Social Media Will Change Your Business

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Aggregators do the same job for the Net. So, just like the record companies, which have figured out how to market bits and pieces of their albums as standalone songs and ringtones, the rest of the media and entertainment world is going to have to think small. Content, whether it's news or a Hollywood movie, is going to travel in bite-size nuggets. The challenge, for bloggers and giants alike, is to brand those nuggets and devise ways to sell them or wrap them in advertising.

Wednesday 6:31 a.m. A prediction: Part of the prediction came true. Blogs have become a staple of mainstream media. BusinessWeek has 20 of them. Publications of all sizes mix blog posts with other news, both online and in print. We're getting bloggier. And more and more publications are subscribing to services that link to related content. These links steer readers away from the media sites, which would have seemed unthinkable until recently for mainstream publishers. Why do it now? Because if sites provide interesting links, the thinking goes, readers will return. One telling example: The New York Times runs Blogrunner.com, a site that aggregates everything from Times articles to blog posts. Still, big media is not dominating blogs or social media by any stretch. No one is. At the same time, certain blogs are turning into influential and lucrative media businesses. Mainstream media companies will master blogs as an advertising tool and take over vast commercial stretches of the blogosphere. Over the next five years, this could well divide winners and losers in media. And in the process, mainstream media will start to look more and more like—you guessed it—blogs. Clay Shirky, a Web expert at New York University, calls it "an absorption process where the thing doing the absorbing changes."

Take a look at blog advertising today, and it's hard to see a glittering future. Sure, enterprising bloggers make room on their pages for Google-generated ads, known as AdSense, and earn some pocket change. Some blog entrepreneurs, such as Nick Denton, publisher of New York's Gawker Media, sell ads for everything from Nike to Absolut Vodka (FO). Popular blogs can land sponsorship deals for as much as $25,000 per month, say consultants. O.K. money for an entrepreneur, but a rounding error in the ad industry.

Blog power simply doesn't translate yet into big bucks. For now, it's running mostly on people's passion to communicate—especially in developing markets. Consider Hossein Derakhshan. He's a 28-year-old Iranian blogger based in Toronto. He has thousands of readers, and politicians respond to his postings—even as the Iranian government frantically tries to shut down the servers hosting his blog. Yet Derakhshan can't yet cash on his fame. "Google doesn't have AdSense service in Persian Still no AdSense in Persian, though it's offered in some 20 other languages. yet," he says.

Still, blogs could end up providing the perfect response to mass media's core concern: the splintering of its audience. Advertisers desperate to reach us need to tap niches (because we get together only once a year to watch the Super Bowl). By piggybacking on blogs, they can start working that vast blogocafé, table by table. Smart ones will get feedback, links to individuals—and their friends. That's every marketer's dream.

The big companies have what the bloggers lack. Scale, relations with advertisers, and large sales forces. Bloggers don't need a big sales force to sell blog advertising. They can farm out that work. Federated Media Publishing, an advertising network for social media, turned revenue of $22 million in 2007, according to its founder, John Battelle. Of that revenue, $14 million went to the bloggers and publishers. Of the 150 sites FM represents, some 15 of them are receiving $50,000 per month. But still, blogs represent far greater power in influence than money. TechCrunch, for example, while surely lucrative, is a major voice in Silicon Valley. They can use these forces to sell across all media, from general audience to bloggy niches. Already, Yahoo and Microsoft have been investing heavily to position themselves for niche advertising. And in February, the New York Times Co. (NYT) laid down $410 million for About Inc., a collection of 500 specialized Web sites that smell strongly of blogs. "What's to stop them from turning those 500 sites into 5,000?" About.com didn't even multiply by two, much less 10. A spokesperson says the company has grown to about 670 sites. says Dave Morgan, founder of TACODA Systems, an Internet advertising company.