Biting Your Own Long Tail

According to Valleywag, AOL is shutting down its long tail blogs because they are underperforming.  But consider, these blog may be "underperforming" because they are attached to AOL.

Valleywag:

The bulk of AOL's ad revenues from its blog network, running at more than $1m a month according to Calacanis, come from a few star brands such as Engadget, Autoblog and Joystiq. They're in traditional broad categories: consumer electronics, autos and video games. The Time Warner internet unit has told editors of smaller and unprofitable sites that they will be shuttered at the end of the month.

AOL is very big.  They have high overhead.  So "unprofitable" to them would be some nice money to smaller companies or individuals.

This is true even for my company.  When Gray Hill Solutions first started we had a little product called TreePro which helped agencies manage their urban forests.  It was fairly popular, but it was also inexpensive.  The price point for it was perfect for the industry, but as our company grew - and our overhead with it - we could no longer afford to maintain the very slim profit margin it provided.

It was too labor intensive.  It didn't scale.

We have other products now that cost less, but scale better.

Blogs, being a hands-on activity, are difficult to monetize for large companies like AOL.  It's too labor intensive and long tail blogging as an application don't scale to meet the demands of the parent agency.

But AOL gets more than just revenue from the blogs, it gets exposure.  I think there were some better ways for them to manage this other than an abrupt shutdown.

The short list is this:

1. Create a smaller holding company with lower overhead that expects only to break even but provide exposure and free advertising for AOL while maintaining their position in professional blogging.

2. Open up those blogs to allow larger communities to blog "for free" and provide minor incentives to people who blog within the AOL network.

3. Continue to take  a loss on the blogs and hired bloggers and write it off as marketing.

Technorati tags: valleywag, jason calacanis, blogging, aol, long tail

Blogged from the Sai Oak in Ocean Shores, Washington

Comments

[Jason]

Actually, they were not closed because they don't make money--that's just wrong. These blogs are all break-even or profitable. I think the issue is (and I'm not there any more) that smaller blogs keep you from focusing on the bigger ones. Bigger ones run at huge margins and they have a ton of growth left in them.

So, for a company like AOL it just makes better sense to focus on making Cinemtial, TVSquad, Autoblog, Joystiq, Engadget, etc. really, really HUGE.

Before I left in November I had worked with my team over there to *consolidate* about 20-30 niche blogs into the bigger ones--so this really has nothing to do with budget cuts or AOL not getting it. This is a very smart move.

[Jim Benson]

Thanks Jason, that's a bit of info I didn't have.

A move to consolidate overlapping blogs may be a good move.

I wonder, though, about overconsolidation of dozens of blogs into six or so. Does that have an impact on the information provided?

Does it make them less "bloggy" and more "magaziney"? And is it necessary to outright remove the smaller blogs to make the bigger ones bigger?

The answer to these questions may well be yes. After all, one of my big issues with Yahoo has been my perception of their lack of cohesion and focus. This could be AOL focusing.

But, it still seems to me the need to consolidate those blogs was to get blogging to scale better for the large organization. To make them "really big". In other words, to take them out of the tail and put them in the head.