Tuesday, December 06, 2005

Content: Can it continue to be free?

An interesting question was raised today by the European Publishers Council (see "Group: Online Content Cannot Remain Free"). Well, actually, you're correct, they didn't raise the question, they made a statement. But for the thoughtful among us, perhaps it is a question better asked than answered out of hand.

Let's take a look at what Francisco Pinto Balsemao, head of the council had to say:

"It is fascinating to see how these companies 'help themselves' to copyright-protected material, build up their own business models around what they have collected, and parasitically, earn advertising revenue off the back of other people's content"

To provide you some context, "these companies" means specifically Google. And the content under discussion is news.

More Content, Anyone?

Where to start? Let's start with getting a proper perspective on the value of content in the context of the internet. When was the last time you were yearning for more content? When was the last time you were wishing search technology was just a tad better.

Right. I can't remember the last time I thought there wasn't enough stuff to wade through on the Internet. But quite regularly wish I could be more effective at searching. That's really just another way to say I wish search technology was smarter - so I don't have to be.

Am I suggesting that content has no value? Certainly not. But the internet has made available to me vastly more content than I can productively deal with. Content can't have value to me, if I can't find it. Of course, search has no value to me either if I can't find anything of value. Which value reigns supreme? While both content and search have some intrinsic value, it is clear that the value of both is heightened when they exist together.

From a big picture perspective, the value to the content provider is the potential subscription fees and advertising revenue. For the content consumer the value is generally in being informed. The value of search is determined by how much time I save over alternative means to find needed content.

With that brief understanding of value, let's ask a micro-question. What value does an individual news story have? Clearly it depends. I don't follow cricket. A cricket story has no value to me. In fact, it may have negative value to me, since any time spent on it detracts from time available for the rest of my life. But a technology review of an html editor has potential value to me as it directly relates to how I make my living. Why only potential value? If the story contains nothing new TO ME, then it has no value. Only if it contains information I did not already know does it have value.

How about the value of a single search? It is really unclear. I know it has value, because I will find what I am after faster than without search. In fact it is hard to imagine how I would go about finding content without search. Browse, I guess.

A Bit of a Catch

So then, at what point do I know if a story has value to me? Unfortunately, only after I have read it. To be sure, some stories can be eliminated from the headline. If I can tell from the headline that the story is about cricket, then I know to pass it by. But that means I have to read all available headlines to get a first pass at the stories that may be of interest to me. Then I need to read them to see if they contain new information. Or perhaps I can narrow the field by using news categories or specialty providers to do an initial filtering of available news. But still I am left with an unwieldy amount of headlines to read (unless of course I am interested in almost nothing). Not to mention all the article that I then need to read.

If you believe in value-based pricing, then the reasonable thing to do is charge a fee based on the value of content. But I have to read it before I know the content is worth it. Would I pay in advance? Maybe for a study from a reputable research firm where I have had the opportunity to read an abstract and read others thoughts on the value of the study. For an html editor review? Not likely. The only way to charge me for that is to ask me when I'm done reading if the story had value to me and oh, by the way, would I mind paying for it? Not a great business model - asking people for money after they have gotten the value from your product.

Search has a similar, but even more difficult problem. At what point do I know how much a search was worth to me? I have a partial answer when I have found the content. I know how long that took. I'd have to compare it to how it would have taken me to find it without search. A difficult question to answer without actually going to find it without search. So how are you going to charge me to search?

For both content and search, you could try a flat fee or transaction based approach. I'll charge you for being able to search, knowing that it will save you time and therefore has some value to you. Or, I'll charge you for access to a repository of content, guessing that there must be something in there you will find useful. And you could do either or both of these, but with the large number of search engines and content providers, I think you'd have a hard time making a sale.

How Does Anyone Make Money?

Well, of all the search engines out there, I tend to use certain ones because the combination of their indexing and my thought processes tend to get me to results the fastest. For content, I only tend to read content that has first passed a search engine filter (or my manual headline filter if I'm 'browsing' for news). What is the common denominator here? To use a search engine I have to physically view the search engines results. To read content I have to physically visit the content providers site. So for both the search engine and the content provider, they have an opportunity to earn advertising revenue. The more I use a certain search engine, the more advertising revenue they make. The more content I read from a certain provider, the more advertising revenue they make.

Is it just me, or does that somehow sound reasonable?

  • Good search = high search traffic = high advertising revenue.
  • Good content = high reader traffic = high advertising revenue.

And who exactly is the parasite here? I just don't see one. In fact, let's quickly check ourselves with a different technology - newspapers.

  • Good content = high circulation = high subscription fees + high advertising revenue.

Subscription fees are much smaller than advertising revenue. Advertising rates are based on circulation (a proxy for the quality of the content). And advertising generates the lion's share of newspaper revenue. In the internet, costs of distribution are lower, offsetting (at least in part) the lost subscription fees. And so it seems that content providers are making money the same way they always have.

So Can Online Content Remain Free? Absolutely. Who are the losers? There are none. As always, good content draws readers and that generates advertising revenue. There is a new player that brings value to the new distribution medium of the internet - search. Good search draws users and that generates advertising revenue.

Few things in life seem as fair as that. So, my advice to the European Publishers Council? Stop whining and get focused on writing decent content.

Steven Beebe
6200 feet above sea level