Over the last five years, Ann Marie Michaels has been a soaring natural food star. Or maybe a meteor would be more like it.
The savvy and charismatic entrepreneur rode exploding interest in artisanal raw milk cheese and other nutrient-dense foods, and built her Cheeseslave site into a gathering place for thousands of followers interested in her recipes and tips for not only making cheese, but preparing and finding food in the Weston A. Price Foundation tradition.
Five years ago, she launched Village Green Network (originally known as Real Food Media), a blog aggregator that at one point in 2012 and 2013 connected more than 900 food and health-related blogs with makers and sellers of nutritious food and environmentally-friendly products. The idea was to deliver to large advertisers a huge audience of natural food lovers. There would be online conferences, e-books and other products for bloggers to participate in selling ..and share revenues from. (Earning half of all advertising, and up to 70% on books and conference sales.)
The approach turned into a win-win enterprise for everyone. Bloggers, who are always struggling to find ways to generate income from their work, at long last had a seemingly reliable way to monetize their blogs. Michaels had an immediate income winner and the prospect of a hyper-growing business run by her and husband Seth Shapiro. Could venture capital and and an IPO be far off?
Even as VGN grew into a formidable advertising force, Michaels maintained an informal community-oriented approach, resisting the temptation to put together written agreements. Bloggers worked together to help each other generate traffic, each week organizing campaigns to use Facebook, Twitter and other social media to attract readers to their blog articles about how to make your own suntan lotion or use coconut oil for healthier cooking.
Within a few years, after word got out that some VGN bloggers were earning six-figure incomes from VGN, food bloggers everywhere were clamoring to be part of the online network. While she had been cautious about expanding from 2009 to 2011, not letting the network get beyond 40 bloggers, by 2012 she decided to take the wraps off, and allowed the blog to grow to 900-plus members.
Michaels herself became a darling of the food rights movement, showing up to support Rawesome Food Club defendants Victoria Bloch and James Stewart, and providing coverage of various farmers under government pressure to give up raw dairy production, like Vernon Hershberger of Wisconsin and Daniel Allgyer of Pennsylvania, on her Cheeseslave site.
Somehow, though, it all seems to have unraveled in the last year, and has morphed into a morality play with shades of Who killed the golden goose?
VGN had definitely become something of a golden goose, spinning off cash for all involved. (Michaels declines to provide any revenue data.) But the killing of the goose occurred slowly, likely beginning last fall, when VGN pared down its blog network from more than 900 down to a little over 100, and required bloggers to sign exclusive two-year contracts to be part of the network.
Now, VGN has announced it is exiting the blog networking business. Putting the most positive spin possible on the network implosion, Michaels says on her Cheeseslave site: Weve moved from where we started (as a blog network) to a destination site ..As much as I have loved working with bloggers and helping them to grow their traffic, I found (by doing) that it was not a business that would scale.
Left in the VGN wake are a dozen or more bloggers complaining that the problem wasnt a business that wouldnt scale, but a failure by Michaels and partner-husband, Seth Shapiro, to live up to their revenue-sharing obligations. VGN stiffed them, they say, withholding hundreds and even thousands of dollars in advertising and other revenues.
There are stories showing up on Facebook of mom bloggers who stayed up till all hours of the night writing special articles on making healthy brownies or starting a veggie garden, designed to drive traffic to the VGN advertisers .now contending that payments due them are being held up.
Even on her own Cheeseslave blog (which Michaels says will be put in mothballs as she moves full-time to re-make VGN), nasty comments have begun showing up. Little miss queen is being knocked off her pedestal, gloats one. Says another: Im very sad, though, to read reports of thousands of dollars of money owed by VGN to your former bloggers, many or most of whom have reportedly bailed amid threats of legal action. I find it really shocking.
Some of the bloggers say VGN earlier this year demanded fees of $30,000 from a few bloggers to exit their two-year exclusive contracts, and has threatened legal actions, while holding up payment of revenue due the bloggers. Others that went along with the contract provisions say that payments due them stopped shortly after the first of this year. And still others say they were left completely in the dark when VGN went to its contract system late last yearthey werent given contracts, and weren’t sure what their status was.
These bloggers and others say they have shied away from going public with their own personal stories out of fear VGN will take legal action against them, forcing them into expensive court defenses. One individual who has gone public is Doris Tan, a blogger recruiter and operations director for Michaels in 2012 and 2013. In a Facebook post a few days ago, she stated: You bloggers have stayed in silence because a mom blogger in Michigan can’t afford retaliation in the form of orchestrated letters from VGN lawyers scaring them with promises of lawsuits . I have been silent for over a year. I will not sit in silent anymore and ask you to stand with me with the entire real food blogger community, and tell VGN: NO MORE!
What went so badly wrong at VGN?
A lot of things, and the problems have been building for months. I signed my blog up as a VGN member earlier this year, promoting a VGN online conference I was speaking at. Not long after that event, I began hearing rumblings of problems from other bloggers.
According to Michaels, the problems probably began in 2012, when VGN decided to accede to blogger interest, and growing demand by advertisers, and increase its blogger network from about 40 up to 900 in the span of a year. The problem that quickly developed, says Michaels, was keeping tabs on 900 bloggers. They wanted real-time data on their traffic and earnings. VGN was having trouble giving them past-time data.
Last fall, VGN decided that one step essential to creating more order was to put its bloggers on written contracts, and pare down its blogger roster. Some had very little traffic because the blogs werent regularly updated. It was the old 80-20 rule at workthat 80% of a companys sales come from 20% of its distributors, says Michaels.
Michaels says she was concerned about liability issues with advertisers if bloggers in her network were taking ads from competitors, or writing blog posts slamming advertisers. One example of the latter she points to was a 2012 blog post by Sarah Pope slamming VGN advertiser Whole Foods (Whole Foods: the Walmart of Healthfood).
The contracts didnt say people couldnt write critical articles, but we just wanted to see those kinds of posts in advance.
In January, VGN encountered what it thought were inappropriate business practices by about 20 high-traffic bloggers, who were directing links to what Michaels calls scraper pagesspecial web site pages with minimal content, and links to additional pagesas a way to maximize their own advertising revenues. Michaels saw this practice by the bloggers as a threat to the Google rankings of all blogs under the VGN banner.
When VGN challenged these bloggers, according to Michaels, they quit en masse. From VGNs viewpoint, the loss of these bloggers was a huge financial hitshe estimates it at about $500,000. There was the loss of revenue from their traffic, and they werent running our banners, plus there was collateral damage in the way it affected other bloggers. There was gossiping and negative feelings about the network. Other bloggers had signed up to be part of a thriving network.
VGN demanded compensation for release from the two years of exclusivity. If you are a blogger, and we trained you and we helped you quadruple your traffic, we have an investment. You might bring in one thousand dollars a month, and over two years, that is $24,000.
The business problem growing out of the blogger flight, says Michaels, is that advertisers signed contracts with her network based on expectations of a certain amount of traffic over a particular period of timeoften three or six months beyond when the bloggers quit.
Michaels says she tried to negotiate with the bloggers who wanted out, and they mostly refusedwouldnt return calls or emails. If you have someone on a TV series and you built them up as a star, and you have episodes written in which they are starring, and then they suddenly quit, what are you going to do?
Things got worse over the last few months, she says, as more than 20 additional high-traffic bloggers quit, largely because of so much bad blood put out there by others. She speculates that some bloggers had developed additional revenue sources, and felt ever less dependent on VGN.
More fuel was added to the flames when a VGN manager and blogger recruiter, Doris Tan (quoted above), went to the California Division of Labor Standards Enforcement last year, accusing VGN of failing to abide by employment niceties like paying overtime and providing meal periods .even though Michaels says she was hired as a contractor. Tan was awarded $19,000, and has said she is among those who havent been paid. A second paid associate was awarded $5,000, says Michaels.
Michaels says she is committed to paying everyone all they are owed, and asks the bloggers and others for patience. She says she had paid everyone on time for the previous four years, until the beginning of this year, when the business problems caught up with VGN.
She says emails are going out within the next day or two to all existing bloggers under contract, promising to begin a payment plan to make everyone whole. But restoring the golden goose probably wont happen, at least via the blogger-network model. (I am one of those owed money, less than $100.)
When fast-growing companies flame out this way, its usually the result of inexperienced management combined with insufficient financing topped off by unrealistic expectations. While Michaels worked for years as an advertising executive prior to launching Cheeseslave and VGN, she had never helped grow a venture like VGN.
Moreover, both Michaels and the bloggers seemed to have held unrealistic expectations. Michaels thought she could steer bloggers, used to operating independently, to abide by strict exclusive contracts, producing a steady stream of pro-advertiser posts. And the bloggers seemed to think that Michaels was making money hand over fist, while they struggled to create attractive content. There have been a number of comments on Facebook about Michaels and hubbie Shapiro living a lavish lifestyle, jetting off to Europe, joining an expensive gym, and Michaels getting facial treatments. Ive never even had a facial, says Michaels. She and Shapiro have been sharing a car that is paid off, for the last two years, to save money, she adds.
Growing a business this way is very hard, she reflects. I think most of the bloggers meant well, but others didnt. They didnt just quit independently, they quit en masse.
VGN, she says, is the goose that laid the golden egg. The social media is what let them grow. They had access to a sales force. They were part of a network that allowed them to learn from each other. They did well. They grew. But in the end, they killed the goose that laid the golden egg.
Or, as some of the bloggers might suggest, Michaels failed to listen closely enough to truly appreciate their grievances. She was insistent on doing things her way, imposing too much structure on an organic process that had worked very well. and so must take responsibility for her role in the goose-killing.
In any event, things usually are great in business when everyone is making money, and they generally become just awful when the tide turns.
Michaels says shes not giving up. She doesnt know the exact form VGN will take going forward, but she is committed to continuing to get the word out about the power of nutrient-dense food.
Organizing bloggers may not be the optimal approach, though. As difficult as it is to create golden geese, its perhaps even harder to herd cats.
Copyright © 2014, David E. Gumpert, All Rights Reserved