New feudal lords are emerging in digital publishing and advertising. Will anyone overthrow them?
Way back when, if you were a farmer, you probably grew enough food to feed your family and that was about it. Later, as agricultural techniques increased yield, farmers began to grow enough extra to sell it. At first they might have sold it themselves, but over time systems developed to aggregate the relatively small output from individual farmers in order to sell it to a larger number of consumers. These distribution and sales systems took the form of markets. Initially, these markets were staffed by individual farmers selling their goods, but over time the farmers were replaced by merchants selling goods from many farmers. And as markets increased in size and vendors became more sophisticated, the markets eventually took over the consumer-selling duties and the vendors became distributors who sold to the markets. Today, as margins on food have become even slimmer, the individual farmer has been all but replaced by the corporate farmer who owns a large number of farms (or several large farms aggregated from smaller farms).
So, what does this have to do with online marketing?
Replace "farmer" with "content creator." Just like the farmers of yore, most of us have the potential ability to grow our own food given the right land/tools/seeds/etc. We also have the ability to produce our own content. However, getting that content to the audiences we want to reach is another story. Sure, any of us can post our content to a blog, but as we all know too well, just because we build it (or grow it or print it) doesn't mean that anyone will consume it. And if we want to monetize the content we create by selling advertising ourselves - well, there are plenty of failed Web companies out there who staked their livelihoods on advertising to prove just how hard making money at this stuff can be.
Making money from content isn't just about having the ability to buy, sell, and display ads; it's also about having enough eyeballs looking at those ads to produce the kind of revenue that you need. Anyone can plop AdSense ads on their site, but only a limited number of people can make a good living doing it.
The Old Feudal Lords
If we go back to the farm again and look at the farms of yore, we can see the parallels between what's happening online today and what's happened in the past. In some ways, the pre-Internet online services (or print publishers) were like feudal lords who owned the land that the peasants farmed in exchange for food, shelter, and possibly a pittance of spending money. It's a system that worked (at least for the lord) because it was an efficient way of controlling the means of production and the means of distribution. Then the New World came along and mucked everything up.
One of the main features of the New World was that it was relatively open and relatively free. Anyone who could get themselves there and who had an entrepreneurial spirit could stake a claim, farm some land, and make a new life for themselves. (Note to historians: I know this is a gross oversimplification, but bear with me.) This life might not be great - they might only grow enough to feed their families and maybe trade some for goods they couldn't grow - but the abundance of resources and the limited control exercised by the government made it pretty much open to anyone with the gumption to do it to become a producer.
But some did better. Some grew their stakes through investment, through an increased labor force provided by the horror of slavery, and by controlling the means of distribution of goods either by aggregating the output of other farmers or growing their own farms. The rest, as they say, is history.
It's not hard to see the parallels between the New World and the Internet. Where the Old World was completely owned by kings and princes and lords and other wealthy landowners (read "publishers" or, later, "proprietary online services"), the New World (read "Internet") provided a wide-open platform for innovation and entrepreneurship. Just as wide-open lands democratized the prospect of land ownership, the Internet democratized the prospect of media production. If you had something to say, a piece of software to sell, or other content you wanted to produce and sell to the public, the Internet provided an open platform to do so that wasn't controlled by AOL or Time Warner or News Corp.
Over time, the influence and power of the land owners in the Old World dwindled as more people moved to the open platform of the New World and started producing and selling things. Of course, a lot of those people failed to make a go on their own (or increase their holdings) and ended up back in situations similar to what they left. Only this time they were under control of the mercantile class rather than the lord of the manor. Eventually those controlling the means of distribution (the merchants and land owners) continued to aggregate resources, and control moved to fewer and fewer hands. And here we are today.
The New Feudal Lords
We can see the same pattern happening in the digital world. There are still plenty of bloggers (read "homesteaders") and content creators, but the people getting rich off the Internet are those that aggregate content in order to "farm" more and more eyeballs. Even so, unlike the New World/Old World folks, there's no limit to the "land" available to those who want to stake their claim online. There's also no limit to the number of people who want to produce content and have the technology to do so - just check out YouTube to see the consequences.
So, where are the limits? Simply put, there are two: attention and distribution.
The attention limit is what most online publishers rely on to make a buck. Sure, there are literally billions of Web pages, but consumers can only pay attention to a limited amount and only one at a time. This limitation leads to models where businesses aggregate content into networks or turn to advertising (or savvy marketing) to "grow" more eyeballs by gaining more viewers. More viewers means more ads can be served and more ads served means more money. Simple.
But attention is tough to come by. Controlling the means of distribution, though, well, that's really the Holy Grail. If you control the means of how content (or food) is distributed, well then, you can sit back and make money from all those content producers and content publishers (small or big farmers, really) who toil away each day to make a buck. No matter what they do, well - hey gotta go through you first and you're not gonna let them do that for free, are you? No way: you gotta take your cut.
What's a fair cut? Well, considering what Apple's planning on charging for its new iAds, a 60/40 split seems reasonable. Thirty percent of your price for an app doesn't seem unreasonable, does it? It's just about what Amazon charges the folks who want to self-publish on the Kindle. Go to the Internet if you don't like it!
With new proprietary platforms such as the iPad, the iPhone, and Google TV, we're seeing some brilliant business moves by those looking to make themselves the new feudal lords. By controlling the means of distribution - the iTunes App Store to buy and the iPad to view, for example - they're making an end-run around the New World of the Internet. These platforms are a way to move beyond the Darwinian battles that take place on the open Internet and move to the top of the food chain. Google TV, which takes its content from the Internet and is available on a variety of platforms, is another approach that relies more on brand and the aggregation/distribution of content to exercise control over the means of distribution. Sure, make any content you want. Stick ads in it. A consumer watching Google TV is still going to have to contend with Google's ads, too. And if that means too many ads and they don't want to watch your content...well, you can always take those ads out and cut a deal with Google.
Controlling the means of distribution has its risks, however. There's a huge barrier to entry economically. There's also the threat of some yet-undreamed-of technology attracting consumers away from one platform to another. But as people invest more in their proprietary apps, they'll probably be less likely to move. However, if something better, easier to use, cheaper, and more fun to use comes along...well, just look to AOL, Netscape, Microsoft, or MySpace for examples.
I'm not naive enough to make this into a moral argument. It's happening. When AT&T has to suspend sales of the iPhone 4G because of overwhelming demand, it ain't like it's going away. But as marketers, we're going to need to be aware that we're in the middle of another Big Shift in some ways on par with the birth of the Internet - only this time we're moving back toward the Old World rather than the New.
Revolutionize your digital marketing campaigns at ClickZ Live San Francisco! (August 10-12) Educating marketers for over 15 years, we return to San Francisco this August with our action-packed, educationally-focused agenda that will cover every aspect of digital marketing. Early Bird rates available through Friday, July 17 - save up to $300! Register today.
Sean Carton has recently been appointed to develop the Center for Digital Communication, Commerce, and Culture at the University of Baltimore and is chief creative officer at idfive in Baltimore. He was formerly the dean of Philadelphia University's School of Design + Media and chief experience officer at Carton Donofrio Partners, Inc.
US Consumer Device Preference Report
Traditionally desktops have shown to convert better than mobile devices however, 2015 might be a tipping point for mobile conversions! Download this report to find why mobile users are more important then ever.
E-Commerce Customer Lifecycle
Have you ever wondered what factors influence online spending or why shoppers abandon their cart? This data-rich infogram offers actionable insight into creating a more seamless online shopping experience across the multiple devices consumers are using.