Scott Karp asked a few days ago “What If Media 2.0 Is Less Profitable Than Media 1.0?”
As consumers spend more and more of their media time online, ad dollars have been pouring into online media — the assumption has been that the billions of dollars that large companies spend on mass media advertising and marketing (i.e. TV ads) will ultimately follow the small company dollars online. [snip].
But what if there’s a fatal flaw in this assumption? What if the transfer of marketing and advertising dollars online is not 1-to-1? What if the Internet has fundamentally lowered the marketing and advertising costs for big companies as it has for small companies? What if large companies can achieve the same sales objectives for a fraction of the cost of traditional mass media advertising?
I think Scott’s hypothesis is interesting, and worth considering, though I’d add a different view on the challenges of the media business.
The atomization of the audience across an increasing number of channels means that audience aggregation gets more difficult every day. If you can’t aggregate an audience, then you can’t build more media revenue. Google’s strength in aggregating an audience in an ever more diverse world is in large part because Google isn’t about anything in particular. Instead, it’s treated as a source for anything.
If you want to connect the dots, read Vin Crosbie’s data-driven reminder that you can already smell the curdled milk in the newspaper business. And focus on this point:
…as print edition circulation declines, the average newspaper will need between 20 to 100 website users to replace the revenues lost from each former print edition user.
Unless ways can be found to increase the per user revenues generated from newspaper websites, newspapers need to gain fantastic numbers of Web site users just to replace the declines in print edition revenues. A 50,000 circulation daily would need to gain a million to 50 million Web site users to postpone the time when it’s no longer economically feasible to produce its printed edition!
It’s not just newspapers.
(Evidence point #324 that I’m a dinosaur beyond my years… I subscribe to, and (partially) read, two print newspapers, in addition to my online consumption. That cannot last.)