I hear a lot of start up ideas. I'm a marketer, which means I get pitched with ideas all the time from entrepreneurs who think their idea is gold, and want me to publicize it. Most of them are delusional, wanting me to work on spec for a small percentage of some future buyout (right - cause that happens). My favorites are the ones who want to subsist solely on advertising. They think they can create content that is of interest, and advertisers will come rushing solely because they're so smart.
Except it doesn't work like that. If you want to run a successful business based on advertising, you start with advertisers. This is the essential failure of most startups, and the basic premise of marketing. When you need advertisers to pay the bills, marketing and PR costs are needed to put your product in front of people. Most people vastly underestimate that cost, and want to do it cheap. If the advertising revenue they bring in is less than the cost of product, marketing, and PR (and salaries), they fail.
And thus we come to Pajamas Media. There's been a lot of talk about PJM, and their failed blogging ad network, but one thing is clear. They tried to copy the mainstream media without recognizing why the mainstream media is failing. It has nothing to do with conservatives not being able to make money online. Liberals aren't any more successful online from a profitability standpoint, and they have a huge built in audience of advertising.
The smaller web operations of liberals are heavily subsidized, both by left wing angels and liberal jobs programs that give them time to write. They still lose money or barely break even, but it's money they're happy to spend. In terms of big media, there's clear bias from Madison Avenue. Look at the commercials on Rush, Hannity and Fox News. For years, they have been low quality, as opposed to signature brands on MSNBC and CNN. That's not traffic, that's the bias of those with purse strings. If Rush and Fox News can't get the best advertisers, how in the world will an online magazine get them?
Citizen journalism is a failed business model because journalism is a failed business model. The newspapers are not publishers - they are advertising networks who use the news comics, and editorials as bait for advertisers. You cannot create a network based on news or content. You create one based on advertisers, and then develop content of interest to an audience that will buy the products you are advertising.
PJM shouldn't feel bad about failing to make money with advertising, they have plenty of good company. They were launched with hopes of being a better version of the AP or Reuters. Those are failing businesses, but they are propped up with huge numbers of advertisers who still buy newspapers because that's where they have always done so. Rest assured, if the New York Times were launched in 2004 - they'd already be out of business. Inertia is a powerful force in advertising. But it can't last forever.
If you want to make money - make friends with advertisers, and give them a product that delivers value. Approaching that from the other end just isn't smart business. It's not the content. Content wants to be free. It's the audience. Something newspapers should keep in mind.
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