffic levels and hot air, but I can assure you that many are now firmly focused on tangible revenue and potential multiples on that revenue down the line. I think this view broadly translates into the wider commerce community.

Sustainability and People Lag

A good friend of mine who set up a very successful web business in the mid 90’s told me something very interesting the other day. He said that when he started up he was possibly the only one in his particular field. Business was slow initially but he continued to build sustainable revenue growth over a number of years. The bubble burst and his business continued to quietly grow, out of the spotlight - because it was built on a firm base of consistent revenue flows, while many well documented companies went to the wall after high octane, capital burns.

Today he sits on what maybe considered a substantial web empire. I asked how he had managed to negotiate the pitfalls of a bursting bubble. He quite simply said “sustainability” and “people lag”. What’s people lag I asked? “Technology moved so quickly at the peak of the bubble that it leapt ahead of where the bulk of general awareness stood at that point. The people lag probably only really started to catch up with a lot of that technology a few years ago when the likes of Amazon actually started to turn a profit for the first time. I was well positioned having weathered the storm to take advantage”

The rather long winded point I’m trying to make here is that for me blogging has great prospects and there is revenue to be made right now with a lot of blood sweat and tears. But what many blog evangelists often neglect to point out is that there is currently an enormous people lag in terms of Web 2.0 and social media in general. Awareness of podcasting, news aggregators, video casting, blogging and wiki’s is proportionately tiny, but growing at a rate of knots. Once the lag catches up which maybe a few years from now, then that‘s when I believe the bulk of those who have built a blogging position (or possibly a Microbrand according to Hugh MacLeod) for themselves will really see some great opportunities to cash in if they so desire. Between then and now there might even be a downturn in sentiment as there was with the previous incarnation of the internet and it will be the survivors who conquer all before them, unless you’ve exited from the party already - like Weblogs Inc.

The Future Value of Single Source Blogs

There has also been much comment about single source blogs (i.e sole content providers like Buzzmachine) not holding value as an entity in themselves. In effect the sole content provider whoever they maybe is perceived to hold all the value and your exit strategy if any may only be limited to ultimately a job offer on a blog network. I'm a little bit more on the fence here, in as far as that maybe the position now, but what about the future?

Firstly, I wonder how many single source blogs today will grow into multiple blog networks, with multiple content providers? The trend of the last year certainly seems to indicate that this is where much of commercial blogging is heading. That is not to say the likes of Buzzmachine will disappear, the complete opposite. All I’m saying here is that the number of blogs with multiple content contributors will probably grow significantly over the next few years with inevitable consolidation to follow. Which again highlights the importance of giving some cursory attention to that scenario in your business plan.

As far as blog values are concerned that is currently a hot area of contentious debate and I don’t really want to delve too deeply into that suffice to say that I personally think the considerations should probably be as follows in rank of importance:

1. Current and projected revenue attached to each domain.
=2 Traffic levels.
=2. Quantity of links pointing to each domain.
=3 Quantity and quality of archive material.
=3 Quality of the existing content provider/providers.

This is only my personal opinion and as with everything the market will ultimately dictate how values are determined in the future, rather than the spurious link or eyeball enthusiasts you read about. Interestingly, Jason Calacanis recently pointed out that as far podcasting was concerned content providers or “the talent” as he refers to them, are likely to take on a much greater importance in the hierarchy outlined above, probably in line with the radio business model. That certainly makes sense to me.

The Demise and Rise of Conventional Media Organizations

Every day I hear more about the imminent demise of newspapers, here Steve Rubel of Micropersuasion weighs in with a long term forecast of what I recollect being mooted 5 years ago and is still yet to materialise. i.e that e-paper technology would cut a swathe of broadsheets and tabloids before it. Having been privileged to actually see 2 versions of e-paper first hand I can tell you that it ain’t what it’s cracked up to be, just yet anyway. Maybe another 5 years of development down the line, but definitely not imminent.

Nonetheless, I buy into the fact that newspapers are hemorrhaging readership. In terms of their demise, well I'm guessing not as soon as everybody is prognosticating. There’s some life in that old dog yet. However, there is a quandary here, and that’s how do newspaper barons face up to filling the pending void left by their newspaper portfolios? Certainly Rupert Murdoch has started to feel the cold winds of a declining industry brush his face – hence his acquisition of MySpace check out this post Murdoch Strategy - Not Panic Behind Net Spending in which Murdoch outlines the $1 billion dollar war chest he has set aside for internet assets. Will blogs form an increasing part of his ongoing strategy?

In my view some established blogs/blog networks may offer part of the answer, maybe not now but in 2 – 3 years. Which brings me back to my original exit strategy post. Will conventional media looking to fill the void of falling readership start buying heavily into established social media in the years to come? I think that’s a definite possibility and rightly or wrongly one I have penciled into my own business plans.

Interestingly, Steve Rubel goes on to mention something in this post (London Telegraph Podcasts Portions of The Paper) which I heartily agree may offer solace to the newspapers. That’s putting article content into podcasts. Great idea and great opportunity in my opinion, particularly if your looking to grow reach into the ipod generation of “time precious individuals” many of us are morphing into. However, as I mentioned in the earlier part of this post there is going to be a people lag on that kind of technology. Afterall, how many everyday people know about or use podcasting? Recent research indicates very few indeed. However, if you can get a foothold and hang out for the catch up, then I believe you maybe exceptionally well placed.

Here’s the Rub

So what am I driving at here you may ask. Simple:

1. Who knows really where blogs and blogging is heading, all I can do is suggest that if your serious about making a stab at commercial viability, then make a comprehensive business plan of where you maybe going, allowing for the vagaries of how blogging as a fledgling industry may develop over time.

2. Be realistic that your blog is only worth what someone will pay for it. As it stands the pool of purchasers for this kind of thing is probably very small. But personally I think somewhere between 2 and 4 years down the road there may well be a much larger market place for established blogs/blog networks, whether through acquisitive consolidation or market floatation.

3. Casting an eye towards these possibilities may well be pie in the sky to many but then I suspect the same cynicism has been leveled at a raft of successful entrepreneurs before now. What’s important is that they probably had the vision and the business plan in their back pockets, which pointed from the very start where they were heading. I see commercial blog entrepreneurs no differently. Business planning, long term targets and less importantly exit strategy can be fluid, but also fundamentally crucial to your focus.