Oh dear. Oh dear oh dear.
“Or worse, they may visit an aggregator like Google News, browse a digital deli of expensive-to-produce news from around the world, and then click on an ad served up to them by Google. For which we get no return. By the absurd relentless chasing of unique user figures we are flag-waving our way out of business.”
In fact, what Bailey says makes a lot of sense when you remember the oft-forgotten fact about newspapers: as I’ve noted before, publishers are in the ad sales business, not the content sales business.
Content is the honey that draws the audience, and at the moment, Google is creaming off the people who are most-likely to respond at an ad at the point of search. The remaining traffic – if it is amenable to ads at all – is poor quality prospects. Google is a competitor as well as a source of traffic, and it’s an open question whether that traffic is high quality enough to be worth having.
What’s interesting is that Bailey doesn’t stop there, but actually puts forward a positive way that publishers can take a step forward – and it doesn’t revolve around cutting Google out of the equation.
“She called for a change to the accepted norms, arguing that publishers could ‘reverse the erosion of value in news content’ by rejecting a relentless quest for high user numbers, in favour of a move away from ‘generalised packages of news’ to instead concentrate on content with ‘unique and intrinsic value’.”
That sounds to me like Bailey is suggesting a strategy of less “me too” news stories and more attempts to make unique, insightful content – something that I think is a great idea. At the moment, the top story on Google News concerns the US journalist sentenced to gaol in Iran – and there are 1238 different publications writing about it, worldwide. How many of those get more than a tiny fraction of traffic from Google? How much of it is the kind of quality traffic – ie, traffic which will click on ads – that publishers care about?
In a sense, publishers obsession with number’s of page views reminds me of the race for users that most Web 2.0 start-ups have gone through. In both cases, it’s a question of “page views first, business model second” – and in both cases, that is a recipe for expenses without revenue. Which, in current vogue speech, is a case of businessfail.
“Google’s YouTube acquisition is looking less and less like a financial boondoggle every day. YouTube is now selling ads against 9% of its content, versus 6% a year ago (and remember, this is a market in serious recession).”
The reason for that is simple: while its revenues should grow at a more-than-respectable 20% in 2009, the number of streams it serves will grow at a rate almost double that (38%).
As Credit Suisse estimates half of YouTube’s expenses come from bandwidth, this means that the growth in revenue is only just paying the bandwidth bill for the growth in traffic.
Add in all the additional costs in infrastructure, people (and now licensing) and it’s clear that it will have to sell a hell of a lot more advertising than 9% of inventory to bring it into the black.
Basically, at the moment, every time someone watches a video on YouTube, it costs Google about 10¢. Delivering ad revenue of 10¢ per view is going to be a really big challenge, even for Google’s mighty ad sales machine.
What’s interesting is that Michael notes that major content creators are coming on board to YouTube, having opposed it for years:
“It also seems like the commercial content producers that were so up in arms about YouTube’s “theft” of their copyrighted works are not only backing down, but stepping up. The latest word is that Sony is going to experiment uploading full-length feature films to YouTube.”
Of course, content like legitimate movies makes it a lot easier to sell ads than, say, chipmunks. If Michael is right, and the content creators ride to Google’s rescue, that will represent a remarkable turnaround – from the dream of “user generated content = revenue” to having to the reality of being rescued by content from major studios. Won’t that be something?
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Farhad Manjoo at Slate offers a timely reminder of one of the underlying realities of online business:
“Everyone knows that print newspapers are our generation’s horse-and-buggy; in the most wired cities, they’ve been pummeled by competition from the Web. But it might surprise you to learn that one of the largest and most-celebrated new-media ventures is burning through cash at a rate that makes newspapers look like wise investments. It’s called YouTube.”
I’ve said before in various conversations that one of the factors that big online publishers need to consider is the value of the traffic they are getting, and YouTube is a perfect, if extreme, example. Without a real method of turning traffic into money, every visitor represents a cost to your business. Bandwidth, server maintenance, development, and infrastructure might have a low cost on a per-user basis, but they’re not free, and the more users you have, the bigger than sum is going to be.
Saying, as some commentators do, that you should build traffic before having at least the outline of a plan to turn that traffic into money is simply unsustainable in the current economic climate. It was actually unsustainable in the old economic climate too, but the flood of cheap credit based ultimately on overvalued assets and Chinese savings disguised that fact. It made it seem like the era when VCs would endless fund business with no business model (and big companies would buy them) would go on forever – and that’s sadly not the case.
I’ve read some stupid reasons why platform X is better than platform Y in my time, but this one on Cult of Mac really takes the biscuit:
“Apple never, ever expresses battery life based on the number of cells that make it up. The ThinkPad I have at work is available with a 4, 6, and 9-cell option. And I have no idea what any of it means or why I should care. Apple just tells me how long I can work without a power source, which is what I actually care about.
The PC-makers just don’t get it.”
Words actually, seriously fail me. Aside from being demonstrably false if you bother to look at PC vendor’s sites, it makes him sound like the kind of person who spends his time combing the Internet for any negative reference to Macs, then writing 5,000 word “Emergency Response Briefings” which he then reposts on every Mac forum on the planet.
There’s no point in recapping how the “Amazon de-lists GLBT books” meme developed, because other people have done a far better job than I. But what it illustrates ably, I think, is the dark side of social networks and how they spread news.
There’s a meme which appeared a while ago about a statement a kid made about news, which has been passed on as a truism about the new media landscape. He said “if something is important to me, it’ll find me”. Behind that is a simple idea: if news matters to me, it will matter to my friends, and they will pass it on to me. If someone isn’t a friend, I’m probably going to be much less interested in it – so there’s no point it getting to me.
If people you know and trust tell you something, you are much more inclined to believe it, and less inclined to stop and think critically about what they are saying. That’s the way we’re wired: we trust our tribe to tell us that we’re in danger, or that there’s a new source of food, or that going that-a-way leads to water, and that-a-way to a nasty other tribe.
Then add in another factor: our reverance for the written word. We have a couple of thousand years of cultural history that makes us much more likely to believe something we see in text. Bibles, text books, newspapers, fake diaries of Hitler – if it’s written, we’re much more gullible about about.
Finally, add in a third factor: the impossibility of making a nuanced, balanced statement in 140 characters.
As social networks increase in influence, this is going to happen more and more, and sooner or later individuals will be physically hurt because of it. Like every village, the global one can turn from warm community to pitch-fork wielding insanity as fast as it takes someone to misread “paediatrician” as “paedophile”.
Joe Wilcox picks up on a comment that I made on his post about Windows 7 and its relationship to the Mac:
“As you know, Joe, I’m a Mac to Linux switcher (with over 20 years Mac use under my belt). But I’m also a tinkerer who’s curious about OS’s, so I’ve been running Windows 7 as my main system for a month or two. Count me amongst the impressed. Microsoft has actually applied some real serious effort to the user interface design, taken some of Apple’s ideas, and made them better. That it’s much, much faster than Vista is a bonus.
Mac fans should take a serious look at 7—not because it will persuade them to switch, but because it’s the first serious competition from Microsoft in quite some time.”
Joe’s timing is impeccable, as in a couple of weeks I’ll be switching my main computer back to Ubuntu from Windows 7. But the reason isn’t exasperation with Windows 7, and it’s not one that should give Mac fans hoping that the new Microsoft OS will be a failure any kind of comfort.
I went along to a blogger’s briefing on the new LG Arena a couple of evenings ago, and – of course – the iPhone came up as a topic of questions and conversation.
What struck me was the way that Apple has managed to come in and completely dominate the conversation about touch screen phones, owning the space and creating a benchmark that every other phone is measured against. And what’s interesting is the way that other manufacturers are pulling against this, and get the conversation back on to territory where they are strong.
The Arena is a case in point. I’ll write up a proper review of it in the near future, but it’s fair to say that it’s terrific hardware. The touch screen is a great improvement over that of the LG Viewty, the camera is 5mp and feature-packed (120fps video, 6-shot burst mode, face tracking, etc), and audio is really good thanks to some new gubbins from Dolby.
But it’s not open in terms of development, it doesn’t have an application store, and the web browsing experience is no more than adequate.
In other words, it’s aimed at people who want music, video, a good camera, and a small phone: People, in other words, who probably wouldn’t even think of an iPhone. It’s not in the same market. And yet, because it has a touch screen, we’ll undoubtedly see lots of reviews which start with the question “is this phone an iPhone killer?” – when it’s not meant to be.
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“Rupert Murdoch threw down the gauntlet to Google Thursday, accusing the search giant of poaching content it doesn’t own and urging media outlets to fight back. “Should we be allowing Google to steal all our copyrights?” asked the News Corp. chief at a cable industry confab in Washington, D.C., Thursday. The answer, said Murdoch, should be, ‘Thanks, but no thanks.’ “
Some people will paint this as an old-media dinosaur not understanding new media, but I’m not so sure. If you’ve read Michael Wolff’s biography of Murdoch, you’d realise that he rarely says something like this without thinking it through, and without having an agenda.
There’s a few points of context which should be considered:
Google is a competitor to newspapers
The pool of advertising money online is finite. At the moment, Google takes a very large chunk of that money. If content isn’t paid for, then that makes Google a competitor to newspapers as well as something which delivers traffic.
Traffic is a double-edged sword
You need readers to make money from content, but even online every reader has an incremental cost. If companies aren’t making enough money from the additional readers they get from Google, then Google represents a cost to newspapers, rather than additional revenue. In other words, if the ad revenue isn’t there, every page view costs money. So why should newspapers care about the loss of page views from blocking Google?
Search feeds off content, just as content feeds off search
If a user can’t find the content that’s most relevant to them from a search engine, that search engine is useless. Relevance is everything – and that works both ways. Taking their content out of Google would hurt a newspaper (unless they’re making nothing from the page view), but it would hurt Google too.
What I think is clear is publishers are starting to think that the present position is unsustainable, as it offers the worst of all possible worlds for them. They don’t get paid by readers. A large chunk of the advertising revenue goes to Google, rather than them, in a world where ad revenue is hurting overall.
Interesting times, and lots of open questions. If someone says that the status quo can be maintained, I’d take that with a pinch of salt.
“In other words, if all hits to TC are via Google, then Google is making 10x more money than TC is. Or, put it another way, if Google has only 10% of the traffic going to TC via its site, it makes the same amount of money.”
While Google obviously adds a lot of value to the customer, does it really add as much value as the content that the customer is actually interested in – let alone more value?
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