Felix Salmon

I’m glad that Jeff Bercovici has fisked the NYT’s silly article on the hazards of blogging, because it means I don’t have to. Instead, I can look past the idiotic central thesis to one of the pieces of supporting evidence:

One of the most competitive categories is blogs about technology developments and news. They are in a vicious 24-hour competition to break company news, reveal new products and expose corporate gaffes…

Speed can be of the essence. If a blogger is beaten by a millisecond, someone else’s post on the subject will bring in the audience, the links and the bigger share of the ad revenue.

I used to work at a newswire, where people really did care when a rival wire beat us by a few seconds. In the financial newswire business, there really is a small number of traders who can make a large amount of money by getting the news just slightly faster than the next guy. But in the blogging world, that simply isn’t the case. It doesn’t make the slightest bit of difference if you’re "beaten by a millisecond," or even if you’re beaten by five minutes. Given the speed with which RSS readers refresh, or the frequency with which sites are crawled by Google News, or the avidity with which even the most zealous blog reader will refresh his favorite blogs’ home pages, a few minutes here or there makes essentially no difference.

Now there are a lot of very competitive guys in the tech-blogging space. Brian Lam, the editor of Gizmodo, even shares with Jason Calacanis, the co-founder of Engadget, a passion for martial arts and for using fights as a metaphor for blogging.

He said he was well equipped for the torture; he used to be a Thai-style boxer.

“I’ve got a background getting punched in the face,” he said. “That’s why I’m good at this job.”

In such a competitive hothouse, it’s entirely predictable that bloggers will care about who got what first. But that doesn’t mean that anybody else will really care – and it certainly doesn’t mean that someone who was a few seconds faster will get the greater number of pageviews. If a big-name blog gets a genuine scoop, that will certainly garner pageviews. But when many different blogs are all presenting more or less the same information at more or less the same time, more or less independently? Then the who-gets-there-first game is pretty much irrelevant, as far as audience-and-links-and-ad-revenue is concerned.

One of the interesting things about the internet as a news medium is that although it’s certainly faster-paced than, say, a daily newspaper, it’s actually significantly slower than television, let alone newswires. As someone without a television, I feel this every time there’s a Fed meeting: while the news of the rate cut, and of the market’s reaction, is pretty much instantaneous on TV, there’s generally a small but significant delay before the rate-cut news appears online, and it’s usually a good 15 minutes before someone armed only with an internet connection can tell how the market reacted.

That said, speed is nearly always overrated, even in the world of newswires. Consider the case of a piece of news which moves the market: wouldn’t you want access to that news a couple of seconds before the other guy? Well, yes, but only if the other guy not only doesn’t know what the news is, but also doesn’t know that there is any news. If there’s a scheduled news event, like an FOMC meeting or an earnings release, then getting to the news a second early doesn’t really help you, since no one is going to trade on the old information when they know that new information is coming any second.

In order to make money from getting news early, then, you need to be completely on the ball, glued to your screen; you need to recognize a market-moving headline when you see it; you need to know exactly which way the market’s going to move (which isn’t always obvious); and you need to be able to hit any open bids or offers very quickly before they get pulled. Yes, it’s possible to make money that way. But it’s not something which happens very often. A good trader generally doesn’t make money from having information that other traders lack; he makes money from trading that information in the knowledge that everybody else has it too.

So when someone tells you about the enormous pressure that bloggers are under to Get There First, just remember that such pressure is entirely self-imposed, and serves very little purpose. There are lots of blogs which do very well out of Getting There Second: Gothamist is a good example. Me, I like to get there the same day, and when something’s more than a couple of days old I often think twice before blogging it. But it’s not something I’m going to have a heart attack over.

Jordan Golson can’t be happy: Nick Denton has cut the amount of money he gets per thousand pageviews to $6.50 from $9.75. That’s a 33% pay cut, on a per-pageview basis. What about on an absolute basis?

Well, the pageview rate is set on the basis of the previous quarter’s pageviews. Total Q4 pageviews were 9,132,723, while Q1 pageviews rose 34% to 12,234,604 . The 33% cut matches the 34% rise in pageviews, right? Er, no. If you’re making $6.50 per thousand pageviews, you need to get 50% more pageviews than you did at $9.75, just to keep your income flat. So the reduction in pageview rate is significantly harsher than the rise in pageviews, and there’s an extremely high probability that Valleywag’s writers will make quite a bit less money in Q2 than they did in Q1, even if they maintain the stellar present growth rates. That’s got to hurt.

If one wanted to be charitable to Nick Denton (and, really, who wants to be charitable to Nick Denton) one could say that the Q1 pageview rate built in much less growth than Valleywag ended up showing, and so he went over budget on his Valleywag salaries in Q1, and now he’s just trying to bring them back down to where they were always meant to be.

But the whole point of the pay-per-pageview system is that it incentivizes bloggers to maximize their pageviews. In reality, it seems, if they do that, they only end up being punished. Here’s Henry Farrell:

If employees provide full additional effort at time t, providing a nice bonus for both employer and employee, they have, in effect, revealed the maximum degree of effort that they are able to put into the work. The employer then has an incentive to lower the piecework rate at time t+1 so as to increase her share of overall revenues, while demanding that the employee continue at the previous rate, or be fired. A rational worker will therefore not make full effort at time t, figuring out that he will be screwed over later if he does.

Looks like the Valleywags are learning this lesson the hard way.

Update: I was rushing out of the office when I put up this blog entry on Friday afternoon, and didn’t make things quite as clear or precise as they might have been. So let me clear a few things up.

First, the number of pageviews which Denton actually pays for: it’s not the same as the number of pageviews that the site as a whole receives. But from looking at the stats page you can work out what it is, by adding up the pageviews for Nicholas Carlson, Jordan Golson, Paul Boutin, Jackson West, and Melissa Gira Grant. (Owen Thomas, as "site lead", doesn’t get paid per pageview.)

But the problem is that it’s hard to see how paid-for pageviews grew from Q4 to Q1, because the stats page only goes back to November, not to October. I can tell you what paid-for pageviews were in Q1 though: 4,525,939. Which means that Valleywag’s payroll for Q1 was $44,128, plus whatever Owen Thomas made, on the grounds that it’s safe to assume that all Valleywag’s writers earned out their advances every month.

I don’t know how that number compares with the equivalent figure for Q4, because we don’t know the detailed per-writer breakdown for October, and we also don’t know what the PVR was in Q4. But I think it’s reasonably safe to assume that the ratio between total pageviews and paid-for pageviews stayed roughly constant between Q4 and Q1. Which is why I used the increase in total pageviews to get a number for the growth rate from Q4 to Q1, of 34%.

I’d also like to be a bit more precise about the Q1 earnings of the top Valleywag bloggers, which I talked about on Tuesday. I was using just the top-line figures for Nicholas Carlson and Jordan Golson, but in fact they both appear twice in the list of bloggers. If you add up both of the times they appear, then Carlson received 952,158 pageviews in March and 2,151,840 pageviews in the quarter, for paychecks of $9,283 and $20,980 respectively. Golson received 570,782 pageviews in March, earning $5,565; his earnings reached $13,920 for the quarter, based on 1,427,718 pageviews.

So Carlson’s quarterly earnings averaged out at about $7,000 a month; Golson’s were more like $4,600. If these two writers increase their pageviews by 35% in Q2 compared to Q1, then Carlson’s pay will fall to about $6,300 per month, while Golson’s will fall to about $4,175. Those are significant pay cuts: maybe closer to 10% than 33%, but more than enough to change one’s standard of living for the worse. And remember, that’s assuming that Carlson and Golson increase their quarterly pageviews significantly from the record levels set in Q1. If pageviews simply remain steady at those record levels, then this really is a 33% pay cut.