The other morning, as I woke up after my usual 6 naked Taylor Swift dreams, I found the following email*:
How would you like a few hundred bucks, just for putting a link on your blog?
*Note, some details of this email have been changed, mostly because I’m too lazy to go find the real one**.
**Literally as I typed that last sentence, I got ANOTHER email about advertising on my blog.
I don’t take blogging that seriously. Basically, I try to take 7 penis jokes and turn them into a serious point about finance. Sometimes I succeed, most of the time I fail. I continue to be impressed that my readership continues to creep up. My Mom must be hitting refresh A LOT. I totally don’t pay her either. Anymore.
When it comes to my lax blogging attitude, I’m definitely in the minority. Most bloggers take the medium really seriously. They’re serious about making a sideline income online, dammit. With advertising offers literally falling out of the sky, I can’t say I blame them. For me, in about the last 8 months, blogging has gone from a fun hobby to a serious sideline business. I’m not going to tell you how much I’ve made or anything, but it’s enough money that it’s actually a lucrative activity. I’ve always dreamed of getting paid to make sex jokes, and you people have made it happen. Give yourselves a pat on the groin or something.
But yet, as I watch the medium evolve, I’m wondering if the boom we’re witnessing is sustainable. I do absolutely nothing to attract advertisers, yet they still contact me, increasingly more lately. Bloggers with more readers are experiencing an even bigger boom. Bloggers are increasingly using their expertise to leverage into more traditional media, doing things like writing books and appearing on radio and tv. Others choose to keep their work strictly online, writing for other bloggers or other internet based publications. The point? The market for blogging and blogging related services has exploded, and at least one blogger is concerned it isn’t sustainable.
As most of you know, Mike from The Financial Blogger is all over buying other financial blogs. Him and his silent partner own probably around half a dozen different sites at this point, with no intention of slowing down. He’s all about expanding his empire, even if he has to take on a lot of debt to do so. The guy has borrowed at almost credit card like rates (10%) in order to continue to expand his business.
Mike isn’t alone in this blog buying business though. This forum over at Yakezie has half a dozen bloggers who are interested in buying sites and milking that sweet, sweet PR teet. They range from the incredibly unrealistic (only willing to pay 2 times monthly revenue) to people who are willing to pay a much more generous figure of 18 to 24 times monthly revenue. This is increasingly becoming the industry norm, replacing 12 times monthly revenue as the norm. Not to be outdone, Mike has raised the stakes, indicating he’s now willing to pay up to 48 times monthly revenue, at least sometimes.
We have a market with rapidly rising valuations. Is that the sign of a bubble? Could be.
Meanwhile, we have all sorts of new competition. I can’t find the info on the Yakezie site, but there are approximately 3.2 million new blogs who are just jonesing to get into the club. Their favorite traffic metric is the Alexa rank, which ranks your site’s visitors who have downloaded Alexa’s toolbar.
I have absolutely no interest in joining Yakezie. After I type the next paragraphs, I’m sure I’ll be banned from ever applying to join, which is just fine by me.
Yakezie is nothing but a ponzi scheme, mixed with a dash of communism for good measure. It’s designed to benefit its benevolent ruler at the expense of the peons making up the bottom of the pyramid. There are so many problems with the business model that this humble blogger barely knows where to begin.
Exclusively using Alexa ranking to determine a site’s popularity is like using a dividend yield to exclusively determine an investment’s potential. Everybody in Yakezie visits each other’s sites, sometimes exclusively. Naturally, they all have the Alexa toolbar installed, meaning they’re artificially increasing each other’s rankings. I know of a certain few sites in the network that get considerably less traffic than I do, yet they kill me in Alexa ranking. You guys aren’t fooling everyone.
Do you know how many non-bloggers have the Alexa toolbar installed? I’ll tell you. ZERO.
Meanwhile, they all hang together. They link to each other exclusively, visit each other exclusively, and probably meet for circle jerks in real life. It’s really quite easy for a relatively new blog to get to a respectable level of traffic, all they need to do is have a pulse, join the Yakezie challenge, get linked to by all the other Yakezie blogs, and they get noticed.
How does this relate to a ponzi scheme? Well, like Bernie Madoff can attest, you need new
suckers entrants in order to keep the whole thing going. If the network doesn’t grow, Google eventually figures out that only a few blogs are consistently linking to each other, hence reducing the effectiveness of the network. Plus, the benevolent ruler can continue to profit from the network, since it keeps getting bigger. He’s sure trying hard convince the challengers the network is for their benefit. Why do you think the slogan sounds like it came straight from Karl Marx?
And then, the ruler will write posts that do their best to discourage people from trying to make a living online.
I think we can add herd behavior to our bubble list.
Meanwhile, let’s take a look at the underlying industry. All the buzz these days is around the high tech names. Facebook is planning it’s IPO. Google is continuing to chug along. Everyone and their dog has an iPhone. Even companies like Amazon and Netflix are flying high. The whole sector is booming like it’s 1999 again.
To review, let’s take one last look at our bubble list. We have:
1) Easy money
2) Increasing valuations
3) Herd mentality
4) The entire sector is sizzling
So, yeah. 1929 just called. It wants its shtick back.