Site content and community were vital to plans to get rich quick. But sites with great content and large communities are still being forced to close, writes Jim McClellan
In the mid-1990s, techno-gurus claimed that successful websites needed to focus on “the three Cs” content, community and commerce. Of these, content as in stuff to read, watch, listen to or look at, was pronounced king.
Truth be told, content’s hold on power was always shaky and was quickly deposed by community and commerce. But plenty of people crucially venture capitalists still believed that content was important online. As a result, various webzines appeared, offering the kind of thing normally supplied by the offline media, albeit with a few interactive knobs on.
Five years on things look very different. According to the American Net journalist David Hudson, the three Cs that now characterise life online are “consolidation, cutbacks and collapse”. Content sites have come under particular pressure, with well-loved names being forced to close. Suck, set up by Carl Steadman and Joey Anuff, and Feed, set up by Steven Johnson and Stefanie Syman, suspended operations last month, provoking much lamentation.
Both titles were Internet old-timers (online since 1995) and embraced the creative possibilities of the net. Suck specialised in sarcastic debunking of Net hype and clever hyper-linking. Feed offered cultural commentary and experimental interfaces. Both were pioneers in their own way and had become part of the online furniture.
Perhaps that was part of their problem, suggests Clay Shirky, a Web analyst (and occasional Feed contributor) from The Accelerator Group in New York.
“Suck’s initial editorial mission was to be smart and sceptical about the Web. At the time no one else was either of those things. By 1999 everybody had gotten smart about the Web. And by 2000 everyone had gotten sceptical.
“Feed’s editorial mission wasn’t clear, because it was always a work in progress. But it’s hard to say what the New Yorker’s mission is, aside from showcasing good writing.”
Actually, both sites did evolve. Suck kept the sarcasm but moved to cover pop culture. Feed dropped the experimental, academic tone. And last year both sites joined forces to create Automatic Media. The visible result was Plastic, the Slashdot-style community weblog devoted to media and politics, which remains online, because the staff, in particular Anuff, work without pay.
Behind the scenes, the aim was to create an advertising network and pool the ad staff of both sites to cut costs. It was a good idea but never really had a chance of working, thanks to the collapse. That collapse (and the unwillingness of investors to continue to fund loss-making Net operations) is the reason sites like Feed and Suck are closing. Most content sites support themselves by selling advertising (usually banner ads).
Rebecca Ulph, an analyst at Forrester Europe, says the online ad market is still growing.
“Even in these days of doom and gloom, it’s up 30-50% a year. But the problem is, it’s not growing as fast as the amount of content it’s attempting to support.”
As a result, says Shirky, the market is massively over-supplied and the rates sites can charge have fallen to around a 30th of three years ago. Both Ulph and Shirky believe advertising revenues will eventually be big enough to support content sites. Forrester has suggested that by 2005, “ad spending would bring around $27-billion to [United States] content sites”.
The sites that get these revenues, says Ulph, will offer detailed marketing services to their advertisers services that let them properly target consumers. There’ll be fewer sites, they’ll be bigger and they won’t be the names we know now.
As Shirky says: “The collapse of content sites is just beginning.”
To survive, sites are looking to boost their revenues by resorting to what could be called “the four Ss” shopping, syndication, services and subscriptions. None are easy. Back in 1998 many sites hoped to make money from selling items related to their content.
Unfortunately it has become clear that consumers prefer to buy from dedicated retail sites. Syndication (or licensing) works for some. For example, Zach Leonard, the CEO of FT Marketwatch, says his site initially thought revenues would be “80% advertising, 20% licensing. But the split’s worked out to be 60/40.”
Still, FT Marketwatch is well-placed. It has the FT brand and can license everything from tools and real time financial data to more standard content to businesses keen to be associated with that brand.
Similarly, using services associated with content either to generate money or shore up ad revenues is an option for only a few businesses. Ulph mentions the free wedding planning service offered by Confetti, which locks consumers into the site largely because of the trouble it would take to switch to a rival.
In the US, Ediets has built a profitable business out of charging consumers $10 to $15 a month for content and personalised diet-planning tools.
Shirky remains sceptical. “Ediets is almost like a micro-application service provider. But it’s not clear it is a general solution for the problems faced by what we generally mean by content sites.”
The general solution many seem to favour is subscription. After all, it works offline. However, no one has really been able to make it work online. There are exceptions, the most notable being the online edition of the Wall Street Journal, which claims to have 574 000 paying subscribers. However, this hasn’t made WSJ.com profitable.
In March the site confirmed it was cutting jobs as a result of the ad revenue squeeze. Ulph says the high subscription figures aren’t what they seem. Most subscribers are businesses who take up the general subscription offer for the print and online edition combined.
Shirky says that WSJ.com offers its opinion pieces free, because it wants them to circulate widely.
It is a sign that if subscription charges do come in for content sites, they won’t be crude flat fees. Most will continue to offer some free content (aimed at general consumers) and content you pay for (aimed mainly at niche markets, in particular business users). For example, many US newspapers offer their content free for seven days, but charge for their archives.
Yahoo now charges for some premium services, including auction listings and the ability to make phone calls via its instant messenger client.
Salon, the cultural/political webzine tipped to be the next content casualty, charges users $30 a year for extra content and the chance to read the main site ad-free.
As far as the United Kingdom/ European market is concerned, Shirky says it will be a “big indicator” if FT.com decides to try subscriptions.
FT Marketwatch’s Zach Leonard says that the FT group is “actively looking” at online subscriptions.
“The questions are what and how much would remain free.”
Indeed, at the moment, as he points out, FT.com charges for some services/content for example, its AskFT archive search. FT.com is one of the few sites that might be able to charge, says Ulph.
“Sites have to produce the best of breed content you can’t get anywhere else reliably, otherwise people won’t pay for it.”
There needs to be a fundamental change in the consumer mindset, she suggests. People expect to get content free. When faced with a charge, they assume they’ll be able to find something similar elsewhere free. They also feel they have already paid once in their ISP subscription charges. That indicates, suggests Leonard, that companies such as AOL-TimeWarner and TerraLycos will be best-placed to make money from content. They might adapt a cable TV pricing model, and add levels of content according to how much the user paid.
“That way the user experience is not hindered. They just pay upfront and everything is all in.”
AOL, in particular, seems to be moving this way. While the high-profile content casualties are American, the pressures are being felt in the UK. Ulph says several sports sites will close over the next year.
The women’s sites will also struggle. Drew Cullen, editor of the cheeky British IT news site The Register suggests Dotmusic may have problems.
“It has a massive readership, but it doesn’t generate much income.”
What about The Register? Cullen seems confident. The Register knows its niche. It has a large readership and a small staff (14 in total). It is managing to support itself via advertising.
“But if we wanted to do more than wash our face, we’d have to look for money, which would be difficult now.”
Perhaps that’s a blessing in disguise.
Shirky says “venture capital damaged online media”. Most such companies put money into Net companies expecting to lose it or make back 30 times their investment in two years, he explains.
Content sites were never going to offer those kinds of returns.
“Media outlets chug along either just below the waterline, as with The New Yorker, or just above, as with most magazines. The media business is just not a wealth creation business.”
Unfortunately, people believed that everything connected with the Net would make them billions. No one thought content sites needed to be shielded like a new magazine for five years while they found their feet. So content sites now need to look for a different kind of money, says Shirky.
“They need patrons, rich media companies that don’t mind running them as a loss leader. After all, the New Yorker has never turned a profit.”
Then again, there’s only one New Yorker. You could argue Microsoft is running Slate, its cultural webzine as a New Yorker-style loss leader. This particular solution might work for Salon, possibly even Feed and Suck, but not many more.