A Brief Discourse on the Economics of Blogging

Having been the author of a blog for more than two years, I have developed a keen interest in the incentives and economics of blogging. Simply put, I would like to better understand what motivates me to author a free blog five days per week. The answers to this question were provided for me in a recent article in Wired (see: Free! Why $0.00 Is the Future of Business). The basic premise of this article is that the most successful new approach to business, particularly for web-related activities, is to provide services at no cost. On the face of it, this doesn't make much sense but let's delve deeper into this matter.

Turning to the topic of blogs, one needs to understand first that the readers of this blog are paying to read it but not in a way that is commonly understood. Readers pay for this blog not with money but by the expenditure of their time and attention. These latter characteristics can be more valuable for some than money because they are in short supply. Let's now turn to the key quote from the Wired article that explains why bloggers are motivated to blog (boldface emphasis mine):

[The answer] is externalities, a concept that holds that money is not the only scarcity in the world. Chief among the others are your time and respect, two factors that we've always known about but have only recently been able to measure properly. The "attention economy" and "reputation economy" are too fuzzy to merit an academic department, but there's something real at the heart of both. Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). Anything you can consistently convert to cash is a form of currency itself, and Google plays the role of central banker for these new economies.

There is, presumably, a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and the world of free exists mostly to acquire these valuable assets for the sake of a business model to be identified later. Free shifts the economy from a focus on only that which can be quantified in dollars and cents to a more realistic accounting of all the things we truly value today.

Here's another definition for externalities that will make the case for the value of blogging even clearer:

Those costs or benefits arising from production or consumption of goods and services which are not reflected in market prices.

Based on all of the above commentary, here's a mini-course on the economics of blogging in the form of bulleted statements:

• Blogs are not free -- blog readers pay for them with with their time, attention, and the respect that they bestow on the blogger for the service that is being provided.
• Professional blogs function as a filter for news and analysis. This filtering function conserves time for the readers of the blog. Readers only pay attention to the small number of blogs that they trust and have the time to follow.
• The time, attention, and respect that are directed to a particular blog are externalities, which is to say that they are costs and benefits associated with its consumption (i.e., reading) and which are not reflected in its cost.
• The monetary costs of blog publishing, as opposed to the value of the time and effort exerted to write the blog, are so negligible that they can easily be ignored. They are negligible because computer server time is a commodity, the result of Moore's Law.
• The author of a blog is compensated by being able to convert the time, attention, and respect directed to the blog into ad revenue, marketing a product/services (e.g., book sales, conference registrations, consulting engagements), or the enhancement of reputation.
  
• Academic bloggers such as Russ Roberts and Don Boudreaux have created the  economic blog, Cafe Hayek, in part to enhance their reputation as college professors. Their blogging effort is thus monetized through their academic salaries. In academe, promotion is based, in part, on developing a national reputation and blogging is [increasingly] one way to achieve this goal.