Time for a quick thought piece about one of our favourite subjects here at Filtered. There are two competing forces in the media business which seem completely at odds:
1. All content is a commodity.
2. We value content that is specifically relevant and meaningful to us.
Both those statements can evoke emotional and involved responses, so permit me to grossly simplify things for a moment.
The problem with commodity content is that from a business perspective, the margin pressure is constantly pressing downwards. The assumption is that over time, the cost of creating and publishing online content will continue to decline, and therefore associated marketing costs will either drop or the same dollar will go further.
To switch sides to the value we place on content as consumers and participants in the digital media landscape, there are times when something is so valuable, so important, that we actually want to pay for it. Think about magazines that you have intentionally subscribed to because you are passionate about that subject. Or conferences that you were happy to fork out big bucks for you because they promised to deliver knowledge, contacts, and hopefully business. Most of us are not accustomed to paying for niche content on the Internet. Speaking personally, I've spent money on the WSJ online, and a couple of other niche sites because I valued the content.
Chris Saad commented last month that we need to "start thinking niche", something I've done ever since I started my IT journalism career in the late 1990s at Network World Australia, a niche networking industry magazine which no longer exists. The reason for its demise was no great mystery - it no longer brought in enough advertising.
So my point is this: at some point, every content creator regardless of whether it is an individual or company needs to make a decision about what their time and efforts are worth. If you have decided that you will generate content for free, more power to you. But if through your writing you are hoping to make a living or build a business, you ultimately must consider what business model will apply.
Hypothetically, you could decide to finance your blog or content business using Google AdWords on the assumption that if you get regular links from Digg/TechMeme/TechCruch/Slashdot to drive traffic, you could make a few bucks. An assumption I have made, however, is that you are still participating in a system in which the margin model trends downwards. That is, I suspect Google is more likely to pay you less money per click over time, rather than more. Am I right?
On the other hand, if you created an online business which provided some level of qualification or filtering to participate in consuming the content (either paid or unpaid), you have the ability to create more value for an advertiser. Theoretically under this model, you can try and push the margins up. But I've not read comments from too many new media publishers outside the Fairfax's (particularly AFR.com - check out FBM decision to stop paying Factiva and AAP. They're charging $500 a month!! ** See correction below)of this world who are actively and openly trying to create value around content, and extract greater value from that content over time. The dominant meme in the blogosphere, it seems to me, is that we simply give away all our content, sign up to Google and cross our collective fingers. I've spent enough time around financial analysts to know that's not a business model people will support in the long term.
As I said before, if you are not trying to make money from content, none of this is an issue. But if you are, at some point you've got to draw a line in the sand. The big question is where exactly did you draw yours?
Is it possible that Google, the great driver of efficiency in online advertising — and the great democratizer of online ad revenue — has in fact dragged down the average value of ALL page views?
So what is online media to do? It already commands a third of total media attention, rivaling television, the ultimate monopoly medium. So why can’t websites charge monopoly prices? Well, the handful of big online media brands, like Yahoo, AOL, MySpace (homepage), MSNBC, CNN, etc. DO charge premium prices for their premium inventory. The top online destinations can and do price like high-priced offline media.
But for as the long tail — it just doesn’t scale.
Update 2*: I've been corrected on the pricing model from an internal source at FBM. The minimum spend is $25 per month, and that fee is waived if you are a subscriber. Pricing climbs to $150 per months for an advanced markets package.