AOL proves that big companies and blog networks are a difficult mix

Duncan Riley

A week after announcing cut backs, bloggers at the AOL Weblogs Inc are still up in arms, according to a post at ReadWriteWeb.

In an internal briefing AOL Senior VP of Programming Marty Moe spun a positive line, noting that traffic and revenue was growing across the network, and that the company had further international expansion plans. However, "blogger compensation costs were exceeding allocated budgets and needed a breather before major restructuring. From now all on each Weblogs Inc. blog will have its own budget and run as a semi-independent business."

It's also not a case that blogs in the network are all losing money, instead "Moe also explained that many of the blogs that have faced cuts were struggling to reach a point of profitability that was desired." The emphasis is mine, but it's the key: desired profitability. Simply, many blogs aren't making enough money.

But how much money is enough, and do blogs work well in corporate environments that emphasize profit margins?

Blog started as personal pages with no budgets or ROI tracking. Some evolved into businesses themselves, complete with budgets, wages and even marketing expenses, but compared to old media they are nearly always lean. Some make good money, but keep their expenses low, others balance expenses and profit, investing returns in their writers instead of themselves. As stand alone entities blogs even at the very top do not resemble large corporations or traditional media in any way. AOL is a large corporation that grew fat off its dialup business and is still struggling today to turn itself into something more streamlined and lean. Instead of continuing to run a lean ship at Weblogs Inc, AOL has instead fallen into the build it and they will come approach that included increasing staff numbers on the expectation that profits would follow. They have succeeded in some cases, but in others they have failed miserably. The ethos of a lean network under Jason Calacanis that emphasized growth opportunities while keeping costs under control has long disappeared, but this is to be expected from any large organization.

On profit, the acceptance of a blog with a small profit with or without growth potential but kept on none the less is replaced by the need to show significant profits from every blog in the network. Large corporations strictly number crunch every dollar, and those that don't make the cut, even when profitable, lose support. And yet, in blogging we accept that some sites don't make as much as others, that some will have a bigger margin, and we don't necessarily hold one better than the other, at least as a value proposition in continuing trade. Blogs can be a fine margin business, and this will never sit well in a corporate setting.

Blogs can be successfully acquired, and will be so in the future, but the more blogs in a network, the easier the lean machine ethos is lost when a larger corporation acquires the blogs, unless of course they are kept as a separate business unit. AOL proves it.