I’ve discussed the economics of blogging numerous times in the past. Can
blogging be a viable career? Can the blogosphere mint hoards of new
millionaires? These are all questions that many have asked over the
past several years as the blogosphere has grown in size and prominence.

Despite the fact that I have been able to turn my blogging activities
into a bit of cash, I’ve remained skeptical about blogging as a
business and as a career, which is why the man behind Drama 2.0 still calls ‘international business‘ his primary line of work.

The economics simply don’t make sense. For the average blogger, even one with a reasonably ‘large‘ following, there simply isn’t enough money to be made to make the exercise worthwhile as anything more than a side endeavor.

That’s exactly the conclusion reached by Dan Lyons, the former Forbes editor who is perhaps best known as Fake Steve Jobs.

In his Newsweek article, Time to Hang Up the Pajamas, Lyons explained how he came to the conclusion that “while blogs can do many wonderful things, making huge amounts of money isn’t one of them.

The first clue: when he was outed as the man behind Fake Steve Jobs, 500,000 people visited his blog in a single day. His Google AdSense ads netted him about $100 that day. Over the course of the month, 1.5 million visitors generated a little over $1,000.

Clearly, that’s not enough to pay for the penthouse apartment at the Four Seasons and to put gas into the CL63. Even with an advertising deal that followed, Lyons never made enough to support his lifestyle by blogging full-time.

Lyons isn’t alone. He claims that Michael Arrington, who is going to be taking a hiatus, has been trying unsuccessfully for the past year to sell TechCrunch for around $100m. He also cites Gawker Media and Pajamas Media as examples of companies that haven’t exactly achieved overnight financial success either.

Of course, none of this is surprising to me and it isn’t a surprise to those who have some knowledge of media.

Whether you’re writing for yourself and compensating yourself with sweat equity or paying cash to a team of editors and writers, good content isn’t cheap to produce. And despite the economic downturn, there’s still a limit when it comes to recruiting talented content producers on an insanely low budget or worse, a revenue share offer.

When it comes to advertising dollars, even the biggest blogs and blog networks lack the reach to pull in massive buys from major media buyers. It certainly doesn’t help that they don’t exactly have the type of inventory that media buyers are going to drool over.

Forget about premium content. Paid content and subscriptions won’t provide a scalable revenue stream for the vast majority of blogs because they don’t have the type of breadth and depth necessary to create the unique, high-value content that such a model realistically requires.

None of this is to say that there aren’t blogging companies making decent money. But most of the time when you examine the actual business models critically, they don’t look as pretty as they do with kool aid goggles on.

Take TechCrunch, the big kahuna of technology blogs. Even putting aside an actual evaluation of its revenue and costs, the business model hardly justifies the $100m Lyons claims Arrington has been seeking.

TechCrunch may have a sizable audience, but from a media buyer’s perspective, it’s still a niche offering. TechCrunch is therefore highly dependent on the health of the industry it serves. With technology startups and established players alike cutting back, selling 125×125 sponsor buttons for $10,000 apiece isn’t exactly a recession-proof model.

As I’ve asked before, it’s actually quite unclear exactly what most sponsors get out of these sorts of deals. This is an especially relevant question when one considers that media buyers can often access remnant inventory on blogs like TechCrunch at a hefty discount through ad networks and exchanges.

Over time, I think you’ll see quite a few blogs lose traction with sponsors, as many are clearly run by people who seem to have no idea that sponsorships aren’t cash giveaways. In these times especially, sponsors are demanding more and looking for the type of value that will translate to ROI.

It’s a tough world and at the end of the day, companies trying to build new media empires will face many of the same challenges as their old media counterparts. And most will probably do so at much smaller scale. The reality is that the same forces causing problems for traditional media companies, such as newspapers, will have an impact on new media companies as well.

Don’t expect a blog network to grow into the 21st century equivalent of the 20th century’s New York Times. Just as the New York Times has been forced to come down from the mountain top it used to occupy, new media folks will have to accept that the mountains they’ll occupy will have a much lower elevation too. There are simply physical limits in the world of media today whether you’re old media or new media.

Which brings us back to Dan Lyons and his dream of finding “a huge pot of gold” at the end of the blogging rainbow. Obviously, he discovered that rainbows are fleeting. But that doesn’t necessarily mean that bloggers and blogpreneurs should throw in the towel.

It comes down to expectations. If you’re looking to turn your blog into a multi-million dollar enterprise, chances are you’ll find nothing more than a gut, bags under your eyes and disappointment. But if you enjoy writing and can manage to make a few bucks on the side by fitting some blogging into your schedule, the news that blog riches were a “high-tech fairy tale” probably won’t bother you.

Blogging is dead, long live blogging.