What is the thread that connects the great media companies of the last 20 years? I think the answer will surprise you.
In 1995, Yahoo was founded as a personal project of two Stanford PhD’s. The project aggregated links from around the web, creating an index of third party content in one place. It was a brilliant business model because it had no content costs yet created billions of ad impressions that could be sold to advertisers.
In 1997, two Stanford PhD’s created Backrub, which eventually became Google. They built a new index – this one more advanced than Yahoo’s because it mechanically crawled the web instead of using human-based curation. From a publishing standpoint Google created an infinite number of pages – all a user had to do was type a word into a box and it generated a new page. From a media standpoint it was a brilliant model because it had no content costs yet created billions of ad impressions that could be sold to advertisers.
In 2003, Mark Zuckerberg started Facebook. Facebook was an open forum for users to contribute content, about themselves or about their friends. Looking at my stream it has now morphed into a way for people to share links that they find interesting. From a media standpoint it is a brilliant model because it has no content costs yet creates billions of daily ad impressions that can be sold to advertisers.
When I look at the best outcomes in new media I see very little original content, but rather low cost ways to aggregate audiences. Huffington Post has a network of unpaid bloggers, Twitter has a network of user-generated content, and YouTube has a network of “sometimes-pirated-sometimes-user-generated” content. These are all no different.
Not surprisingly, the most successful traditional media companies have adopted a similar model, emphasizing reality television and live sports over content production. Content creation has now been outsourced to independent shops that compete for distribution. Many of them struggle and lose money while they search for the next hit.
Maybe the pendulum will swing back in the future, but candidly I think the days of media companies deficit financing content and trying to make it up later on advertising are coming to an end. I can see how some subscription properties, like HBO, can continue to finance high-cost original programming – they have stable cash flows after all – but I think other media companies are on a short fuse. I don’t know what this means for the quality of television in the future (or print or radio) but I assume that my kids will grow up watching more sports, reruns, and reality television than I did. That is if they watch television at all.