Digital Futures: How Do Companies Get Money To Follow Users?
While search has been the primary facilitator, social networks and blogs, as well as handy applications such as widgets and RSS feeds, help users cut through the clutter to find what is relevant. But despite the Web's speed, it has been slower to adopt profitable business models. Widgets are all the rage, but no one knows how to make them pay.
Sure, some blogs have been legitimized with advertising, but the credibility of the content has become the center of a growing debate. At issue is the credibility of some real-time opinion, the authors of which appear more smitten with themselves than with fact-checking. Indeed, many niche bloggers appear to feed off of each other as part of a giant viral buddy group.
Social networks, which sometimes function as unwieldy aggregators of special-interest content and communications, have a general resistance to advertising and e-commerce. But despite the numbers--Facebook, MySpace and YouTube--the medium is considered by some to be passé, according to Ross Levinsohn, the ex-Fox executive and co-founding partner of Velocity Interactive Group. His insights came during an opening-day conversation with Jonathan Miller, a co-founder in Velocity at OMMA Global Expo in Los Angeles on Monday. The new venture-capital fund is not backing any more social networks. It's focused on whether widgets represent a sustainable viral distribution platform that can grow into a moneymaker.
"It is important to justify a dollar spent will bring big dollars," Levinsohn said. Fluctuating valuations, uncertain metrics and obscure economics make it difficult to know what even popular Web sites and applications are worth. It underscores the challenge facing all well-funded enterprises that are diving into digital interactivity in search of the next lucrative innovation.
That mission, per Miller, requires constant probing, thinking, experimentation and flexibility. Solutions frequently fall short, and come after the popularity of a new platform or process has peaked ... or sometimes, not at all. Larry Kramer--senior advisor to Polaris Ventures and another OMMA panelist--said he is confronted daily by the rush of new concepts to integrate content, advertising and user functions in search of viable new business models.
The good news is there is something for everyone on the Web. The bad news, panelists agreed, is that it's difficult to find it or even know that it's there. Another challenge is the form and function of advertising, which Kramer says should be held to "the same ethos" as content creation. The interactivity that advertisers view as a "headache" now will become the golden egg of new revenues, once they can monetize virtual links with their key consumers, Kramer said.
If "money follows consumers," as Miller observed, then there is a massive dash to blaze the trail. Vuguru, the mastermind of former Disney chief Michael Eisner and his new Tornante Co., produces "tenthole" original series like "Prom Queen" and its latest "All for Nots" for a community of affinity consumers who support downloads and target advertising, according to Vuguru chief Jane Hu.
Brent Weinstein's 60Frames is a new virtual studio that quickly became home for dislocated writers, producers, directors and actors during the four-month television writers' strike. The flood of professionals into the Internet, in places where they can be funded, marketed, syndicated and generally shepherded by companies like 60Frames, has contributed to the rising importance of what Levinsohn calls "prosumer" content.
But even the best prosumer content--what Miller calls the promising expanding middle of online content--needs to be part of a bigger structure that will provide the survival links to taregt consumers and advertisers. "It is hard to build a business around an infinite series of one-offs," Weinstein observed.
For former Googler Patrick Keane, now executive vice president of CBS Interactive, the art of building new content, advertising, community and commerce around leveraging existing TV brands can be a gold mine if it is done well. The company is utilizing everything from widgets and downloads to video on demand and ad-supported recycled and original fare, to build what is essentially a new interactive business connected to the CBS franchise.
In recent weeks, Micrososft chairman Bill Gates has declared that television will soon become dependent on the Internet. Walt Disney chairman and CEO Bob Iger declared the computer will soon supplant TV as "the screen of choice." Still others are advocating the connected cell phone and other mobile devices will be the universal screen. Eisner, his predecessor, says: "The time is right to make money from online content."
However, many online content brokers insist they are more concerned about finding ways to leverage profits from disparate fare and advertising regardless of where they display. In fact, the scramble is threefold: devise accountable metrics across all media platforms; make advertising more creative and interactive; and improve the management and fundability of content. Bringing all that to fruition may be the Internet's equivalent of the frontier's great land grab.