Two interesting posts last week related to changes in the media industry. Silicon Alley Insider has a post called "The Great Ad Shift: Google Sucks Life Out of Old Media" which discusses the extent online advertising is replacing offline advertising. The point of the post is that online media companies are rapidly gaining share relative to traditional offline companies. Their analysis shows that online companies gained "7 percentage points of market share in a single year" (Q2 07 versus Q2 06). This is a huge one year shift and not positive news for traditional media.
The second post comes from Anita Campbell at Small Business Trends. Her post is called "Google Controls the Fate of Small Publishers", which talks about the growth of small online publishers and Google's impact on them. Key quote:
"In the United States alone there are 20,733 Internet-only publishing businesses, according to the most recently available U.S. Census figures.
Not only are most of them small businesses, they are very small. Over 90% of Internet publishing businesses — 18,858 of them — are single person businesses. Another 1,452 have fewer than 10 employees."
Anita also points out this data pre-dates the boom in small, blog based micropublishers that has happened since 2005.
The interesting linkage is how traditional media views content and audiences versus how Google (and the other online media companies) does. Traditional media companies tend to be vertically integrated. They create or acquire content and sell ads against that content. Traditional media business models assume large content audiences. To varying degrees, Google and the other online media companies tend to work with large ecosystems of 3rd party content producers to sell ads. Their business model works well with both mass audiences and fragmented audiences.
This ecosystem reaches a broad audience. But at the same time it also serves a large number and wide variety of specialized content markets. By working with small publishers Google can easily - and very profitably - sell ads into very small, very targeted niche markets. This is something traditional media simply isn't capable of. This not only greatly expands Google's market, it also keeps their costs low relative to traditional media since others create the content and develop the audiences. This model also creates enormous new opportunities for niche publishing businesses, who take advantage of Google's advertising programs as a revenue source.
This model - working with a ecosystem of partners to serve niches too small or too specialized for larger firms to effectively reach - is not new. The tech industry has been using VARs in this role for years, and there are a growing number of examples in other industries. What is new is being able to do this in the content industries, which traditionally have been built on mass audiences.
Niche publishing is now a very viable industry. Small publishers using business models that leverage large corporation ad networks and affiliate marketing programs can serve extremely narrow niches profitably (sometimes very, very profitably). This, coupled with the low start-up and operation costs associated with online publising, is leading to a growing number of small online publishing companies.
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