May 4th, 2006
2.0 Business Model Doomsday Scenario
It’s official — Microsoft is no longer a software company. With the launch of adCenter, Microsoft will be joining the ranks of Google and other media companies:
“Ad-supported software services are an integral part of Microsoft’s plans to give consumers access to a broader variety of digital media, whenever they want and on whatever device they prefer,” said Ballmer. “Our close partnership with the ad community is extremely important to us as we evolve Microsoft from a software company into the world’s largest, most attractive provider of online media through MSN, Windows Live(TM) and adCenter.”
This is the real “convergence” — the technology industry and the media industry have now merged. EVERYTHING IS MEDIA — software applications, electronic devices, Hollywood content, publishing content, user-generated content, etc.
And despite the success of eBay and iTunes and a few companies still pursuing paid services/content (e.g. Flickr), the focus of the new “industry” is overwhelmingly on one business model: ADVERTISING.
Microsoft’s growth strategy: ADVERTISING
Google’s growth strategy: ADVERTISING
Yahoo’s growth strategy: ADVERTISING
MySpace’s growth srategy: ADVERTISING
Nearly every Web 2.0 startup’s growth strategy: ADVERTISING
Network and Cable TV’s growth strategy: (online) ADVERTISING
The problem arises when you look at the amount that brands have spent on paid media advertising for the following marketing initiatives:
Burger King’s Subservient Chicken
BMW’s The Hire Film Series
Land Rover’s Go Beyond Channel
CA Milk Processors Cow Abduction
Wendy’s Square MySpace proifle
Nip/Tuck’s The Carver MySpace profile
You can see the pattern emerging. The network effect turns everything into a media platform, while at the same time obviating the need for media as a marketing vehicle because brands can use the network itself as a marketing vehicle.
So, you have the new media/technology industry orienting its collective business model toward advertising…at the precise moment when the paid media advertising pie may be on the verge of shrinking.
A recipe for disaster if ever I heard one.
Topics: Advertising ROI | Digital Media | Google | Media Economics | Microsoft | MySpace | New Media | Online Advertising | Technology | Web 2.0
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Attention is becoming ever more scarce… people will go to greater lengths and spend greater sums to try to grab it.
Interesting ideas, but I think there is a lot of potential for new advertising models, outside of the viral, branding examples you mention which all involve feel good, fuzzy communication between a company and an individual. Online intermediaries that connect buyers and sellers online have tremendous power to aggregate consumers and advertisers, empower consumers, lower information costs and measure interactions.
I think online intermediaries should use this power to create a better way to connect buyers and sellers online. Do so could create a flood of advertising dollars.
Jim, first of all the viral effects of the network are, in the purest sense, free. What you need is engaging experience and content — brands will pay a lot to create that, but they will NOT have to pay media companies to distribute it. In other words, there will be lots of money spent, but not in the form of traditional paid media advertising.
Scott,
A great blog. Technology has meant that marketeers need to approach us in a very different way. Traditional marketing is dead.
Companies need to understand that the “new” marketing is through networks, through communities. If they build communities they will build and nuture advocates. If this can be achieved then the rest is easy (IMHO).
Stuart
+ Discussion: SEO Consultant Esoos Bobnar, Web 2.0 Explorer, Bink.nu,Publishing 2.0, The Kelsey Group Blog, LiveSide, Between the Lines and Vecosys
[…] To put it bluntly, we (education, business, healthcare) don’t understand what networks are doing to our spaces and structures. We know things are changing…but the depth and final end-product (that is probably the wrong way to see it - process is more accurate) is uncertain. 2.0 Business Model Doomsday Scenario: “The network effect turns everything into a media platform, while at the same time obviating the need for media as a marketing vehicle because brands can use the network itself as a marketing vehicle.” Posted by gsiemens at May 4, 2006 09:01 PM | TrackBack Comments Post a comment […]
[…] 2006.05.05. 00:59:35 errÅ‘l meg már nem is beszélve:publishing2.com/2006/05/04/20-business-model-doomsday-scenario/ […]
기술업계와 미ëâ€â€Ã¬â€“´ì—…계가 ë“œëâ€â€Ã¬â€“´ 융Õ©ëÂÅ“ 것ì´다. 모든것ì€ 미ëâ€â€Ã¬â€“´ì´다. 그게 소Ãâ€â€žÃŠ¸ì›¨ì–´ ì• Ãâ€Å’리케ì´션ì´든, ì „ìžÂ기기ì´든, ՠ리우드 컨Ã…Â츠ì´든, 출ÃÅ’Âë˜늆컨ÅÂ츠ì´든, UCCì´든간ì—Â.) -2.0 Business Model Doomsday Scenarioì—Âì„œ ع시. ع시…. 주목경제 때문ì—Â? ^^;
[…] Fast forward to today, and I’m seeing signs that the idea is trying to rise from its grave. I guess it shouldn’t be a surprise, since software developers are trying to make a living from an audience that increasingly expects to get everything for free - free music, free videos, free software, all supported by advertising (it’s all one big media platform, right?). […]
I guess it shouldn’t be a surprise, since software developers are trying to make a living from an audience that increasingly expects to get everything for free - free music, free videos, free software, all supported by advertising (it’s all one bigmedia platform, right?). I still don’t like the idea, but it may actually work this time if those involved understand why it failed the first time. One reason it failed was simply because too much screen real estate was given to advertisements, and much of it
Es oficial, Microsoft ya no es una empresa de Software…
DÃÂa triste para la industria del software, Microsoft se une al resto de compañÃÂas como Google, Yahoo,etc. para convertirse en una empresa de los que los americanos llaman "media". De hecho lo que se está viendo es que todas las estrategias de…
I’m continually impressed with Scott Karp’s insights and level-headed approach to sizing up this Web 2.0 thing. Two days ago he painted thisWeb2.0 Doomsday Scenario: You can see the pattern emerging. The network effect turns everything into a media platform, while at the same time obviating the need for media as a marketing vehicle because brands can use the network itself as a marketing vehicle.
[…] We are watching the death of advertising and media as we knew it, in real time, right before our eyes. […]
[…] 2.0 Business Model Doomsday Scenario. What happens when the web business model is advertising, and the traditional advertising model is dying? Scott Karp calls it a recipe for disaster. […]
[…] Du “We Media” au “Me Media” Des nouvelles du “We Media Global Forum” organisé àLondres la semaine dernière sur le thème (je simplifie) : comment Internet redistribue les cartes entre médias et consommateurs (associé à: mais comment gagne-t-on de l’argent dans tout ce bazar ?)L’un des invités, Jeff Jarvis, en dit quelques mots énervés sur son blog (ici), tout comme mes confrères du Journalism.co.uk où l’on trouvera également de passionnantes interviews des principaux intervenants (par exemple, ici, le directeur Internet du Guardian, et ici le patron de BBC News Interactive qui évoque notamment le problème des “citizen paparazzi”). Tout ça en anglais.”We Media”, c’est l’expression utilisée (en hommage indirect au livre fondateur de Dan Gillmor, “We, the Media”) pour décrire les nouveaux mode de “consommation” des médias. Car justement, on ne consomme plus les médias, on y participe : en commentant l’info, en la corrigeant, en votant pour la hiérarchiser (digg.com), en la partageant, en témoignant, ou en se proclamant soi-même “citizen journalist” ou “citizen media”.Rien de bien nouveau, donc… la question essentielle étant aujourd’hui, comme le répète Jeff Jarvis : “What should we do?” Que devons nous faire maintenant ?Car le phénomène du “we media” (ou “media 2.0″, en référence au Web 2.0) ne remet pas seulement en cause les métiers du journalisme, mais tout un ensemble économique : petites annonces gratuites (est-il trop tard pour les journaux ? s’interroge-t-on ici sur Journalism.co.uk), mode de consommation et de diffusion de la publicité (la pub a-t-elle encore besoin des médias ? se demande ici le très sérieux “Publishing 2.0″), gratuité de l’information…Et histoire de compliquer la situation, dans l’affolement général accompagnant l’explosion du web 2.0, on assiste aujourd’hui àun glissement du “We media” (”le média partagé”) vers un ego-centrage beaucoup plus agressif et révolutionnaire: le “Me media” (”je suis le média”). Apparu avec des services comme MySpace (qui permet aux adolescents de créer leur propre “média”) ou YouTube (où les internautes partagent leurs vidéos), le “Me media” n’a finalement plus grand chose àvoir avec l’univers médiatique que nous connaissons : c’est la chambre d’adolescent, voire l’inconscient freudien, qui remplace la salle de rédaction, et même le programme télé.Bref, quand le roi de l’info, Rupert Murdoch (qui vient également d’acheter un site de karaoké!) a mis la main sur MySpace pour 649 millions de dollars, on s’est d’abord montré dubitatif (quel rapport avec les médias ?), avant d’applaudir le visionnaire (qu’il est sans doute)… Aujourd’hui, cependant, on commence às’interroger (par exemple, le New York Times, ici, ou, en français, Emmanuel Parody, ici) sur la façon dont on va bien pouvoir gagner de l’argent avec ce type de média, certes générateur d’audience (70 millions d’utilisateurs), mais où les utilisateurs ne supportent aucune règle et produisent des contenus “àrisque”. De fait, le tarif publicitaire est aujourd’hui extrèmement bas sur MySpace: 10 cents pour 1000 pages vues.Ce qui ne veut pas dire qu’il n’y a pas de modèle économique, mais que le trafic ne suffit pas. Une des solutions envisagées par MySpace : transformer les annonceurs en membres de MySpace, qui peuvent désormais créer leur propre profil et leur page au même titre que les adolescents… lesquels peuvent alors devenir “amis” avec une marque de t-shirt ou un fim d’horreur.Quand tout le monde devient média, cela veut aussi dire que tout devient média: le média, le consommateur et l’annonceur… D’où la question posée en clôture du forum, qui sonne presque comme un SOS : “Where is the money ?”, ou “Who’s going to pay for media ?”.La vie des patrons de presse va devenir très, très compliquée dans les années qui viennent…—–”We Media”/ “Me Media”, on en parle aussi (toujours en anglais) dans ce post de Robb Montgomery sur Editor’s Weblog (ici) . […]
If you think folks were addicted to something as simple as Tetris just wait until you have an entire generation who can be whoever they want whenever they want. We are watching the death of advertising andmedia as we knew it, in real time, right before our eyes.”
uses Microsoft’s adCenter launch to declare that Microsoft is no longer a software company
[…] Seems like everyone wants to be a hammer when the pile of nails is getting smaller. Scott Karp at Publishing 2.0 uses Microsoft’s adCenter launch to declare that Microsoft is no longer a software company. But he goes even further with his analysis with this table: Microsoft’s growth strategy: ADVERTISINGGoogle’s growth strategy: ADVERTISINGYahoo’s growth strategy: ADVERTISINGMySpace’s growth srategy: ADVERTISINGNearly every Web 2.0 startup’s growth strategy: ADVERTISINGNetwork and Cable TV’s growth strategy: (online) ADVERTISING But then he notes that a advertisers are creating Internet content themselves like Subservient Chicken (Burger King) or Internet films (BMW) instead of buying ads. The result: just at the moment that nearly every Internet company has pinned their growth on on-line advertising, the big on-line advertisers are going direct to the consumer via the net. […]
[…] Maybe, I told the Santa Monica audience, Microsoft isn’t chasing a share of a $500 billion advertising market after all. Maybe it will only be a $250 billion market. In subsequent postings, Scott has suggested even that may be optimistic: "The network effect turns everything into a media platform, while at the same time obviating the need for media as a marketing vehicle because brands can use the network itself as a marketing vehicle," he wrote on May 4th. "So, you have the new media/technology industry orienting its collective business model toward advertising … at the precise moment when the paid media advertising pie may be on the verge of shrinking." "Advertising is in a death spiral," he added last week. "I can’t predict how long it will take, but the evidence is mounting daily. If you’ve got content or a web service, better hope someone will pay for it directly, because the days of the convoluted advertising subsidy business are numbered." […]
ubiquitous ad-based business models. Despite substantive growth in online media, financial types are getting antsy about the growing dependence on this as a business model. Scott Karp put it more bluntly, labeling it a“doomsday scenarioâ€Â. “You can see the pattern emerging. The network effect turns everything into a media platform, while at the same time obviating the need for media as a marketing vehicle because brands can use the network itself as a marketing vehicle.
[…] The smart hunter would rather be hunted. Scott Karp – May 18th, 2006 | Email | Print | Link Article Tags: Google, Advertising, Yahoo, Brand, Marketing2.0 […]
from Lisa Barone at Bruce Clay, Inc. A fascinating discussion about PPC innovation and effectiveness sparked by a recent Don Dodge post. From SEOmoz.org, an in-depth interview with MSN’s search team. Scott Karp offers some sobering opinions. How much PPC is too much? Opinions to share? Please let us know!
[…] As if it weren’t enough that digital technology has turned everything on your computer, from software to online stores to music, into media — digital technology is rapidly turning everything in the “real world” into media. THE HOTTEST FORM OF DIGITAL media on Madison Avenue isn’t online. It’s out-of-home. Digital out-of-home networks are popping up virtually everywhere: in stores, in theaters, in health clubs, in office buildings, and perhaps most importantly of all, on media planning flowcharts. The new networks, a subset of the outdoor media industry that is sometimes referred to as place-based television, are growing at a rate of about 10 new per month, according to a new report being released this week by marketing consultants Profitable Channels. The report estimates that the 700 digital out-of-home networks launched since 2002 will account for $1.2 billion in national ad spending this year, making it the size of a major network TV daypart. […]