December 3rd, 2006

Content Businesses Don’t Scale Anymore

by

Can anyone think of a content business — meaning a company that produces original content — that has scaled dramatically in recent years? I can’t. Look at the businesses that have scaled — Google, MySpace, YouTube — all platforms for content, but not producers of content. Compare those to original content businesses like Weblogs, Inc., Gawker, TechCrunch, Paid Content — they are successful at their scale, but that scale is still tiny compared to the scale of the aggregation businesses. Even portals like AOL and Yahoo are much more aggregators of content than original producers of content.

Last spring I wrote about the Long Tail of Revenue 2.0, observing that the most of the revenue goes to aggregators in the head, and the rest is spread very thinly across an ever growing and ever thinning tail of content creators. Tim O’Reilly has posted a version of this obeservation in The Economics of Disaggregation:

…long tail businesses disproportionately benefit the aggregator. While they create new opportunities for content providers “down the tail” who might not otherwise have been noticed, they create even greater collective benefits for the Amazon, the Google, the Netflix, who hosts the entire collection, the dog who wags the tail.

William Bulkeley put this phenomenon in a larger context in a WSJ article title, “The Internet Allows Consumers to Trim Wasteful Purchases“:

Marketing 101 says success comes from selling things people want. But advanced marketing calls for companies to leverage the relationship to get the buyer to pony up for other products — or at least for extra product. When customers find a way to avoid buying the excess baggage, they change quickly.

Take the film business. Eastman Kodak and Fuji Photo Film had a highly profitable duopoly for 20 years before digital cameras came along. They never dreamed customers would quickly abandon film and prints. But customers are happy to pay for new digital cameras because the cameras let them pick the good pictures without having to pay to print out a roll of mostly mediocre shots. Now film sales are dropping 20% or more a year and Kodak has reported losses for eight consecutive quarters while closing plants around the world and laying off thousands of people.

Jack Shafer in Slate narrows the lens on the newspaper industry:

Bulkeley could have easily applied the wisdom of his lesson more broadly to newspapers. It’s not that the complete gestalt of local, state, national, and international news plus sports, comics, classified, opinion, and hints on fashion, home, entertainment, and food isn’t still useful. It is. But given a choice, and the economic means to make a choice, many buyers prefer to make an unbundled purchase. Unbundling the news they want from the news they don’t want is what the Web allows readers to do now.

The result of unbundling, disaggregation, the loss of pipe control (to use Andy Kessler’s construct) — i.e. the inability to force people to consume content they don’t want — is that content businesses don’t scale anymore. That doesn’t mean creating content isn’t profitable — independent publishers like Mike Arrington and Rafat Ali can have nice little businesses — but the same phenomenon that allowed them to become business at all will probably prevent them from becoming large businesses. I’ve heard Mike Arrington say he wants TechCrunch to be as big as CNET — the problem is that CNET’s audience is not only being chipped away by TechCrunch but also by hundreds of other independent technology publishers, which limit the growth of TechCrunch as much as they shrink the reach of CNET.

Robert Young posits the “fat belly” as a missing link in long tail economics:

The recognition of the existence of the Fat Belly is critical for many reasons, but allow me boil it all down to this overarching statement: Any economist or political scientist will agree that the health of any democratic society that’s fueled by free market capitalism is measured by the robustness of its middle class. A large and vibrant middle class demonstrates a healthy redistribution of wealth within a nation and its economy, ultimately serving as a catalyst for the power of one vote and equality amongst its peers/citizens.

The comparison to the middle class is exactly right — content businesses will have a share of the welath, but they will never scale to be “wealthy” like the aggregators.

So does that mean that content creation will forever be a small business? Likely, yes, unless you can aggregate your way up to scale — this is what Weblogs Inc attempted, realizing that none of its blogs would ever be a big business unto itself — aggregation also enables an internal network effect that gooses the scale. But even Weblogs is still dwarfed by the aggregator businesses, even after it was acquired by one (AOL).

The democratization of the content businesses, like any other democratization, requires a flattening of the business — a lot more people can play, but the opportunity is limited by each successful entrant. There’s still a finite amount of attention for content. And let’s not forget that much of the new content is being produced by people who have no interest in being in the content business — they just want attention in some form. But all those MySpace pages and silly YouTube videos take dollars off the table — except for MySpace and YouTube.

The real wealth generation opportunity for businesses like Weblogs, TechCrunch, and Paid Content is the prospect of being acquired by an aggregator — but I think we’ll see the continued growth of a new breed of “mom and pop” content business, content (pun intended) to make an independent albeit middle class living.

UPDATE

Some additional thoughts occurred to me on the treadmill:

Many of the aggregator businesses, like YouTube and MySpace, are better described as platform businesses, i.e. they provide a platform for content creators and distributors, which makes them de facto aggregators. Also, new platforms like Brightcove are likely to support lots of small content businesses rather than launch any large scale businesses.

The content creation space is also being crowded by brands, which are increasingly trying to create content as a destination rather than commercial messages as an interruption — and because they can leverage platforms like YouTube, they no longer have to pay content creators to ride along with their content. Every minute we spend with a brand’s content, whose objective is selling the brand, is a minute we don’t spend with content whose objective is selling the content.

Jonathan Miller at Web 2.0, shortly before his abrupt departure from AOL, effectively conceded that the content business is losing scale. John Battelle asked him whether portals like AOL can hold onto their monopoly, or whether they will go the way of cable TV, i.e. infinite fragmentation. Although he gave the dutiful public company answer, that in practice he didn’t see why AOL wouldn’t hang onto its monopoly, his first answer was frank and honest — in principle, there’s no reason why these monopolies shouldn’t unwind.

Comments (71 Responses so far)

  1. Dismantle Content Management Systems (CMS)! Rebuild them with Social Media Features I’ve used four CMS systems in my career, and they have tremendous problems with scalability, flexibility and vendor lock in. Content Businesses Don’t Scale Anymore » Publishing 2.0 The result of unbundling, disaggregation, the loss of pipe control (to use Andy Kessler’s construct) — i.e. the inability to force people to consume content they don’t want — is that content businesses don’t scale anymore.

  2. inte. Titta pÃ¥ de företag som har skalat upp – Google, Myspace, Youtube – alla är innehÃ¥lls-plattformar men inte producenter av innehÃ¥ll. /…/ Till och med portaler som AOL och Yahoo är mer ihopsamlare av innehÃ¥ll än originalproducenter.Läs hela analysen och kommentaren här. • Det jag brukar kalla “chunkabilitet” (läs mer här) kallas även “snacking” – läs hos Martin Jönsson: “istället för att inta stadiga tv-mÃ¥ltider i form av lÃ¥nga program tar man sig lite smÃ¥tuggor här och där – ibland i mobilen,

  3. at some of the top blogging topics. I have posted before about how i like Techmeme and it helps me keep on top of hot topics in the blogsphere. There i found this meme on how content businesses don’t scale anymore starting with a post by Scott Karp in his blog Publishing 2.0 with some interesting comments and then some additional pickups which i am sure will continue tomorrow. Since Karp defines original content businesses to be producers like Weblogs, Inc., Gawker, TechCrunch

  4. Content Businesses Don’t Scale Anymore

  5. Scott Karp of Publishing 2.0 breaks down the economics of news production and aggregation. It’s bad news for Old Media and for bloggers and podcasters who want to get filthy rich. It’s good news for businesses or organizations that can find an audience and feed it. In summary, Karp says content aggregators like Google are far more likely

  6. Scott Karp at Publishing 2.0 came up with a thought provoking discussion on why content businesses don’t scale any more; together with his discussion on the Long Tail of Revenue, there’s some insights that any Web 2.0 venture needs to think of. Last spring I wrote about the Long Tail of Revenue 2.0, observing that the most of the revenue goes to aggregators in the

  7. Publishing2.0

  8. Content Businesses Don’t Scale Anymore » Publishing 2.0

  9. profitable verticals you see many sites rank which are various flavors of forums, user accounts, xss exploits, and other social spam. In spite of Yahoo! being the most visited website compare Google’s recent stock performance to Yahoo!’s. Given that content as a business model does not scale well, traditional monopoly based content providers are going to have to work hard to get users to create / add value to / organize their content. As they do, many of these types of sites will make it easier and easier to leverage them directly (easy to rank

  10. who might not otherwise have been noticed, they create even greater collective benefits for the Amazon, the Google, the Netflix, who hosts the entire collection, the dog who wags the tail.” Scott Karp sums up the content creation vs. aggregation debate: “The result of unbundling, disaggregation, the loss of pipe control (to use Andy Kessler’s construct) — i.e. the inability to force people to consume content they don’t want — is that content businesses don’t scale anymore. That

  11. handle ad bidding on Google for spots in which Google promotes itself. Interestingly, Yahoo does not do this…yet. I also recommend this string of articles on Publishing 2.0 by Scott Karp. BEWARE THE DIGITAL GENERATION BS DETECTOR BRANDS AS MEDIA CONTENT BUSINESSES DON’T SCALE ANYMORE (I TOTALLY AGREE) SOCIAL MEDIA IS A MARKETPLACE FOR TRAFFIC

  12. choice between “culture and mammon” will no doubt continue to have repercussions on the business of bringing books to life. I guess we have a lot of work to do – or perhaps we continue to cater to what the audience want or expects…. Since I read this article by Scott Karp I have been thinking about it a lot. I don’t agree with all of it but it a very interested view point on data/content aggregators and content creators. There is a under current of negativity associated with the ‘aggregator’ business model

  13. Publishing 2.0

  14. Scott Karp

  15. Scott Karp writes: Can anyone think of a content business — meaning a company that produces original content — that has scaled dramatically in recent years? I can’t. Look at the businesses that have scaled — Google, MySpace, YouTube — all platforms

  16. Content Businesses Don’t Scale Anymore » Publishing 2.0

  17. paidContent.org FTC May Regulate PayPerPost TechCrunch Wikia Launches Offers Free Hosting WHIR News Search 2.0 – What’s Next? Read/Write Web Shelfari Launches Book Widget for MySpace, Blogs Mashable! Content Businesses Don’t Scale Anymore Publishing 2.0 Deals 2007: New Media Inroads Too Risky to Bypass The Hollywood Reporter Best Practices Web 3.0 – The Bridge To The Singularity Web 3.0 The User-Generated Solution MediaPost Online Spin

  18. Paul Boutin, who has written for Slate and Wired, joins Valleywag. Melissa Lafsky and Nick Douglas (who used to blog at Valleywag) join HuffPo’s Eat the Press blog. Bloxpert has an interview with David Sifry. Publishing2.com says content business don’t scale anymore. It could also be that very successful media companies just take a very, very long time to build. Some of the best known content providers have been around for several decades.

  19. Recente ICT jobs! The Economics of DisaggregationContent Businesses Don’t Scale Anymore » Publishing 2.0

  20. post from Scott Karp

  21. content creation, rather, it draws upon these efforts elsewhere by having the site’s editor select items from a custom built feeds dashboard that loads content from around the web for bookmarking to the front page. This can be seen as

  22. Content Businesses Don’t Scale Anymore”. The basic premise of the post is that all of the recent content businesses which have scaled dramatically in recent years are content platforms (YouTube, MySpace, Google) and not creators of original content.

  23. Very interesting comment on the business side of publishing in a peer to peer oriented publishing environment. Worth reading in full, we’re just reblogging the first paragraph to give you a taste of the topic. Publishing 2.0 writes

  24. content creation, rather, it draws upon these efforts elsewhere by having the site’s editor select items from a custom built feeds dashboard that loads content from around the web for bookmarking to the front page. This can be seen as ‘content generation.’ Hence, the

  25. Content Aggregators Change Navigation and Control of Content (odtud pocházejí ilustrace v článku) More on Content Aggregators Content Producers Must Adapt to Survive Monetizing The Value Of Contexts – From Media Publishers To Content Aggregators Content Businesses Don’t Scale Anymore PS: Pokud vás článek zaujal, pomožte ho agregovat tÄ›mito ikonkami. ;-)

  26. Content Businesses Don’t Scale Anymore » Publishing 2.0

  27. Publishing 2.0 – Content Businesses Don’t Scale Anymore

  28. Combine that with the fact that more and more authors are becoming brands with growing platforms on their own, needing a sales, marketing and publicity function is becoming less of a need–this is the real benefit a publisher provides now… Link: Content Businesses Don’t Scale Anymore » Publishing 2.0

  29. [...] Scott Karp at Publishing 2.0 has a long and thoughtful post on the subject of the content business and aggregation, and so does Tim O’Reilly. [...]

  30. Terrific post. I wrote a little about this last week on my personal blog, and while Philly Future’s business model still isn’t laid out, it was part of the bet I made when I re-launched it.

  31. Scale and Revenue…

    Scott Karp at Publishing 2.0 came up with a thought provoking discussion on why content businesses don’t scale any more; together with his discussion on the Long Tail of Revenue, there’s some insights that any Web 2.0 venture needs to think…

  32. Can anyone think of a content business — meaning a company that produces original content — that has scaled dramatically in recent years?

    Wikipedia.

  33. Nick, yes, perhaps I should have been more specific — a for-profit business producing original content that has scaled?

  34. I agree with most of what you’ve said here, but I think it’s important to note that the Internet has helped places like the NYT, the BBC, the Guardian and the Washington Post scale up — not to the scale of aggregators, but certainly up. 20 years ago these were outlets consumed only on their home turf. Now they are the world’s leading English-language news sources.

    I think things are different for these guys because (A) they create top-notch content in the head (relevant and interesting to almost everybody), and (B) it is hard to produce this kind of content (not everybody gets leaked memos from the Secretary of Defense). The result is that as media unbundles, these winners are stealing audience from local and metro papers that were bundling low-quality head content into their reports.

  35. Calling Techcrunch, Weblogs Inc, Gawker, PaidContent business that are successful at scale is stupid. They are far from scaling. The produce nothing in terms of content. Pumping out trivial text is simple.

    Media businesses have proven scale on their ‘old’ platform. We’ll certainly see new companies emerge that can scale with video and audio. There are a few out there now pumping out a ton of video and audio original content.

  36. Scaler — first, why not take credit for your insights? Second, I said those content businesses are successful at their scale, i.e. at their current scale, meaning they are all profitable today. I profitable content business is far from “trivial.”

    There are a few out there now pumping out a ton of video and audio original content.

    Can you be a bit more specific?

  37. [...] Excellent post by Scott Carp of Publishing 2.0.  But hey Scott in your post you forgot PodTech.   We’ve been pumping out original content heavily for over a year.  It is clear though (as you point out) that aggregation is key.  One thing that I’ll add to your post and we’ve noticed it here at PodTech – there is a key relationship or interplay between orginal content production and aggegration.  Meaning they are not mutually exclusive but instead work together.  There is natural binding in content – just look at techmeme and other great 2.0 environments.  This is a point that is severely missed by Tim O’Reilly himself.  [...]

  38. a for-profit business producing original content that has scaled?

    Yahoo Answers.

    Wikipedia and Yahoo Answers may be exceptions that prove the rule, but they’re illuminating exceptions.

    Good post, by the way.

  39. Great post, Scott. The theoretical “pie” of our attention is being divided into smaller and smaller pieces. Old-line content creators have responded by desperately trying to maintain their share of the audience. I think they’d be better served by giving away audience — if they do it right.

    Here’s how I envision it: newspapers, radio and TV stations, and magazines have excellent relationships with advertisers. They should be working with those advertisers to help the advertisers capture an audience of their own. Radio stations can keep producing content to reach the biggest number of people possible. Or they can find revenue by creating 100 online programs for 100 niche audiences, each delivered to an advertisers’ specific demographic.

    For example, I work for a company that’s in the radio network business. But the interactive division I work for is not producing the same old programs for mass audiences online. Instead, I get to work with individual clients to help them talk to their audience. In effect, we’re using our ability to create content to give away audience attention to our client-partners, instead of trying to hog it for ourselves.

  40. [...] Bingo. It’s not about the content. It’s about the platform. And it’s about letting people interact in valuable ways on the platform. That’s what creates value. [...]

  41. [...] Scott Karp, one of the deep thinkers about the issues and problems with media businesses, has written a nice piece titled ”Content Businesses Don’t Scale Anymore”, where he argues that scaled content businesses are rare these days, and probably will not happen anytime soon. He uses us as one part of the example, and starts with this: “Can anyone think of a content business—meaning a company that produces original content—that has scaled dramatically in recent years? I can’t. Look at the businesses that have scaled—Google, MySpace, YouTube—all platforms for content, but not producers of content. Compare those to original content businesses like Weblogs, Inc., Gawker, TechCrunch, Paid Content—they are successful at their scale, but that scale is still tiny compared to the scale of the aggregation businesses.” And then, this: “The result of unbundling, disaggregation, the loss of pipe control…– i.e. the inability to force people to consume content they don’t want—is that content businesses don’t scale anymore. That doesn’t mean creating content isn’t profitable—independent publishers like Mike Arrington and Rafat Ali can have nice little businesses—but the same phenomenon that allowed them to become business at all will probably prevent them from becoming large businesses…The real wealth generation opportunity for businesses like Weblogs, TechCrunch, and Paid Content is the prospect of being acquired by an aggregator.” I think the first point he is making has some truth to it, but looking at all these sites as a totality is looking at these things the wrong way. There’s a huge difference between Weblogs Inc, TechCrunch, GigaOm, Gawker, and our company, and despite what anyone might think, our company doesn’t compete for audience, ad dollars or any other kind of revenues with the others. Out of these names, the Silicon Valley crowd compete among themselves, but most of you know this: we keep out of it. I come out of trade media, and will always consider myself as being a trade journalist. In our industry, digital media, or media business, our combined three sites (paidContent.org, Moconews.net and ContentSutra.com) have bigger reach than any other trade pub you can think of. Secondly, scale for us, and me, doesn’t really mean traffic, or for that matter, scaled revenues…it means influence. The people who cut the checks for everyone else in this industry, including any and all of the consultants writing about this industry, read us. Anyone who is coming to our NYC mixer in two days will see it first hand. For us, it has been and will always be about breaking stories and providing context and meaning to all of what’s happening in the digital media industry. As long as we keep doing our jobs on the editorial side, my belief (call it naive, but really, we have proved it over the last 3-4 years) is we will be safe, healthy and growing as a business. As for the rest, who cares… [...]

  42. [...] Scott Karp at Publishing 2.0 has a long and thoughtful post on the subject of the content business and aggregation, and so does Tim O’Reilly. [...]

  43. when did they ever scale. They have always been huge overhead businesses. If not at the beginning, than when they mature slightly.

    There is an abundance of talent -that is the story Scott. Content has never been cheaper to make so this is the first time it CAN scale

  44. [...] Seemed like an appropriate title for a post after reading Scott Karp’s piece that says Content Businesses Don’t Scale Anymore. [...]

  45. [...] Scott Karp has a great article up about Content Businesses not scaling. Hmm. I think I disagree with him which isn’t new. Here’s some hot tips on scaling your content business. That’s if you want to be 100% sucessful. Pay attention I don’t see anyone else out there doing it. Including the wizards of new media content. [...]

  46. Howard, I agree that content creation is scaling like crazy due to an abundance of newly empowered talent — but that’s precisely why it’s so hard to scale the audience for any given content effort — and that’s why the content platforms are what scales.

  47. Great post, Scott. These are not that good a time for content providers as hyped. I wrote on the issue a few times back which your readers may find useful.

  48. Scott,

    Sometime during the past 14 years all economic rules got temporarily tossed aside to make way for the internet and the new economy. This was the verge of utopia and then the bottom fell out. The crash or correction during 2001-2004 was the market getting itself back to a state of equilibrium, or as close to it as theory will allow. Since the internet wasn’t able to BK itself :) and telco’s weren’t pulling their fiber out of the ground and content was getting more compelling and lastly ubiquity in broadband access was not a pipe dream of a rocket scientist(milo medin from @home) but was actually beginning to happen, we were presented with an ideal economic setting for growth. Leverage the efficiencies of this internet with a combination of hardware and software to drive efficiencies in every possible nook and cranny of enterprise and consumer goods and services. The relevance to your posting is that this notion of the market evolving to maturity can be applied to the original content industry. Based on the attributes of the internet like always on, ubiquity in reach(global, not local or regional, interactivity between participants it becomes astoundingly clear that the content producers as we know them are not examples of efficiency as it pertains to the internet. So when you state that content producers aren’t scaling to the degree that the aggregators are you are 100% correct but that shouldn’t be shocking news to anyone. What it should do is stand as a wake up call to how easy it was to get consumed in the hype of web1.0 only to suffer a rather long hangover which wiped out many false dreams. One last example on why youtube, flickr, blogs, and UGC for that matter, are examples of efficiency enablers is highlighted by this fact, it cost the producers of Friends somewhere in the neighborhood of $5M per episode(disclaimer: that # is from memory and rough guesstimate of per actor salary and general production expenses) to produce

  49. [...] Publishing 2.0: Content Businesses Don’t Scale Anymore Aggregators have scaled, but not micoropub content producers, because consumers prefer unbundled products that allow them to trim the things that they don’t need. This means aggregators disproportionately benefit from long tail businesses. (tags: aggregators gawker techcruch paidcontent youtube myspace longtail newspapers business-models) [...]

  50. One of our properties that we own PodcasterNews.com is all based on original content it has been a interesting year on that site and traffic continues to grow and I can tell you original content sites are pretty hard to scale especially for a boot strapping startup. We require that all of the content be original aka not found anywhere else that is not to say that the producers are producing 100% original but we try..

  51. [...] Scott Karp posts on why content no longer scales. For those not hip to the lingo, let me break it down: with the obliteration by the internet and other technologies of the cost of producing and distributing media, barriers to entry have tumbled and virtually anyone can now have an audience for their particular voice – whether it’s in print, audio or video. A billion voices means a billion niches, however, and one can never grow very large serving a small market (We already understand this quite well in Canada). [...]

  52. [...] Scott Karp has a great crack at understanding this conundrum on his blog, Publishing 2.0, today: Can anyone think of a content business — meaning a company that produces original content — that has scaled dramatically in recent years? I can’t. Look at the businesses that have scaled — Google, MySpace, YouTube — all platforms for content, but not producers of content. Compare those to original content businesses like Weblogs, Inc., Gawker, TechCrunch, Paid Content — they are successful at their scale, but that scale is still tiny compared to the scale of the aggregation businesses. Even portals like AOL and Yahoo are much more aggregators of content than original producers of content. [...]

  53. [...] Content Businesses Don’t Scale Anymore Can anyone think of a content business — meaning a company that produces original content — that has scaled dramatically in recent years? I can’t. Look at the businesses that have scaled — Google, MySpace, YouTube — all platforms for content, but not producers of content. Compare those to original content businesses like Weblogs, Inc., Gawker, TechCrunch, Paid Content — they are successful at their scale, but that scale is still tiny compared to the scale of the aggregation businesses. Even portals like AOL and Yahoo are much more aggregators of content than original producers of content. [...]

  54. Scott – what a great post!

    I work more with reference content in the STM (science, technical and medical) market and the “silver bullet” there is integrating content into the workflow and creating tools, thereby, making content more accessible (for a professional practitioner or researcher). If you look at Thomson, for example, they have been successful on this front and it is the mantra for Elsevier and Wolters Kluwer as well.

    But your point still holds in STM because even with the move towards integration and tools – companies that still want to sell JUST their content will meet with less success than those that are open to all content sources. Consumers want what they want regardless of who published it.

    Aggregation is an important model in STM, but even some aggregators are having a hard time keeping their market share. Aggregators that don’t keep updating their pricing, content “bundling” options, and platforms are learning the hard way that they can’t just “dump” books and journals on the electronic shelf anymore.

  55. My immediate reaction is that content never was truly scalable – but there are certainly some news publishing companies in the UK that recycle content across a series of their titles and through new giveaway editions. I guess it depends on your definition of dramatic.

  56. [...] It seems to be trendy at the moment to say that content businesses do not scale and that the future is all about aggregation. I wholeheartedly disagree. I think aggregation and platform plays are great, there is no denying YouTube and MySpace’s success. However, what happens when the latest and greatest platform or aggregator comes along? How do you maintain your audience? Stickiness is a real problem if you don’t own the content. Does Metcalfe’s Law apply to platform businesses when something cooler appears on the scene? And if it’s one thing we know about the innernet, it’s that there is *always* something cooler just around the corner. [...]

  57. [...] When you look in Google’s search results for long tail queries in consumer finance or other profitable verticals you see many sites rank which are various flavors of forums, user accounts, xss exploits, and other social spam. In spite of Yahoo! being the most visited website compare Google’s recent stock performance to Yahoo!’s. Given that content as a business model does not scale well, traditional monopoly based content providers are going to have to work hard to get users to create / add value to / organize their content. As they do, many of these types of sites will make it easier and easier to leverage them directly (easy to rank content host) and indirectly (indirect traffic and direct link authority) to spam Google. [...]

  58. [...] Content Businesses Don’t Scale Anymore [...]

  59. Great post, Scott. But I actually think today’s independent publishers have a better shot at scale than traditional media start-ups because, unlike media start-ups of the past, they can outsource more of the publishing work, namely ad sales, ad serving and collection of accounts receivable.

    At the low end of the effective CPM scale, there’s Google. I’m at Federated Media, where we’re trying offer independent sites with higher effective CPMs. We do this by working with advertisers directly (human sales people) to build integrated programs & to sell each site’s unique magic. This gives us access to higher CPM brand-advertising budgets rather than the direct-response / CPC budgets that fund most of the campaigns with Google.

    Traditional print magazines and web publishing companies spend 75-85% of their budget on SG&A, the non-editorial stuff. Mike Arrington, Om Malik, the Boingers and 100 other indie publishers offload those costs to FM, while giving away (to FM) only 40% of the ad revenue. For small & mid-sized publishers, Google takes about 49%. FM’s “federation” approach gives us economies of scale that small & mid-sized sites wouldn’t have on their own. In other words, today’s niche publications can collect the premium ad prices previously only available to major media companies with funds for big sales staffs — without the same cost structure. Maybe those higher margins will enable them to publish more content, launch new publications, and reach larger audiences. Perhaps there’s hope for scale!

  60. [...] Scott Karp is talking about Content Businesses Don’t Scale Anymore: “…the loss of pipe control — i.e. the inability to force people to consume content they don’t want…” [...]

  61. [...] Coming at this from a different angle, consider Scott Karp’s comments on the business of producing content: Can anyone think of a content business — meaning a company that produces original content — that has scaled dramatically in recent years? I can’t. Look at the businesses that have scaled — Google, MySpace, YouTube — all platforms for content, but not producers of content. [...]

  62. Scott,

    I’ve enjoyed your blog for a while and thought this was a tremendous, thought-provoking post. I think you make a lot of sense and as an entrepreneur, it definitely makes you think about what you want your startup to be when it grows up.

    Thanks for posting.

    Rahul

  63. [...] Headlines for 13 December 2006 Trends Family With Big Stake Seeks Part of Tribune The New York Times* Yahoo! Search Marketing Platform Opens Online Sign-up for New Customers Yahoo! Media Relations When Numbers Mean Anything And Nothing: iTunes Sales; FIM-YHOO paidContent.org FTC May Regulate PayPerPost TechCrunch Wikia Launches Offers Free Hosting WHIR News Search 2.0 – What’s Next? Read/Write Web Shelfari Launches Book Widget for MySpace, Blogs Mashable! Content Businesses Don’t Scale Anymore Publishing 2.0 Deals 2007: New Media Inroads Too Risky to Bypass The Hollywood Reporter Best Practices Web 3.0 – The Bridge To The Singularity Web 3.0 The User-Generated Solution MediaPost Online Spin Guide To Promoting Integrity In Scientific Journals Published By The Council Of Science Editors Medical News Today Cool Tools Semantic Web Experiment Uses ClearForest Web Services Really Simple Sidi Deals, Parnerships & Sales IBM and Yahoo! Unveil Free Enterprise Search Software WebWire Bloomberg to Enhance Messaging Compliance With Autonomy’s Aungate Real-Time Governance Solutions PR Newswire via Yahoo! Finance [...]

  64. [...] Valid point: Content Businesses Don’t Scale Anymore: “Can anyone think of a content business — meaning a company that produces original content — that has scaled dramatically in recent years? I can’t. Look at the businesses that have scaled — Google, MySpace, YouTube — all platforms for content, but not producers of content.” Obviously periods of transition cause pendulum swings beyond what will be sustainable in the future. We have moved well past content – the dialogue is currently about conversation and connections. But we still need something to aggregate. While YouTube has given us great insight (?) into the behaviour of individuals with web cams (Hey, I’ve got an idea – why don’t I lip synch to a song and let viewers see my messy bedroom!), we still need professional actors and musicians. Content isn’t so much created randomly as it’s created in reaction (or relation) to something. From my experience, a partly developed wiki page results in more contributions than a blank page. An existing song is the basis for remixing…rather than starting from scratch. Posted by gsiemens at 03:17 PM | TrackBack [...]

  65. [...] key to revenue growth."  This led me to recall Scott Karp’s post several weeks ago:  Content Businesses Don’t Scale Anymore.  While benefits from acquisitions may be short-lived, major media companies may have no [...]

  66. [...] post at Publishing 2.0. Scott’s thesis: the long tail as it plays out in the content world — the [...]

  67. [...] than point solutions is something that resonates strongly with us. Scott Karp at Publishing 2.0 had a post along these lines talking about Aggregators (platforms) vs. content sites (point solution… Another great post if you’re interested in online media. ]]> [...]

  68. [...] to stop an Unchained Journalist from becoming a New Media Magnate. Investors are skeptical, because “Content Businesses Don’t Scale Anymore” but there is a good living to be made in many niches and this is almost certainly more fun than [...]

  69. [...] Most importantly, while niche paid content may well be a business that endures, it probably won’t be a business that scales — which fits with the larger observation that original content businesses don’t scale anymore. [...]

  70. There is a difference between finding a content business that has scaled and saying that content doesn’t scale. Foremski’s first law of new media states that content is infinitely scalable…

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