The E-Business Software Weekly is a series profiling trends and developments in software and applications that support e-business, the Internet, and other electronic communication channels. Look for a new story each week in this space.
The New Internet Content Model
If the Mouse can't do it, who can?
Early November brought the news of yet another Internet casualty: the demise of the six-year-old entertainment portal Mr. Showbiz, one of the Walt Disney Company's dwindling portfolio of Internet properties. One of the Web's first major entertainment sites, Mr. Showbiz offered news, commentary, and celebrity profiles-including one of the most comprehensive celebrity databases on the Internet. It was also wildly popular: as recently as this past winter, the market research firm PC Data ranked Mr. Showbiz third in the entertainment news category, just behind the Internet sites of the much more established media companies E! and Entertainment Weekly, with more than 1.2 million unique visitors per month.
But Mr. Showbiz fell victim to the Disney Company's budget axe as the entertainment giant tries to recover from a slowing economy and a series of Internet debacles. Reuters news agency, with delicate understatement, recently chronicled the Web travails of the Mouse. "Disney, which was one of the biggest Web players early on, has had a difficult time, like many media companies, figuring out how to make money off the Web," the news report noted. "Disney early on had acquired search engine Infoseek and attempted to transform it into its own search portal, called the Go Network. When that failed, [Disney] tried to restructure the portal, Go.com, to focus on entertainment, lifestyle, and leisure topics, but that also failed."
Disney, Reuters went on, subsequently closed Go.com in January "and shifted its focus to individual Web sites for its various divisions, such as ABC.com for the broadcast television network, ESPN.com for the cable TV network, and Disney.com for the overall company." And, of course, Mr. Showbiz as its flagship entertainment site.
Coming on the heels of the celebrated failure last month of Stephen Brill's Contentville (discussed in an earlier column in this series), the inability of such an experienced and successful entertainment provider as Disney to make money with a popular and exceptionally well-executed entertainment site like Mr. Showbiz causes one to wonder: is there really a future for content on the Web after all?
Making Money on Content
If we assume that the purpose of Internet content sites is, in fact, to make money, it would be helpful to enumerate the ways in which that objective might be achieved. Surprisingly, this far into the life of the commercial Internet, only two main ways have emerged: sell advertising or sell individual site subscriptions. Other models are hardly in evidence. For example:
The network subscription model, in which a content aggregator bundles the wares of a variety of content providers into one subscription package, is the foundation of the extremely successful cable-television model. Its closest structural parallel on the Internet is the Web portal, and both general and special interest portals abound, but virtually all are built on an advertising-revenue model. Microsoft, with its MSN, originally flirted with the content-network subscription model, and was on its way to creating a rich content network (its Mungo Park, for instance, was once one of the best travel sites on the Internet), but quickly backed away and settling for becoming an ordinary Internet service provider. In fact, the only successful major exponent of the network subscription approach is America Online, the Internet's most expansive content company and one of its most profitable. Nevertheless, it would be hard to claim that AOL's subscribers were paying $22 a month largely for the privilege of viewing AOL's "proprietary" content (most of which consists of links to stories and sites on the public Internet). Rather, the AOL content network exists primarily to generate a huge number of page views against which the company can sell advertising and sponsorships.
Pay-per-view, an extremely successful revenue producer for numerous cable television networks, has also yet to migrate in any appreciable way to the Internet. While a few major pay-per-view Internet events have taken place, almost no Web site makes more than a trivial amount of its money in this way. The closest ongoing offerings on the Internet in this regard are the "pay-per-article" archive services like Northern Light and Lexis.com, but they, too, are in a tiny minority.
Content licensing and syndication, a cornerstone of network television's money machine, does exist on the Internet through such vendors as iSyndicate and Moreover.com, but again the Internet's overall syndication revenues are minuscule when compared to the advertising and commerce totals.
Merchandising rights-which, for many mainstream media properties (like Star Wars, Pokemon, and numerous Saturday morning cartoons) have spawned revenue flows greater than those produced by the original entertainment vehicles-are similarly absent on the Internet.
Content sponsorships, in which content is created and distributed as a way of drawing attention to the sponsor's brand or product, were popular in the early days of television, and live on today in such TV ventures as the "Hallmark Hall of Fame," QVC, and televised infomercials, and in the special advertising sections in major print publications like BusinessWeek. Some Web sites-most notably PlanetRx and Top9.com-successfully executed on the content sponsorship concept at one time; for instance, though at its core an online pharmacy, PlanetRx was widely regarded as offering some of the best health content on the Net. But that venture met its demise earlier this year and the Top9.com site, awaiting a new content provider, hasn't been updated since March. Few other successful examples of this approach remain.
All of which leaves just two prospective content-related revenue sources for the Internet: advertising and individual-site subscription fees. And neither of those, as it happens, are performing very well either.
The Internet and Advertising
The virtual collapse of the Internet advertising model has been so widely publicized that it hardly bears rehearsing. Suffice it to say that, with the exception of AOL, Yahoo!, and a scattered few other major media Internet properties, very few Internet sites are profiting primarily through advertising. The reasons may be obvious, but they are worth stating explicitly.
The answer begins with what the Internet is not. For one thing, the Internet is not television. Far and away the most lucrative advertising-driven business ever created, television relies for its success on two key factors. One is the ability of television advertising to tell stories, to play memorable music or jingles, to present strong visual images, and otherwise to create a powerful emotional response on the part of viewers-all in no more than 30 to 60 seconds. The other key factor is what is commonly termed "interruption messaging," or the ability to naturally interrupt the flow of viewers' or readers' attention and so create a captive audience for the sponsor's advertisement.
Advertisers on the Internet lack both of these capabilities. Even the best banner advertisements pale in effect compared to the theatrical quality achievable on television, particularly since the Internet remains primarily a soundless, low-bandwidth communication environment. The Internet also has only a limited "interruption messaging" capacity since, unlike television viewers, Internet users can easily ignore or click away from Internet ads and continue reading what they came for (unless they own a TiVo box or some other digital recording device, TV viewers can "click away" only by leaving the channel they are watching). Even the few attempts at interruption messaging on the Internet, such as AOL's logon "interstitials," the Internet's pop-up and pop-under ads, and the new "exploding banners" are far less effective than television ads because, while interrupting Internet users in space, they generally cannot command the fixed amount of time that television advertisements can, and therefore must convey their message in an instant or else risk missing the opportunity to do so altogether, essentially eliminating the ads' emotional and storytelling potential.
Magazine and newspaper ads are also more successful (and hence more remunerative) than Internet ads because they have more physical space at their disposal for creating a visual impression and they, too, more effectively interrupt the flow of their readers' attention because of the linear nature of print publications. The Internet, by contrast, is distinctly nonlinear and interactive, depriving it of the interruption messaging power possessed by the more traditional media. And, unlike the more leisurely viewing experience associated with television (in which viewers cannot control the pacing of programs) or magazines (whose paper pages impose something of a speed limit on browsing), the Internet is characterized-some would say dominated-by an emphasis on speed, making its users even less tolerant of the interruptions of advertising than are TV viewers or magazine and newspaper readers.
Note, moreover, that the above characteristics are intrinsic features of the Internet. To wit: in order to be optimally successful, advertising requires a nontrivial share of people's attention-something that the interactive, nonlinear, every-site-a-click-away Internet is fundamentally incapable of delivering. While some banner ads will continue to generate brand awareness, produce sales leads, or even lead directly to an online purchase, these capabilities are likely to remain far below not only the comparable abilities of mainstream media advertising, but also well below the originally forecast potential for the Internet itself. The expansion of the broadband Internet may usher in a more immersive advertising environment, but unless the Internet becomes a lot more like television-with sound, continuous action, and visual versus text-based content-it is unlikely to becoming profitable advertising territory for more than a small proportion of Web site owners.
Rethinking the Subscription Model
The Internet's emphasis on speed and interactivity may undermine its ability to generate its predicted advertising riches, but the same factors create a large and growing opportunity for another form of revenue: subscription payments. This may seem at first glance to be an odd assertion, given the limited success of the Internet subscription model to date, one that even well-funded and well-written Web-only publications like Slate have been unable to master.
But perhaps the failure of these subscription vehicles lies not so much in the nature of the Internet as it does in the nature of the online publications being offered. For just as the Internet is not television, it is not a magazine either: the same Web-based reading experience that is conducive to breaking news and short articles is not as hospitable to the lengthy analytical essays and other expository pieces that characterize magazines like Slate and its ilk. Indeed, even highly successful online subscription programs like those of The Wall Street Journal and BusinessWeek are restricted to "premium" content, with a good share of these publications' material made available to the public for free. And, not least, these publications rely on the well-established brand names of their parent periodicals.
Yet the subscription model's potential remains enormous-and largely untapped-the Internet's traditional "everything is free" character notwithstanding. But in order to appreciate that potential, it is important to first recognize the Internet for what it is. As indicated, despite offering some very entertaining sites and content, the Internet is fundamentally not an entertainment medium. Nor, like television or print news magazines, is it really even a "feature" medium. Rather, the Internet was born as-and remains-primarily an information and research tool. Witness, for instance, that among the perennially most popular Internet sites are the search engines, whose raison d'etre is to help people locate information. Even the most successful profitable commerce sites, like the Amazon bookstore and eBay, thrive primarily because of the vast amount of product information they provide (in Amazon's case) or the ability that they give customers to search out and find products not normally available in local stores. (By contrast, online grocery stores, pet stores, and pharmacies-whose products are readily available in the physical world-have been far less successful.)
The content sites that will be able to charge the most money in the future will be those that, like Amazon, eBay, and the search engines, significantly improve users' speed and quality of access to urgently needed information. That is, rather than fighting against the Internet's interactivity and emphasis on speed, these sites will find new ways to leverage and satisfy those demands, in the process overcoming the main defect of even the best modern search engines: the delivery of too much irrelevant content.
In fact, in a small way, this transformation is already beginning to take place. Consider:
Despite the profusion of free business research sites, Hoover's continues to prosper by charging its users' a monthly subscription fee for access to its deep, well-organized premium corporate research base.
Similarly, even though there are countless educational and homework help sites, Cincinnati-based Thinkronize can charge schools $1,500 a year for access to its index of 160,000 teacher-screened, grade- and standards-organized Web sites, placing the year-old Internet company well on the road to profitability.
CPADirectory, an accounting research and services site, commands $25 a month from accounting firms for its best-on-the-Web CPA directory and its rich suite of accounting content.
Likewise, news search engines like eLibrary and Northern Light can charge fees (either subscription-based or per article) for content that is electronically archived and available almost nowhere else.
Once a free service, 555-1212.com-one of the most accurate online telephone directories-now charges a fee for access to its database, with the fee levels customized to the subscribers' anticipated usage levels.
Also once a free site, Headhunter.net charges corporate users a several-hundred-dollar subscription fee for the privilege of reviewing its database of professional job applicants.
And public records aggregators like KnowX and USSearch.com succeed in charging hefty subscription fees for access to their databases of publicly available but otherwise relatively inaccessible records on people and corporations.
The New Information Malls
The subscription model that emerges from examples like those above is inherently different than that employed by Slate and other more conventional publications. The success of the Slate model is highly dependent not just upon the quality of the publication's content-no small hurdle in itself-but upon the willingness of subscribers to read such "recreational" content over the relatively unnatural medium of the computer monitor. By contrast, the success of the new information-oriented subscription model turns less on the quality of the site's content (in fact, some of the best of these new-class content sites contain almost no original content), but on the quality of the order and access they bring to the content of others.
Some years ago, writing in their book "Net Worth," John Hagel III and Marc Singer coined the term "infomediary" to describe Web-based organizations that provided structured access to the content of others. Although the specific model they had in mind was somewhat different than that discussed here, the core concept is the same. And its potential just as great: much as search engines like Yahoo! and Infoseek ruled the early Internet, the new fee-based infomediaries like Hoover's and Thinkronize are likely to play a major-even dominant-role on the Internet in the years to come.
Indeed, one can easily envision the final emergence of a true cable television-like Internet content model in which some future content aggregator bundles a portfolio of leading infomediary services into a single discounted monthly subscription package, charging a fee that subscribers will gladly pay in exchange for the convenient, pinpoint-accurate access to the valuable content that will become increasingly hard to find as the deluge of information accessible via the Internet continues to swell. Unlike AOL or the original Microsoft Network, which are (or were) conventional media properties repurposed for the Internet, these new Internet content aggregators will deliver specialized content chosen for its informational rather than entertainment worth and not as easily available elsewhere, offering would-be subscribers a purely monetary value proposition: the ability to deliver a large bundle of content for less than it would cost to subscribe to these services individually. Hence, while the Internet might not now (or ever) be television, it may, over time, begin to look a lot more like cable TV.
Of course, one can predict (and hope) that the free Web sites of the existing major media properties, like CNN.com, ABCNews.com, and WashingtonPost.com, will continue operating, as marketing vehicles for their offline properties if nothing else. But as noted in a previous column, these online properties face a much less oppressive cost equation than the Internet-only content sites, since the major media Web sites' most significant operating cost-the production of the content-has largely already been paid for by their offline counterparts. Even so, one can expect that premium versions of these media services will be included in the bundled offerings of the future Web aggregators, perhaps as the "anchor stores" of the new information malls.
And so, to respond to the question posed at the outset-"Is there a future for content on the Internet?"-the answer must be a resounding "yes." But that future is apt to be considerably different-and, yes, far more profitable-than the content models that have predominated on the Internet to date.
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