The Myth of the Missing Digital Business Model

Once and for all, let’s put to rest a celebrated myth. Let’s bury the myth of the missing business model for successful online publishing and broadcasting.

Executives at most media companies still claim that the business model is missing or has yet to be invented for digital publishing. They’ve been making this claim for years, mainly to excuse why they haven’t earned much online doing what they’ve done with print or broadcast.

In reality, the business model for digital publishing has existed for at least a decade, conceptually even longer. The successful business model for online publishing has been obvious to anyone who has bothered to widen his perspective enough so that he can see the forest and not trees. Nevertheless, there is an understandable reason why executives at most media companies can’t see it; why they are lost in the woods, searching for it.

OK, since I’m throwing around metaphors, let’s cut to the chase: what is the successful business model for online publishing and online broadcasting? What’s the Holy Grail? How does this baby work?

First, understand that the crucial difference between media in the previous era and media in the new era is the difference between scarcity and surplus.

We’re all consumers. During previous millennia, we had scarce access to information. Only 30 years ago, the average American who lived outside the country’s 10 largest cities (in other words, 95 percent of the population)and who wanted access to information that changed daily, had only one or two printed newspapers, a dozen radio stations, and three to four broadcast television networks. He had access to no other sources, which meant those media’s usage was high.

But in our new millennium, the average American has access to a half dozen or more printed newspapers; dozens of radio stations, hundreds of television networks via broadcast, cable, or satellite; and online access to almost every one of the world’s newspapers, radio stations, and television stations. He has a veritable cornucopia of access.

Each and every person has a unique mix of interests; it’s what makes us individuals. Every person naturally gravitates to whatever media, or mix of media, matches his own unique mixes of interests. People nowadays are enthusiastically using their newfound cornucopia of access to satisfy each of their own individual interests.

Meanwhile, they are increasingly forsaking any traditional medium that continues to provide the same mix of content to everybody — notably legacy media such as newspapers, general-interest magazines, and general-interest TV networks.

Individuals now have to hunt and gather whatever satisfies each of their unique interests from a variety of sources — search engines, RSS feeds, Web sites, and cable and satellite channels. This is because no media company yet delivers all that to them on an individuated (define) basis.

More than a decade ago, new media held the promise that each person would only see content that actually matched his own needs and interests and likewise only advertising for products or services that actually matched his needs and interests. This promise might nevertheless be tempered with the ability of an editor to send each person the few bulletin stories (a war, a disaster, a public scandals revealed, etc.) about which an editor thinks everyone should be informed or that might serendipitously stem from an interest (“if you like those stories, you might also like this tangential one”), but this promise of new media still stands today.

The business plan thus calls not for mass media but for individuated media on a massive scale.

Google, Amazon, and Yahoo (at least before Terry Semel’s errant attempt to turn it into a traditional mass media company) understand the enormous revenue potential in a scalable business that delivers to each individual the unique mix of content from reputable sources that the individual specifically needs or wants, and does so to massive numbers of individuals. This is the basis for Amazon’s recommendation engine, MyYahoo, and iGoogle.

Another example of individuated delivery is Facebook. Each of its 120 million users sees a different mix of content than every other user — a unique mix that varies according to each user’s interests and network of friends. Individuated content delivered on a massive scale. See the massive forest? It consists of trees, and each tree is unique.

Unfortunately, most media executives work at companies that can’t see the forest for the trees. Their companies still provide the same mix of content to each of their consumers, the traditional forms of media that most people are now forsaking because they now have much greater access, forms of media such as newspapers, general-interest magazines, general-interest television, and radio networks. Those companies blindly cling to the now antiquated business model of providing the same mix of content to every consumer.

When their executives claim that the successful business model for online publishing is missing or has yet to be invented, what they really mean is no one has yet discovered a business model in which they can continue to make considerable revenues from the now-antiquated practice of delivering the same mix of content to each consumer. That business model is indeed missing and long may it be. It won’t ever be invented, unless by antique dealers.

Media executives must cease delivering the same content to everybody and begin delivering a unique mix of content that satisfies an individual consumer and do so to massive numbers of consumers. Otherwise, their companies will be toast.

This means replacing those companies’ analog presses with digital ones and replacing analog transmitters with digital ones — all capable of individuated content delivery. The companies also must begin syndicating their original content so that other companies can deliver it individuated. And all companies in these industries must work together to develop means to track, account, and share revenues from this super-syndicated traffic.

Traditional media companies won’t want to make those changes. The fact is, if they had begun 10 years ago to make those changes, they wouldn’t now be going out of business. They can still own their consumers, but only if they can successfully satisfy those consumers on an individuated basis.

It’s a myth that the successful business model for online publishing is missing or hasn’t yet been invented. That business model has been obvious all along.

Postscript: a month ago I calculated how anyone who had bought $10,000 worth of beer three years ago and gotten drunk every night since would have done three times better financially just from the keg deposits remaining than anyone who had purchased $10,000 in newspaper company stocks instead. Make that four times better by this month. Time marches on.

Join us for a Consumers and the Influence of Blogs: What It Means for Your Marketing Mix on November 20 at 2 pm EST. Find out how online consumers discover blogs and navigate between them, what kind of opportunity blogs represent for advertisers, and much more!