Jim Spanfeller is the former president and CEO of Forbes.com. He is also treasurer of the Online Publishers Association and chairman emeritus of the Interactive Advertising Bureau.
The conventional wisdom in digital has been that content in and of itself is a no-win business model, at least recently. The idea is that without core differentiation in technology, there is simply no way to make original content pay because it’s so expensive to create. This is not an entirely wrongheaded, but many investors and senior executives have made extremely misguided decisions in its name.
In every medium, technology has played a key role. But through history, once critical mass has been achieved, the technology implications around the business model begin to wane, and the value of the core product begins to take center stage. Movable type was groundbreaking and totally changed the world. Radio and then TV waves likewise. Sheet feed color printing presses, color TVs, FM radio, and so on — they all fundamentally changed the way the business of the specific media was transacted. But as they became commonplace, and as the newer innovations became variations on a theme, the core creative content was once again the most important part of the product.
The web is no different. Rupert Murdoch recently said that “content is not just king, it is also emperor of all things electronic.” He is right, as he has been many times before. Content is indeed the driving force behind almost any business model in the digital world (with the obvious exception being e-commerce plays). By definition, media is about content. Without content, there is nothing to search; without content, there is nothing to aggregate; without content, there is a whole lot less for folks to comment on.
The problem has been publishers’ inability to deliver on consumer expectations around the new medium. Users want multi-media, they want non-linear navigation, and, most importantly, they want interactivity — but in most cases, they’re not getting it. As people change how they consume and interact with content, publishers have to create some new rules. What it does not require is allowing third parties to perform disintermediation of content from the producers of that content with either the latter’s tacit or explicit permission. The most glaring examples of this are data networks and horizontal-ad networks. Big premium content producers allow these third parties to aggregate their impressions and their data and pay mere pennies in return is one of the most value-destructive practices imaginable.
It is, in fact, these kinds of misguided practices that are at the root of the problems around making content organizations successful in the digital world. And while I do not share quite share all of Mr. Murdoch’s enthusiasm for pay walls, I believe it’s a step in the right direction. Content is king, but only if it is treated as such. At the end of the day, the reason the end user ventures onto the web in the first place is usually to be informed or entertained. The relationships forged between experience creators and consumers are at least as strong online as off. And the value in that relationship is at the very heart of the general concept of advertising — that is, of inviting consumers to consider a product or service in a different, more positive light than they had before.
The future of value creation in the digital world will almost certainly be more about content than technology. The platform is starting to mature. We have arrived at critical mass and open-source platforms, and the general transparency of code makes replication all too easy.
In reality, the world is almost exactly the opposite of how many see it today: It is the technology that is commonplace and the quality content that is unique. What a shame that many of today’s content companies will not be around to profit from the sure-to-come better understanding of the digital ecosystem. Why? Because they, themselves, are among the core promulgators of these misperceptions.
If someone says technology trumps content, they not only wrong, but they should be fired.
This type of thinking is rampant throughout mass media content producers. What bright person working at a mass media organization decided it was smart to do a pay-per-click ad revenue sharing deal? Or sign up with external ad networks?
Newspapers been throwing away good revenue opportunities since PointCast was around. Nobody is moving the mass media cheese – the mass media is breaking pieces off their own cheese and throwing it at everybody in the room…..
jim… that is a horrible lean you have going on in your picture.
Jim, You are 100% correct. It is hard to believe that we are over 10 years into web publishing and yet many remain far too enamored with the technology which has become several orders of magnitude cheaper and simpler over the same period.
I am stunned by the quality of my HD Olympic experience. Clearly this is wonderful enhancing technology but it has not changed the frequency or duration of my viewing.
But we must also admit that ever improving search algorithms, mapping, mobile applications, podcasts, and many other behind the scenes technologies still play an outsized role in web publishing relative to technology in other media. I feel like we are still at about the same point as early color television in the late ’60′s.
After all the web is still about interactivity and how we make that happen, almost as much as it is about WHAT we present to the user.
As for ad networks and disintermediation of clients, don’t get me started.
Wow – this was an enlightening article
I happened across the PDF version of a Malcom Gladwell article I was looking for, straight from it’s print copy in the New Yorker; ads, cartoons and all. It was just what i was looking for and what i would be willing to pay for monthly to access.
Jim, I agree with the crux of your argument but I think that your opening paragraph misses the mark. The problem is not that media companies believe that “without core differentiation in technology, there is simply no way to make original content pay.” Rather, the underlying problem and resulting disintermediation is traditional media’s reluctance to adequately leverage technology to keep pace with customers’ expectations (including both consumers or advertisers).
Media is about content. Technology is about production and distribution—and it has drastically altered the economics of the industry. Technology will not be a key differentiator; and it is certainly not a panacea; however, for the true value of content to be realized it can’t continue to be an afterthought.
Agreed. Case in point: (i.) Craigslist & (ii.) Wikipedia
Jim,
I have to agree with somewhere around 90% percent of the points you make, but there’s one thing that turns this whole equation upside down. You say:
“At the end of the day, the reason the end user ventures onto the web in the first place is usually to be informed or entertained.”
Well, this is changing somewhat. More and more people are going online to connect — not just with information and entertainment, but with friends. And many times that info/entertainment is coming from their friends in small doses (via Twitter/Facebook/Communities), rather than a bigger, longer form content creator.
With Facebook now attracting more monthly uniques than Yahoo (by some measures), you’d have to being thinking about our friends being the portals to information and entertainment than larger media companies. And that’s a big change in the way media works.
Jim-
Great post. Like you, I just left the IAB leadership summit. One topic discussed there was about how media buyers are focused on buying audience, not content. Of course advertisers want to target a relevant audience. But does everyone believe that they will not care about where their ads run? I don’t. And from what I hear, most advertisers don’t either, with the exception of some of the ‘tail’ DR folks. Content is ‘king’ in this regard. And I fully believe that ad content, in proper context (read: trusted authors), is the foundation for successful ad campaigns and long term customer trust.
Steve
Good Lord, when are we going to stop debating about the role of content. It’s not a debate. Content is crucial and people want it.
But today’s incumbent content COMPANIES, ah, now there’s an interesting question. The fact is that their cost structure and organizational model doesn’t fit the new environment as evolved by technology.
Content will always be valuable. But the vast majority of today’s legacy content companies are going away. Period.
Content as the fuel for apps, gadgets, social nets, and yes for just lean-back-and-veg has a future, albeit under different management. But content as a Fortune 500 business that looks to carve out and isolate readers, viewers, game players, listeners through some sort of DRM or chokehold on the distribution channel isn’t king. Soon enough, it won’t be mayor of a greasy spot in the road.