Online Ad-Base Business Models

Today's article in the WSJ about online ad-based business models (or lack thereof) reinforced three growing beliefs of mine which are:

  1. The Importance of Brand. Without a terrific brand that signals quality, entertaining, and relevant content, it's proving to be very difficult to make a lot of money as a publisher selling online ad inventory.
  2. Monetization = Ads + Subs. Online publishing business models will increasingly resemble business models in the cable, magazine, and newspaper industries. Advertisers will pay for targeted ad impressions while consumers will pay for high quality, informative, and entertaining content. Publishers running at a profit will find quickly a model somewhere along the continuum of ad-based and subscription-based revenue streams.
  3. Consolidation is Happening. I'm as much a fan of the concept of the long-tail as the next person but I do believe that a missing dimension to the discussions of this idea and its commercial implications is the relationship between content relevance and quality. Ensuring the former is something Google is terrific at while the latter is proving to be much more elusive due to the perverse incentives driving a significant amount of the SEO activity today. As long as there's an economic incentive to appear on the first page of search results, then individuals and businesses will compete aggressively (and in some cases unethically) to ensure that links to their sites appear on page-one. If left unchecked, the poor reliability of search results will drive more and more people to the sites and brands they trust to deliver the content for which they're searching. In order to deliver on this promise, these brands must then ensure they've got people on board that can produce high quality content for their audiences. If you buy this argument, then consumers get higher quality content, talent gets exposure and compensation, publishers get distribution, and advertisers get audience. Or something like that...

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