Digitalwall: Google's Choice (1) Lessons for Portals

Yahoo! adores heroes, Google respects grassroots.

[+] The value of media content - not easy to show

The saying "content is king" may represent the pride of content creators including journalists, editors, writers, painters, singers, directors and so on. Content is the crystallization of their creativity. But, due to its intangibility, it may be respected in terms of its value but not so in terms of its price.

In any part of the physical world, the establishment of concepts of copyrights and intellectual property rights takes some time, which is generally facilitated by measures including education, advocacy and regulations. Only after the confirmation of t these rights can the income of content creators and the viability of content industry be assured.

Since digitization breaks the content from hardware of paper and CDs and brings it to the Net, the price is even less recognized. During the ten years of Internet development, the saying of "content is king" is constantly heard, but still there is a lack of a mass public who are willing to pay for it. And consequently its value is highly questioned.

A hardcopy of newspaper can be sold at several dollars, but once it's put on the net it becomes free of charge. This is exactly the struggle the newspaper industry has been facing during the past decade. Without fundamental revenue, it is impossible to support news articles dedicated to the Internet. It turns out that the Internet becomes the recycling plant of newspaper articles.

If the production of content can not promise revenue, will the management persist with it? This is a question with an easy answer, which rightly reflects the mindset of the portal runners in the early stage. Early portals never hired their own reporters to write their own news content.

[+] Managerial thinking of search engines

Search engines started in the U.S. ten years ago. In the beginning they did not have a viable business model. No sooner they saw their user base growing, and then they thought of developing themselves into media. The most important factor in media's business model is the size of user base, and of course the number of pageviews and advertising value that may follow.

Yet there is a fetal weakness of the advertisement model: the users won't stay on. Most people leave the search engines for their destinations as soon as they find what they need. If people view only one or two pages and then get away, then how are they going to sell ads? No, they've got to develop their user stickiness.

The first idea that comes to their mind is to present news content directly on search engine sites. Sites runners start to talk to newspapers and magazines about cooperation, so that their users can see news or stock prices without leaving the search engines. This is straight forward thinking: I don't want to let you go, so I put on things that you are interested in.

Besides, is there anything other than content that can help firmly grasp users? So, you see the emergence of free services such as free emails, and virtual community services soon afterwards. The attempt behind these is to bind the users with virtual interpersonal communication through functions such as chat rooms, forums and calendars. Search engines then transform into portals.

In any case, these site runners keep their hands way off content. When working with newspapers, the content is provided by cooperative partners. In the case of community services, the content is provided by the users. For ten years portals never produce content all by themselves, and they hire very few reporters. Most content on the Net is second-hand.

[+] New business paradigm brought up by Google

In the past decade, there was nothing wrong with this business mindset. The cost to produce content is high, the users' willingness to pay is low, and it's simply unsustainable to reply on the slender ad revenue. For websites as big and offering services as diversified as Portals, it needs to develop more pipelines in various areas. As such, it is right to save the cost for content production.

Yet, as times move on, we see the emergence of a new breed of companies, which is very much like giving two lessons to the old ones. A search engine company, which has reaped fat profits from ad sales only, went public in the U.S. with big success. The popularity among investors for this company has driven its stock price to as high as USD300 and above. This company is named Google.

The first lesson: Google taught industry players that online advertisement model must link up with key words. This model is favored by quite a few ad buyers and search engine users, and is lining the pocket of the company as a result. The second lesson: a search engine company has no need to focus on increasing user stickiness - they'd better find what exactly they want and then leave right away.

The paradigm set up by Google is that, a search engine can be reduced to a small search box on the website and can still survive. In the past, players did everything, which made them too big to reply on ad revenue solely.

Most people wonder if Google would become a kind of a general portal like Yahoo!. Yet, all signs show that Google chooses the role as "a software service provider" instead of "a media content provider".

[+] Choice between the roles of a media company and an IT company

One example. The news content, headlines and abstracts on Google's news channel are fetched from various major news sites. These news articles are sorted and ordered according to the calculated times they show up on the Net. There is no manual editing involved in the entire process. Google's functioning relies on the power of the Internet.

Yet traditional portals need human editors. We may probably think that such editors do little to add value to the content, but the act of editing itself represents the attitude of the media, the judgment of the owners on current affairs, and even the ability to create trends.

The traditional logic is, "I am the editor, and I'll tell you what is important." And Google's way is, to find out what most people deem important by using the power of technology. It is to resolve complexity with simple algorithm, which is 100% engineers thinking. This is quite evident when we look at the offering of Google.

On the other hand, traditional media run on another system. Basically it replies on some kind of talent, which cannot be computed. You probably cannot tell which out of ten unreleased songs will hit the market, but a music producer at a record company can.

This is why famous directors, screenwriters and music producers are always so highly respected. They are gifted, and the content they create may have the chance to be appreciated by many of us and survive the test of time. Yet, we can almost be sure that the corporate culture in Google will not nurture such kind of people.

[+] Yahoo! has a different belief in media than Google

Yahoo! takes a completely contrary approach. Yahoo!'s CEO Terry Semel is from Hollywood. Since he took this position in 2001, he has led this company to break out of the DOTCOM bubble and achieved brilliant performance. Now his plan in mind is to transform Yahoo! to a company that is more like Time Warner.

He set up a media division, and has started to recruited senior people from Hollywood (despite that these people have no clue about the Internet industry), hire journalists to write news, and produce generic programs for the Net. He hopes to devise the possible ways that the content may be presented on the Net in the future.

Simply put, Yahoo! believes that Internet media definitely need masters similar to well-known directors for movies. Only masters can lead the trend and create content that can touch the bottom of the hearts. And Google trusts "the decision of most people," and assumes that the so-called " trend" is supposed to be the result of the selections made by the majority of people.

Yahoo! adores heroes, and Google admires grassroots. As a matter of fact, if both companies refrain from doing things they are not good at, both will succeed. However, if we look at them purely in terms of interest, Google's way may appear a bit insipid. The difference between the two may become more obvious as time goes by.

Do you believe in the genius of masters or the collective wisdom? The audience is getting clearer about what they want to see and their make their choices known via the Net. The emergence of the Internet results in the dissolution of mass media and adverse conditions for the birth of masters. But, it is also true that the prodigies are irreplaceable, as least for now. (
2005/11/13 - By Digitalwall.com - Way to
China Internet/Telecom )