What’s the Written Word Worth?: Bringing Market Efficiency to Content

Marketplaces find the correct price for paying for content production.

A few days back I wrote two stories regarding Demand Media, a firm that has found a way to make money with online content. I noted that the firm 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 regarding 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 regarding 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 regarding 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 firm had to cut costs. First, it moved almost all of its development to India. A little while following I left, it hit closer to home: the firm 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 firm where he interfaced with firms in the U.S. but had a team of analysts in India.

Oh, and that same software firm 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 regarding $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 firms I usually charge regarding $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 ought to 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.