I don’t make any advertising or revenue decisions around here, that’s left to our CEO Heather Harde. But I’m nervous about our ad partner Federated Media, which supplies about a third of our total revenue. They’re going through layoffs (I read this on their blog), and payments from them have dipped substantially in recent months (which isn’t a surprise given market conditions).
We’ve stuck with Federated Media through the years, despite our love/hate relationship with them.
But as advertising dollars become harder to come by, staying with Federated becomes more costly. The biggest issue is that as a market leader among tech blogs, we end up subsidizing others. An example – an advertiser comes to us with, say, a $100,000 spend. They are referred through to Federated, who if they make the sale gets a 40% cut. That cut is fine. But what Federated then does is spread that $100k around to many different blogs. In the end we may only see a small fraction of it spent on TechCrunch. This works in our favor as well when leads come in from other blogs. But given how much higher profile we are than many of the other blogs in the Federated network, a disproportionate share of leads comes in through us.
In effect, we’re subsidizing our competition. As ad dollars become more scarce, the effect of that subsidy is more pronounced.
These and other reasons led Digg, GigaOm and others to leave the Federated Media network. Are we next? That’s Heather’s call. But we’ll be sure to let Federated Media know what we’re thinking via a blog post, the same way they delivered their news today.