The Harsh Economics of Free Content

A few years when I worked for a blogging network, one of the biggest challenges was figuring out how to pay writers.

Should they be get a flat fee, per pageview and/or a percentage of advertising for their work? Complicating the situation was the fact there were people with high-traffic blogs, and hard-working writers will low-traffic blogs. It raised the thorny issue about whether popularity of a blog should mean more pay.

The question of blogger compensation raised its head again last week when the Huffington Post was acquired by AOL for $315-million.  A big part of the Huffington Post’s success is the great – and free – content generated by an army of writers. Whereas some publications struggle with the economics of creating content, Huffington Post has no problems. Seeking an opportunity to get their thoughts and names in front of millions of people, people writing for Huffington Post are happy to do it for free.

The dynamic of this cozy club changed, however, after the deal with some writers feeling the sting of watching Huffington Post’s investors be handsomely rewarded while the people writing for the popular online publication received nothing. There seemed to be a feeling that Arianna Huffington and her fellow investors should share the wealth.

Maybe this “what about me?” sentiment was caused by the abrupt nature of the deal, which caught many people by surprise. Other than maybe some pressure from investors, Huffington did not have to accept an offer because the Huffington Post was growing in terms of pageviews and advertising revenue.

For whatever reason, Huffington Post’s writers might have felt as if they were members of an exclusive club as opposed to a place that just accepted anyone who could write. Maybe this sense of entitlement caused them to believe they were part of the business.

The reality is they were part of the editorial machine, which is fuelled by free content. Writing for free is a trade-off they accepted to gain membership into the Huffington Post and the status it provides writers. In return for free content, writers have a new way to build their personal brand and reach a wide audience. If they made a deal with the devil, they received attractive compensation.

Perhaps the bigger issue raised by the AOL-Huffington Post deal is how much free content is created online – whether it’s high profile publications, crowdsourcing/citizen journalism sites, or the millions of bloggers pumping content each and every day.

This is a huge challenge for publications that pay their writers because the competition has a huge economic advantage – and lower operating costs. This dynamic is a major part of an evolving marketplace in which the economic rules are still being established. AOL’s purchase of the Huffington Post simply exposed a financial reality of online publishing.