How robust are the digital champions?


 

This post originally appeared on BUSINESS SPECTATOR

If 20 years ago someone told you that in the future the largest, most valuable emerging media companies wouldn’t have to create content you would have scoffed.

Media companies lived and died by the quality of the content they produced and the quality of the media brands they created and nurtured. Now days the situation has changed rather dramatically.

There are media brands today that don’t actually create their own content and have no intention of doing so.

Google, Facebook, Digg, Twitter, Techmeme and YouTube are all companies with differing missions, significant valuations – but with no aspiration of creating content.

They are simply facilitators – companies that contribute to the fulfilment of a need or furtherance of an effort or purpose. Google is the best example of this.

Pre-Google, the internet was a heaving, disorganised mess. It was difficult to find what you wanted and this was challenging the medium and its future usability.

Google came in and created a tool that allowed internet users to find what they needed quickly and easily. It reinvented search and has allowed consumers to get anything they want, whenever they want, and for the price they want – generally for free.

At the same time, the company that is now commonly referred to as the ‘search engine giant’ created an advertising tool that was so simple, effective, and scalable that it completely changed the ad world.

In doing this, Google has became more valuable in the eyes of investors and consumers than the companies that are actually creating the content. And at the same time it has initiated a significant shift in how media is consumed.

At the beginning of November Google was valued at $US169.68bn. This is more than Disney/ABC, News Corporation, Viacom, Time Warner, CBS and Yahoo! combined.

So now, the race seems to be on to find the next great organiser of content rather than the next great creator.

Facebook is perceived as many as the next company to reach Google-esque heights. Like Google, it doesn’t ‘create’ content in the traditional sense.

What it does is provide a platform for others to share their content and connect with others and it’s 250 million global users seem to value this.

Twitter is another company with lofty market expectations. It’s valued at around $US1 billion after its last round of funding and is the current ‘darling’ of the media and advertising industry.

Both Facebook and Twitter are connectors. Their purpose is to help people connect with others and many commentators and industry folk would say that the value they are creating is in community.

Like Google they organise information and make it useful, but to their detriment neither has a killer commercial model.

What is yet to be determined is the true value of ‘community’ in the long term – both commercially and for consumers.

There is undoubtedly a consumer value to a user of a facilitator, however, is there a danger of building a business that relies on others to create the end product?

Facebook relies on its users to post content, pictures, thoughts and links but a user’s Facebook experience is only as good their network. Twitter is the same – the value users get from Twitter is only as good as who they are following and how active and interesting they are.

Both Facebook and Twitter have minimal control over this. They can improve technical and usability aspects but they can’t guide content – they are controlled by their users.

Google doesn’t create content, but it does control its product, how its packaged and what it serves up. The difference between a Google and a Facebook or Twitter is significant.

User controlled media is nothing new in a digital sense. In the early days of the ‘modern internet’ forums were a big deal. Many sites would add forum functionality as it served two key purposes; it gave users a reason to return (hence boosting frequency) and it was great for page view generators (boosting engagement).

However, in some cases the forums became bigger than the site and often changed what the brand meant, sometimes in a negative way. Many sites had great, rational content but were defined as brands by the vocal bullies on their forums.

Like forums, if the interesting people lose interest in Facebook or Twitter, generally other users will too. And this can happen quickly. Two years ago MySpace was the dominant social network in Australia, now Facebook has over three times as many users – 7.8 million.

With that in mind, what is the long term value of these facilitators as media brands? How can they build value over time? How can they build trust? Or do they become commodities – like email, like instant messenger and RSS?

Generally, media brands have become valuable due to a mix of content, cultural relevance and public perception. All three are equally important.

What does a Facebook stand for? Or Twitter? Or YouTube? As a user, what do they say about me? As an advertiser, what can they do to help me position my brand?

In some ways it’s not too dissimilar to the crazy world of hospitality. A club is effectively a facilitator – a facilitator that allows people to relax, meet people and discover new music.

You can open a club put in the best sound system, the most comfortable seating the best lighting rig, fantastic staff and a great selection of drinks. You can have fantastic entertainment a central location and plush fittings. For one, two, maybe three years, the place will be in demand and busy.

Technically and functionally everything is sound. But at any time, everything can change and for seemingly no reason people will flee. For reasons that can’t be distilled into rational reasoning people tend to lose interest and move on. And because some people move on, others follow. Generally there’s nothing the club can do. Sure, they can renovate, bring in new features, entertainment etc. But once that edge is gone, it’s generally gone for good.

So the big question facing Facebook, Twitter and MySpace, is whether, in this sense, they are the nightclubs of the digital media world.

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4 responses to “How robust are the digital champions?

  1. this is an important question, and I think MySpace (and Friends Reunited, and a whole host of other disastrous investments into new media) demonstrate. At the moment, Twitter for instance is just coming over the top of the Gartner Hype Cycle peak (http://en.wikipedia.org/wiki/Hype_cycle), and when it bottoms out, who knows what will be left of the company? They’re already struggling to get new users and worldwide traffic actually dropped last month.
    The big problem for me with companies like Google is that they’re basically huge businesses utterly reliant on one source of revenue (or in Twitter’s case, NO source of revenue!). The internet changes all the time, but imagine if someone develops some killer app for facebook/twitter that delivers content you’re looking for – it could move the game on and Google would suddenly look shaky.
    If I was buying shares in an online company I couldn’t cash for 20 years, I’d go with Amazon – at least you know people will still want to buy stuff!
    [Great blog by the way: good for expat Aussie in London to find out what’s being talked about in Aus online industry in one easy place]

  2. The main reason people flocked from MySpace to Facebook was a question of quality. MySpace was a $&?!hole, the only dodgy nightclub in the village. Facebook’s interface is what garnered it its userbase and now they are big enough, ugly enough and agile enough to make sure that anything any new club, opening up on the street offers, they can offer better.

    It’s the age old marketing adage ‘you can’t polish a terd’ and Facebook doesn’t need to.

    So long as it stays abreast of competitor enhancements it’ll remain a nugget of gold, the of iPod of social networks if you will.

  3. Good post. I’m generally with you, except I don’t really see how Google controls their product any more than Facebook or Twitter. Sure they don’t have people creating content on their site (though increasingly neither does Twitter), however, Google relies completely on us to make stuff for them to index. If all of a sudden the world stopped creating content, or even worse updated their robots.txt to disallow the big G, they’d be left with a bunch of advertisers wanting to pay them to put their ads on non-existent pages.

  4. Hi Ben

    Thanks for initiating dialogue on this topic, its one that often goes under the radar…

    All sites mentioned here are essentially web applications as we know…

    I attended a presentation from google not to long ago where i recall the speaker saying Google can be replaced in 3 days, should some kids in the valley build a better search application. I suppose the same can be said for the rest of the apps mentioned here.

    Can be argued that the very nature of being an application / commodity lends itself to your product having a finite lifespan.

    Content with human emotion and opinion put through a ‘quality’ filter is what tends to carry audiences.

    If you for example were to migrate your blog from wordpress (an application) to another platform in time, i suspect most of the readers will follow. As wordpress has no meaning to the consumers.

    I personally love facilitators online, as they tend to facilitate everything for free 🙂

    Online media business are better build when you have a ferrari (machine/applications) being driven by Schumacher (content that is human, can inspires an audience).

    Ps. MySpace did try to build a content proposition (& still is) around fashion, music etc – was too late in their product lifecycle to succeed, and their proposition was application led from day 1 – which led to a finite appeal.

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