Tobold's Blog
Thursday, February 05, 2015
The business of creating content on the internet

I am old enough that my first steps on the internet happened on a university mainframe with text-only terminals. In 1993 the eternal September began with AOL opening Usenet to the masses. At that time, AOL was not just an internet service provider, but also a major content provider. It is very hard to sell internet access if there is no content on the internet, so this totally made sense. Of course the amount of content on the internet quickly exploded, and that business model went out of the window.

The next big idea, which led to the bubble was that you created content in order to attract "eyeballs", and that those eyeballs would then create revenue via advertising or direct sales. So AOL was still in the content creation business. While online advertising annual revenue in the USA alone is a $40 billion business, that revenue is very dispersed. Some companies like Google get a big slice of it, but there are millions of small sites that just earn pennies.

This week AOL decided to close several sites which operated on this "we create content and get ad revenue" business model. While those sites weren't really huge, they were big in the niche they operated in: Writing about computer games, and specifically the MMORPG niche. Gone are Joystiq, Massively, and WoW Insider. The overall interest especially in MMORPGs has waned, and apparently these sites weren't sufficiently profitable for AOL. Of course the people who ran those sites disagree and claim that AOL is just making a huge mistake by shutting them down. But from the outside, without having access to the numbers, it is very hard to criticize business decisions like that.

More interestingly it appears that the people who ran WoW Insider decided to go independent and change their business model. They now call themselves Blizzard Watch and want their readers to finance them via Patreon. They say their "minimum operating requirements are $8,000 per month", with additional content like class columns being posted if they can get $9,000 or $10,000 per month. This should be interesting to watch. As the new content will not be behind a paywall, people can just freeload and get the content without paying a monthly subscription via Patreon.

Personally I am a bit skeptical that this will work. While my blog is certainly in a much smaller league than WoW Insider, in my experience the willingness of people of donate money for content they could also get for free is quite limited. There might be a first rush, and then the contributions wind down. Patreon might actually work better than my donate button, because people sign up for it and then just never find the energy to cancel. But that is not a business model under which I would like to operate, counting on people's initial enthusiasm followed by inertia to get money.

Patronage is probably the best solution I've seen to break the tragedy of the commons. It seems to be the flavour of the month for content funding.

My issue with Patreon is that there is no option for one-time donation. If I want to donate $50 my only method is to make it in a pledge then unsub. It doesn't help future planning if the month-one revenue is actually a one-time hit and not continuous. I do worry they will hire extra writers then have to lay them off in a few months time when the initial surge dies down.
They already hit $12.000/month within 2 days. I'd say it's an impressive amount of money, considering we're speaking of a 100$ free news site about a videogame.

Of course the "nostalgia" and "human" factors have a huge component here. Those who didn't know about Wowinsider will never-ever drop a cent for the new site. That 12K is a token of appreciation from the long-time readers, nothing less, nothing more. As soon as the initial wave will be gone, the fundrising will reach and end too.

Even if it's not a good business model for the future, in my opinion, it's a great way to support the new adventure and help them organize and find other funding sources (sponsors, banners, ...).

There is another similar case: Exploding Kittens, from Matthew Inman (The Oatmeal). With an extremely simple card game (think Cards against humanity) he raised 5.3 million dollars in two weeks. Starting with a pledge of 10 thousand dollars only. With a total of 140K bakers, the average offer was $38. For a card game.

If people love you (and by "love" I mean they truly love like Apple fans loved Steve Jobs) they will be ready to spend a lot of money for you. I mean, 5 million dollars for a card game? Let's be serious.

Wowinsider transition to Blizzwatch shares a similar story. Different numbers, same feelings. At least they had the luck to transfer the readers from the old site to the new one. For anyone messing around with websites... that's a HUGE boost.
I don't disagree but think you were a bit too skeptical on the sites. AOL laid off 150 people and shuttered non-gaming sites including an Apple one that was in its second decade.

TW-AOL lost a record nearly 100 illion dollars in a year, so it is not exactly a paragon of wise corporate strategic decisions.

Adriana Huffington married a man with inherited oil money who won a congressional seat in california and went on to narrowly lose a senate seat. After the loss, Adriana divorced him and well here is Wiki

She is the co-founder and editor-in-chief of The Huffington Post. She was a popular conservative commentator in the mid-1990s, after which, in the 1990s, she became a liberal. She is the former spouse of former Republican congressman Michael Huffington.
In 2003, she ran as an independent candidate for Governor in the California recall election.
In 2009, Huffington was named as number 12 in Forbes '​ first-ever list of the Most Influential Women In Media.She has also moved up to number 42 in The Guardian '​s Top 100 in Media List. As of 2014, she is listed as the 52nd most powerful woman in the world by Forbes.
In 2011, AOL acquired The Huffington Post for US$315 million and made Huffington President and Editor-in-Chief of The Huffington Post Media Group, which included The Huffington Post and then-existing AOL properties such as AOL Music, Engadget, Patch Media, and StyleList.

I am not saying gaming enthusiast blogs are great business but I do think it reasonable to think that at least partly they were caught up in the larger AOL strategic problems (what should they do? why are they still here?) as well as not being of interest to the new execs running the division. My guess is if they were gossipping about politics not games or computers, they would still be around. I further guess that their profitability did not overly affect a huge company doing realignment. The editor of Massively said that when they were layoffs a year ago, their page views year over year were up 40% and WoWinsider editor said they were profitable when the layoffs happened.

With their $8k/month, is it too cynical to think they are probably more profitable than many US newspapers and several MMOs?
Sorry I messed up the B in billion. From the 2003 LAT:

Battered media giant AOL Time Warner Inc. posted an annual loss of $98.7 billion, the largest in corporate history, after taking another massive charge to reflect the falling value of its Internet unit and other properties.
Wow Insider added value to my WoW sub. I learned about things in game I never would have without the site. That's worth $5 a month to me as long as I'm subbed to WoW. Thats what I'm giving to them.
F2P works (for given values of "work") so why wouldn't this? In fact, this is precisely why F2P works: all the people pledging would have been giving these websites money directly, but were arbitrarily limited to just contributing page views.
I think they're ALSO supporting themselves with ads.

Ah, here we go. From their FAQ:

"We currently intend to run ads, yes. Without a dedicated salesperson, ad revenue isn’t enough to sustain a large website of professionals, and we aren’t in a position to hire a dedicated salesperson (as in a person who has sales as their only job) without first having the revenue. Hence Patreon. However, we intend to put as much of our Patreon funding as possible toward content generation. Our ad revenue would supplement our funding from Patreon and cover expenses such as hosting, design, and ongoing technical support. If ad revenue exceeds expectations, we would put that funding into a pool I’d like to simply call “extras.” Extras would include expenses such as sending a team (or individual) to BlizzCon each year for liveblogs, photography, and so on. It would also contribute to the aforementioned nest egg to smooth out any unexpected financial hiccups. Double also, it could act as a safeguard against catastrophic equipment failures."

Honestly, the amount I used to read and rely on WoWInsider, I'm actually kinda tempted to set a patreon account up to chip in a buck or so per month as well.
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