For two years I was obsessed with trying to turn a blog into a business. I posted 10 or 20 items a day to my site, The Secret Diary of Steve Jobs, rarely taking a break. I blogged from cabs, using my BlackBerry. I blogged in the middle of the night, having awakened with an idea. I rationalized this insane behavior by telling myself that at the end of this rainbow I would find a huge pot of gold. But reality kept interfering with this fantasy. My first epiphany occurred in August 2007, when The New York Times ran a story revealing my identity, which until then I'd kept secret. On that day more than 500,000 people hit my site—by far the biggest day I'd ever had—and through Google's AdSense program I earned about a hundred bucks. Over the course of that entire month, in which my site was visited by 1.5 million people, I earned a whopping total of $1,039.81. Soon after this I struck an advertising deal that paid better wages. But I never made enough to quit my day job. Eventually I shut down—not for financial reasons, but because Steve Jobs appeared to be in poor health. I walked away feeling burned out and weighing 20 pounds more than when I started. I also came away with a sneaking suspicion that while blogs can do many wonderful things, generating huge amounts of money isn't one of them.
Now others seem to be riding the same downward curve, with euphoria giving way to exhaustion. Michael Arrington, whose TechCrunch blog empire attracts 6 million readers each month, has gone on a monthlong hiatus after three years of nonstop blogging. His break was prompted, he says, by burnout and by the craziness of the blogosphere (he says he's been stalked, threatened and spat on) and not by the fact that he's been trying to sell his company for a year and hasn't been able to find a buyer who'll pay his price, which is rumored to be $100 million. Gawker Media, a leading network of blogs, recently laid off all but one of its writers for Valleywag, its tech blog, which has struggled for three years. In January Pajamas Media, a collective of right-wing political bloggers, shut down its ad network, which CEO Roger Simon says "was a money loser for three years."
In late 2005 a columnist who writes for the ABC News Web site predicted that by 2010 the blogosphere would create "a whole new group of major corporations and media stars" and that "billions of dollars will be made by those prescient enough to either get onboard or invest in these companies." (He was responding to an article I'd done that criticized some elements of the blogosphere.) This guy was right on the first part, sort of. But as for those billions? Last year the total spent on blog advertising in the United States was a mere $411 million, according to researcher eMarketer. That represents only a sliver of the $23.7 billion spent on U.S. Internet ads last year, which is itself only a fraction of the $276.8 billion spent on all forms of advertising in the U.S. By 2012 blog ad spending will reach $746 million, while overall online ad spending will hit $32 billion, eMarketer says. More money was spent on e-mail advertising last year than was spent on blog advertising—yet you don't see anyone touting e-mail as the next big billion-dollar media business. Technorati, a blog researcher, estimates that bloggers who run ads earn an average of $5,060 per year. Don't call the Ferrari dealer just yet.
Advertisers shy away from blogs because they're too unpredictable and because few blogs attract anything approaching a mass audience—and even those that do face so much competition that ad rates remain pitifully low. "A lot of expectations are coming down in terms of monetizing social media," says Paul Verna, an analyst with eMarketer. " People have not figured out a clear way to monetize some of these vehicles." The bad economy compounds the problem, Verna says, but the real issue is "the lack of a clear business model that can generate substantial revenues."
To be sure, some blogs are little goldmines. Gizmodo, a gadget blog run by Gawker Media, had record traffic last month, with 98 million page views, and is "fantastically profitable," Gawker CEO Nick Denton says. Dooce, a personal-diary blog run by a husband-and-wife team, does between $500,000 to $1 million a year, according to Federated Media, which sells ads for the site. Arrington says TechCrunch did $3 million in 2007 and even more in 2008. He says he could sell the company today, albeit for a lower price than it would have fetched a year ago.
Those success stories keep money pouring into the space. The Huffington Post raised $25 million just a few months ago. The Daily Beast, led by editor Tina Brown, raised money from Barry Diller's IAC/InterActiveCorp. for its launch last October. (Disclosure: Diller is a director of The Washington Post Company, which owns NEWSWEEK.) Then again, The Huffington Post and The Daily Beast aren't really blogs —they're media companies that happen to feature, among other things, the work of some bloggers. Some A-list bloggers have found that the best way to "monetize" their work is by returning to the much-maligned "mainstream media"—like political writer Andrew Sullivan, whose blog, The Daily Dish, now runs on The Atlantic Monthly Web site. Presumably Sullivan makes a decent living. But as for that vision of the guy in his pajamas making millions with a blog? Or that one about investors raking in billions by betting on that guy in the pajamas? Take it from someone who dreamed the dream: I wish it were true, but right now it's looking like yet another high-tech fairy tale.