Too Much Ad-Supported Media?
Of course, this flurry of activity, and competition, is freaking out some folks who have historically controlled the ad world, but is also freaking out some investors who are learning that there are virtually no "barriers to entry" when it comes to creating and publishing ad-supported Web content. They now publicly wonder if we are going to see this intense competition pull down online ad rates and eventually find that many of these ventures will crash to earth, having found only very modest revenues and profits. Is this likely to happen? Are thousands and thousands of today's new ad-supported Web sites going to go away? If so, should we care?
Yes and no. Yes. A number of sites will go away. Should we care? No. Here's my thinking:
- Publishing is now an "open" business. Freed from the distribution barriers of offline media, the world of Web publishing is flourishing, and will support many more and smaller ad-supported publishers than the traditional media world, particularly with the recent advent of large monetization networks from Google, Microsoft, Yahoo and AOL. While the idea that small-scale ad-supported publishing can flourish online confounds most large media companies, it doesn't confound the hundreds of thousands of entrepreneurs and hobbyists who are having a blast. This is a good thing.
- Advertisers care about audiences, not media companies. As Trevor Edwards from Nike told Louise Story of The New York Times for her article on new advertising forms earlier this week, "We're not in the business of keeping the media companies alive. We're in the business of connecting with consumers." The days of distribution-driven media monopolies are dying. Just look at the revenue and cost trends in newspaper, magazine and broadcast media earnings announcements.
- Free media is a good thing. With offline media, distribution is expensive - think papers and trucks and postal costs and cable head-ends and miles and miles of coaxial cables. Thus, media companies typically charged consumers for the content that they delivered in addition to collecting ad revenues. It was a nice model for the media companies, but not for the consumers. Web and Internet distribution of ad-supported publishing means much more free content (although lots of companies are making some serious monthly money delivering that content) and more diversity of content for many more people. That is good, not bad.
- Venture capital flowing through the streets is not bad. Risk is venture capitalists' business. Most only expect a minority of their investments to actually produce significant returns. Managing risk in explosive and unpredictable markets is what they do. What this means, of course, is that media incumbents better watch out. Venture capitalists are smelling offline media blood in the water and know that those traditional franchises are leaking lots and lots of their audiences and advertisers. They know that these "new" media franchises can be quite valuable; think Google. They will continue their aggressiveness, and audiences, advertisers and entrepreneurs will be the beneficiaries.
More ad-supported media? It's a good thing, I think. I can't wait for all of the ad-supported service devices, like free phones and PCs and, who knows, maybe even free laundry services provided by clothing retailers, so that they can know what clothes everyone in your family needs before you know it yourself. What do you think?