As we’ve all seen and read, major acquisitions to stake out broader positions in the changing online ad landscape have occurred, as companies look to extend their advertising reach on the Web.
The mantra Content is still King is now more relevant than ever as huge dollars line up to monetize it. Recently we’ve seen the long-running saga of Rupert Murdoch and News Corp. buying Dow Jones for $5 billion in a grand effort to support his broad media vision: find new audiences for ad-supported Dow Jones content online, mainly because it is lagging in the old line, offline world.
All the while Google snapped up YouTube, News Corp. bought MySpace, and partnered with NBC Universal; while cable giant Comcast put its hat into the ring too, predicting it will generate at least $1 billion in online advertising in the next five to six years as it cultivates new revenue sources.
It is Game On. This past March, News Corp. /NBC formed a YouTube rival, a move summed up perfectly by NBC Universal CEO Jeff Zucker: “This venture supercharges our distribution of protected, quality content to fans everywhere. Consumers get a hugely attractive aggregation of a wide range of content, and marketers get a novel way to connect with a large and highly engaged audience.”
Meanwhile, Yahoo! is getting it right; having recently purchased Right Media, which came on the heels of Google’s announced acquisition of DoubleClick and shortly before Microsoft scooped up aQuantive.
Bottom line: the time is now to take existing and/or new content and distribute onto social networks replete with captive audiences with easily defined and categorized demographics.
As the Internet continues to challenge traditional advertising methods and Big Media frantically build their arsenal of content, build their social sites and vie for the best advertising position, the big question is how to monetize all this content? The world of social media and user-generated content has yet to be pegged down into a scalable financial model.
First, consider that there are three pieces to this puzzle: content, users to view the content, and distribution. Looking at content we see there are basically three types:
2. Free content
3. Everything else
Advertisers have a handle on the first two categories. Subscription is pretty self-explanatory; the typical user is willing to pay for certain content that they consider valuable, whether it is music, movies, news, etc.
But there is only so much content the average user is willing to pay for, which leads to the second bucket, free content. Free content is high-quality content that is monetized using traditional advertising. You missed your favorite show on TV and want to catch it over the Internet, well then you’re going to have to pay the price by watching a few commercials.
The first two buckets combined account for less than 25 percent of the content on the Internet. The rest includes content – I like to call “misfit” – that is either too racy, or is social media that can’t be bought.
The issue lies in determining what to do with the final category: the 75 percent of the Internet that includes blogs, forums, user-generated content (UGC), wikis, social networking and social bookmarking sites, and the list goes on.
Media is already available everywhere, from the lobbies of office buildings, to your grocery shopping cart, to individual phones and PDAs. As users continuously tap into the media stream of misfit content, companies will have an increasing vested interest in monetizing these channels. First, however, they have to have a method of distribution, the second piece of the puzzle.
No new strategy here, just aggregating content, something smaller players have been doing for a while but without the success to gain interest from the big players.
The final puzzle piece: the users. To monetize content you need people to view the content. Right now, there is a massive amount of content for viewers to absorb, and it’s only growing.
The difficult space to compete in this sector will be the middle ground; 30 second-to-15 minute video spots where quality is irrelevant. This includes prevalent User Generated Content (UGC), and this area is not easily captured in either of the initial buckets mentioned; subscription or free content with traditional advertising.
This is where the Internet and technology brings an additional benefit. Because the Internet is a two-way medium, it is possible to time and place shift advertising so that an advertiser or group of advertisers might support some content, but only later show the user the advertisements. Offline, think of this as the “complimentary” three-day vacation you get from time-share companies if you agree to sit through their two hour sales presentation. While not every person buys a time-share after attending these presentations, clearly enough do to sustain the model.
The other benefit of the Internet is that it is not limited to a single product to promote across all users. For example, suppose the same time-share company gave away three day vacations, but asked you which of three presentations you would like to see:
2.) Life insurance?
3.) Financial services?
It would be even better if the three options happen to match perfectly with what you were in the market for. Suppose that while you don’t need a time-share, you do need both life insurance and financial services, so you get a free vacation and helpful information on something you need.
With a time and place-shifted model, you have a variety of benefits that many traditional media companies simply can’t employ. First, you can sponsor any type of content users want to see without making advertisers nervous that their brands are mixed into an environment that would not be consistent with their brand.
Second, once again because this is a two-way medium, the maximum benefit of time or place-shifting is when you simply wait to present the advertising offer when the consumer of the content is looking for something that your advertisers sell.
For example, in the story above, when the time-share company offered financial services to the people looking for financial services instead of a time-share, they made a sale. Maybe not the same amount as selling a time-share, but certainly better than nothing. Also, on a broad scale over time, this time-share company actually got so good at predicting what people liked that they might sell them two or three things and could then offer more deluxe vacations and get more people to come visit.
There is a new online ad money train and it is already gathering steam to barrel down the tracks. Get your tickets now, hop aboard and let’s enjoy the ride.