New Media Dreams Are the Old Delusions of Marketing

The other day, I wrote about how the Huffington Post is finally profitable, to a large degree on the backs of unpaid contributors. I called it an example of the New Feudalism, where new media companies often expect people to work for nothing for the chance at using a space on-line to make money for themselves by building their reputations.

A friend and colleague -- no personal fan of donating work to a for-profit company -- thought I was being unreasonable and that individuals made rational decisions in their self-interest. But I don't think so. The argument supporting the view of new media serf as entrepreneur has a logical flaw that is similar to one that creeps up in all too many strategic marketing decisions, regardless the industry. The flaw is assuming that your potential market and the total market are the same size. That is almost never the case.

Let's go through the new media example to show the flaw. HuffPo gets roughly 30 million to 32 million visitors a month, according to Quantcast.com, which in this case gets directly reported numbers.

The argument goes roughly as follows:

HuffPo gets a lot of traffic.
If I get a blog on the site, I have a chance to attract this traffic.
Even if I can get just a thousandth of the traffic, that is anywhere from 30,000 to 32,000 people a month. If I could get 1 percent, that would be hundreds of thousands of readers. It's a great jump start to building an audience.
With that much exposure, editors who would pay me for my work are bound to see me. (Other variations include potential book buyers or consulting clients.)

The logical chain drives our intrepid blogger to work, and that's the problem. There is no further analysis and, generally, no method in hand to identify how much work or how many sales come from the new audience.

Sadly, this is also the approach of many in marketing, at least in high tech, and I suspect in many other industries. I cannot count the number of business plans and projections I've seen that draw upon the supposition that a group might gain a 1 percent traction in a market.

That's an issue, because it rests upon the assumption that the big number is homogeneous -- that all the members and their interests are similar -- and so looking to gain what seems to be a toehold is realistic. The marketer assumes that all people are potential customers. Unfortunately, that is never the case. The homogeneous group is actually heterogeneous and varies widely in many ways. Here are just a few:

preferences in product and service features
price sensitivity
influences to which their opinions are exposed
preferred venues for making purchases
expectations from a product or service

You never address the entire market, any more than a giant retailer like Starbucks realistically can target all people who buy coffee. There will be large numbers that don't want to pay Starbucks prices for caffeine, that expect a drive-through location on their way to work when there is none, or that see the entire coffee culture as being too precious and in conflict with their self images. Even among people who will pay more for coffee, other large numbers want to support local businesses or don't like the taste of the chain's brew.

Starbucks never addressed the entire coffee-buying public, and I suspect that founder and CEO Howard Schultz is too sophisticated to think that it did. Let's continue the HuffPo analysis to see reality after a little more prodding. Go to the site's blog page and you can get a list of the top ten most-viewed blog entries at the moment. Here's the list for today with author, title, and number of page views:

John Robbins; How Bad Is McDonald's Food?; 355,751
Bob Cesca; Glenn Beck Mocks Fire Victims, Reaches New Depths of Awfulness; 266,079
John Hamilton; "Progressive Hunter" Jailhouse Confession: How the Right-Wing Media and Glenn Beck's Chalkboard Drove Byron Williams to Plot Assassination; 158,617
Marka Hansen; The Gap's New Logo; 126,851
Doug Lansky; 7 Funniest F%#king Signs Ever (PHOTOS); 111,932
The Frenemy; 14 Things We Learned From Romantic Comedies; 101,408
Robert Reich; The Secret Big-Money Takeover of America; 94,515
Henry Louis Gates, Jr. ; Faces of America: The True Dichotomy of Eva Longoria; 73,844
Jeanne Devon ("AKMuckraker"); Joe the Debtor? Miller Owes Tens of Thousands in Credit Card Debt; 59,002
HuffPost TV; Beyond Left And Right: Arianna And Mike Huckabee On Fox News (VIDEO); 45,706

The list includes well-known authors, famous academics and public policy voices, featured blogs, and even a CEO trying to defend an ill-advised logo change. All have extensive promotion of one form or another. Now look at the pattern of blog entry views (click chart for more detail):

The curve seems to have an exponential form. Do a projection out 40 more places and you get the following (click chart for more detail):

Granted, this is limited data, but, it's what we have, and the trend even among the top ten posts is very strong. Perhaps post rank 100 is still getting some traffic in the low hundreds of people. But there are 6,000 blogs on HuffPo, and I'd argue that the high traffic posts will almost always be from a high profile name that gets promotion on the front page of HuffPo.

Most bloggers get virtually nothing, and that's not surprising. They aren't featured and, as the numbers suggest, the amount of traffic moving back into the blogs is low. Of the audience that does go back into the blog section, only a portion will go far enough to see any given post, and, of them, an even smaller part will be interested enough to click the link.

It's predictable, and yet most would-be new media stars won't undertake the small amount of analysis to quantify the likely real opportunity. Similarly, too many business executives take the easy one-percent-of-total-market view of opportunity and don't look for often available additional numbers that can provide a more realistic look.

Related:

Image: RGBStock.com lusi, site standard license.

Erik Sherman

Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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