Most content companies today lack the know-how or even the data to begin answering these basic questions. And maybe we shouldn't be too surprised at this. Although content businesses have been around for centuries, as the complexity of distribution has increased dramatically, an understanding of what drives value has simply collapsed. It's time for a new science focused on content and determining the true market value of that content.
That science needs to take into account the following three trends.
- First, technology is making it easier and less expensive to both produce and distribute content. For example, companies such as Blurb and Lulu make it dead simple and affordable for authors to produce and sell books independently. Other companies such as About.com, Associated Content (I'm an investor) and Demand Media enable writers and content producers to easily publish their work online and to make money. As distribution has become easier, content companies are realizing that they need to loosen their control over a number of aspects (e.g., how newspaper content is circulated online and where it is read, how a book is reviewed and marketed, etc.). And this makes distribution less reliant on traditional command-and-control hierarchies and more reliant on crowd-sourced recommendations. For example, a 100-word customer book review on Amazon can be just as helpful to an author as a 1,200-word treatise from the NYT.
- Second, consumer behavior is changing. While both the production and distribution of content are becoming increasingly complex, the consumer's ability to find and consume all this content remains limited, constrained by the time and attention they are willing and able to devote to it. For most of us, the primary challenge today is navigating this rapidly expanding content universe to find what is most relevant to our individual preferences or interests at any moment in time. The consumer wants to be in control. And consumers are changing what they view as "quality" content. In the past, it might have depended upon whether or not the content came from a trusted source, or how well-crafted or extensively researched an article was. Today, other attributes such as authenticity, specificity, timeliness/freshness, utility and other traits weigh heavily in that determination of "quality." And while the source of a piece of content remains important, how it is aggregated, curated, contextualized and presented to a consumer is becoming an equally important consideration. Newer forms of content, such as Twitter posts, will undoubtedly lead to new ways in which "quality" is defined. Content companies are grappling with these changes as they re-shape their businesses for the future.
- Finally, online content monetization is changing. And it is in this area where a new science focused on the fair determination of content value is needed. Gaining a better understanding of content value presents an enormous opportunity for content companies. Though far from perfect, today's search engines enable consumers to more easily discover content that is most relevant to them, making it easier and faster to find what they want to consume.
Consequently, how content is monetized online differs significantly from how content is monetized offline. An article in an offline magazine or newspaper is for all intents and purposes published once, and monetized one time only. That same article published online lasts much longer and can continue to generate money long after the date that it was published. At Associated Content, for example, content that was created five years ago continues to be monetized far longer than expected. In fact, that content actually produced more revenues in 2009 than in the first year that it was published. This fact suggests that a different economic framework needs to be used when measuring the value of online content.
For example, NBC Universal CEO Jeff Zucker famously warned media companies against trading analog dollars for digital pennies (more recently he amended this to digital dimes). But what if a piece of content generated a digital dime in year one, a digital nickel in year two, a few digital pennies in year three, etc.? More critically, what if new technologies and business methods can enable content companies to produce this content much more cost-effectively? The economic picture now looks a little less bleak. And therein lies the opportunity.
In the past decade, significant investment has been spent re-thinking, improving and optimizing every facet of online advertising, from creative to ad placement, from real-time campaign management to post-campaign reporting and analytics. Every bit and byte of a display ad and every user cookie can now be analyzed to the nth degree and dissected for insights. In contrast, little has been invested on the content side to become more analytical and metrics-driven regarding the value of the content. A similarly rigorous approach needs to be applied to how content is created, distributed, measured, and monetized.
For the past decade, companies like Google have forced their more traditional advertising counterparts to become more scientific and rigorous in how they operate their businesses. Content companies need to learn from Google's experience with advertisers and develop the science behind their content, a science that explains and predicts its value. In the process, content companies may well find more and more ways to serve consumers, thereby delivering a more valuable audience to advertisers. The answer is a new science with new value metrics delivered at scale (along with the content) all in real time.
Disclosure: Through Canaan Partners, I sit on the boards of several media and advertising startups, including Associated Content, mentioned here, as well as Motionbox, Peer39, Tremor Media and Vivox. I am also an advisor to Blurb.
|ABOUT THE AUTHOR|
In addition to his work at Canaan Partners, Warren Lee blogs about the New York startup scene at www.eastwestvc.com.