Marketplaces find the correct price for paying for content production.
Earlier this week I wrote two stories about Demand Media, a company that has found a way to make money with online content. I noted that the company will have a hard time getting fair press coverage since many journalists probably feel threatened by its model.
Here’s one example, aptly named “Demand Media Can Go To Hell“. In the post, author Tony Silber complains about what he calls Demand Media’s low pay to writers. There are a few times in my life I’ve told someone to go to hell, and it’s usually when I feel threatened.
Through Demand Studios, Demand Media is bringing market efficiency to content production. That’s scary to some people that are afraid of change. Call me a capitalist (the horror!), but that’s the coolest thing about Demand’s model.
Now, am I just some smug blogger who laughs at the peril of others? No. My wife is a professional journalist. My family gets its regular paycheck from her job. It’s our only source of health care, too. But one of the things that most impresses me about my wife is her ability to adapt.
She graduated college 10 years ago. The next ten years saw perhaps the most upheaval the journalism world has ever seen. When she interned for BusinessWeek in the late nineties, there was a clear wall between print and online. Online was second rate. That quickly changed, and she changed with it. A couple years ago she left the print world for an online blog.
I’ve also experienced the effects of increasing market efficiency. When I graduated college I landed a nice, high paying job as a financial analyst for a software firm. Then the dot com bubble burst and the company had to cut costs. First, it moved almost all of its development to India. A little while after I left, it hit closer to home: the company moved almost all of its finance jobs to India, too.
Those affected could have bitched and moaned. But one smart guy in the finance department saw an opportunity. He started a financial analysis company where he interfaced with companies in the U.S. but had a team of analysts in India.
Oh, and that same software company has subsequently moved much of its development to China. It was cheaper.
Now, back to the Demand Media model. First of all, I don’t think it pays as little as people like Silber claim. Sure, a magazine may pay $1 a word for freelance writing. But to get that job you have to pitch stories. Once accepted, you have to write the story. Then you have to invoice the publication and wait 30-60 days to get paid.
Demand Media writers have an unlimited flow of work. No pitching. Payments by PayPal twice a week. So they may earn about $25 an hour on average, but they get paid for each hour they work. To put it in perspective, when I do domain name consulting for companies I usually charge about $400 an hour. But if you consider how much time I spend on the sales call and keeping up to speed on everything I need to know, I’m not earning close to $400 an hour.
Is Demand Media paying too little? Apparently not, since thousands of writers are willing to write for it.
In fact, if you want to see some truly scary market efficiency at work, try this idea. Perhaps Demand shouldn’t pay a set price for articles. It should hold a reverse auction, letting writers say how much they’ll write the article for. Now that would show us the true price of the content.
Alex Tajirian says
A Distributed Cocreation Solution to Domain Name Development
http://bit.ly/9ppn8w is far superior to Demand Media’s model.
bernard says
The value of an average piece of content is about 50% of what it can bring with advertisement within a reasonnable publisher website, and not a penny more.
Matt says
Andrew, is this really a case of market efficiency, or market inefficiency? On the surface it looks textbook: Demand Media increases the supply of content, price goes down. But this is not a new influx of talented journalists, it’s (largely) average Joes being given a big microphone. There is little demand for content from Average Joes. The inefficiency occurs because the demand/ consumption side of the curve in online media is driven by search, and Google’s current emphasis on domain authority leads them to confuse size with quality. In other words, DM’s crap content lowers the value of professional content only because Google cannot tell the difference between the two… yet!
Bill Sweetman says
Hmm… I think I’m going to raise our hourly rate for domain name consulting. LOL
Mark says
Curious how you came up with Demand paying $25.00 per hour.
Also curious how you justify invoicing and Net 60 terms as deserving $1.00 per word for a magazine writer and a “Demand” writer not getting a fair rate because they can get paid by PayPal at a faster rate.
I gotta tell you Andrew, as a writer and someone married to a writer, I am surprised at your opinion on this.
Demand is no doubt marginalizing the value of writers and content. For demand, it’s not about quality content it’s about response.
Sad.
Andrew Allemann says
@ Mark – I came up with $25 based on what some of their authors are quoting around the web. I’m also not saying net 60 at $1 per work equals paid right away at 3 cents. I’m saying that’s one of the perks of writing for Demand.
Good authors will always be rewarded richly. I think the best journalists are making more than they made five years ago.
tw morse says
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Matt: They’re not looking for, or taking “average Joes” — see this link for the standards. As a former journalist, I’m impressed. http://write.demandstudios.com/downloads/Style_Guide_Studio.pdf (NOTE: I had to dig deep on their site to find this)
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Andrew: As for payment, they have both a flat fee (which they don’t specify) and a rev. share model. They give only select freelancer the shot at rev. share. They also allow writers to direct traffic to their particular articles, thus helping the PPC for Demand Media, which helps the writer who is working under rev. share. (At least that’s my understanding, based on an initial read of the “deeper” part of their site.
RE: Payment, they are on a “work for hire” model, so the company gets perpetual rev. from ads — and the writer who’s under a flat fee is paid, but derives no further $$ from his work.
NOTE: Here’s an interesting article, that discusses the different freelance pay structures: http://freelancewriting.suite101.com/article.cfm/how_do_freelance_writers_get_paid
Ultimately, it is up to the writer to know what he/she will accept and the time the job will take, and the value of the work.
An interesting point in the above article is the “online” pubs that take “limited” rights vs. print that takes “work for hire.” Demand seems to have this very well buttoned up in their biz model, with the online getting “work for hire.” As I read through the legal stuff for contract issues, they certainly have their stuff in one sock.
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Mark: While I agree that you could consider these writers “marginalized” — compared with the opportunities to be syndicated via the expansive network of sites that Demand runs, even if a writer only gets the flat fee, this can: a) help him/her with getting some “professional credits” which may lead to exposure in other areas and b) in the rev. share model, can create a growing income, albeit modest at the start. The writer who proves him/herself on flat fee jobs likely also has a better shot at the share gigs.
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Bernard: Interesting perspective. With the demand model, I think one has to consider the labor market; the talent pool; the “grit” of those who wish to undertake such work; etc.
Let’s say that the rate is appx. $25/piece (And I can’t confirm the rates, which seem to be based on particular assgt.) If a writer can do two articles a day (4 hrs./per) — my math gives me an annual of $13K. If he/she is better and faster and can do 4/day (2/hr.) that give me 26K. And if the writer is on a rev share for any of the work, that brings in residual income.
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Mark: “For demand, it’s not about quality content it’s about response.” — This can work both ways: If I were to write a piece for Demand, and sell as WFH, I can still take the research I put into the project, if I’m industrious, and re-work it into a different, even significantly different piece.
In addition, if you take a look at the writer guide, Demand provides an advantage of listing articles that they have already determined have reader “demand” — and seem to provide — at least indirectly — some idea of the keywords (and I assume that these KW’s are more lucrative than others, even ones a writer may try to dig up) — so, there is benefit on a secondary level.
Ideally, if we see this company as a “launching pad” — vs. a steady gig — it may not seem so bad, esp. if our names are not doing so well — parked or otherwise.
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Alex: Not so sure I agree with you, based on all of the above.
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Bill: Good idea! Charge it off to inflation.
Matt says
@TW – Thanks for the link, that’s interesting. I’ve actually run a few tests to see how bad of an article I could write and still have it accepted. Haven’t been rejected yet. 😉
But even when articles are reasonably well-written, they are never authoritative, and that’s (at least in part) what SEs are/ were designed to bubble to the top. IMO G’s increasing reliance on domain authority rather than niche authority or page-specific factors has lead to this situation where eHow and similar sites with strong domain authority rank well even though no human would ever consider their content authoritative. (And that, in turn is driving down the value of truly authoritative content.)