Guest columnist Robert Young, writing in Om Malik’s Blog, provides a really good assessment of how News Corporation’s recently acquired online community, MySpace, can rank higher than Google in terms of number of page views, but will generate only $30 million in revenue this year versus Google’s $6 billion in revenue.
While recognizing that this is not a pure apples-to-apples comparison, Young’s post poses the central question of whether a MySpace page view is really only worth one-half of one cent to the Google page view dollar.
A core part of his thesis is that historically, advertisers have held little trust in content that was not tightly controlled editorially and, therefore, the value they were willing to attach for ads placed next to such uncontrollable content was very low.
What is interesting is that Young asserts that with the emergence of blogs as a medium which complements and challenges traditional media for people’s time and attention, the barriers are coming down, and the game plan for securing ad revenue is changing.
As Young sees it, Google changed the rules when its AdSense service started commingling ads placed in traditional media sites with ads placed in blogs, and now MySpace (and all other community services) can benefit. The upside is capturing some or all of the 99.5 cent spread on the Google dollar.
In thinking about online communities as a business, I think that this thesis heavily suggests that the best days for community web sites lie ahead (see also “The Second Coming of Community Web Sites” for more fodder on the topic). Further, my bias is that the growth of this space is not destined to be a zero-sum, winner takes all outcome. I say this for a couple of reasons.
One is the human fundamental; namely, that real communities are an amalgam of context, meaningful conversations and true self expression around those contexts. As in the real world, logic suggests that no one service is going to satisfy both the many different “faces” that people wear and the different types of conversations that they desire to cultivate over the course of their online lifetime.
For example, MySpace was hired by young music lovers and the Long Tail-ed 100,000+ band community. Facebook satisfies college students looking to cultivate conversations borne of a profile model that facilitates lookup and hookup, or what I call “traversing contexts.” Flickr enables a totally different type of communal conversation around pictures and tags. And this doesn’t even touch the surface of the vertical communities beginning to emerge around health or the needs of aging baby boomers, not to mention communities focused on catalyzing the dynamics of mobile communications and rich media.
Two is the fact that people just like variety. We don’t have one TV channel that everyone watches, and equally important, the market has proven that both broadcast media and more specialized programming like cable channels can grow into very large businesses, supporting many tens of channels with markedly different consumer targets. In fact, the largest profit centers of media goliaths Disney and Viacom are the most job-specific ones – ESPN and MTV – not their big dogs, ABC and CBS.
Three is that a cornerstone of Web 2.0 is the emergence and embrace of open standards for publishing, syndicating and subscribing to online content, and with it, a de-coupling of such content and related user data from proprietary walled gardens.
As I have argued in earlier posts, this de-coupling is fundamentally about the market coming to terms with the fact that the future of media and brands is being defined by consumers on an individualized basis versus being served up to consumers in a one size fits all fashion. I call this trend Channel Me.
The ramifications of this transition for online communities is profound as it suggests that the industry model that will emerge is best thought of as a “three walled” garden.
(Disclaimer: one of my portfolio companies, the appropriately named me.com, is a nascent online community addressing a number of the particulars that follow.)
What is a three walled garden? It is probably best understand by what it is not. In a traditional walled garden like AOL the metaphorical four walls arise from a proprietary, rigidly programmed and tightly controlled environment that serves to lock in advertisers, users and content providers.
By contrast, in the three walled variety, where the fourth wall used to be is now a virtual and open bridge to the community space. This bridge enables consumers, content providers and advertisers (i.e., branded products or services) to build as much proprietary-ness within their three walls as they like while simultaneously letting them take advantage of the tremendous network effects an online community has to offer.
To frame this one, consider the following use cases for an advertiser, content provider and consumer in a hypothetical three walled garden.
For example, imagine Sony enabling all of their datasheets, how-tos, product comparisons, advertisements and magazine reviews that are housed within their web site to be syndicated to multiple online communities as a kind of virtual marketing, sales and support channel.
Akin to the web programming mantra of "write once, run anywhere," this channel would enable Sony to dramatically extend the reach of their proprietary content and services beyond their web site. Moreover, in a community environment, this content could serve as the kindling wood for consumers building user generated content to talk about, rate and review Sony products, as well as aggregate these same components into more value added content packages, such as a Home Theater Starter Kit. In terms of mindshare, engagement and relevance, there are few better ways that I can imagine for Sony to engage with its target customers.
Similarly, imagine ABC extending their online content resources of video clips, photo galleries, games and discussion groups for the hit show “Desperate Housewives” such that these resources could transparently be embedded within multiple consumer sites. How many people that are huge Desperate Housewives fans but have never visited the ABC web site nor desire to could nonetheless cultivate their interest in the show and spread the word in a more viral fashion?
Finally, the consumer is seriously empowered in this model, having broader access to proprietary content and services, and a larger aggregate audience for their user-generated creations (since the flow of information is bi-directional).
With empowerment and flexible tools for self-service and self expression, such consumers achieve a higher level of emotional engagement with the enabling content, product or service provider, in the process become mavens, connectors and salespeople. Truly, a win-win-win scenario.
So how does the operator of an online community best position themselves to get hired by consumers, advertisers and content providers as the enabling platform for a three walled garden?
Well, first and foremost it starts with the operator seeing its site/service as more of a community of communities than a singular entity. Begin with the end in mind, so to speak.
Fundamentally, though, a lot of this comes down to nailing the workflow and usability requirements of specific use cases along the lines I discussed earlier, and then ensuring that the underlying technology platform provides a well-integrated set of services and design tools that enable the combined value chain to satisfy those cases.
Admittedly, it is tempting to reduce such cases down to composite functions (think: utilities for creating radio programs or podcasts; uploading and hosting services for rich media content; posting tools; unified communication services; context-rich user profiles; transparent user and usage tracking mechanisms; and meaningful search). But the truth is that such capabilities, while critical, are mere ingredients in what is nothing short of a new kind of service recipe.
Think about it. The three walled garden approach represents the consummate 1+1=3, whereby the synergy of brand-specific content being used in a communal space extends the reach of the brand, driving quantitatively and qualitatively richer conversations outside of the walled garden, and ultimately pulls more people back to the brand than would otherwise happen in a web site centric model. Pretty cool stuff, I think.