Fractals of Change

On The Front Page of the New York Times

 

Fractals of Change made the front page of the New York Times online edition, thanks to a robot of course.

The Times has a new feature called Times Extra which inserts hyperlinks to blogs which relate to front page stories in a scrollable box under the story as you can see above. I posted my criticism of Treasury for pre-announcing a plan for a subsidized interest rate cut and thus keeping the housing market in freefall until the cut materializes. The robot, which is part of a Times-owned service called blogrunner, recognized the relationship to the Times story (and was kind enough to disregard the fact that my post keyed off a Wall Street Journal article about the preannouncement).

Although, as a New Yorker, I was brought up to believe that being above the fold of the NYTimes is the road to fame and fortune, the extra traffic from this link is so far negligible – far less than when Techmeme picks up a post. This may be because Times Extra was just introduced yesterday and/or because you have to click the "Try Our Extra Home Page" button in the masthead below to get into Times Extra mode. Most visitors to the front page aren't in the habit of doing this.

 

But it's nice to be part of the conversation.

We Are ALL Part of the Change We Need

Tim O'Reilly blogged yesterday on the need for those who supported Obama in the election to stay involved and help the new administration but, more importantly, the country succeed. Those of us who didn't support Obama have an equal obligation: we can't sulk; we can't work for the failure of the Obama administration; we have to work for the success of the country no matter who gets the credit if for it and regardless of future elections. To do that we have to work with the administration wherever possible and be constructive and principled when we disagree. Change IS needed.

Tim asks "What do we do next?" and gives four substantive answers and one procedural.

Substantively:

1. "Actually apply for one of the jobs in the new administration." (This certainly applies even to those who didn't work for getting the administration elected. We should take the new administration at its word that it'll be open to former opponents and new ideas.)
2. "Whether inside or out, the tech community can continue to lead by example."
3. "Identifying specific proposals for best practices and points of leverage."
4. "We really need to weigh in on the issues that matter. From climate change, to open spectrum, to education policy, to investments in science and technology, we need to make our voices heard." (These voices, even from the tech community, won't be unanimous but they need to be heard. Particularly easy for us bloggers to do.)

Procedurally Tim proposes posting ideas to the transition team's website change.gov. Tim does note that the site itself should change so that submissions to it are not just one-way emails but visible to other visitors who can then comment. In the spirit of constructive suggestions,  I'd suggest that anyone have an ability to post to it – subject to after-the-fact moderation for egregious abuse. Also would strongly suggest that the blog on the change.gov site be open to comments. That would be a mechanism for and a demonstration of the change we need.

DISQUS for discussions

Lately the comments and replies on Fractals of Change have gotten a lot more intense and interesting, maybe because these are interesting times.

Typepad comment handling is pretty primitive so I've switched to DISQUS starting with this post. DISQUS supports threaded comments, has a more powerful profile system for commenters across blogs which use DISQUS, lets you (and me) get email notification of replies to comments and even lets us reply to comments with comments by reply email. Should be neat; let me know what you think.

For testing purposes, I'll be making the first comment on this post.

Full disclosure: I'm an indirect investor in DISQUS through Union Square Ventures.

Blogging 101 – Comment Spam

Sometimes you will find comments on your blog which link back to commercial sites and are there to promote a product or boost the google-juice of the linked to site. Are these spam? Should you remove them all?

Here are two comments which were recently posted on Fractals of Change. IMHO, one is legit and one's not:

"what a nice post Good luck!!!!!!!!!!!!***[commercial name removed] Challenge"

"We have recently created a free link exchange directory http://www.link-exchange-submit.com. Providing people use it fairly, it should help you with your SEO link building. It is automatic in terms of your link and suggested category being added. But it is also moderated daily in terms of spam removal."

The first comment is clearly spam in that it contains no internal reference to the content of the post. For some reason, the people or bots that post these almost always stick in a generic compliment thinking, perhaps, that you are starved for praise and will leave the comment posted. This one was deleted and reported to Typepad.

Since the post that the second comment was attached to WAS about links, the comment is right on target (although it could have been posted by a smart bot). My post was against link exchanges and this is clearly a contrary view; but that's fine – good, in fact. The service which is being promoted is something a blogger thinking about link exchanges would want to look at. So the comment is likely to be useful to readers of the post. It gets to stay.

Similarly, a post of how to make cheaper cellphone calls abroad is festooned with comments containing links to SIM providers and cheap or free calling services. Again, anyone interested in the post is likely to be interested in the links. Sure, they serve a commercial purpose and I don't get paid for them as would get paid for ads. But the comments expand on the post and make it more useful to readers. On FOC, that's the spam/no spam criterion.

Blogging 101 – Exchanging Links

My friend Al is a new blogger. He's received his first requests for link exchanges and would like to know what I think of this practice. For non-bloggers: a link exchange is an agreement that says I'll put a link to your blog on my blog if you link to my blog from your blog.

The sites which have solicited Al do not particularly impress him; but they do have fairly high link ratings. That means that, if they point to his blog, he will gain Google juice and Technorati rank and possibly readers. All he has to do is point to them in exchange.

Should he agree to the proposed exchanges? If you're a blogger, you've probably already faced this question.

Links ARE important. I said that in the first post in this series and also described here how the math of a group of cooperating blogs gives the whole group a competitive advantage compared to blogs not in the group – an advantage that can be significant out in the attention-starved desert of the long tail. So should you or Al do link exchanges?

I don't do link exchanges because I want my readers to find that my links are relevant to them. I also don't because I want the blogs that I do link to know that I value them – but can't deny that I hope that they'll find that the value is mutual and that their readers may appreciate my posts and link to me when appropriate. So you might say that I do actually tacitly do link exchanges. I don't insist on a quid pro quo; I don't link to content which isn't either relevant to the current post or likely to be of general interest to my readers.

Readers who come through random links won't become regular readers; they have no reason to. Fractal of Change is eclectic (not a great way to build circulation – focus is better) so sometimes an automobile blog or a company blog or an environmental blog'll point to a single post of interest to their readers. FOC can get a flurry of hits this way and I'm glad for the chance to sound off on whatever the subject is to these people outside my regular reader group. But FOC doesn't get many return visits from these random hits – not enough here to interest them. On the other hand, if a VC blog or nerd blog or even an energy blog points here, some of the new readers become regulars because there's enough content relevant to them to keep them.

Assuming you want regular readers and not just more hits (which may not be true), then link exchanges aren't likely to get you there because they somewhat devalue your content. On the other hand, link exchanges with blogs much more linked to than yours WILL get you a higher Google rank for the subjects you write about than if you didn't have those links so you do pay a price for being a purist (nb. rumor has it that Google bots know how to devalue references from blogs which would otherwise gain authority from link exchanges but I haven't heard this directly from any bot's output device).

What IS a good strategy is to engage in a blog to blog dialog including comments on each other's posts with a group of blogs which cover the same subject matter as your blog – better if you're all NOT always in agreement; better if the links to each other have more substance than "Joe just posted something great"; but links which get each other readers AND give readers value by advancing a discussion are the best kind.

BTW, linking to new blogs which catch your interest is a social obligation of existing blogs,

Should Your New Web Business be Ad-Supported?

Contrary to popular belief, the ad-supported model for a web business is very, very hard to succeed at. I've underestimated the difficulty of living on ads a couple of times in the my investment career. Wouldn't want you to do the same either as an investor or an entrepreneur.

Google, of course, is advertising-supported and is a huge success; that's bad news for you - and Yahoo and Microsoft. Google is consuming most of the free oxygen in the ad-supported cave. If someone wants to buy keyword-driven ad inventory, they go to Google. Why should they bother going anywhere else, especially to a startup very few page views? If you want ads on your service, you'll have to sell them or get them from someone else who is selling them. No matter how neat your self-help ad engine is, no one except maybe your mother will try using it UNLESS you open the way to a significant new market AND can prove that.

OK, you say, people won't by ads from me but they'll buy them from Google. I'll create the page views with my wonderful new service and Google'll put the ads there. Google'll put ads anywhere. Yeah, but. Google will put ads on your pages; some people will click on these ads (Google charges for and pays for clicks in case you've been living on Mars and missed that). You will get a small stream of revenue; it won't bring you anywhere near breakeven. It won't impress potential investors. In fact, the trickle of revenue you get from Google might even convince potential investors that you CAN'T make a living with ads; no ads and no revenue might leave them easier to convince.

Google ads are fine for harvesting ADDITIONAL revenue. Bloggers run them because any revenue is nice; but most bloggers aren't trying to make a living from their blog or attract investors to it. If your website sells something, it makes all kinds of sense to sell additional related somethings through Google ads or Amazon ads (which you can better aim at your customers). If your website has some spare space, Google ads are something people are used to looking at and they'll make some spare change for you. But they won't make your business model.

Maybe there's a counter-example (if so, please post it). In theory, I thought, since Google does such a good job of keyword targeting and increasingly good job of geo-targeting, a well-defined site that viewers come to for well-defined reasons (not an eclectic site like Fractals of Change) ought to be able to induce the Google bot to send just the right ads to attract many clicks at a high price per click. But I haven't seen it happen that way.

Besides Google there are ad networks which will actually sell your site to advertisers. Professional blogs do get a great deal of their advertising from networks like Federated Media (FOC is a small blog using FM). But it's tough to get the attention of a good ad network if you don't already have good demographics AND high viewership. Even if a network takes you on, their salesmen aren't going to be able to do much for you unless you have numbers big enough to get their attention and the attention of the advertisers and agencies they sell to. If your content is powerful enough, you might make a living with agency ads – but it's a long shot if you're not BoingBoing.

Whether it's Google or an ad network, whoever sells your ads is going to have to keep a lot of the revenue to pay the selling expense. It's highly unlikely that they'll be enough left for you to run your business on.

The bottom line is that you have to have way to sell ads if you're going to support a service on advertising revenue. Sell as in actually convince somebody to buy something, not just take orders. Selling ads nationally means having existing contacts with people who buy ads nationally AND having such a hot property that they'll pay attention to you. Selling locally means feet on the street walking into stores and helping to build local campaigns. Radio stations know how to do that; you probably don't and probably can't afford to hire someone who does. The easy local ads were the classifieds because the newspapers didn't sell them, they just took orders. Craig and his List jumped quickly into that huge niche. Almost inconceivable that you'll make money there.

If you have a better way to sell ads, then maybe you should start an ad-supported service. If you just have a better service, you probably can't support it on ad revenue alone.

Too Much Revenue, Not Enough Growth

Jeff Jarvis posted a comment on my post In Praise of Revenue:

"I'd also like to see you reprise your lesson (from the Union Square event some time ago) on extracting minimal value from the network you create so the network grows as large as possible and the value you've created and can extract in the end is greater than if you had tried to extract more value at the beginning. Did I get that right? I quote you to that effect all the time. Did it just the other day with a big publisher whose blog ad network is taking too high a cut. I told him to just cover his costs for the first year - or less - and he'd end up growing something bigger that would be more valuable to each member, thus bigger, thus more valuable to him. Eh?"

Jeff remembers quite accurately that I advocated optimizing for growth rather than revenue – in the extreme forgoing revenue. Jeff's advice to the publisher was right on. If you simply solve for maximizing revenue, you can end up with little growth – and little future revenue opportunity. Note, though, that Jeff did not advocate forgoing revenue; in fact, he did advise the publisher to cover costs, presumably so that growth can occur without needing to raise more capital or so that there will be a solid basis for raising capital when it can be put to good use.

The case Jeff presents of an ad network is particularly straight forward. It is difficult if not impossible to sell ads which will be seen by only a few number of people. The cost of selling the ads is too high to justify the effort; advertisers are not interested in taking the trouble to investigate a tiny potential market or put any creativity into reaching it. Other than in strictly local markets, there need to be millions upon millions of impressions AND data to do targeting with before advertisers are interested. So it is not practical for any but the very largest blogs to sell their own ad space – and even they usually don't. There is an opportunity for ad networks which aggregate advertisers and advertising on one side and an inventory of space ads can run on the other side. The network matches the ads to the blogs, typically collects from the advertiser, and pays the blogger. Google is the most successful example of an ad network but the ads it aggregates appear in many more places than just blogs. Federated Media, the ad network to which Fractals of Change belongs, is an example of a blog-based ad network.

If you're an ad network, the more page views you have to sell, the more and better the advertisers you can attract. The more advertisers and the higher the rate for page views you can achieve, the more bloggers you'll attract to make their page view inventory available through you. You obviously have to scratch to get started, need to have some credibility or an existing inventory of ads to start with, and are going to lose some money getting going. But now you've got traction: how much of the ad revenue should you share with the bloggers and how much should you keep? Your investors may be pushing for some return on their capital (profits); your compensation might even be tied to your margin on sales rather than just your gross sales. Nevertheless, charging more than you have to, even if you can for a while, is a mistake.

Charging too much stunts growth so you'll have fewer units to charge for in the future. Charging too much opens the door to competition.

The more that bloggers make from your ads, the more space for ads you'll have available as bloggers tell their friends which ad network to use. The more ad space you have, the more ads you'll get and – on the average – the more you'll be able to charge for ads because you'll have better opportunities to target and you'll have more advertisers interested. The more ads you get and the more you can charge for them, the more money bloggers in your network can make.  You want to keep this virtuous circle of growth going as long as you possibly can.

If you are extracting profits before you have to, you're forgoing future growth. In any sort of competitive market, profits attract competitors. Big profits attract lots of competitors. Would-be competitors can point to your profits and easily get funding. Funded competitors can undercut your rates and "steal" your bloggers. Whoops; the circle is now turning in the non-virtuous direction. If you're doing well but running at or close to breakeven, you've made it impossible for anybody to undercut you without running at a deficit which is hard to get funding for – at least in this market. The biggest danger to you is someone who finds a way to substantially cut costs or to deliver a better product. Obviously you've got to be vigilant about that and ought to lose some sleep over these possibilities – but keeping prices down keeps a plague of me-too competitors from cutting off your growth.

This logic goes well beyond ad networks, they just make a good example.

Craig's List has the successful strategy of forgoing revenue for MOST listings it runs and MOST markets that it's in. That strategy helped it attract a critical mass of listings and a critical mass of listings meant a critical mass of ad readers which attracted more ads etc. etc. If Craig now attempted to maximize revenue by charging for a substantially higher percentage of ads, a door would be cracked open for competition. There is no chance at current rates for a competitor to steal Craig's listings (and readers) by charging less. If and when Craig's List is bested, it'll really have to be by something which delivers a better way for listers and readers to communicate.

Unless you are a protected monopoly, high prices are a recipe for losing whatever lead in the market place you have. Low prices are the engine of growth.

The strategy Jeff suggested to the publisher and that I'm recommending here is to keep revenue as low as it can be and still fund growth. No revenue is a different strategy that I'll post more about.

Blogging 101 – The Importance of Links

An old friend recently started blogging and was kind enough to ask my advice.

Bonus hint #1: whenever you are about to write something that isn't a secret and isn't boring, turn it into a post on your blog. I'm taking my own advice.

The world wide web is all about links. Blogging differs from offline writing mainly in its use of links. Every two weeks I select one of my posts to run offline in some Vermont newspapers. Many of them simply can't be considered because they crucially depend on live links in them. Spelling out URLs on paper for people to type in is not at all the same thing. Blogger Galeal Zino posted a good rant on how dumb it is that his first grade son is only being taught to write on paper.

Links both help a blog attract readers and help a blog's readers find and access information and entertainment. Links are much more than just live footnotes but they are that as well.

The ethic of blogging is that you are always welcome to quote excerpts from another public blog provided that:

1. you quote accurately (copy and paste preferred);
2. you give proper attribution;
3. you link back to the source blog.

The link serves multiple purposes: it lets your readers verify that you quoted accurately and in context; it helps your readers find more information if they want it; it is your thank you to the blogger you quoted and helps him or her attract new readers; it may get the blogger you quoted to read your blog; it may even get him or her to link back to you and help you get more readers.

Bloggers have many ways to know what sites sent traffic to their site including tools built into most blog hosts. If I see any substantial amount of traffic coming to my site from another site, I almost always take a look at that site to see why. If the site's interesting, there's a good chance I'll link to it at some point. Linking to other bloggers gets you their attention.

It IS bad manners to quote 100% of someone else's post without explicit permission. If you think your readers should read all of someone else's post, link them over to that blogger's site.

There is a mechanism called "trackback links" that is meant to allow one blogger to put a link on another blogger's post as a sort of comment saying "I blogged about this post here". Unfortunately, phony trackbacks are used as spam to increase traffic and google juice for sites so many blogs don't allow trackbacks. Fractals of Change does allow trackbacks; but, unlike comments, they don't go live until I OK them. Most ARE spam.

However, if you have posted something which significantly continues a discussion which began on another site, it is perfectly good manners to post a substantive comment on that site and include a link back to your post.

End of today's lesson. BTW, you can read Al's first post on why 3% down payments are a bad idea here.

 

Testing Office 2007

Meant to start this series on moving to a new computer (gulp) and upgrading to Office 2007 (gulp, gulp) and Vista Pro (GULP!) in an orderly way with a post on how computers get old and slow. But when I told the new Microsoft Word that comes with Office 2007 that I wanted to create a new document, it asked me if I really meant a document or a blog post. Well, this is meant to be a blog post so…

Word asked me, reasonably, who my blog provider is – it's TypePad – and then for my TypePad ID and password; it warned me that these would be transmitted in the clear. Since I have several test blogs on TypePad as well as Fractals of Change, Word asked which one I wanted. Maybe I should have started with one of the test blogs but what the hell… let's give it a try.

If you read this post, it is possible to go directly from Word to a post without cutting and pasting. I'll let you know what steps intervene after I click the Publish icon.

Reset#1: After I clicked Publish, I noticed two typos and that there is an Insert Category button. Clicked cancel. Word became unresponsive for a while according to Vista but did recover and say that the blog service provider wasn't responding.

Clicked Insert Category; got back my category list from Typepad (nice) but can only choose one category even though TypePad makes it possible to choose several (not nice) but will continue the experiment.

Reset#2: OK. It did publish; in fact, so did my previous attempt. There is an Open Existing option so have done that and now am presumably editing and able to repost. Tried to use this option to delete the earlier post but can't do that (no big deal). Will try reposting by clicking Publish again. Then will go directly into TypePad to add more categories and Technorati Tags (too bad but not critical).

Just saw an option for handling pictures (imbedded, I hope) by uploading them to the blog provider (default) or somewhere else (which the documentation says can be anything with a public URL including Flickr). Will insert a picture below and leave the default to have it hosted at TypePad. Hmm.. scaling only gave a choice of 1% (maybe for a thumbnail?) but could simply specify a new height and the width adjusted to keep the aspect ratio. We'll see what happens.

 

FeedBlitz, Gawker Media, and Amazon S3

FeedBlitz (in which I’m an investor and board member) recently announced that all Gawker Media sites are offering weekly updates of their top five stories via FeedBlitz-generated email. Gawker needed to be able to customize the look-and-feel of the newsletters which go out to match the appearance of the individual sites and needed to be able to let readers manage their own signup, email address changes, and unsignup; FeedBlitz is an answer to these needs.

Not coincidentally, FeedBlitz CEO Phil Hollows also blogged that FeedBlitz has begun using Amazon S3 for many of its storage needs. Huge potential traffic from Gawker properties and similar megasites makes it essential to be able to scale fast but impossible to predict how fast. S3 is an answer to these needs (I have no financial interest in S3 but am fascinated by its potential to enable rapid prototyping and scaling).

Phil describes Gawker this way: “Gawker sites… are well written but often irreverent, somewhat profane, sometimes politically incorrect and frequently deal with topics you might not want to discuss with your mother.” They include Valleywag, Lifehacker, Gizmodo, and Defamer among many others and are, to say the least, often visited. To see how closely Gawker was able to reproduce the graphic elements of the websites in the automatically generated email, look here for a Valleywag sample and here for Gizmodo.

FeedBlitz is sending out more than 3 million emails (double opt-in emails, not spam) per day. In the old days when a company grew, it brought operations inhouse in order to save money – it verticalized. That was then and this is now. The fastest way for FeedBlitz or any other modern company to grow is to outsource everything that’s not a core competence. So FeedBlitz moved all of its image and script-serving to Amazon S3 rather than just keep buying bigger and bigger servers. Total bill at this point: about $3/day for a significant amount of both storage and traffic. And Amazon’s multiple connections to the Internet backbone and replicated database can serve this stuff up much faster than any local hosting site or a (shudder) in-company data center. No matter how fast FeedBlitz grows, its growth will be easily absorbed within the Amazon cloud. FeedBlitz engineering is free to concentrate on adding new functionality for publishers of newsletters as it worries less about pure scaling of existing functionality – often an Achilles heel for fast-growing services.

Phil says: “If you're running a site or service that is going to get big, I'm now of the opinion that you're nuts not to outsource to S3 or a similar service to store and serve objects that aren't core to your value add. It's faster, better and cheaper and whole lot less hassle. Do it!”