When CNN shut down its Spanish language news Website last month, the press release said it wasn't making money and that they were relaunching CNNenEspañol.com as an information site, focusing on scheduling, programming and anchors. The company said it wasn't giving up entirely on the concept and would try again "when financial conditions for interactive companies improve and new business models emerge." This is corporate-speak for "We don't have a clue why it isn't working."
This mystery — how media companies are supposed to make serious money online — is behind most of the shaking heads in the television industry today as broadcasters look to the Internet to make up for shrinking revenues.
In so doing, many discover that the Modernist business absolute known as supply and demand — a law as old as (mass) marketing itself — is working against them.
The logic of the law of supply and demand is simple and pure, and it determines the prices of goods and services in a free economy. When the supply exceeds demand, the thinking goes, prices will be low. But when demand exceeds supply, prices go up. And so business people try to balance the two, and most of the laws and rules of business are based on supply and demand.
The business world likes the law of supply and demand, because it provides companies with a modicum of control in a mass marketing paradigm. They can raise demand through advertising and public relations, and they can limit supply by reducing manufacturing. Hence, supply and demand form a control panel, the knobs of which businesses tweak and manipulate to make a profit. For all our talk about "the market" setting this, that or the other thing, the truth is that the law of supply and demand is why God made MBAs.
But along comes that rascal, the Internet, and messes everything up. The law of supply and demand may be immutable, but in the Internet's networked economy, the ability of businesses to manipulate it vanishes. This poses great difficulties for institutional Modernism, and it's at the bottom of why CNN has decided to wait for "new business models" to emerge. Supply is out of control. There are just too many information options for Internet users these days, regardless of their language preference (and if you can't find it in your language, you can translate it for free!). It's the supply side of the law that's gone to seed, and the real question CNN and many others are asking is, "How can we control it."
We can't. Starcom's Rashad Tobaccowala said it best: "2004 ushers in an empowered era in which humans are God, because technology allows them to be godlike. How will you engage God?" Indeed.
And yet, this hasn't stopped some companies from trying to force new wine into old wineskins, and there's a sub-cultural discussion underway about this that's highly relevant as we look at the future and try to form workable business models for a Postmodern world. These kinds of discussions are taking place in the blogs and forums traversed by the advance guard of the new age — the techies.
One illustration is in the UK, where The Sun recently cut back on its online content, because they felt it was hurting their core business. BrandRepublic wrote:
News Group Newspapers, the division of News International that oversees The Sun and the News of the World, has discovered that about 90,000 readers a day (5% of their total) were looking at the Sun Online rather than buying the newspaper. The fear of cannibalisation of newspapers by their online products is one that has posed a conundrum for publishers, but The Sun is first newspaper to cut back. The Observer reported that ... most of the editorial will be cut back to only show story samples, to encourage people to go out and buy the newspaper.
This circle-the-wagons mentality will backfire, because Internet users will simply go elsewhere to meet their information needs. The content of The Sun just isn't compelling enough to move people back to buying the paper.
Subscription models are another attempt to limit supply and justify price. Restrict access, the thinking goes, and the content has more value. The Wall St. Journal is the model for this, but its reader base is unique and quite willing to pay for access to the online content. This is true of most publications that are considered essential in the business world, where the cost is reimbursed or can be written off.
Elaborate site registration processes also restrict access to content, and the question in the techie community is whether that's deliberate. John Dvorak, PC Magazine writer and techie guru, thinks it is.
I have to conclude that the typical newspaper in this country does not want you going on its Web site, and deliberately creates a barrier in order to prove to the shareholders that the Web is losing them money. It's a feeble attempt to emphasize the printed version of the paper at the Web site's expense. The Web seems to be just something that newspaper people feel they have to do because everyone else is doing it.
When you peruse the Web sites of newspaper publishing associations, it's almost as if they are reluctant to even discuss what's going on. There are few studies, no hard numbers that I can find, and no information on best practices. And when it comes to running one of these sites, it always appears to be part of a very expensive content management scheme that has to hurt profits. You get the sense that the more popular a publication becomes online, the more money it must be losing, hence the barriers. Maybe it's time to change the model.
Media companies that require in-depth registrations say they use the information to help provide contextual advertising, but the reality is that the on site behavior of users alone is sufficient for contextual advertising to be effective. Simple site registration, where users are only asked to provide zip code, gender and age, is much less intrusive and also provides rich data for contextual advertising.
But the prize for the most absurd attempt to restrict access to content goes to Patrick Kenealy, CEO, International Data Group (IDG) and publisher of InfoWorld, a popular and important techie magazine. Kenealy doesn't think its right that money-making businesses should be able to link to his content without him getting a cut. While this may sound terribly logical to business types, it's actually a blatant example of shooting oneself in the Internet foot. By restricting simple links to his content, he's closing himself off to the very audience he wishes to reach.
We're talking about straight links here. Nothing more. One of the beauties of the Web is that writers can link to source material from which they quote or reference. Mr. Kenealy thinks that's fine, unless, for example, the writer is selling advertising on his or her site. Here's the way he justified it in Technology Marketing:
IDG has become concerned by "deep linking for profit," where money-making entities use our content to sell advertising, sell sales leads or build direct marketing lists. Here's our version 1.0 policy: Outsiders who use our content to gather registration data must share that data with us. Outsiders who use our content to sell advertising must share revenues with us. Outsiders who use interaction with our content to create sales leads for sale to third parties must share revenues with us. Outsiders who use our content must respect our privacy policies.
The result is that unless and until a Website has a formal arrangment with IDG, links from that site to IDG content produce this:
"We regret that we can not satisfy this specific content request because it originates from a source that is not authorized to redistribute our material. Please access all of our rich store of technical knowledge directly by clicking on any of the following links."
The source of the link, however, is not "redistributing" the IDG material, but simply providing a link to IDG's own page. Mr. Kenealy is blocking access to his own free content from people predisposed to read it, and he's doing it on the misguided principle that supply and demand can be manipulated online. In building a wall around himself, he's isolating his company from the very people it is intended to serve.
If this view was extended to include all Websites, there would be no Google. In fact, there would be no Web, which is, after all, an elaborate series of hyperlinks. This would probably be fine, however, with those who lament the loss of control over supply and demand. The Cluetrain Manifesto's thesis #7 is "Hyperlinks subvert hierarchy," But in the business world, hierarchy produces command and control, and so there is enmity between institutional business and the Web.
Blogger Anil Dash put it this way in an open letter to Mr. Kenealy:
Patrick, it's well within your rights to ask people not to link to your stuff, or to do so conditionally. But it reflects a grave misunderstanding of the market you're in. Learn from iTunes, not from the RIAA. Ask your writers and your advertisers what they'd prefer. I bet they're not looking to be walled off from the web.
Again, what appears to be smart business turns out to be counter-productive. Here's the way Rosemarie Wise puts it in an article in SitePoint.com:
Anyone who's determined to copy your content or code will do so regardless of his or her ability to bring up a browser context menu. If they want your source code then it's as simple as selecting 'view source' from the main menu. Article text can be highlighted and copied, images and media presentations can be retrieved from the cache, and streaming media can be recorded.
As Internet ad spending continues to rachet upwards with double-digit certainty, more and more people are beginning to realize that there's money to be made online — even considerable money. However, the time, energy and resources we spend trying to "protect" ourselves from a supply-rich market would be much better spent looking for ways to capitalize as the market moves forward.
Restricting content is exactly the opposite of what we should be doing, for it's foolish to assume a limited capacity for information in a Postmodern world and arrogant to assume our content commands more attention than anybody else's. The law of supply and demand online is a paradox, and owning a bigger share of the supply is a more likely path to profit.
Doc Searls, one of the authors of The Cluetrain Manifesto and a visionary marketer, says the biggest mistake people make in applying the law of supply and demand to the Internet is an assumption that it's just another distribution vehicle.
Face the fact that the Net isn't yet another medium for pumping "content" from a few producers to countless consumers. Instead, it's an environment -- a very real marketplace -- where the demand side has the power to supply. The consumers of yesterday are now full-power customers, plus something much more important: they are *participants*. They participate in the form of product advice, personal involvement, and by creating new inventions and businesses of their own. You either embrace that participation, or risk being shoved aside by it.
The Internet simply isn't the easy money tree that we all hoped it would be 10 years ago. It takes work to make money — sometimes lots of work. The payoffs, however, can be spectacular.