Bloggasm

The publisher Simon & Schuster partnered up with a company called MediaPredict, which uses a science called prediction market. It allows users to gamble with fake money on what books or movies will become successful, and it turns out that the predictions will be right with a 16% margin of error. This is different than focus groups, which have scientifically been shown to be only partially successful. The New Yorker has an article up about the science and how it works.

Imagine this. You’re a lazy worker for a local company. You’re scheduled to install a major appliance in a man’s house. Because you’re completely incompetent, you screw things up, piss the guy off, and when he gets annoyed with you, rather than trying to diffuse the situation, you give him lip when he complains.

It’s only after you’ve passed the point of no redemption that you find out that the guy is the business reporter at the local daily paper, the only major media source in a 50-mile radius. You’re fucked.

I was reading this post by Edward Champion, in which he complains about shitty service from a phone/cable/internet company, and it drove home the consumerist advantage of the blogosphere. Before the internet, the chances of a company pissing off someone with access to a major media outlet was slim. Now, there’s no telling whether the person you’re screwing over has a blog that’s read by perhaps thousands of people.

It’s a great example of the plurality–the democratization–of Web 2.0

A New York Times reporter gives a first-person account of his attempt to investigate a Chinese toy factory that had sold dangerous products. The reporter was detained by the factory’s security, and when the police and even government officials were called, they had no power to make the factory security members release the journalist. Sales to the western market have grown so large that the oppressive China government we always imagined can actually be quite powerless.

***

Related posts: Interview with Burchismo, Local papers offer web TVcasts, Interview with Donald Luskin from The Conspiracy to Keep You Poor and Stupid, Ranking of 30 Most Popular Newspaper Sites for May

Don’s 25-year career as an entrepreneur, executive, investment manager and commentator has been built around his passion for the application of technology and innovation to the challenge of investing.

Prior to founding Trend Macrolytics with David Gitlitz, Don was Vice Chairman and co-Chief Investment Officer of Barclays Global Investors, where he worked with the world’s largest institutional investors to create innovative indexing and quantitative investment management strategies.

After Barclays, Don was CEO and co-founder of MetaMarkets.com, and manager of the pathbreaking OpenFund — the world’s first mutual fund to disclose all its holdings and trading activity in real-time on the Internet.

Don was the inventor of the POSIT ECN, and founder of Investment Technology Group at Jefferies & Company. He has been a hedge fund manager and an options market maker on the Chicago Board Options Exchange, the Pacific Stock Exchange, and the New York Stock Exchange.

Don runs a web-log based on his forthcoming book, The Conspiracy to Keep You Poor and Stupid — in which he examines the obstacles to wealth creation by ordinary people. He is the author of Index Options and Futures: The Complete Guide, and editor of Portfolio Insurance: The Guide to Dynamic Hedging, both published by Wiley & Company.

Don’s columns are published weekly on SmartMoney.com and he contributes frequently to National Review Online, where he writes the Krugman Truth Squad column. He appears regularly on CNBC’s “Kudlow & Company” and on Bloomberg TV, CNN and Fox News. He was formerly a columnist for TheStreet.com and Business 2.0. His commentaries have been published in the Wall Street Journal, the Harvard Business Review, Pensions & Investments, the American Spectator, the San Jose Mercury News, and the Detroit News.

Simon Owens: In our last interview, you indicated that the Mainstream Media rarely corrects its mistakes when they’re pointed out by bloggers. Do you think that the blogosphere has gained enough credibility over the last year that the MSM is taking it more seriously? I’ve noticed that more and more bloggers are being interviewed on cable news and writing opinion columns for major newspapers.

Donald Luskin: The MSM is certainly taking bloggers more seriously. They have to. Bloggers have become a huge force in molding public opinion. That doesn’t mean the MSM respects bloggers – after all, bloggers represent an incursion into what had formerly been an oligopoly.

Simon Owens: You’re one of many writers who have taken a book you wrote and expanded on with a blog. Another major example of this is the writers of the Freakonomics book who later turned it into a popular blog. What were you reasons for doing this?

Donald Luskin: This isn’t accurate in my case. My blog came BEFORE my book, and was intended to help me write it. It backfired. I still haven’t written the book.

Simon Owens: What do you think of the ecomony as it currently stands? Republicans claim it’s doing well but Democrats are quick to point financial disparity.

Donald Luskin: The Republicans are right. If there were a Democrat in the White House, they would be saying this economy is doing great, which it is.

Simon Owens: Is there any significant evidence that the hike in minimum wage will actually hurt small business? Previous wage hikes haven’t seemed to hurt business at all based on the statistics I’ve seen.

Donald Luskin: Forget the so-called statistics. An artificial price control on anything, including wages, distorts the market and causes the economy to operate less efficiently – thus hurting everyone, on average. It should be obvious from first principles that if you legislate a price for something higher than its value, then that thing will not trade. If you set a minimum wage, then you reduce the number of low-paying jobs. Small or large companies that depend on those jobs will go out of business. If this principle weren’t true, then why not set the minimum wage at $100,000 or $1,000,000 or infinity?

Simon Owens: Do you think the blogosphere is slowly taking away “elite” power in the media?

Donald Luskin: No. It is taking away that power quickly, not slowly.

***

(Related posts: Writing entire books attacking people who wrote books about other people, Why Google News shouldn’t include blogs in its search results, How much money is your blog really worth? A Bloggasm case study

Premise: Over the past year, more and more media companies and blog networks are buying up blogs for sometimes vast sums of money. The most famous case of this is AOL buying Weblogs Inc for $25 Million, but this is no longer a rare occurrence. Many of the potential buyers are now forced to assess an individual blog’s worth, and unfortunately this is not an easy thing to do. There have been a few programs so far written to calculate blog worth, but as many have noted, they are drastically unrealistic in how much worth they assign a blog. The most famous program is this one, which vastly exaggerates a blog’s worth for two reasons: As my research (which will be outlined below) showed, a blog’s worth changes based on 1. The niche of a blog, and 2. How many inbound links are coming in; as in a blog’s worth grows exponentially with incoming links, not with a steady, fixed rate.

An example of the exaggerated prediction:

So while we can look at that worth calculator with some hopeful amusement, I don’t think very many people think that their blog is actually worth that much.

Because of this, I set out to statistically find a formula for predicting a blog’s worth, so somebody that is thinking about buying a blog can use it to estimate how much money he or she should spend buying out the blog. Please note that this only predicts the worth of the blog itself, not the blogger as well if you’re planning on bringing him/her on board.

Methods of experimentation: Obviously, I could only use blogs that had transparent advertising methods for my study. What this means is that they had to use an advertising program which allows anybody to view how much money they are making per week. The main two programs that do this are 1.Blogads: a combination of picture and text advertising that allows you to place an ad for a given amount of time for a set rate, and 2. Adbrite: a link-text advertising program that allows you to place a text ad for a given amount of time for a set rate.

For each of these programs, you know exactly how many people are advertising and how much they are paying for those ads.

Now, many people will point out that people who use Blogads and Adbrite also have alternate forms of advertising on their site, usually Google adsense or some kind of affiliate program. To compensate for this possibility, I used this rationale: Blogads, in return for its services, takes out 1/3 of your income for themselves, which means that the blogger only gets 2/3s of the listed price. With Adbrite, they take out 1/4. Also, if you only advertise for a week, you’re buying a much more expensive ad than if you were to buy a bulk package of 2 weeks or more. So by not subtracting these amounts out and going only by the one-week ad rate, I’m attempting to compensate for what the blogger is making through other advertising programs.

When trying to figure out how much any company is worth, many people will tell you that you should spend as much as that blog/company will make in an entire year. So to figure out a blog’s worth, I merely took those weekly rates and multiplied them by 52.

I surveyed 100 blogs that use transparent advertising programs, and divided each blog into a niche. I was somewhat broad with the niches. They are as follows:

1. Political/military/legal/feminist
2. Gossip/movie/television
3. Gadget/technology/software/”nerd”
4. Regional/city/location-oriented
5. Literature/books/art/poetry/publishing
6. Sports/gaming/outdoor-activities
7. miscellaneous/ non-niche
After figuring out each blog’s yearly worth and then placing it in a niche, I then used Technorati to find out how many blogs were linking to each blog. For those who don’t know, Technorati, in its ranking system, only counts the number of blogs that have linked to you in the past 6 months when calculating your rank. So for instance, you can see that Bloggasm has 115 blogs linking to it as of this posting. There has been a lot more than just 115 blogs linking to us, but that’s the number that has linked to us in the past 6 months, and so that’s the number I used when I calculated the money-per-link worth.

After I knew how many blogs were linking to a particular blog, I divided that number into the amount that blogs makes in a year (aka, its total worth), and by doing this, I was able to tell how much each link is worth and devise a formula for calculating a blog’s worth within its niche.

After all this was done, I averaged all the amounts together in each niche, so that you can use the forumula below to calculate a particular blog’s worth:

1. If your blog is a miscellaneous blog that doesn’t adhere to a specific niche (example: BoingBoing), take the number of blogs linking to you and multiply by $21.57 to figure out your blog’s worth.

2. If your blog is a Political/military/legal/feminist blog take the number of blogs linking to you and multiply by $27.64.

3. If your blog is a Gossip/movie/television blog, take the number of blogs linking to you and multiply by $52.58.

4. If your blog is a Gadget/technology/software/”nerd” blog, take the number of blogs linking to you and multiply by $34.89.

5. If your blog is a Regional/city/location-oriented blog, take the number of blogs linking to you and multiply by $51.70

6. If your blog is a Literature/books/art/poetry/publishing-industry blog, take the number of blogs linking to you and multiply by $13.75.

7. If your blog is a Sports/gaming/outdoor-activities blog, take the number of blogs linking to you and multiply by $46.80

Interesting observations: 1. As the number of links to a blog went down, so did each individual link’s worth. So if you have a blog with 100 people linking to you, each of those individual links is worth less than a blog who has 200 blogs linking to it.

2. The blogger who was #1 in his/her niche had a VASTLY higher money-per-link ratio. The #1 bloggers always outperformed the #2 and #3 blogs in their niches by much more than I expected.

3. There were a surprising number of blogs who only used Blogads as their single source of income. I can understand that adsense doesn’t pay very well in some niches, but I still think that a lot of these blogs could have brought in a significant amount of extra income to their blogs by including it.

Results in action: For fun, I’m going to take some random blogs and calculate how much they’re worth. Here we go:

Whatever is worth $20,750, Guy Kawasaki is worth $151,387, Gladwell is worth $27,221, POD-dy Mouth is worth $2337, Infothought is worth $9804, Unclaimed Territory is worth $74,932, Fosfor Gadgets is worth $42,180, Cinematech is worth $8,833, Organizing LA is worth $1912, CrimLaw is worth $2128, War Liberal is worth $864, Bookdwarf is worth $1038, Feministing is worth $42,012, Cinecultist is worth $7150, Professor Bainbridge is worth $27,363, Yet another comics blog is worth $1072, Basketbawful is worth $18,579, Got Gay? is worth $3154, Open Book is worth $7493, Sports Law Blog is worth $8704, Valleywag is worth $75,327, PSP Hacks is worth $9036, The Movie Blog is worth $50,108, The ADD blog is worth $563, Is That Legal? is worth $6,965, Wordyard is worth $1722, LA voice is worth $14,837, Screenhead is worth $43,168, Pajiba is worth $26,973, Dispatches from the culture wars is worth $18,337, Cinematical is worth $130,661, The Blog Herald is worth $54,334, Norwegianity is worth $9,936, Queerty is worth $47,778, The Mumpsimus is worth $2,791

Conclusions: 1. It’s still very hard for a person to make a full time living off of a single blog.

2. Blogs which don’t fall into any sort of niche are at a serious disadvatage. This probably owes to the fact that it’s far easier for niche blogs to find niche advertisers.

3. Gossip blogs, gadget blogs, and regional blogs have great advertising potential.

4. I’m surprised at this, but Lit Blogs aren’t pulling in a lot of money yet.

5. If you have fewer than a hundred people linking to you, your blog probably isn’t worth anything yet from a buyer’s standpoint.

Flaws in my experiment: 1. Obviously, even though I try to compensate for the ad programs other than Blogads and Adbrite, I probably didn’t even come close in some instances. From reports I’ve read, gadget blogs make a ton of money off adsense, so most gadget blogs are actually worth a lot more than I predicted. Though I think if we want to avoid another dot com bubble, we should be conservative in our estimates, so perhaps my estimate isn’t that bad of a starting point.

2. Some niches just don’t work well with Blogads or Adbrite. For some, text/based advertising is the way to go. For others, it’s image-based advertising.

3. There are some niches that only use Affiliate marketing, like poker blogs and sex blogs, and from what I’ve read, they can make a good living.

4. I would need a bigger band of blogs to get a more accurate study. For some niches, there weren’t very many blogs that used transparent advertising programs.

Criticism: Now, I have a feeling that this case study is going to get a lot of criticism from bloggers. You can place this criticism in the comments section or email me at Simon.bloggasm@gmail.com

Just remember, if I got my math wrong, I didn’t do it out of some kind of hatred towards anyone, or any kind of malicious intent. So please be civil while you’re criticizing my work. If I get enough intelligent emails regarding this, I’ll have a follow-up post with them so people can hear your feedback.

Thanks for tuning in to this weeks Bloggasm Case study, come back next Friday for our next one.

A day or two ago I got an offer I couldn’t pass up…well sorta. A man named Richard Quick offered to let me interview him as long as I sent him $1500. Since I didn’t have the cash on hand (I will soon, though, after reading his website, in which I will mail him a 10% consulting fee), I lied to him and told him that I did, and since rich people will do anything when money is dangled under their noses, he fell for the lie and let me interview him.

As it says on his blog: “I made my first million by age 12, and reached billionaire status by 28, 16 months ahead of schedule. But my real passion is helping others become filthy rich with little to no effort, skills or investment. I’m also an accomplished author, coach, electrical engineer, movie producer & actor, author, and more.”

Simon Owens: What if I want to get rich slow? Or moderately fast? Could you show your readers how to do that?

Richard Quick: No problem. I have even assisted the grammatically conscious in “Getting Rich Quickly.”

Simon Owens: Some people say that the lottery is a tax on people who don’t know how to do math. As someone who got rich quick, is the lottery the way to go?

Richard Quick: For most people, the only lottery I suggest is “The Lottery” by Shirley Jackson.

That’s because they don’t have a system. They don’t have a system and they don’t have a network. I have a system, and a network, and that’s enabled me to make hundreds of millions of dollars in online lotteries that I never even entered! For tax reasons I do not disclose total winnings, but I posted the results of the first two weeks of April.

Simon Owens: Have you ever blown your nose with a $100 bill?

Richard Quick: Absolutely not! I don’t blow my own nose. I have undocumented workers blow my nose for me. Though I did sneeze into a Kruggerand once.

Simon Owens: Is there anything you won’t do for money?

Richard Quick: I am insulted by this question and the anti-wealth bias it indicates. Mr. Owens, you perpetuate the stereotype that all of the ultra-wealthy elite are materialistic and moneydriven. That’s one of the reasons I founded the National Association for the Advancement of Wealthy People: to break down those bigoted stereotypes, and to promote recognition of the contributions the rich have made and the deep ethical beliefs that guide us. While money is important to me, there are many other forms of assets that I value, including gold, jewels, plutonium and treasure. And don’t forget fame and power. And immortality. And revenge.

Simon Owens: What are the five blogs you’d recommend to supplement the reading of your own?

Richard Quick: There are none that are in my league, though I ran across a delightful and inspiring site moments ago: Millionaires for Jesus.

I am a great admirer of my ex-lover’s Gwen Hammond’s Upper Echelon

Prospertobless is a fine upstanding site. As is New Utopia, which is a utopian community on barges in the caribbean that I am funding.

There’s a young man who wants to write a free verse biography of me. His blog is at angusomann. Let me know if you think he’s too much of a nutjob to indulge.

I look forward to the receipt of your funds as well as seeing the work you are putting in to further my fame, fortune, financial standing and wealth. I invite you to join my followers and students, and I will help you find your inner millionaire, and nurture your inner pirate!

See you on the Veranda!

Joel Johnson: I’m a freelance writer living in New York. I’ve pretty much written about technology on the whole, but occasionally dabble into other areas. (But mostly technology and videogames.) I’m also given to somewhat opposed inclinations with my wallet, being both moderately generous with my spending when it comes to friends — or god knows, myself — but also extremely thrifty when it comes to the actual purchases. I won’t stop myself from buying something I don’t need, but I’ll at least temper that impulse purchase with the fun of comparison shopping.

The Consumerist was started as a sort of experiment. We knew we wanted a shopping blog, but haven’t found enough sites on the web telling us what *not* to buy. It’s the usually unspoken counterpart to the standard company > media > customer information flow. It’s not that we think companies are all evil. It’s that all companies are evil sometimes. It’s our job to amplify the voice of those customers who want to warn off their neighbors from making a bad purchase.

Simon Owens: If you’d have to pick an income bracket that your blog is geared toward, what would it likely be?

JJ: We don’t target any specific bracket, but I suppose that after a certain level of wealth one would lose interest in saving a few bucks on purchases. Or maybe not! Maybe that’s how people get rich.

I mean, even as I get older and learn to be better with my money (and have more income to blow), I still want to save. In fact, the bigger the purchases, the more percentage savings and the like can make a difference.

SO: Does your blog also focus on pointing out consumerist scams at all? If so, what are some of the biggest scams the blog has found?

JJ: We do try to point out scams, of course, but like most of our editorial we really have to rely on our readers to do the footwork by, you know, being scammed. Sometimes the scams are obvious and we’re just reminding people that their instincts are probably dead-on, but occasionally we’ll find something a little more subtle and insidious.

We haven’t found anything that I would consider uniquely critical yet, although I continue to be fascinated by the idea that large national chains like Urban Outfitters will just straight-up steal concepts from small designers with little to no recourse. I’m going to keep trying to follow that one (even though I am somewhat limited in my ability to know if a design is a rip-off or not), because I suspect there are a lot of independent boutique designers who may not even realize they’ve been had. It’s especially egregious since so often the people the big stores are ripping off are just kids or not-quite-starving-but-not-quite-eating-foie-gras-milkshakes artists who would have probably been happy to license the design for a small fee or a modest percentage of sales.

SO: As a blog that focuses on consumer products, do you ever find there to be a conflict of interest with your advertisers?

JJ: What advertisers? Right now all the ads on The Consumerist are network ads from Gawker Media. We have yet to have any company actually advertise on the site, which is probably partially due to the relatively small audience size (compared to other Gawker sites) and also from the fact that I have sworn to pay special attention to whatever company chooses to first advertise with us. It’s a unique opportunity for any company to get feedback who is really concerned with improving to get raw feedback from their customers, but as yet no one has taken up the gauntlet.

SO: What are the five blogs everyone should be reading (besides your own)?

JJ: Well, I read the majors just like everybody else, so when you say ‘should be reading’ it’s hard not to mention stalwarts like Boing Boing and Metafilter. But since you’re probably looking for something perhaps a bit more off the beaten path, I find myself always intrigued by what Thomas Mahon of EnglishCut.com has to say. (In the total antithesis of bargains, I aim to one day own a suit cut by Thomas.) I love Make’s blog by Phil Torrone, of course. I enjoy my own occasionally-updated blog about construction toys and Lego, nextbrick.net. My friend Noah Shactman’s DefenseTech.net is about as much politics as I can handle, made palatable by a healthy dose of mechanized killing machines. Clive Thompson’s Collision Detection is updated irregularly, but makes it possible to follow where Clive’s tangental interests are leading him any given day, like tracking a library by reading its droppings. TechDirt and GigaOm could very nearly give one all they need to understand the business side of technology, from the deals to the gear. And Mr. Holkins would never cop to it, I bet, but the thrice-weekly posts at Penny-Arcade.com make it one of my favorite blogs.

Anyway, I read a lot of blogs and could go on and on, but mostly I just marvel at the richness of media, written or otherwise, and wonder what it must have been like to live a few hundred years ago when the sum total of knowledge could have been soaked up in a lifetime. And I bet Da Vinci never got cilps of Colin Farrell boning some girl inserted next to a dissertation on the aftereffects of Ed Murrow’s editorializing on broadcast journalism. Truly, we are gods.