BlogAds Revenue Analysis
Starling Hunter has conducted a detailed study of BlogAds revenue and discovered that:
(1) Traffic Is King. Page views are the strongest of the three predictors tested: it explains at least twice the variation in ad revenue that either the number of inbound linking sites, the number ads, or the political orientation do. Taken together, page views, the number of ads, and political orientation explain over 80% of the variation in the ad revenue, a very substantial amount. This indicates that the statistical model predicts ad revenue with a high degree of accuracy. Doubling the weekly page views results in a 50% increase in ad revenues.
(2) Space Matters, Even in Cyberspace. Holding page views constant, the average effect of adding one more ad is a 20% decrease in price and a 40% increase in revenue. Interestingly, the number of ads on most blogs is well below the number where returns to revenues become negative, i.e. the point where increasing the number of ads results in less, rather than more, revenue.
(3) Partisanship Pays, But Unequally. When controlling for both the number of weekly page views and the number of ads, politically-oriented blogs generate no higher ad revenue and command no higher ad prices than other blogs. However, revenues from ads on left-of-center (LOC) blogs are 40% higher than average while their right-of-center (ROC) counterpartsÃ¢€™ revenues are 23% less. There are notable exceptions to this general trend, however. While LOC blogs dominate at both the lower (below 100,000) and the upper (above 1 million) ends of the weekly page views continuum, ROC blogs earn much more in the middle territory. Potential explanations for this difference, along with graphs, tables, statistical analyses, and a discussion of the other results, can be found in the full report [PDF].
As he notes in an email advertising the post, “the findings have implications for the OSM/Pajamas venture.” Indeed they do, although the lack of comparable data transparency on OSM’s part makes comparison difficult. I’m sure they will alter their business model–and BlogAds bloggers will tweak their practices–after digesting the results.
The first finding, that traffic matters more than links, strikes me as obvious. Advertisers pay for eyeballs and viewer demographics, not intra-blog prestige. This is likely to become even more true as gamesmanship such as open trackback rings and incestual blogrolling ruins the Ecosystem as a meaningful measure.
The strips/revenue ratio is much less obvious, although one that I have never quite been able to decode. Ad sales and prices fluctuate wildly with outside events and the competition is fierce. The top of the BlogAds order page–ranked by traffic–is increasingly filled with celebrity porn blogs.
The ideological variable is by far the most interesting finding. It has long been obvious that the top lefty blogs were outselling righty blogs, but it appeared to be merely a function of traffic. If it holds true even controlling for page views [Update: It does. Hunter employs multiple regression analysis.], that is a puzzler. Commenter brainster observes that,
Hugh Hewitt has long complained that Instapundit charges too little for his blogads; maybe he’s holding down the right of center blogs revenues? I also note that the lefty bloggers are much more likely to have ads for political candidates and often run fundraising drives, which may create a feedback loop–advertising on Kos leads to fundraising by Kos, leads to more advertising on Kos.
The latter issue, especially, strikes me as the most logical explanation. As Chris Bowers and others have observed repeatedly, the left side of the blogosphere is much better networked than the right side.
Interestingly, although LaShawn Barber has a reference to this article in a post of November 14, I haven’t seen any discussion of it. Perhaps it has been lost in the OSM blogstorm.
Update (1031): Having read the full report, a couple of additional points stand out.
As expected, revenue increases with every additional ad but the increases grow smaller with every one of
them. One difference between the price and revenue graphs is the location of the inflection point: revenue
doesnÃ¢€™t level off until 14 ads appear on the blog and doesnÃ¢€™t turn negative until there are 17 ads. This
suggests that there is unused carrying capacity for BlogAds, i.e. that there is Ã¢€œspaceÃ¢€ for more ads. Whether
there is demand for them is another matter.
From my own experience, which is admittedly anecdotal, and from continued observation of the trends from a self-interested perspective, I think the answer is clearly No. With very few exceptions, blogs are unable to sell that number of ads even at prices well below ad rates for those with comparable traffic.
[W]e can observe that four ROC blogs stand out in the zone above 500K weekly page views- Little
Green Footballs, Instapundit, Michelle Malkin, and Powerline. These four blogs are able to earn, on average,
67% more per week than their seven LOC counterparts (Raw Story, Washington Monthly, Smirking Chimp,
Talking Points Memo, Crooks and Liars, America Blog, and Atrios). Interestingly, a fifth ROC Blog, Hugh
HewittÃ¢€™s, earns more ad revenue on 250K page views per week than does any of these seven LOC blogs, each
of which has from 2 to almost 4 times the weekly page views. Why the ROC blogs are so dominant in this
region is a question that warrants closer investigation.
The sample size here is so small that it’s hard to know, really. The Hugh Hewitt anomaly is the most interesting, though. I suspect that the fact that his blog is augmented by a popular radio show is the major explanatory factor. This would be especially likely if he mentions his advertisers on the show.