Content = Free
More content (videos, articles, music, photos) is being generated than ever before. And some of it still makes money, however any content generation business that's based solely on advertising revenue, is going to zero.
For instance, the big 4 networks are seeing their advertising revenue collapse, and not just because of the recession. The newspaper industry is on its death bed, and even with continuing attempts to reinvent itself, it can't.
The 'next generation' models that are held up as superlative examples of Web 2.0 businesses aren't sustainable. And why am I so certain that any content business based on advertising revenue is going to zero? Because I just read an article in Google Reader, copied the the URL using a Firefox widget that instantly transformed it into a link with exactly 18 characters, and redistributed it to hundreds of my 'followers'. At no point did anyone visit a property that actually generated any content. Or put another way, even though I consumed and redistributed content, no advertising revenue was generated for any content producer.
What do the New York Times, NBC, Youtube, Facebook, Twitter, Flickr, etc. all have in common? They all attract huge audiences, they are all have very sticky content, and they all fail at the core task of a business, making money.
In each of these companies' respective industries (excepting Twitter), there is a smaller, subscription based competitor that is not only profitable, but growing.
Print: New York Times vs. The Economist
Television: NBC vs. HBO
Online Video: Youtube vs. iTunes
Social Networks: Facebook vs. Linked In
Photos: Flickr vs. SmugMug
Even with hosting and storage costs continuing to decline, bandwidth costs are not. Gigantic audiences drive brand recognition, huge valuations, and ballooning costs. At the end of the day, your cash in has to exceed your cash out, and if it doesn't, and there isn't a clear way to monetize your audience besides advertising, your business is not sustainable.
Hence, content generation businesses built solely on advertising revenue are going to zero.
For instance, the big 4 networks are seeing their advertising revenue collapse, and not just because of the recession. The newspaper industry is on its death bed, and even with continuing attempts to reinvent itself, it can't.
The 'next generation' models that are held up as superlative examples of Web 2.0 businesses aren't sustainable. And why am I so certain that any content business based on advertising revenue is going to zero? Because I just read an article in Google Reader, copied the the URL using a Firefox widget that instantly transformed it into a link with exactly 18 characters, and redistributed it to hundreds of my 'followers'. At no point did anyone visit a property that actually generated any content. Or put another way, even though I consumed and redistributed content, no advertising revenue was generated for any content producer.
What do the New York Times, NBC, Youtube, Facebook, Twitter, Flickr, etc. all have in common? They all attract huge audiences, they are all have very sticky content, and they all fail at the core task of a business, making money.
In each of these companies' respective industries (excepting Twitter), there is a smaller, subscription based competitor that is not only profitable, but growing.
Print: New York Times vs. The Economist
Television: NBC vs. HBO
Online Video: Youtube vs. iTunes
Social Networks: Facebook vs. Linked In
Photos: Flickr vs. SmugMug
Even with hosting and storage costs continuing to decline, bandwidth costs are not. Gigantic audiences drive brand recognition, huge valuations, and ballooning costs. At the end of the day, your cash in has to exceed your cash out, and if it doesn't, and there isn't a clear way to monetize your audience besides advertising, your business is not sustainable.
Hence, content generation businesses built solely on advertising revenue are going to zero.
posted by d-a-n-i-e-L at
11:32 PM
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