Stop me if you’ve heard this one: content is king. The problem is, in case you haven’t noticed, monarchies aren’t exactly in vogue these days, and one could argue that social is the democracy and distribution/aggregation is the republic.
Indeed, online, there’s no lack of content, social, or audience. It’s all there, and despite a robust first quarter in online advertising which saw $7.3 billion spent in the U.S. alone, the reality is that online advertising will gravitate toward a few at the top. Google did $8.575 billion in Q1 revenues globally.
The market leaders have always dominated industries. In broadcast, NBC/ABC/CBS and FOX own their category. In cable, it’s obviously more fragmented. Print is even more so due to the local aspect of publishing. But online, the theory suggests that the long tail would benefit from the so-called verticalization effect. In reality? Not so. Not at all.
When Jann Wenner doubles down on the power of print and rails against the Internet, he’s not as delusional as some professionals in online media would like to believe. Online, anyone and anything can be a “media company”; while that is great and wonderful on many levels, the harsh reality is that this simply means that many more will fail.
What This Means for Niche Content Owners
When I started our company, our video content editorial strategy was “a mile wide and a foot deep,” in that we were producing hundreds of videos each year across a dozen or so categories instead of thousands of videos in a category or two. Everyone thought the strategy was doomed to fail.
At the time, I argued that our core competency was storytelling in video format, and not a particular vertical. Niche producers, I was told, could “specialize” in a category and command triple-digit CPM rates.
In hindsight, one could argue any strategy in video was doomed to fail. YouTube won the platform/sharing consumer space; 5Min sold (somewhat prematurely) in the aggregation/publisher space; and all consumer-facing startup content producers faced headwinds when they sought to build an “own-and-operated” audience and secure video advertising revenue. That last part has proven elusive due to the practical aspect of advertising sales.
With social or aggregation/distribution, we’ve seen the dominance of the platforms.
With content, it’s clearly not that simple, with a stratification emerging over the past five years:
– Broadcast: great quality and pricing power but relatively little volume;
– Portals: Legacy brands with high reach adopting a super premium stance but being attacked by YouTube, who is adding a professional façade on top of the user-generated media and aggressively courting professional content owners and rolling out more advertising features and growing at a torrid pace in which a whopping 48 hours of media is uploaded to the site each minute;
– Ad networks: lots of reach but no defensibility or differentiation, fighting with one another for publishers’ real estate while they fend off the trading desks being set up by the big buyers and ad agencies.
By the time content owners get to the front of the line, it’s a matter of too little, too late.
But that isn’t even the main issue:
– With broad producers, the mile wide but a foot deep strategy takes a while to scale, and by the time you scale enough, you have to worry about building the kind of sales force it requires to garner big ad dollars.
– With niche producers, conventional wisdom suggests sky-high CPM rates would make small audiences lucrative enough. Of course, the reality is far different: the lack of scale and volume for niche producers has made it increasingly hard for many to stay in business.
That’s the advertising plan. Some will pray that their programming will get people to open their wallets and fork over money.
Good luck with that. Start collecting the food stamps.
Ultimately, to stay in the game, you need a plan to scale over time and a plan to stay in business by keeping costs down. If you can do both, then you stand a shot at survival.
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