My 2013 prediction warned of the continued fall in the value of online content which would lead to the production of ever more content as media companies tried to maintain ad revenues.
You can think of it as a towering tsunami of content, or as a massive bubble of content inflation.
Just as inflation devalues currencies, content inflation is devaluing content.
Ryan McCarthy, Deputy Editor of Reuters.com, and the former Business Editor of the Huffington Post, comes to a similar conclusion:
The dirty secret about the web media business is that there’s a massive oversupply problem. Everyday, content creators are producing more journalism, more think-pieces, more interactive graphics, more photo galleries, more tweets, more slideshows, more videos, more GIFs, and more deviously socially-optimized Corgi listicles…
This creates more supply for display ads, web media’s favorite and still growing revenue generator. All that supply, however, drags down ad prices.
He points out a troubling reality:
…if you’re working in media now you shouldn’t be worried about getting your website to hit 20 or 30 million uniques — if ad rates continue to fall, even websites of that size may not be economically viable.
Keeping up is getting tougher.
What’s important to note is that new media companies could now be disrupted almost as fast as old media companies — maybe faster because they don’t have legacy revenue streams to provide some support.
To generate more traffic, more content is needed but that content has to be produced as cheaply as possible.
However, online advertising revenues for everyone are directly affected by the advertising rates set by giants such as Google, Facebook, Yahoo!, AOL, Microsoft, etc.
Their content production costs are tiny compared with traditional and new media companies, which have to use people, not just algorithms and user-generated feeds.
Most online media companies can’t compete on those terms because they need people to produce much of their content, and so their costs of content production are so much greater than advertising revenues can support.
So what’s the solution? What’s the funding model for journalism? We still don’t have it. But we know that advertising is not it.
Reuter’s Ryan McCarthy thinks it might be Gawker’s affiliate links model.
Gawker’s move to blend its content with an ecommerce platform, where posts are a delivery system for links to products, seems like it could help reverse this.
I think it has to be a “Heinz 57″ business model with multiple revenue streams from: ads, subscriptions, affiliate links, special marketing packages, events, membership packages, virtual goods, and more.
That’s a lot of work to manage each stream. Plus, each of those media revenue opportunities is under its own threats of disruption.
The rise of corporate media…
We are witnessing a surge in corporate media as businesses step up their production of video, blog posts, articles, thought leader columns, online magazines, video shows, etc.
Some of it is produced at a very high quality by former journalists and TV news show producers.
The corporate media is trying to fill a space left by the declining ranks of journalists and other professional media.
But this corporate media is caught in a massive bubble of content inflation. Huge amounts of all types of content competing with each other.
No matter how good the quality of any one piece of content — its value declines because of the inflating bubble of all online content.
Corporate media will get less traffic, less engagement, less visibility, because it has to compete with everything else online.
Which means it will become more expensive to reach the same results as before.
Smarter machine media
The expansion of content inflation will eventually slow but not for a good while.
There are big improvements coming in automating content production and raising its quality. We’ve only just begun in this area and it will help keep the bubble of content inflation expanding ever faster — just like our universe.