DISQUS

Paul Montgomery · 3 years ago

Bollocks, Scott. The new business model is not about the media players getting their control back, it's giving control to the users of the medium: advertisers get better tools to track ROI from their advertisements, and the audience only see the ads that are relevant to their interests. These things are only made possible by having networks within networks, as long as information flows freely between those networks.

I agree that it will be less profitable than the old way. But does that mean it will be any less successful? On the contrary. That is because it is only less profitable per unit of advertising. The model which can support every advertiser from the hits down the last thousandth-percentile on the long tail can make up in volume what the 1.0 model had to do with a smaller hits-based advertiser base.

haydn · 3 years ago

Web 2.0 is really about corner shop publishing and the ability to monetise small e-publishing operations. YouTube is used extensively by people who have set up video publishing businesses and want to avoid all the server cost - and so give it to YouTube. Just as I might not want to host pictures in an epublishing enterprise - I give that to flickr.

Web 2.0 gives me plenty of ways to develop a website and to draw in content at next to know cost. larer media players are challenged by the amount an individual or small team can achieve. The sheeet volume of content in a newspaper website is no longer a challenge for me to match or at least appear to match.

Advertisers will certainly benefit - if iI want to launch a calssified and ad sale business for a dozen websites I can aggregate them and do it and undercut most established media businesses. For example I could do $5 house sale classifieds profitably.

We've yet to explore the implications of a million publishers who used to be called journalists unleashing that economic power.

Scott Karp · 3 years ago

Paul,

advertisers get better tools to track ROI from their advertisements

Therefore advertisers can spend more efficiently, and so don't need to spend as much.

the audience only see the ads that are relevant to their interests

Fewer ads delivered means fewer advertising fees collected.

That is because it is only less profitable per unit of advertising. The model which can support every advertiser from the hits down the last thousandth-percentile on the long tail can make up in volume what the 1.0 model had to do with a smaller hits-based advertiser base.

Search is already getting $10+ Billion from the long tail. How much do you really think the long tail has left in it to spend? Do you really think it can it could make up for the loss of the crazy billions of spending from the big advertisers?

ScottA · 3 years ago

Juxtaposing this discussion around pipes vs networks is a dated way of thinking about this problem. It really comes down to fragmentation and branding. Fragmentation is real no doubt, but in the case of Google and YouTube for that matter, they have actually capitalized on fragmentation by being exceptional aggegrators of content. The result? Both now have exceptional brands that are "authoritative" in nature. This doesn't allow them to control the network per se, but it does allow them to largely control access to it.

One other quick comment - advertisers can track ROI much more effectively online, but that doesn't necessarily translate into lower spending. In many cases, it translates into higher spending, particularly in nascent media markets (like the internet), where advertisers are hesitant to spend big without visibility.

Paul Montgomery · 3 years ago

Scott, we don't disagree that 2.0 is less profitable. However, your attack on Google is unwarranted. Media 1.0 had many different huge providers sharing from a larger pie. 2.0 at the moment has one company dominating a smaller pie. Google's profit is larger than any of the 1.0 media giants individually, even though it may not be larger than the totality of their profit. Does that mean Google's position is precarious? Hell no.

In fact, Google's upside is not in the long tail, they've already cornered that market (which is still growing, btw). It's in the short rump. I'm sure you've seen the studies saying that advertising on the Net is lagging the audience shift from TV. Many of those fat contracts with the TV stations will get transferred to the Google system - for less money than TV charged, but what does Google care? 100-X per cent of a cubic assload is still a lot.

J. Jeffryes · 3 years ago

I've worked in advertising, and it's an open secret that most ad dollars are completely wasted. The internet allows much narrower targeting, and much better tracking of ROI, the result cannot be anything other than less ad dollars are going to be spent, simply because companies won't be throwing away 80% of their budget.

If internet companies can create ways to capitalize on extremely narrow niches and matchmaking between consumers and the advertisements they want to see, they may be able to capture some of that 80% and turn it into something useful now that it is no longer being wasted. Instead of buying airtime, corporations will pay to have interactive web games made, or short entertainment pieces. Traditional advertising's slice of the pie is going to shrink, but rather than disappear the rest is going to be eaten by methods of reaching consumers that are entirely new.

Arul Sundaram · 3 years ago

Scott -

I think your thesis (as I understand it) is a sound one. However, I'd challenge the notion that Google is the only company that has made significant profit in networked media. What about eBay? What's different about eBay than Loot or any of the free classifieds papers? A significant amount of eBay's money comes from listings - not just from the transaction component.

I say this because somewhat inherent in your statement that "Google is the only media company that has successfully profited from the new network paradigm" is the notion that Google is a fluke. What is inherent in some of the succesful business-models is the ability to create difficult to replicate communities and layer on top of that tools and information that create true lock-in - i.e., a situation in which consumers choose to stay within the network. As much as people are upset with eBay's fees, people continue to list there and to make money on eBay. Similarly with Google. Alternatives to each exist (and, in some cases, Google and eBay are alternatives to each other), but users / advertisers choose to remain with both.

Sam · 3 years ago

As advertisers use their marketing budgets to more specifically target their customer, and waste less of that "80%", what happens to television? As ad rates in TV decline, do television production standards get lower? Does capital dry up?

Hamish MacEwan · 3 years ago

While I admit enjoying the loss of control that was bought by a few to serve the mass lowest common denominator and consequently, as scarcity means margin, margins have declined and so has profitability, as a "ideological sensibility," I think you're looking the wrong direction to find "the scalable business models."

Its about lowered cost of entry, reduced costs, diseconomies of scale (in the upward direction) and the loss of Coase's transaction cost benefits. IE, the scale is about many small business models rather than the hit-mentality of the past.

Honestly, if I'm reading you right you sound *concerned* that organisations with "problematic" behaviour cannot white-wash themselves with "axe in the head" media branding? That its a *bad thing* "the best way to increase sales is not by advertising in the traditional sense, but by making better products and providing better service?"

You think it better the market operate on how much sh*t business models can wipe off themselves and their products with advertising rather than actually behave and serve the customer?

I guess if you're peddling the toilet paper, that would be the POV.