Complacency had no home at the Software and Information Industry Association (SIIA) Summit last month in New York. The annual event centers around strategic issues for SIIA's Content Division, whose members publish and distribute online content or offer technologies and services to facilitate licensing, presentation and distribution of digital information products.
Speakers and panelists repeatedly stressed the need for information companies to become more effective, cost-efficient, innovative and savvy as their business models are threatened by technological and competitive forces.
Henry Blodget, CEO and editor in chief of The Business Insider, moderated a discussion with three panelists whose business models are disrupting traditional industries—Gaby Darbyshire, COO of Gawker Media; Jim Fowler, CEO and co-founder of Jigsaw; and Cheryl Milone, CEO and founder of Article One Partners, a year-old patent validation service.
Unlike traditional data companies that have built huge databases requiring expensive technology and extensive labor to cleanse and update, both Jigsaw and Article One rely on communities of users, known as “crowd sourcing.” Gawker Media, meanwhile, is challenging traditional media with its lower-cost model, which includes online-only distribution and compensation to content creators based on page views and unique visitors.
Blodget said disruptive companies start out by being “good enough” for customers to accept, even though their quality may not match that of established competitors. As the upstarts gain experience and hone their businesses, their data and/or competencies improve but their cost structure remains extremely low while higher-cost businesses become unsustainable. “It's incredibly difficult to fight off a disruptive technology,” Blodget said.
In the news industry, “the economics of the whole industry have been reset at a lower level,” Darbyshire said. “There's no way around it.”
The economics of online advertising are also about to change, predicted Ari Paparo, Google product management director and a DoubleClick alumnus. In his presentation on the latest ad technologies, Paparo said Google's new DoubleClick Ad Exchange will bring transparency and efficiency to the process of buying and selling display advertising online, which will weed out media companies and agencies with bloated cost structures.
In a panel on evolving business models, another Google executive, David Eun, VP-strategic partnerships for YouTube, said, “People are searching for a silver bullet, but there isn't one answer for everyone.” Although YouTube is not yet profitable, “there is increasing monetization on YouTube,” he said.
YouTube's vision for its future business model includes both advertising and user payments because “we want to be able to offer all the levers our content creators want to pull,” Eun said. M