Blogonomics dissected

abnormalreturns
February 12th, 2008

We have had a long-standing interest in the state of the investment blogosphere. In a couple of posts we discussed the challenges of becoming an A-list blogger and the challenges encountered by investment bloggers looking to maintain and grow their blogs.

There are any number of motivations for financial bloggers. Some want to raise their profile in the hope of generating job prospects or client leads. Others want to create sufficient traffic to monetize their readership. In a recent post we discussed the difference between positive and normative bloggers. One could extend this discussion to say that normative bloggers could be the ideal candidates for subscription-based services where their forecasts could be utilized and tracked.

On the other hand positive bloggers look, in a certain sense, like traditional media where the emphasis is on the dissemination of data. Thereby, leaving the conclusions, in general, up to the readership. Note how Jeff Miller at A Dash of Insight approaches the distinction between positive and normative thinking in the investment arena.

Yves Smith at naked capitalism has a thoughtful post on blog economics. He looks the ways in which a blogger can benefit from a growth in blog readership. However the issue is murky at best:

But there is an open question as to what the payoff to blogging really is. Most bloggers are not motivated solely by monetary results (they’d need their heads examined if they were). The returns to blogging resemble those in fields like sports, acting, and writing that have many people dabbling in it for non-financial or indirectly-financial motives. The payoff curve looks hyperbolic: most make nothing or very little, and there is a steep vertical ascent to the small number who do make a decent return on the time invested.

Felix Salmon at Market Movers has a keen interest in the topic as well and expanded on a suggestion by Eddy Elfenbein at Crossing Wall Street. The idea being how to compensate (and motivate) bloggers for generating unique content that could be used in lieu of buy-side street research. One could see how this could be a boon for the health of the investment blogosphere.

That being said at present the pecuniary benefits for bloggers are few and far between. Salmon in another post notes that the investment blogosphere will never be able to compete with even the lowest paid rungs of Wall Street. In short:

Blogging remains a labor of love for nearly everyone who does it. There are lots of possible ancillary benefits, most of which are not available to bloggers who wish to remain anonymous. But if all you’re interested in is potential income, and you’re used to earning Wall Street money, blogging will never be for you.

Indeed even the highest profile investment bloggers, like Barry Ritholtz at the Big Picture struggle with the challenges (and trade-offs) of trying to generate revenue in a responsible way from their blogs.

The investment blogosphere will, at least for the time being, remain the province of writers ranging from experienced professionals to the dedicated amateur. The investment blogosphere continues to evolve. In our opinion, we will continue to see some of the most accomplished independent bloggers aligning with larger media organizations. This allows both for a higher profile (and traffic) and the opportunity to generate some revenue for the effort.

Does this mean the end of the start-up investment blog? Not by a long shot. But it does mean for those looking to break into the upper echelons of blogging a more challenging path to self-sustainability.