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Content Economics

Felix Salmon wrote an excellent two-part series on the economics of content: how do content providers get paid and what does that mean for the reader. As a reader of online media, this should interest you and I’ll talk a little bit about the specific economics of Farnam Street towards the end.

In the first part, Salmon explored how content providers “sell readers to advertisers.” The second part, “is about the ability of publishers to persuade readers to pay the publisher directly.”

There are basically three ways to go about persuading readers to pay the publisher directly. “You can put up a paywall; you can ask for donations; or you can sell non-digital things to your digital audience.”

So if you’re a huge publicly-listed corporation, by all means create an elaborate paywall in the hopes that people will decide that they need your content and will just have to pay for it. Every so often, that can work, as it has at the FT and the NYT. But frankly I don’t think those examples are particularly replicable: they’re both sui generis in many ways. Instead, it seems to me, the most promising aspect of content payments is at the other end of the spectrum. Build up a relationship with your readers, in large part by giving your content away for free; ask for money with pride and shamelessness; and place no cap on how much you let your readers spend. Give them the opportunity, and you might be very surprised at what they’re willing to buy.

Let’s talk a little about the economics of the blog you’re reading right now: Farnam Street.

Behind the scenes
Farnam Street is a one-man show with 20,000+ “subscribers” and many more casual readers. I try to post something interesting almost every single day.

This year it will take about 1,500 or so hours to bring you the site and its content. That works out to about 4 hours a day each and every day of the year.

Of course, it doesn’t take 4 hours to write a typical post. But most of the work is stuff you don’t see.

Before I can pull together an interesting post I have to find things, read them, filter out the noise, and connect them. Only then can I post. I also need to edit posts as well — an area, no doubt, you’ve noticed I could pay a lot more attention to.

A post like How Strategy Really Works is never as simple as it first appears.

Until I made a choice to experiment with sponsorships late last year, the site generated revenue exclusively from the Amazon Affiliates program and donations.

Let’s look at these a little closer.

Amazon
This has been the primary source of revenue for the blog. If you see a book you like, click on the link, add it to your cart, and purchase it within a few hours I receive a small commission from the sale. While that’s the gist of it, there are all sorts of exceptions to this. Oh, and don’t worry, the book doesn’t cost you any extra.

This is a great way to make money as a blogger because I’m only getting paid if I point you to something you’re interested in. It’s almost like a finders fee – you trust me to curate things, and I hope you use the amazon links when you find something you’re interested in learning more about. Our incentives generally align — If I’m not finding you interesting stuff, I’m not receiving any compensation.

However, many of you live in places where Amazon links don’t work. This happens for a variety of reasons, but usually boils down to three. First, you might not have Amazon available in your country. Second, if you do have Amazon available, I might not have a referral code for your particular country. Lastly, if you click on a link to a book you want to purchase and it takes you to Amazon.com and not the local site (say, .co.uk, .ca, .fr, etc.) I don’t receive any revenue from purchases. To make a commission, I need to provide a direct link to the Amazon site local to your country.

Donations
For the past two years, each December I’ve put a footer at the bottom of articles that looks something like this:

In 2012, I spent over 1,000 hours bringing you Farnam Street. If you find any value in reading Farnam Street, I’d greatly appreciate your support with a modest donation.

This offers an easy way for you to make a one-time donation (the Tip-Jar page offers a way to sign up for monthly donations.) Donations are a great feedback mechanism for people who appreciate the work that goes into the site. I try not to bother you with reminders daily, weekly, or even monthly but the option is always there should you choose.

Sponsorships
I started to experiment with sponsorships late last year.

I view sponsorships as a way for me to do more with Farnam Street. For example, having a sponsor has allowed me to upgrade the hosting service, increase the quality of the content, and explore some other things which are in the works that I think will generally benefit everyone. Sponsors also allow me to keep up my caffeine habit and when you do most of your blogging after midnight, that’s important. (While not an excuse, these hours also explain the spelling mistakes that you occasionally find in posts.) But to have sponsors, I have to find them first.

Right off the bat, I hit a homerun. The first sponsor has been an excellent partner over the past six months. I’ve gotten to know them a bit and they are top notch. That sponsorship comes to an end in a few days. Trying to find a replacement for a great partner is not easy.

Over the last few months, I’ve turned down 7 possible sponsorships for Farnam Street: two sites of a non PG-13 nature (one of these offered more than the monthly rate too); one company that sold a questionable product; one company that offered to sponsor the blog in return for sharing your private information with them; and one company that wanted me to turn off full RSS feeds so I could increase “page views.”

Sponsors have no control over the content of the site — posts are not sponsored in any way.

That’s a tough sell and a few great companies have walked away from the opportunity because they couldn’t post a plug for their product or service.

The sponsorship is still viewed as an experiment. If I can’t find the right partners, I’ll turn it off for now. I might, however, prompt you for donations a little more often. (If you’re interested in sponsoring the blog, drop me a line.)

In the end
While Farnam Street started as a site to help me learn more, it grew into something unexpected. I had no idea so many people would find the site interesting and subscribe. Together we’re mastering the best of what other people have already figured out.