Online Content: Desperately Seeking Profitability
Content producers must be clear about their strategy. Try pitching your model against nine criteria suggests Rebecca Ulph
17 October 2001
“Online content ventures are profitless and directionless.
Online content is expensive to create, and advertising-based business models don't provide enough income to cover costs.
Also, the culture of free content online makes it very difficult to cover costs.
Content providers are desperate for their online business units to make money, and are looking at new technologies such as WAP and ongoing market shakeouts to solve their problems” thinks Rebecca Ulph, analyst with Forrester Research.
Tell me about it.
Such alternative routes are hardly solutions, thinks the analyst “In many cases, the silo-ed basis of measuring standalone business unit success is flawed, as it fails to account for the effect online activities have on the rest of the business. Content doesn't have an absolute value - value depends on a much
wider context. To generate online subscriptions, content must substitute completely
for another source, or provide information that cannot be got
elsewhere. Audiences which are displaced in some way - either geographically, such as expats, or by time/work constraints, are the best
targets for such content” she says.
One of three positions
Ulph suggests that online content providers should choose one of three strategies.
Either they provide substitution services, which replace another source of
content and generate online payments , the so called
"payment pushers".
“Properties where online consumption replaces an offline purchase, because
of the added value of the online media. For example, Loot magazine online.
In many cases, online access to the adverts will replace a user's purchase of the
offline product, because online the product is far more searchable and up to date. Users will pay to access Loot online, and for SMS updates
for new adverts relating to their search requirements” she explains
Alternatively they could extend and strengthen existing consumer relationships with a low incremental revenue potential , and fall under the label "relationship reapers".
“Where only low level of additional revenues would be possible, and online
activities should be more about maintaining customer relationships and reducing
churn rates. Such as However, online activities have a "value" in continuing a user relationship online, throughout the day/week/month and PR value in ensuring when users go looking for a brand online they can find it. In some instances, small amounts of incremental revenue may be available from existing users who know and trust a brand -- say, ITV for soap updates” the analyst continues
They could also focus on brand building and awareness with really no revenue potential, aka "brand builders"
Where brands have very easily replaceable content, with no/little value
added from being online. Example - Virgin Radio. Users are not going to pay
for this content online as it's very generic, easily substitutable, and
with the Web even more so -- they have access to thousands of stations.
However, online activities have a "value" in finding new readers online,
extending the brand values -- Virgin is the fourth most popular radio station on the Web, not all of those listeners are going to be people who listen to it offline too - it's finding a new audience online.
Forrester's Nine Criteria
Forrester’s guide to calculating which services/content fall into
Is based on nine criteria.
model?
one-offs)
elsewhere?
Depending on which sector you fall into, advises the analyst, the way to measure the success and returns of the online business will differ.
www.forrester.com
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