Digitalwall: Media, Community, and Blog (2) The Dream of New Media

If Blog is to be a new breed of media, it will have to face the problem about how to support itself, sooner or later.

[+] No one can afford to run a pure Internet media

I would like to introduce a concept about media content: TTL or Time to Live. Any kind of media content has its own life cycle. It is the most valuable when it's fresh; as time goes by, it will no longer be needed and gradually fades away.

"Yesterday's news is tomorrow's fish and chips paper." Content is a kind of consumables; it is consumed at different speeds for different types of media. For example, magazines are consumed on the basis of month(s) or week(s), while newspapers are on the basis of day.

For news content on TV, it is consumed at the rate of hour, and this hour's news bears no value at the next hour. If you are interested, you may sit in front of the TV watching news for a whole day, and at the end of the day, you'll find that not only the anchorperson but also the news content keep changing every hour.

In terms of the size of business, a magazine is smaller than a newspaper and a newspaper smaller than a TV broadcaster. So we come to realize that, a media company needs to adapt itself to the consumption rate of content. The faster the content is consumed, the bigger the size of the organization as well as the capital required will be.

Anyone can talk about the characteristics of the Internet as being real-time and interactive. But, has it ever occurred to you that the content on the Internet is consumed in real time, too? In other words, the value of a piece of news can expire in five minutes. Frankly I doubt if there is any business that can survive such kind of consumption.

[+] The quality of content on virtual community websites

The most popular business model among portals may be virtual community services. They are about providing categorized forums, chat rooms, and personal homepages to users, with advertisements attached to web pages popped out. What a convenient tactic.

Yet community website service brings troubles to website operators. Firstly, the cost of setting up the system and acquiring bandwidth is huge. If you want to provide free forums and chat rooms to users, you'll have to purchase a lot of machines and pay for the tremendous expenses for the bandwidth consumed by chatting activities.

Secondly, the content produced on forums or chat rooms is mostly humdrum conversation like "how old r u", "where do u live". There's nothing much worth reading and very few quality content.

Thirdly, there are a lot of deserted community websites. On portals we can often see some celebrities' fan clubs hosted by enthusiastic users. People of shared interests may be attracted to join. But after some time when the passion passes away, people no longer come and the sites are thus deserted.

Fourthly, advertising revenue brought by community website service is rather thin. With low quality content to attract readers, those who visit the websites think about chatting only and rarely care about advertisements. As providing free community services has become an expensive imperative with very low cost-efficiency for portals, it has been a pain in the neck.

It is a good idea to let users provide the content, but the value, which is to be translated into revenue, of the content produced by these communities depends on its quality.

[+] Why Internet media cannot survive on advertisements only

I pointed out that it was not viable for Internet media to rely solely on advertisements in a speech in 1999. Yet at the time when the stock prices of dotcom companies were at their peak, such argument was harsh to the ear and was rejected by most of them.

The rationale is simple. Only the monopolistic media market structure can ensure the price of advertisements staying high. When there is only one TV station, the audiences have no other choice, and the TV advertisement can be sold at an excessive price. Once there is a second TV station, the audience as well as the advertisement buyers can have an option, and the price naturally falls down.

It is the way most media markets around the world maintain the market order, including TV and newspapers. With the emergence of Cable TV, the number of channels soars above one hundred, with audience being dispersed. TV broadcasters no longer enjoy handsome revenues as they used to be, because the unit price of advertisement is dropping.

However, the Internet can not be monopolized. It is super decentralized! Everybody knows that the traffic on portals is heavy, but few people really understand that this traffic is in fact only a small part of all the traffic on the Internet globally. A lot of users don't stay on portals, and they never view advertisements!

To be able to rely solely on advertising revenues, the media have to attract a Critical Mass of users. As the Internet is born to be decentralized, there is no website that can reach this Critical Mass, not even the biggest portal in the world.

For example, if one day you turn on your TV at home and find out that there are 5000 channels, I believe the top three channels will not be able to support themselves by advertising revenues as the audience is too scattered even for the top three channels. Not to mention that the number of websites worldwide is much much more than 5000.

So, despite that bigger portals are able to absorb more advertising revenues and to some extent hold the dominant position in the market, they cannot corner the market and raise their advertisement price. The size of their user base is not big enough to bring economy of scale, so the advertising revenue alone is not able to support their operation.

Why do I spend so much time discussing the issue of cost and income of the Internet media? Because we've learn from the previous hype over free services that free stuff is not sustainable at all. If Blog is to be a new breed of media, it will have to face the problem about how to support itself, sooner or later. (
2005/03/13 - By Digitalwall.com - Way to
China Internet/Telecom )