Wednesday, December 29, 2010

Making less money for more junk: How the 'New Media' is the new fossil fuel

Ten years ago, we thought that the biggest thing the Web was going to be was a high-tech mail order catalogue. Some of the most publicised tech stunts in the first Web boom of the late 1990's involved geeks voluntarily locking themselves indoors for weeks and subsisting on stuff that can be ordered via the Web -- all to highlight the foreseen downfall of businesses derided by first-generation Web heads and their Wall Street cheerleaders as "bricks-and-mortar" establishments. Jeff Bezos, founder of Amazon.com was rewarded for fitting that "vision" when he was made TIME Person of the Year in 1999.

We now know that the Web went on to prove that its biggest direct value to the average schmoe was as a forum for "social networking". Facebook.com enhanced real-world and real-person networking while a plethora of massively-multiplayer gaming platforms opened alternate realities for alternate-person networking.

Ergo: 2010 TIME Person of the Year = Facebook's Mark Zuckerberg.

That's history up to this moment in 2010.

Between 1999 and 2010, the the money train off the Web changed from directly transactional to peripheral.

Big-in-the-90's Amazon.com and eBay.com made money from the primary activity on their sites. Users logged on to Amazon and eBay primarily to buy and sell stuff; and they paid for that activity, one way or another. In contrast, the primary activities of users logging on to Facebook.com (connecting with friends) and Google.com (connecting with the information they seek) are supported by those sites for free. User volume remained a key metric since advertising remained the only realistic means to monetise the communities these platforms created.

For that matter, advertising remains the only legal means to make money off sheer user volume. As it became evident that the real toll on us for all this "free" service we were enjoying was levied in the form of the trail of revealing data we were leaving on these sites the Law caught up (we hope) and hog-tied these sites in privacy legislation. Game over (in a sense). Facebook and Google have become nothing more than the 2010s' contribution to addressing a basic human need to connect with the bigger community in the same way that television and radio did in the 1950's. But they remain fundamentally the same -- free services limited to a best effort at having revenue-generating content (advertising) competing with primary (but freely-accessed) content.

In a sense, there was not much of a paradigm shift in Media business models over the last 100 years.

Indeed, television and radio (referring to the passive-media-consumption devices rather than on them as a class based on their technical nature) possibly remain more effective advertising platforms than the "New Media"...

On a per audience-minute basis Old Media revenue utterly dwarfs "New Media" revenue.

Facebook currently boasts a user base of 500 million. Being a privately-held company, however, it is mum on its revenue figures. So let us go by the estimated one billion dollars it may have made in 2009. Assume too that the average Facebook user was logged on an average one hour per day. That translates to about 0.009 cents in revenue per audience-minute.

Compare that to the American media network Fox's Super Bowl franchise which is among the most-viewed content in Old Media. The 3rd February 2008 broadcast of Super Bowl XLII (New York Giants vs. New England Patriots) attracted an estimated 50 million viewers. A thirty-second advertising slot in a Super Bowl broadcast on the average costs about $2 million. That's about 8 cents in revenue per audience-minute.

In short, compare:

New Media: Facebook requires an audience of 500 million to make 0.009 cents in advertising revenue per minute of air time.

Old Media: Fox requires an audience of 50 million to make 8 solid cents of advertising revenue per minute of air time.

Thus:

Old Media requires only a tenth of the audience to make 1000 times the revenue of New Media.

What are the observations here? There are two key ones:

(1) Old Media relies on costly premium content to realise its immense revenue-to-audience ratio.

(2) New Media relies on dirt-cheap commodity (and mainly junk) content (that goes by the euphemism "Web 2.0") to realise infinitessimal revenue-to-audience ratio.

Consider too that;

(a) The on-going storage requirements of Old Media support mainly the content it produces; while,

(b) The on-going storage requirements of New Media support mainly the content contributed by its audience.

There are some lessons to be learned here when we put humanity's well-talked-up "embrace" of "New Media" in the above perspectives. Watch this space for what I think those lessons are but, for now, I'll leave this as some food for thought:

Storage required by Old Media is growing linearly, while storage required by New Media is growing exponentially.

Scary, isn't it?

Next in series: Am I a social networking star?

nyek nyek!

3 comments:

  1. a friend once asked where all the user-generated content goes to which another friend responded that it goes to outer space. lol.

    of course, we know content occupies very real space in the form of hard drives on servers (or whatever such hardware is called) and that costs a lot of money.

    on another matter, that quivering head of pacquiao seems to have an hypnotic effect on me.

    ReplyDelete
  2. If you've seen an actual data centre, you'll know what I mean. The data centres that serve many businesses here in Australia, for example, are housed in large airconditioned buildings with thousands of litres of diesel stored underneath to fuel an array of generators on standby in case there is a power interruption.

    You'd understand data centres built to store valuable information like financial transactions and stuff like that. But think of all the junk uploaded on Facebook and (specially) YouTube, all those forwarded memes, spam emails, etc. All of those are being stored somewhere...

    That's Pacquiao. Have you seen the quivering graphic of Noynoy yet? ;-)

    ReplyDelete
  3. yes, i've seen it. i dare not look at it for too long. :)

    ReplyDelete

Related Posts Plugin for WordPress, Blogger...