The Business of Blogging

You know what blogs are, right? Here's one definition: "Web logs, or blogs, are a type of Web content typically created by independent writers (although some reporters for media companies create blogs on newspaper or magazine sites). Some are personal journals; others resemble newsletters or columns. Often, they contain links to other sources of content."

Well, I'm one of millions of people who enjoy reading various blogs and stumbling upon interesting new ones. I've recently noticed that they offer some insights for investors. Permit me to offer a few:

• Perhaps the most valuable blogs for investors are the ones that focus on the business world, offering their authors' thoughts on various companies and developments. In a sense, you might even consider this page on the Fool website rather blog-like, as it offers a continuous stream of articles featuring information and opinions by Fool writers, arranged chronologically. Others to check out include Reveries.com, MarginalRevolution.com, Adrants.com, and Footnoted.org.
  
• I recently learned that the folks at technorati.com are using a formula (inspired by Tristan Louis) to calculate the value of blogs. It's based partly on the purchase of the Weblogs Inc. company by Time Warner's (NYSE: TWX) AOL unit for $25 million to $40 million, which some bloggers see as a metric for the way traditional businesses value blogs. Huffingtonpost.com, for example, is worth $4.5 million, while The Drudge Report is worth $4.7 million. This little exercise should remind us that there are many ways to value a company. With a subscriber-dependent business like Netflix (Nasdaq: NFLX) or satellite radio outfit Sirius (Nasdaq: SIRI), you can use market cap and the number of subscribers to determine a value per subscriber and then apply growth projections to the number. The series of articles on this topic collected on this page is a bit dated but still illuminating.
  
• Some CEOs are finding blogs valuable in their operations. According to a govtech.net article, the fifth annual 2005 PRWeek/Burson-Marsteller CEO Survey reveals that only about 7% of CEOs currently keep a blog. "Despite the low numbers," the article continued, "59% of CEOs said blogs are useful for internal communications, and 47% said blogs are effective for external audiences." Companies with corporate blogs include IBM (NYSE: IBM), Hewlett-Packard (NYSE: HPQ), Verizon (NYSE: VZ), and Microsoft (Nasdaq: MSFT). Some companies, when attacked by bloggers unhappy with their products, services, or practices, respond with blogs of their own. General Motors is one troubled company offering blogs for the public, including some written by executives. A Forbes article covered another example, noting that "even mighty Microsoft, for all its billions, dares not defy the blogosphere. In April. gay bloggers attacked Microsoft over its failure to support a gay-rights bill in Washington state. ... Microsoft reversed itself two weeks later, saying it supports gay-rights legislation after all." The company maintains many blogs.
  
• There are more than 20 million blogs out there. According to the Digital Inspiration blog, "One person is added to [the] Indian population every two seconds. But blogs are growing even at a faster rate. One blog is added to the blogosphere every second. ... The blogosphere has just about doubled again in the past five months and ... continues to double about every 5.5 months." Investors need to restrain their excitement here. This growth rate is phenomenal, but it can't and won't last. At the current rate, within five years, there will be more blogs than there are people on Earth. The sad truth is that several billion people are living on less than a few dollars a day -- I doubt that many of them will be setting up blogs anytime soon.

Blogs have been cited as fueling the recent riots in France, and Congress has been discussing how they relate to campaign finance laws. Blogs are worth paying attention to, if you're not already doing so. They're big, they're growing, and they're having an effect on the world around us.

Share your thoughts and favorite blogs on our Blogging discussion board.

And by the way, if you're looking for some good investments, consider checking out one or more of our investing newsletters -- which you can do for free. Each will let you peek at a long list of recommended stocks (or funds) -- and their track record so far is pretty good.

Longtime Fool contributor Selena Maranjian owns shares of Netflix, Microsoft, and Time Warner. Netflix and Time Warner are Motley Fool Stock Advisor picks, and Microsoft is an Inside Value pick. The Fool has adisclosure policy.