|
Reinventing Paper
by J.K. Riggin
Point your browser in almost any direction and it's impossible to avoid the tidal wave of new media pioneers. TheStreet.com (TSCM:NASDAQ) and MarketWatch.com (MKTW:NASDAQ) raced to market with up-to-the-minute financial news and analysis, and actually managed to go public in the process. On the politics and general interest front, Slate.com and Salon.com (SALN:NASDAQ) each serve up several new articles a day. The Internet business itself remains a huge source of content, putting print/online combinations like Red Herring, The Industry Standard and Upside on the map. Goofy grouch Stephen Brill (of the infamous Brill's Content) is now on his second attempt with a try-and-buy "portal" called Contentville.com, which is little more than a fairly broad Web site attempting to pay for itself through fees for referred print magazine subscriptions and online book sales.
And that's just the tip of the iceberg. Virtually every major (and not so major) metropolitan daily — from the Washington Post to the Buffalo News — is making everything their print subscribers pay for available for free on the Web. Don't forget to throw into the mix the media conglomerates' various Web efforts, such as Time Warner's (TWX:NYSE) failed Pathfinder.com and subsequent merger with AOL (AOL:NYSE); NBC's early deal with Microsoft to form MSNBC and then reorganization of Internet "assets" under an NBC Internet tracking stock (NBCI:NASDAQ); and Disney's (DIS:NYSE) stop and go efforts to build and spin off its own Internet tracking stock with the Disney Internet Group (DIG:NYSE), a semi-unified network of Web sites that includes Disney.com, ESPN.com, ABCNews.com and the Go.com (formerly Infoseek) search engine. But just offering your content for free means little: when everybody's giving it away, the word "free" becomes meaningless.
Getting scooped
And of course there's Matt Drudge, who perhaps best leverages the Web's power to rapidly disseminate news. The Drudge Report remains starkly and anachronistically basic. Black courier type on a white background. See headline. Click headline. Read news. Click back button.
Drudge relies exclusively on his ability to be the first to present bits and pieces of highly controversial news. He's toyed with alternative delivery channels, but the un-moderated Web is his home. And through it all, his Web site has remained among the most popular on the Internet.
This is a business?
So with all this content, where's the money coming from?
For the most part, the real source has been from the recent run-up in the market. Online advertising has meant the rapid transfer of IPO dollars from dot-com to content provider. Until 1999, most Internet companies built Web sites to sell widgets. In that year many of them went public in search of cash to fund expansion and marketing. Where do they go for marketing? To content provider Web sites (portals like Yahoo, Excite and Lycos, and content sites like NBS, Disney, Salon.com, TheStreet.com, Drudge, etc.) who, for a fee, offer to slap banner ads in front of the most attractive demographics.
So the advertising networks are making a killing, right? They were, but the Web audience is clicking on banner ads at a lower and lower rate, and consequently banner ad revenues are falling through the floor. Witness the share prices of Engage (ENGA:NASDAQ), Doubleclick (DCLK:NASDAQ) and 24/7 Media (TFSM:NASDAQ), each of which has plummeted to about a third of their highs in the early spring of 2000. And as more and more dot-coms closed their doors or pared back their advertising budgets during the early summer months, some of the ad networks actually went undersold.
Thus many content providers are operating at a loss, funded only by hopeful corporate, institutional and retail investors. NBC Internet is losing US$2.33 a share. Disney Internet is losing US$1.02 a share. Salon.com is losing US$3.63 a share. TheStreet.com is losing US$1.85 a share. It's enough to make Matt Drudge look pretty smart for sticking with the basics.
What's the real product?
It's important to note that, from the consumer's perspective, many of these content-oriented Web sites are breaking new ground. News events are being covered in greater depth and detail than ever before. And in some ways, they really are defining the medium as an (almost) indispensable part of everyday life.
Radio was just a novelty until people began depending on it to hear Roosevelt's presidential addresses or World War II field reports. Television came into its own with the Nixon/Kennedy debates and the Apollo moon shot. Monica Lewinsky may not hold the same level of historical significance, but certainly was a milestone by which the Internet proved itself a more rapid and efficient medium for detailed and customizable information.
What we have, then, is a medium still in search of a reliable business model. Online content does not pay in the same way as print content, since the two are fundamentally different in the way people consume them. And with the proliferation of e-commerce, the role of online advertising is not so much the building of brand awareness as it is redirecting consumers from content to product.
The question to ask of content-based Web business models is not so much "does content pay?" or "can content sell?" as it is "what's the real product?" At the moment, the best examples of content that can be sold and delivered to a mass market audience on the Web are Stephen King and the Wall Street Journal. With the exception of smaller, highly targeted efforts, just about everyone else has failed to create an online market for their words.
The challenge is to reinvent advertising. That's going to happen in two ways. First we're going to see new and more immersive online advertisements. And then will come a more concerted effort to surround content with the opportunity to buy virtually any related product or service.
Fresh air
One way is through "ad-bots," which are virtual characters that can answer questions about products. ScreenMates.com is a company that produces these ad-bots. In some cases, the characters are tied to a movie or television show. Users download the program, and the character jumps around their computer screen, hawking other products while extending the value of the movie or television property. Granny Klump, from Eddie Murphy's Nutty Professor movies, has been downloaded by more than one million people from ScreenMates.com.
Another attempt is through more appealing multimedia, such as a larger pop-up windows with sound, video and animation. Unicast Communications Corp. and Net-mercial Inc. are working this territory, developing the technology to abbreviate the download delays often associated with richer multimedia. Unicast has had some success working the expanded format for traditional advertisers such as Nike, Johnson & Johnson and Miller Brewing Company. The company claims click-through rates of up to 6 percent for the multimedia pop-ups, which is big news compared to the industry average of less than half of one percent for banner ads.
Perhaps farthest down the ad-bot technology road is Artificial Life (ALIF:NASDAQ), a company that has had early success in developing and marketing intelligent software bots. These "smart bots" are virtual guides that help corporate Web site operators improve a host of tasks, including Web navigation, user profiling, sales response and call center management. Customers include Metropolitan Life, General Instrument, Credit Suisse/First Boston and PriceWaterhouseCoopers.
Mediating Purchases
The other side of the online advertising coin will rest on content providers' ability to connect readers with potential purchases. One company that has been making headway on this front is called Zooba.com. Based in Boston, this self-proclaimed "infomediary" launched its service in May, 2000, to help content publishers assemble targeted email lists containing products dynamically linked to the topical content that its members have elected to know more about. The emails are free for users to subscribe to, and provide retailers with unique opportunities to place the right information in front of the right person at the right time.
In less than four months, Zooba.com already has established partnerships with an impressive list of trade and academic publishers, including Simon & Schuster, Farrar Straus & Giroux, Columbia University Press, Taschen and Stanford University Press. In addition to the email distribution service, Zooba.com provides publishers with real-time, comprehensive, aggregated psychographic and demographic data on subscribers. Zooba.com is funded by the European VC firm Europ@web, which has invested more than US$500 million in etailer eluxury.com, mobile Internet service provider Quios.com, investing Web site MetaMarkets.com, and the wagering Web site (already mentioned in a previous issue) Flutter.com.
Who survives?
Though their content is less costly to develop and certainly more commerce-oriented, three companies lead the way. In June I reported on CNet (CNET:NASDAQ), Homestore.com (HOMS:NASDAQ) and Ticketmaster/CitySearch (TMCS:NASDAQ). All are up since June 1, and Homestore.com has nearly doubled.
Of course, Yahoo (YHOO:NASDAQ) and AOL continue to be the pre-eminent Web destinations. Among the advertising networks, watch Engage Media (ENGA:NASDAQ) for the biggest 6- to 12-month upside. Engage has been expanding globally, with special focus on increasing its ability to serve online advertising in Asia. The company is also making more aggressive efforts to serve rich media and commerce referrals.
The jury is still out on the content upstarts. By the first quarter of 2001, tough decisions will have to be made at TheStreet.com, Salon.com and MarketWatch.com. All are working from a similar set of options, which include establishing print outlets to catch bigger ad revenues; stepping up the syndication of their content to build brand awareness and loyalty; increasing product placements; and courting acquisition by larger media companies looking to bolster their online presence.
Watch for several print offspring by next year. Print ad revenues have jumped as interest in business and the Internet has increased. Other Web sites have successfully tapped into the reservoir of cash from magazine advertising by launching print versions. Yahoo, Expedia, and Nerve all have either launched or plan to launch "print progeny" magazines.
As the Web goes mainstream, more traditional companies will see it as an essential way to promote both online and offline products. The dot-com shakeout of 2000 was a wakeup call to online advertisers that they needed to provide consumers with more compelling and creative content and advertisers with more direct results.
|
