Risk and Reward

Every business investment comes with risk and certainly blogging is no sure
thing. The risks in creating a business out of blogging include:

1. Choosing a Low Potential Niche
Perhaps the biggest risk you run is creating the wrong blog. If you start a
blog in a niche that has limited potential either because of the audience,
the competition, or the revenue potential, then you create a significant
impediment to success. You can shift the blog, reinvent it, invent a new
way of finding revenue, trounce the competition somehow, or grow the
topic’s audience ... or you can choose a niche with strong potential to
begin with! We’ll deal with selecting a niche in the next chapter.

2. Not Producing a Popular Product
Assuming you’ve picked a good niche to blog in, you still run the risk of
producing a bad product. Maybe you hire the wrong staff, maybe you
don’t figure out what sort of content people want, or maybe you get the
frequency of publishing wrong. There are plenty of factors that go into a
good blog. The best way to learn about them on an instinctive level, is to
read and think about other blogs in your spare hours over a reasonably
long period of time. You’ll also get to read about what goes into hiring
and content in later chapters of this book.

3. Competition
Every business has competition of one sort or another. It might be other
blogs or it might be traditional media. If your business grows beyond
blogging, then it might simply be other service providers. Competition
vies for audience, for revenue, and ultimately for dominance. Even if
you scope out a niche very thoroughly and deduce that there is little
competition, you can never account for the competition that is sitting in
a garage somewhere plotting and planning their strategy for domination.
Aside from thorough research, the best defense is to be on guard all the
time, to always be looking for ways to be the best, and to think about
ways to differentiate your product from your competitors.

4. Running Out of Capital
The simple reality of business is that in the beginning you will burn
through your cash with little or no return. Later in this book, you can
read about three case studies from my own experience where you will
see that each blog took many months of losses before hitting break
even, and that one set is in fact still burning through cash!
To combat this you’ll need to make sure you have a reasonable amount
of capital to begin with. You’ll also need to look for ways to get some
revenue as fast as possible to help slow the losses. You’ll need to
constantly evaluate whether you are on the right track, whether you can
save money somehow, and how much longer you can last.

5. Market Conditions
No one can control the broader market conditions. At this point in time,
blogging looks to be a good bet with lots of growth potential and more
and more advertising moving online. Whether this is true, whether it
lasts, who knows? The most important thing is to keep your finger on
the pulse. Stay up to date with tech blogs, advertising blogs, blogs
for bloggers and publishers, and stay informed. If you feel a change in
market conditions coming, adjust your business plan to compensate.
If you think there are lean times ahead and you are low on capital, pull
back on your plans. Conversely, if you think there’s a boom coming in a
particular niche, then you might ramp up to take advantage of it.


While blogging is not without its fair share of risks, there are also
plenty of rewards. First and foremost is the satisfaction of running a
successful publication. Watching your readership grow, seeing
comments and discussion happening on your site, hearing from readers
who enjoy the site, and seeing link-backs from sites you respect are all
incredibly rewarding.
On a monetary level, a blog business can grow very large. One of the earliest
blogging companies, Weblogs Inc, which included powerhouse blogs like
Engadget (http://engadget.com) and TUAW (http://tuaw.com), sold for a
reported $25m to AOL in 2005. Another high-profile sale occurred in 2007
when environmental blog Treehugger (http://treehugger.com) sold for $10m
to the Discovery Network.
While a big sale to a listed company isn’t on the books for every blog, it’s
certainly possible to do well purely on operating profits and revenue. In
the case studies in this book, you’ll read about two blogs that I’ve worked
on which have been fortunate enough to hit profitability and turn over
enough cash to grow other businesses and to expand themselves to bigger
revenues and larger audiences.
In fact, later in this book we’ll look at how a blog can not only become very
successful in its own right, but can also become the engine that drives new
businesses such as blog networks, apps, services, or products like books
and job boards.