Making money in Media 2.0: It’s all about data

Ben gets a lesson from Mr. McGuireEarly in the film The Graduate, Mr. McGuire pulled Benjamin aside to talk about his future, “I want to say just one word to you. Just one word. Are you listening? Plastics!” McGuire was admonishing young Ben to get into the world of plastics, because it was synonymous with making money in the future, circa 1967. Would that I had invested in plastics back then.

Today, the word is data. Just one word. Are you listening? Data! This word is the essence of all that is new and “future new” in the real business of media, advertising, and if you want to make serious money in Media 2.0 today and beyond, you have to be the owner of data. I can’t say it any simpler. Data equals money. No data equals no money.

But, Terry, “data” can mean a lot of things. What kind of data?

Okay, let’s begin with the basics. What IS the Web? Well, it’s a lot of things, but at core, the Web is a database or, perhaps better, a series of databases that can talk to each other. And what’s IN a database? Yup. Data, all sorts of data, every form of information imaginable, from recipes and scores to news items and bits of information about users. Google knows this. Facebook knows this. Twitter knows this. Apple knows this. Groupon knows this. Every venture capital company funding the disruption knows this. The only people who don’t seem know it are local media companies who are bent instead on perpetuating the folly that content is what matters. It matters, yes, but only to the extent that it can be used to gather data, because it’s the data that has the value. It’s the data that can be sold, not the content.

More specifically, we’re talking about redefining the marketplace and turning that into a database, one that can connect with the Web in profitable ways. There are companies that will sell us data about our markets, and we would be smart to buy it, but only if we can connect it with other forms of data. An email address is a form of data. What percentage of the email addresses in the market does your company have, 5%, 10%? Do you have cookie or IP data about the people who visit your sites? How about the online habits and behaviors of those visitors?

If a local merchant wants to buy a sports-related audience, must you serve their ads in a sports content “section,” or are you able to use content sections to gather data about the interests of your visitors and later serve those individuals targeted ads? If, for example, you have those who’ve previously visited your sports section identified, you can serve them sports-related ads regardless of where they are on your site. Does your company practice this with regularity?

Welcome to the world of advertising by behavior and the targeting of individual browsers instead of content segments. This is how you make money in Media 2.0.

Online advertising’s revolution has already taken place in that advertisers can target by data instead of dropping ads in front of a mass. It’s much more efficient and produces much higher quality results. If you’re still doing the online ad game the old way, you’ve already missed the boat. Of course, you must be able to serve your own ads in order to capture ad data, and, well, that’s just not the way we do things, right? We rely on third-parties to serve our ads in the name of either hosting our website and providing its content management or by taking easy money from agencies who work with third-party ad networks.

These third-parties come as wolves in sheep’s clothing, because they bring value to the table. Whether it’s a company that provides TV websites or one that simply provides ads, media managers weigh the overall value of the cash involved and make decisions based upon that. In some cases, the amount of money they bring to the table is substantial, but it pales in comparison to the downstream data potential of serving our own ads. ESPN and Conde Naste led a publisher revolt against third-party ad networks a few years ago, because they were tired of others setting the value of their web properties. Plus, they wanted the data.

The worst kind of third-party arrangement actually comes from within media companies themselves, those whose digital divisions function as third-party ad networks themselves. In these cases, the division arranges a deal with whichever ad network will give them the biggest dollar value and uses the combined reach of its own network to make money, and again, sometimes a lot of it. The problem is a simple business conundrum, for that which is good for the network always trumps that which is good for the individual properties. And when revenue flexibility is at the local level, this puts companies who behave this way in an awkward business position.

But the most serious problem in banking the future on third-party ad networks is that they use our data to further their own ends while we end up with nothing. Let me repeat: the one who serves the ad places the data cookies on user’s machines, which gives them the value of that user information. To third-party networks, this is worth more than the money they earn from running the ads in the first place, because the better the data, the more value it carries.

While I’m at it, we all need to understand that ANY pureplay seeking “partnerships” with local media companies is likely in it for data. This is evident with Groupon, for example, a company whose algorithms know the very moment the data gathering has peaked. When that happens, the value proposition of the partnership goes down, and new “partners” are necessary to further grow its enormous database. We give this data away, because we’re hungry for the money they put in our pockets, and that’s a shame. In the end, the data is all that matters, because its value lives on when the easy cash has already been spent.

I understand the lure of taking the money, but I want to make sure that those who make that choice fully understand what’s happening. It’s not about the money; it’s entirely about the data and the use of that data.

So if we’re serious about making money in Media 2.0, we must remember this: Data equals money. No data equals no money.

Comments

  1. Both of the above answers are just fine, although be careful when aerating around the bottom. Azaleas don’t like to have their roots bothered, so just go lightly!

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