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It's E-Media, Stupid
Changing the way we consume content
Ranjit Goswami (ranjit)     Print Article 
Published 2006-11-21 14:58 (KST)   
There's been a lot of debate and discussion on the start of e-commerce with the dot-com boom, its bust and its subsequent stronger than expected revival. Although the central theme remains the disruptive potential of the Internet in all things we do, it's no longer commerce that's driving this revived interest in dot-coms.

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E-commerce and its various associated models -- whether B2B or B2C -- are no longer where the private money and younger audience is flocking. Investors and Generation Nexters hate a matured Internet . Although business models on the Web may not be facing the bleak future that the newspaper industry is facing globally due to Web 2.0, they are no longer delivering Internet growths. The growth of most commerce enabled B2C sites has slowed down to more moderate old economy standards, if they have not stabilized altogether or fallen due to pricing pressures and other limitations.

It's hard to find a single B2B enterprise, other than probably Alibaba (Yahoo acquired 40 percent of Alibaba for $1 billion in August 2005), that is being valued at more than a billion dollars. The B2B exchanges, marketplaces, verticals and horizontals still exist -- but the fact of the matter is that they no longer have the potential to change the age-old industry dynamics. Erstwhile B2B darlings like Ariba, Commerce One, FreeMarkets, Covisint (created by the three big auto makers in Detroit, two of which, GM and Ford, are deep in the red now) either have merged or been acquired by another industry player and merely remain in the business like hundreds of others looking for that killer applications/business model but never finding it. The chances of finding such a miracle look increasingly remote.

So the action is no longer in e-commerce. But the Internet is looking formidable this time around with real potential to change other industry dynamics. And it's e-media this time. Banner advertisements to search advertisements to models like pay-per-click are driving this new generation of Internet growth. And as of now, this new generation of user generated content and social networking looks sustainable to some extent so far. But voices of concern are being raised again about valuation and business models, as was done before the bust back in 2000.

The party spoilers may again be the old media companies of repute if, as in the past, traditional B2B or B2C players regain control of their supply chains against online exchanges or stores with their core strengths. The New York Times made an online acquisition, and pushed up its online content management, as BusinessWeek and others have done, through frequent online surveys. Established media companies have geared up, individually and collectively, to take on the new challenge; however, unlike in the past, where business models favored the brick-and-mortars; this time the die is heavily loaded in favor of the e-media marketplaces. Through far reaching industry reforms, the industry has started offering what Web 2.0 is offering, often by violating intellectual property rights and distributing content generated by the traditional media. It reminds one of Napster; however, Napster was not backed by media giants or Internet giants like a Rupert Murdoch (News Corp) or a Google.

In that context, recent developments where Universal has sued MySpace over copyright issues can potentially have a far-reaching impact on how the future of e-media will be going forward. MySpace, a firm acquired by News Corp just over a year ago for less than $1 billion is now valued anywhere between $5 billion and $15 billion. Google followed suit recently by acquiring YouTube for $1.5 billion. And unlike the complexities of past business models, revenue models and value propositions, this time there is only one thing that these sites offer to their largely youth-centric audiences: freedom to create their own media -- and that's potentially creating the deadly blow that will strike established media companies.

Today, no film marketing company can release a blockbuster without an ad in MySpace or YouTube. The same goes for makers of music videos, or any new media release. It's not only the newspaper industry that's being affected, it's all media, from audio (music) to video (TV, movies) to print (newspapers, magazines). Experts have already projected an era of personalized television viewership in the future.

Rupert Murdoch in a speech in March talked about how the death knell was getting closer to the traditional media.

"A new generation of media consumers has risen demanding content delivered when they want it, how they want it, and very much as they want it," said Murdoch at a gathering of media barons in London.

The circulation of print media has been declining in the developed world and so has their advertisement revenue; however, many of these media companies have simultaneously seen higher traffic on their Web sites, and garnered a higher and higher share of online advertising revenue.

Despite all the noise generated during the first wave of e-commerce, no top executive of any brick-and-mortar company ever predicted the death of that old industry. Rather, the brick-and-mortar companies butchered the high-flying dot-coms easily when they adopted the same Internet models themselves. There were no revenue models earlier. The cost of technology and acquisition was high. With Web 2.0, there is revenue from the beginning and no tremendous technology costs. There is seldom a need for the new generation start-ups to spend money on advertising.

Global advertisement spends in 2005 equaled more than $400 billion, out of which $18.5 billion (4.6 percent of the total) was spent online. Bank of America projected that its U.S. online ad spend would reach $12.4 billion in 2010. Forrester projected a less optimistic global figure of $26 billion in 2010. And unlike commerce revenue, where companies like eBay charge a percentage of the transaction value as their fee, ad spends directly add to the bottom line of these Web 2.0 firms.

Compare this $400 billion global ad spend with eBay's commerce revenue of $5 billion to $6 billion and its lower than $1 billion net income. Or that of Amazon.com's $7 billion to $8 billion revenue and net income of close to $800 million. In a hypothetical situation, where the Internet commands a reasonable 10 percent ad spend, a couple of players that again control 5 percent to 10 percent of that spend would get a cool addition of $2 billion to $4 billion dollars in their bottom lines.

This also explains why Google's last quarter beat industry expectations, whereas both Yahoo and Amazon.com disappointed. EBay was not impressive either. Yahoo, despite having an ad-based model disappointed because it's spreading itself too thin, getting into everything under the sun without a clear focus, as a recently leaked memo revealed.

New alignments and developments are buzzing in this industry. More than 150 newspapers in the U.S. with names like the Journal Register Co. (parent of the Morning Journal) have joined hands with Yahoo's HotJobs to create a U.S.-specific national online advertising network. These 150 newspapers from 38 U.S. states have a combined circulation of 12 million copies, whereas their Web sites record another five to six million readers a day. Yahoo alone gets four to five million unique U.S. visitors each day, still the highest for any site. But the gap is narrowing because of Web 2.0 starters like MySpace. Yahoo is expected to give a national reach to those mostly local newspapers, whereas those newspapers will make Yahoo's content available to more local audiences. Google made its auctioning ad inventory with newspapers into more of a partnership after its first attempt met a lower than expected response.

Echoing the words of Murdoch, mobile customers in South Korea -- a country with more than 60 percent broadband penetration -- are now looking at mobile search applications. Twenty million Koreans access the Net from their mobile devices. Google, the online search leader, has tied leading Korean service provider SK Telecom in trying to develop a specific mobile search engine to target this growing user base. Many of them are already searching the Internet from their mobile devices as well.

As applications grow, and as people spend more and more time on mobile devices or on the Internet, content needs to find new ways to reach the right consumer at the time the consumer wants it and in the format the customer wants it.

Content is becoming increasingly meaningless in isolated silos. Traditional media companies are well aware of the threats, and the new opportunities, because of their core competency in generating, managing and delivering content -- either through traditional channels or through compatible multiple platforms. New-age Web 2.0 companies know the opportunities and threats they face from intellectual property rights issues.

We didn't see the creation of a mega marketplace of e-commerce coming -- barring the examples of Amazon.com and eBay. However, there is a possibility that a mega marketplace of media may become a reality. Where commerce failed to realize its potential, the media may find possibility in the near future.

Advertisers will follow us wherever we go. And as is often stated, half of all marketing expenses are a waste -- the problem is no one is certain which half. With new-age electronic media becoming the norm, it indeed simultaneously represents the best and the worst of times for the media industry.

Murdoch may again have been right when in that keynote address he compared Internet start-ups with explorers like Columbus. When Columbus wanted to find India, he landed in a land of opportunity called the Americas. When people wanted to find in e-commerce a way to change how we do business, they found in e-media a way to change how we consume content.
©2006 OhmyNews
Ranjit Goswami is a research scholar with the Indian Institute of Technology (IIT), Kharagpur, India; and is the author of the book "Wondering Man, Money & Go(l)d'".
Other articles by reporter Ranjit Goswami

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