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May 22, 2006

The changing media business model

Last week, I led a panel on the impact of Technology on the content business, at the Software & Informatioun Industry Association Content Forum. The panel was my “dream team” of social computing, and included (by topic and speaker):

-          Blogging: Six Apart, Marissa Levinson

-          API’s and mash-ups: Google, Bret Taylor

-          Wikis: WetPaint, Ben Elowich

-          Tagging: del.icio.us, Joshua Schachter

-          Social media: digg.com, Kevin Rose


The goal of the panel: to give “traditional media” attendees an idea of how new technologies are changing the way consumers interact with media. As readers of this blog, you are probably already experiencing the changes personally – everything from becoming content providers yourselves to just simply enjoying the proliferation of user-generated content.


But the question is terrifying for many media companies – the idea of letting go of control of their content and the experience flies in the face of most companies. And I got several comments from attendees that the panel participants were on average HALF the age of the attendees and other conference speakers.


One key idea I shared with the audience is my take on the role of media companies in the future. Media companies in the past derived their value from either: 1) their distribution channel; or 2) the content they created.

I believe that in the future media companies will generate the bulk of their value from serving their ability to aggregate and serve audiences better than the competition. It doesn’t matter if the media company actually creates or even controls the content that draws them. Channels will be transparent and content won’t necessarily even be owned in a syndicated and aggregated content landscape.


A case in point: digg.com produces no content of their own but has a very unique way to look into the interests of its users. Kevin showed a very cool software tool they use internally called “Trace” that looks at the stories a specific user is reading, and shows in real time how that user’s attention jumps to other topics. Kevin also showed how “diggers” were related to each other based on the stories they mutually “dugg”. The traditional “audience management” advocates like Tacoda have shifted toward behavioral targeting, but at the core, understanding users at a highly granular level will be an essential skill for media companies.


A few other examples: Google’s Bret Taylor showed two mapping mash-ups, housingmaps.com and mapmyrun.com. (The latter is particularly useful (albeit, a bit kludgy) as I’m having to re-plan all of my running and biking routes with my recent move.)


The general recommendation for media companies from the panel I think also applies to marketers in general – start small but start now. It won’t be easy or feel natural, but the sooner media companies and marketers can experience these technologies first hand, the better off they will be as more and more consumers adopt them.


So who’s doing it well in the media business? I like to point to CNET’s News.com, which has great news content targeting the tech enthusiast. Take a look at this story from today’s front page, “Microsoft making better music?” It’s a piece of news analysis, which is great original content. But they also provide a service called “The Big Picture” which “maps” how this story is related to other stories, topics, and companies. It’s a great example of an application serving as “content”. Other features on the story include 38 “Talkback” comments and Trackbacks (hopefully at least one from this blog post).


But what I think best typifies News.com’s unique approach is their “Extra” section. It started as “More News From Around The Web” where the editors selected top stories from other sites. It’s evolved into a place where you can read about tech stories from all around the Web, even if CNET’s News.com isn’t covering it. So there’s an article wireless technology from Business 2.0, and a story on Steve Ballmer’s comments on Vista includes a link to the News.com story, as well as links to stories from competitors like TechNewsWorld, PCWorld, and Wired News.


That’s akin to The New York Times linking to the New York Post, The San Francisco Chronicle linking to The San Jose Mercury News, and dare I say it, Forrester linking to Jupiter or Gartner! But if you take the social computing view that as a publisher, you can’t serve ALL of the needs of your customer yourself, then the best that you should do is to be the FIRST source of information for your audience. In that way, News.com ensures that although it may not be the ONLY source of technology news, it has a fighting chance of filtering and aggregating that news for its audience better than anyone else.

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Listed below are links to weblogs that reference The changing media business model:

» Media Models from The Fourth Estate
Charlene Li from Forrester posted an interesting argument today about the future of media arguing that:In the future media companies will generate the bulk of their value from serving their ability to aggregate and serve audiences better than the compe... [Read More]

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Comments

Mike Walsh

Not sure that I entirely agree. Media has always been about aggregation.

Traditionally, making money in the media space depends on how much it costs you to aggregate a mass audience, compared to what you can make selling advertising from it. With the exception of subscription television, access revenue (e.g newspaper or magazine coverprice) barely covers production and distribution costs.

The real game change is not aggregation, but content brands. When any piece of media is available anywhere to anyone (TV shows, music, articles, photographs), the power goes back to the original content producer who now has the ability to have a direct relationship with their audience rather than cede this to an aggregator.

So if you are fan of the Simpsons, Lost or Desperate Housewives - does it matter which network is aggregating the service or simply that you get the content you want? When the latter is the answer, hit content creators will commodify their distribution channels and seek to own the audience themselves.

Of course there will be money to be made in aggregating content and audiences as an intemediary. But you can see this business model in action today - the millions of affiliate marketers who create targeted content pages to make money from Google Adsense.

A scary thought - but that may be the future of niche audience aggregation.

Mary

It's really very inevitable. This is something you have to be aware of. If you are going to neglect this growing and developing technology, then, you are not letting your business grow. You have to think that communication keeps on changing. Now with the coming of blogs, the readers are empowered and traditional companies therefore should be able to adapt to this. If not, then they are letting themselves be stagnant of the possible advancements that blogs make towards its audience.

Errol

Content, content, content, at the end of a click is content. Whoever supplies the best, straight to the point easy to understand, use and find content has an audience. Why is Diggs popular because the stories get filtered by all kinds of people with many different interest. Why is news.com successful because when it comes to technology news why look anywhere else. Myspace,YouTube,Flickr a million channels of people created content, something for every one, easy to use and easy to share.

Alice Krause

The Media should be excited by these changes rather than afraid of them. The power to reframe the news in ways not possible in the past opens up huge opportunities. Newsonwomen.com, for example, doesn't want to be first or to rank stories but wants to put women in the headlines. All the news is the same, but information previously buried can now be served up on a platter in endless varieties. If they can't see the benefit in this then they are in the wrong business.

hubert gertis

"Media companies in the past derived their value from either: 1) their distribution channel; or 2) the content they created. I believe that in the future media companies will generate the bulk of their value from serving their ability to aggregate and serve audiences better than the competition."

Well, some media companies might. Most likely, the more focussed distributors and some top tier production houses.

But the big question ist still lumbering: even if you aggregate a sizeable audience, how are you going to convert eyeballs into revenue? Look at YouTube. Billions are watching. But where's the scalable business model? AdSense as the poor man's answer for media sales can't be taken serious as a solution. And cutting some special deals with some media houses makes good PR, takes a lot of time and probably barely covers the legal cost of reviewing the contracts.

Thing is: your business model depends on your place in the media value chain. In b2c it's either product sales or ad sales. In b2b it's either product sales or selling services.

Where would you place, for example, digg? Again, AdSense is nice, but. Now let's look for an equivalent in traditional media.
How about this (I'm not sure whether Kevin likes this comparison): a TV Guide for the techno-cognoscenti audience, based on a recommendation engine, which tracks certain explicit behaviours?

Now, let's look at the TV Guide model: b2c product sales (the printed guide), ad sales (the printed guide, the web, tv), b2b services (tv guide on screen), b2b product sales (EPG data) and so on and so on.

A great company, an undisputed global market leader in it's field. But still: just an aggregator of meta data to tv content. The real business lies somewhere else.

So let's be careful: most of the stuff we're talking here about is meta content. Important, yes. And, combined with the (technical) cost of production and distribution being in free fall, good for quite some tectonic movements.

But let's be reasonable: Give me a camcorder and iMovie and a broadband connection, and I will compete with "Americas Funniest Home Videos". But I take any bet that nobody reading this comment will be a able to produce a full season of "Desperate Housewifes" in his past time.

Brian Hayashi

Charlene makes a good point, but I think there is a very good aggregation business model that has done extremely well: the cable TV business.

Local cable operators negotiate with local municipalities for the sole purpose of aggregating local audiences and LOCKING OUT the competition. The only content they produced for years was the monthly cable bill.

As the industry matured pioneers like John Malone started taking equity interests and ultimately Comcast bought into TiVo and whatever that other VOD company used to be called (SonicBlue or something like that) so they could have their finger on the pulse of the nascent VOD marketplace. And for all of you citizen publishers out there...the MSOs even supported user-generated content in the form of so-called PEG channels -- what do you think "Wayne's World" was about? Or how exciting C-SPAN used to be in the early days, when the camera would be fixed on a miked podium -- without a speaker??

Too many people are going on and on about this as if it's a new thing. In the meantime, people like Barry Diller, who learned these lessons long ago, have already taken the second or third derivative learnings -- I dare you to rethink what is the "audience" and what is the nature of "aggregation" -- and see how IAC is busy securing those audiences, and quietly closing the door behind them.

Mithun Ghosh

this very helpful for everybody

QB

Dear Charlene:

Who controls the content? As a blog creator, I'm curious about how one attracts good content contributions vs. spam. As a writer, I wonder about copyright and making a living. As a copywriter, I'm curious if there's a potential for more niched advertising and sponsored content -- writing for that specific audience.

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Yegor Kuznetsov

Media shouldn't be afraid of new technology.

Check out a case study showing how The Cincinnati Enquirer, the oldest daily newspaper in Greater Cincinnati and Northern Kentucky, evolved into a dynamic multimedia company and used cutting-edge online research techniques to make this transition more effective.

The newspaper used WebSurveyor online survey tools to optimize the launch of multiple web sites, improve relations with readers and boost employee satisfaction.

http://www.websurveyor.com/company/websurveyor-customer-profile.asp?c=765

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