Jeremy Wright has stepped down as CEO of b5media, the blog network he helped co-found, mostly for unspecified personal reasons.

While Wright will remain a board member and shareholder of the venture-backed startup, he already has a replacement: Elaine Kunda will take over the reins as CEO from this point forward.

The decision apparently stems from the beginning of this year, when Wright took a short vacation and went offline for about 10 days. He writes:

I did it because I was tired, burnt out and recognized that my life wasn’t what I wanted it to be. I was working too much, unhappy at home, unhappy at work and just felt completely blah. Basically I did it because a friend asked me what I wanted my life to be… It was then that I realized not only was I unhappy, but that I had no idea what I wanted my life to be.

Wright’s soul-searching follows some shifts at b5media itself, which saw massive pay cuts for bloggers as the economy tumbled last fall. It hasn’t been fun since then.

But at least the network as a whole is holding up, with comScore estimating 5.8 million worldwide unique visitors in May, 2009, up from 2.7 million last August. I had a brief chat with Wright, and he assured me revenues and traffic are holding steady, though he refused to detail either one.

CrunchBase tells us b5media has raised $2 million in venture funding to date, but since he mentions “millions and millions of dollars” in his blog post I wanted to find out if it was actually more than that. Wright confirmed that the total amount of capital invested in the company is in fact higher than the listed $2 million, but refused to disclose any new investors, let alone any amounts.

Wright is moving on to new things, and in the meantime will run a consultancy agency of sorts along with some other people. The name of the short-term venture he will be shifting most of his attention to from now on is netmobs.

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Image-licensing network GumGum is growing by leaps and bounds. Measured as an advertising network, it is now a Quantcast Top 100 site, reaching 13.7 million people in the U.S. and 23.5 million worldwide. More than 1,000 Web publishers are licensing images through GumGum, which allows them to pay based on how many people see the image or use them for free with embedded advertising.

Today, GumGum is adding blog network B5Media and gossip site DailyFill to its customer list. They join Glam Media, MTV, and Gawker. Sites that rely on celebrity pics particularly like GumGum’s model.

Sites contract directly with photo agencies, and GumGum keeps track of who is using what images and how many times they are viewed. That is what those Quantcast numbers are counting, thus GumGum acts like an ad network for images. Typical CPMs (cost per thousand views) are $0.15 – $1.00 per image for sites that opt to pay instead of accepting ads in their images. This kind of licensing model makes much more sense on the Web, where small sites want the same quality images as large sites but don’t have the resources to pay the same rates.

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Gone are guaranteed payments of “$100-$200/month” plus bonuses for traffic. In its place are much smaller guaranteed payments plus monthly bonuses for “press coverage you or your blog gets, exclusive interviews you land and growth of your blog.” Blogs can also get a quarterly bonus based on a scoring system.

The traffic bonus system was over-rewarding bloggers, says Wright. The new system will likely result in a big pay cut, but Wright says it’s necessary to align incentives:

I’m sure by now you’ve run your blog through the system above and realized that (with a handful of exceptions), due to the change to Omniture as a stats package, your pay will go down. For some it will go down significantly. Obviously this isn’t the intent of the new pay system, it was just the flaw in the previous stats package. For the last two years, b5 has been effectively paying bloggers 2-3x more in traffic bonuses than they were actually getting. While, again, this isn’t a blogger’s fault, neither is the new pay system about “cutting pay”. Any reduction in pay is due almost exclusively to the reality of using an inaccurate pay system in the past vs an industry standard third-party audited system going forward.

While this is certainly not good news for the already low paid bloggers in the b5Media network, it isn’t necessarily a sign that the company itself is failing. Rumor is that b5Media has raised a new round of financing and will be announcing it soon. In April, we reported that merger discussions with Technorati fell through at the last minute.

The full email memo is below. I’ve contacted Wright for a comment.

Good afternoon everyone,

As part of b5media’s evolution, we attempt to update our blogger pay system every year. This is both to fix issues in whatever system we were using previously as well as to evolve as an industry in how we pay and reward the people who make the magic happen here at b5 (ie: you!).

Obviously pay is only a small part of being a part of any network like b5media. Soft perks like press access, increased profile and free hosting are valuable, as are community benefits like being part of a group of similarly passionate bloggers, contests and channel events and ongoing training programs.

But while it’s a small part of the overall experience here at b5media, we fully recognize that pay is an important one. Which is why this year’s new pay system has taken us longer than previous iterations. We’ve spent most of this summer working with CEs and a handful of bloggers on the new system. We’ve gone through four completely different iterations, and within each of those several refinements were made before settling on the system we’re announcing today.

The “Old” (ie: Current) Pay System

Before I get into the new pay system, I wanted to cover issues with the last pay system. Some of those issues are issues for you (bloggers), others are issues for b5 as a company. Because while we love the community and want to do everything we can to make sure you guys are happy and grow both as bloggers and as people, we do still have bills to pay and investors to keep happy.

When we designed the current pay system, it was in response to our previous model of doing a type of revenue share. The details of that don’t matter too much. What matters is that the current pay system of base pay + traffic bonus was really designed to encourage bloggers to build a community around their blog and to be a part of the larger community within which their blog sits. We felt that ultimately these things would drive traffic and so while traffic in and of itself wasn’t the goal, we recognized that more comments, links, posts, participation in other blogs, etc all drove traffic … and as a result felt that keeping it simple and rewarding traffic was the easiest way to go.

Sadly, as would have been obvious in hindsight, by only rewarding traffic and length of service what we were in fact encouraging was “traffic for traffic’s sake” as well as pure longevity. While we’d hoped to create a striving for quality, because we weren’t specifically rewarding quality it became harder and harder to push for it in any systematic way.

The other major issue with the current pay system is that the base pay, while theoretically viable for having paid bloggers for writing regardless of their traffic, created some very difficult economics. At the end of the day we’d always sought to have us and bloggers “on the same side of the table”. Making money the same way, enjoying the same growth and effectively being on the same team. However (and this obviously isn’t the only reason this happened) by paying a base pay up front when b5 wasn’t making money, there were a whole host of blogs and bloggers that were making 100-200$/month for very low traffic blogs. Blogs that were making 30-50$/month at the best of times (and less at the worst).

Dreaming Up a New Pay System

So obviously when we started looking at a new pay system in April, we knew we wanted to change a few fundamental things. First and foremost, we wanted to be able to reward quality content irrespective of traffic. While we believe quality content will drive traffic (so bloggers get paid for both!), we also believe that by specifically rewarding quality content we will ideally fuel more of it.

Second, we realized that any new pay system had to be as simple as possible. While it would be fun to take into account traffic growth, post growth, comment growth, “peer review scores”, bounce rates, visit length, and a host of other variables, it would be basically impossible for a blogger to know what they were likely to earn. Not that we didn’t try to make a system just like that work (to this day I’m pathetically proud of the fuzzy math I employed to do just that!), but ultimately it was too complicated.

Third, we wanted CEs to have more input. We wanted them to be able to point at a great blog, blogger or post and say “that’s exceptional, reward THAT!” … without creating an awkward situation where a blogger who perhaps didn’t get along with their CE felt slighted.

Fourth, we wanted to begin to define a “path to success” for bloggers. The challenge with the old pay system that the only way “up” was to get more traffic. And while traffic will always be a core metric for the business (it’s how we make money, after all!), we wanted there to be other “rewards” bloggers felt were within grasp than just getting more pageviews.

And finally, we wanted to ensure that while we rewarded larger bloggers, we were also specifically creating rewards for smaller bloggers. Because as we all know, while it’s certainly easier to be writing a small blog as part of a network than all alone without anyone to help, it’s still a very hard and demanding task.

Oh, sorry and one final thing: MINIMUM POSTS ARE EVIL!!! Our intent with minimum posts was truly to say “here’s the minimum we feel you should do to grow your blog as fast as possible”. But there were two problems with that: first and foremost it actually created a “goal” for bloggers, and so after that goal it was easy to get complacent (we’re not pointing any fingers, this is our fault, not yours) and second for some blogs more posts didn’t directly correlate to more traffic.

So while we still believe regularly posting new content is better, we also believe that for a blog to be successful, more than just a small fraction of a blogger’s time should be spent participating in the larger community within which their blog resides (ie: outside b5). Bloggers will see a larger return (and more traffic) from devoting time to specific “outside the blog” promotional/community activities. Great content drives traffic. Great content that people are actually aware of drives more!

Pay System Basics

There are two sides to the new pay system: traffic tiers and bonuses. Traffic tiers are, as they sound, “groups” of blogs based on how much traffic you’re getting. The lowest tiers get a flat rate pay per month (not including bonuses). The highest tier gets a set CPM ($X for every 1000 pageviews recorded in Omniture for your blog).

Bonuses are grouped into either monthly bonuses or quarterly bonuses. Monthly bonuses are based on things like press coverage you or your blog gets, exclusive interviews you land and growth of your blog (to reward smaller blogs). Quarterly bonuses are based on a new score card for blogs (ie: the better the blog, the higher the quarterly bonus).

New blogs will receive $50 per month for the first three months, after which they will be placed into the appropriate tier based on traffic. Bloggers taking over pre-existing blogs that fall in tier 4 will also receive $50 per month for the first three months while they get settled and have an opportunity to see what they can do to get their traffic up so they can stay, or grow past, Tier 3.

The pay system is structured with the lowest 3 tiers as a flat rate because adopting a pure CPM approach for a blog doing 5K pageviews per month seemed more than a little silly. It also creates specific goals which bloggers can aim for (instead of every month wanting an extra 2% or whatnot). The reason the highest tier is purely CPM based is because at that point, the blog is profitable for b5, so CPM ends up being the easiest means of ensuring larger blogs continue to get paid a competitive rate (industry average currently sits between $2-6CPM, even at the largest networks, without bonuses).

Details, Details, Details!

So, how, exactly, does the new system work and what is the pay for each tier?

1. Tier 1: 30,000+ pageviews/month – $4CPM

2. Tier 2: 10,000 – 29,999 pageviews/month – $100 flat rate ($5-$10 CPM)

3. Tier 3: 5,000 – 9,999 pageviews/month – $50 ($5-$10 CPM)

4. Tier 4: 0 – 4,999 pageviews/month – $25 ($5 -$50 CPM)

For Tiers 2+3, we are effectively artificially inflating the CPM to ensure that a blogger in that tier is encouraged to continue growing. Because while “dropping” to a $4 CPM might seem “unfair” to some, paying a blogger who’s doing 541 pageviews per month just $2-3 (actual example) wouldn’t be fair either. The flat-rate tier system allows us to reward bloggers who cross specific thresholds (5K/10K/30K pageviews/month). In addition, much of our training will be focused on helping bloggers who are in a tier they aren’t happy with (specifically Tier 4 bloggers) to get out of that tier and to work on specific traffic growth strategies that we’ll help with.

Tier 1 is really the “self-sustaining” blogs. Blogs doing more than 1,000 pageviews per day, in our experience, are ones that are going to grow at a very reasonable rate just due to the existing community on the blogs. On blogs of that size, installing community-oriented widgets adds real traffic, because there is a community large enough to get real value out of them.

The 3-Month Temporary Pay Protection Floor

I’m sure by now you’ve run your blog through the system above and realized that (with a handful of exceptions), due to the change to Omniture as a stats package, your pay will go down. For some it will go down significantly. Obviously this isn’t the intent of the new pay system, it was just the flaw in the previous stats package. For the last two years, b5 has been effectively paying bloggers 2-3x more in traffic bonuses than they were actually getting. While, again, this isn’t a blogger’s fault, neither is the new pay system about “cutting pay”. Any reduction in pay is due almost exclusively to the reality of using an inaccurate pay system in the past vs an industry standard third-party audited system going forward.

However, again, because the change in stats (and hence pay) isn’t bloggers’ fault, we wanted to give a window within which bloggers could (if they so desired) increase their traffic or go after specific bonuses to increase their overall pay.

As a result, b5 has put in place a “floor” for 3 months: you will not earn less than 50% of what you earned in September, even if your stats were inflated (and thus dropped) by 60%, 70% even 92% (as happened to one blogger). Because this change isn’t your fault, we’re meeting bloggers who have seen a significant drop in traffic halfway to give them time to grow their traffic to a level where they are happy.

The Bonus Plan

The first part of the pay system (the traffic tiers) is designed to reward bloggers the same way b5 gets paid. While we’ve done our best to ensure it’s fair (by subsidizing smaller blogs with a higher CPM and with a temporary floor to protect bloggers due to stats changes), our goal with this new pay system (as I said at the start) is to truly encourage bloggers to go outside their blog and outside their network to build community and be part of the existing community in their niche. Via commenting on other blogs, reaching out to larger bloggers in your area to form friendships, participating in social media sites like Mixx, StumbleUpon, Lipstick and Digg, participating in forums you can do as much (if not more) to grow your blog as via writing new content.

At the same time, and CEs were very adamant on this (thanks guys!), we wanted to be able to reward non-traffic-driving endeavours such as you being interviewed in the mainstream media or landing an exclusive interview, we wanted to reward specific non-traffic-generating (by and large) things that bloggers are already doing, which we love and which we want to specifically encourage.

In addition, bonuses will be allocated based on quantitative things such as % increase in comments and traffic, mostly so that smaller blogs can get a little extra money in the bank as their blog grows.

Finally, every quarter we’ll continue to do performance reviews, and as part of those great blogging will entitle you to a quarterly bonus as well.
This list of bonuses is by no means complete, so if you have suggestions for other monthly bonuses we really do want to hear them. We’ve attempted to balance traffic-generating endeavours with community efforts with pure growth, and if you have other items we can add to our bonus list, please let us know.

Bonus Details

Our initial monthly bonuses (again, please feel free to suggest more!) are:

1. Major social media sites frontpage (Mixx/Digg/Lipstick/StumbleUpon/etc) or coverage by leading industry blog: up to $50

2. Exclusive interviews: up to $50

3. Press coverage: up to $50

4. % increase in comments: up to $50

5. % increase in traffic: up to $50

Each of the categories is designed with an initial cap (we can move this if it makes sense later). The first 3 categories of bonuses are on sliding scales. Obviously getting covered in TechCrunch is more important than getting covered at CenterNetworks (as much as I love Allen!), getting an interview with Bill Gates is more important than one with me. It will be up to you to alert b5 and your CE when you feel something you’ve earned a bonus on the first 3 items. The last 2 will be calculated automatically.

These monthly bonuses allow smaller bloggers to double or triple their revenue if they are able to go “outside their blog” and build community, participate in the industry, build connections, etc. All the stuff you’d do if it were your blog, obviously, and stuff most bloggers are doing now – we just felt since it is adding value to the blog, we want to reward you for that value!

At the same time, we’re very focused on ensuring that not all bonuses are traffic related. So even if you don’t qualify for one of the initial monthly bonuses, quarterly bonuses will also be paid out for high quality content, “evergreen” content (ie: Top 10 lists, etc) and for being an active member of the b5media community.

Next Steps

Assuming we haven’t screwed something up (let us know if we have!), we’ll be answering your questions all this week. Next week we’ll be sending out new contracts, and assuming we haven’t (okay, lots of assumptions!) screwed that up, we’ll get you a final version in time for the 15th. We’ll cancel the old contracts on the 15th, effective the 31st which will give you 2 weeks to review the contracts and if you are going to continue writing to sign the contract and get it back to us.

So the schedule is:

· Week 1 (now): review/answer questions on pay system

· Week 2: review/answer questions on contracts

· Nov 1: have new contracts in and effective

· Dec 15: your first pay under the new contract and pay system

Questions/Comments/Concerns?

Alright, so hopefully this has answered questions and confusions around pay. Please feel free to air any questions, comments or concerns here. While we’re confident the pay is fair and balanced, we’ve made our fair share of mistakes in the past and so aren’t going to guarantee we haven’t missed something!

______________________

Jeremy Wright, CEO, b5media

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b5media, a media network with over 350 blogs, has partnered with PicScout to obtain legally licensed images at no cost through their PicApp application.

PicScout originally started off as a content copyright enforcer, hunting down unlicensed images on the web with its flagship ImageTracker program. After realizing how ubiquitous unlicensed images were, the company launched PicApp, a flash-based image provider that offers legally licensed images from large databases for free. The company makes money by including ads as part of the embedded picture viewer.

b5media will use PicApp to complement a number of other image partners. Many high quality images from licensed catalogs can go for $10 and up, which can have a significant impact on a blogging network’s bottom line. The company says that using PicApp’s free content for some of these images should reduce licensing fees substantially. b5 has over 250 bloggers, which generate upwards of 10 million unique visitors monthly.

The partnership marks a big win for PicApp, but it’s hard to imagine a Flash-based image provider becoming commonplace on the web. Flash is clunky and slow compared to normal images, but at this point the plugin is a necessity for image catalogs to control their content. GumGum is another player in this space that uses similar Flash technology.

Here’s an example of a licensed image:

Image details: Cannes: Blindness – Premiere served by picapp.com

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Blog search engine Technorati was days away from merging with blog network b5media when the whole deal blew up earlier this week, according to a source familiar with the negotiations.

Technorati has been searching for a new strategy ever since it appointed CEO Richard Jalichandra last October. It was recently trying to raise an additional round of financing, and pitching venture capitalists that it could turn itself into a blog advertising network and/or even pursue a blog roll-up strategy.

The talks with Toronto-based b5media (they’re big in Canada) indicate that it is taking the blog roll-up idea more seriously than we previously thought. If the merger with b5media had gone through, Technorati would have gained a network of 340 blogs. One of the slides in the pitch deck Technorati was showing potential investors (shown above) outlines how a roll-up strategy could be combined with an ad network. Technorati would use its search engine to promote owned-and-operated blogs. It would sell ads using its own sales force instead of third-party ad networks for an “immediate 30-50% revenue bump” and sell across its network.

According to our source, the deal with b5media never went through, though, because of personality conflicts between the CEOs and a lack of transparency on Technorati’s part during due diligence. At least that is how the b5media side sees it. Prior to its dalliance with Technorati, b5media was itself trying to raise another venture round that would put a $20 million valuation on the company. But there were no takers. So b5media started talking to potential merger partners or acquirers (including at one point Federated Media Publishing). A combination with Technorati could have made both Technorati and b5media more appealing to later-stage venture investors. But now the two need to keep looking for other options before their time (and cash) runs out.

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