For something truly disruptive to occur, the current system has to be broken beyond repair, and the incoming “disruption” has to be powerful enough (momentum driven by adoption), and sustainable enough (financially feasible, as far as business models are concerned), to overwhelm the status-quo.
A lot of individuals and businesses are fawning over the demise of “old media”, by attempting to deliver content in a way that’s fast, unique, exclusive, customizable, or pushed and pulled in whichever direction that users want. Most are convinced that money can be made if only the formula is tweaked just so. I’m not so convinced. Remember this, “just because somebody destroys an existing business model, doesn’t imply it is itself, a good business model.”
Bearing in mind that all of the below already exist and are available for free, the next generation of content delivery platform will have to have all of the following wrapped in a free package, and more:
It will need a Friendfeed-esque system that floats the best of the best, aggregating someone’s social media profile along with their friends’, including Twitter, Digg, Delicious, RSS readers, and direct web surfacing.
Recommendations should be provided based on both one’s social network, customizable settings, and automated filtering.
The quantity and quality of the content should both be adjustable. One should be allowed to set both thresholds according to their needs. After all, you don’t want to be overwhelmed by the quantity, nor underwhelmed by the quality.
The content should be personalizable, but not so personalizable to the extent that it prevents you from discovering cool new things out there.
If and when this technological and design feat is accomplished, it’s time to worry about the business model. Consumers are hard to please: they are fickle, prickly, cheap, and worst of all, not all that loyal. This is all but spelled out in the success, or for some, the lack of, that many social networks have encountered.
MySpace and Facebook make money from advertising, and on-site sales of “gifts”. Nobody pays to use those services.
Twitter has no revenue model just yet. But it’s likely they will capitalize on premium subscriptions and partnerships with the likes of Google or Yahoo, by integrating the Twitter network with their respective systems. The recent deal with India’s mobile carrier is an indication that putting the service in front of as many users as possible is the primary goal at the moment. I’m a loyal user, and I would be prepared to pay. I’m not sure about the other 75% inactive users though.
Evernote, Spotify, Last.fm, etc have revenue from premium subscriptions.
LinkedIn has revenue from premium subscribers, mostly those that rely on networking to make their living. Majority of subscribers do not pay. But those that do keep the lights on, and some.
A few quick observations can be made from the existing networks.
- First and foremost, some services started with little thoughts given to business model, in an attempt to build now, and think about money later. The idea of making something cool and flashy, more often than not, supersedes sincere attempts at profits.
- Secondly, people are reluctant to pay actual dollars to socialize. The best you can get from them is time, and eyeballs, if you are lucky. But even that is pushing it.
- We are all reluctant to shell out dollars for content. A micropayment system is difficult – it’s cumbersome, not enough value for money, causes consumers to hesitate before consumption, the miniscule ongoing cost and maintenance versus set up cost, etc. A premium system could work, but content providers may need to jump through a large number of hurdles.
1) Most people do not consume so much content, nor do they want to consume so much content. The market is still large, but it is niche – an important fact to acknowledge.
2) Those that do currently consume content so voraciously as to justify paying for such a system to organize their consumption habits, will need something overwhelmingly great to justify paying for something previously free.
3) The type of content presented must be of either such immense entertainment value, or professional value, that it makes the proposition worth considering.
Looking at the direction of social networks and social profiles in general are moving to, on a scale of public to private, leisure and entertainment versus professional , what do we see?
I think the instances where we pay with little hesitation, can be reduced to two rough categories: to get away from work, or to get ahead at work. The first one is when the service provides tremendous entertainment value, in its purest form – that is to say, not as a distraction, not as a time waster, but has a pull versus push approach. Consumers happily open their wallets in order to get away from work and life in general. In the second case, people are happy to pay to get ahead in work. LinkedIn has tapped into this need for upward mobility and networking, literally bringing a previously expensive and offline activity online. Needlessly to say, it is not shy about charging, and corporate and private clients have little issue with paying.
But back to the business of content delivery, the issue is to position the content, and the delivery system to a quadrant that actually makes money. And before someone compares the success of iTunes and its ability to deliver a previously free-ish product for a fee, here are some thoughts.
- A large part of iTunes’ success resulted from Apple’s clever intertwining of hardware and software. Without the iPods and all the advertising and sex appeal attached to those little white cords, iTunes might not have taken off the way it did. What kind of dedicated hardware or platform is available right now for content? There is no clear leader.
- The kind of content that gets passed through the system matters too. Information in the form of text is something we try to extract value from – whether it’s advice, wisdom, or insider-info. Much of the content consumed outside of pure professional duties (I’m thinking information that can have a direct and immediate impact on profit and loss, i.e. trading data, real time market-moving news) are digested quickly, and discarded even quicker. This kind of consumption pattern is incompatible with micropayment options. With music and movies, the clear end goal is entertainment. It makes you slow down to enjoy. It is a cost one can justify a little easier. It’s not to say that a subscription formula would not appeal to a particular group of content consumers. But I think it might be a hard sell.
- Music is something that one can preview prior to making a purchase decision. Nobody can compact a 40 minute album into a 2 minute fast-forwarded version. This is easy and common, with content. Because a blog can easily come in, and provide a 2 paragraph summary for free, which people might actually prefer over the five page original source report.
- The idea of free content is getting closer to being institutionalized, than free music ever got to. Quality and entry barrier has a lot to do with it. Shitty music doesn’t sell, it never has. Shitty content, well, when bundled up with a paper, has sold for decades. More and more, people are leaving destination papers the equivalent of radio stations, to bloggers and columnists regardless of where they reside – equivalent to downloading artists and tracks individually, whether through iTunes, pirated, or directly from the artists. When it comes to time-sensitive, headline heavy news, it matters even less where one’s getting it from. The value is lost as soon as it’s read.
So where does that leave us? I’m not sure. I think the content delivery business will have a hard time with business models if it stays within the confines of its traditional revenue streams – namely, advertising and subscription. There might be some great opportunities just outside of that box, but some imagination is needed to connect the dots.