Math is hard, especially for journalists
Posted by Greg on May 17, 2010
In this week’s New York Times magazine, Andrew Rice has an piece on journalism startups wrestling with the dilemma of how to put a value on articles in a world where the written word has become commoditized. It’s a good overview of the issue, and I probably should provide some sort of in-depth analysis or fresh perspective. And maybe I will, eventually. But to be honest, right now I’m trying to end my unplanned two-month blogging hiatus, so I’ll just limit myself to a couple snarky asides.
First of all, while I applaud the fact that the companies profiled are experimenting with different ways to fund journalism, I had to laugh at this passage about True/Slant:
In fact, if you break it down, True/Slant pays its writers more than the amount of revenue their work generates at the current online advertising rates. Stripped down as it is, the start-up isn’t yet turning a profit, and it’s now in the process of raising a second round of venture capital.
I asked Bateman, as a matter of raw economics, how much an individual article is worth to True/Slant’s bottom line, on average. He told me he calculated it out: around $10.
Ah yes, the old “lose money on every sale but make it up on volume venture capital” plan that worked so well during the dot-com boom. A piece of advice to any of the VCs talking to True/Slant: Make sure they use your money to hire an ad-sales staff.
Then again, Rice himself doesn’t show much of a grasp of basic numbers when he mentions that “individual articles, if sold at the going rates, bring in between a penny and nickel each time a reader looks at one.” I don’t know whether Rice transcribed his notes incorrectly, misheard his interview subject, or got snowed by a fast-talking head of sales, but basic arithmetic should have told him those numbers were BS.
Think about it for a second. Earning one penny per pageview equates to a $10 CPM. A nickel is $50. (And that’s assuming the site is selling all of their ads. In reality, unsold inventory generally means that sites’ net-effective CPM is far lower than what advertisers are actually paying.) If publishers were commanding CPMs like that, the industry would be flush with cash and Rice would have to find something else to write about. Or to put it another way, if sites like True/Slant are making $10 per article on CPMs of $10-$50, that means those articles would be getting between 200 and 1,000 views apiece. If True/Slant’s traffic numbers were really that piddling, the Times wouldn’t be wasting time covering them, and again, there’d be no article.
Archimedes wept.
