Content Factories and The New Media Model

Google has recently patented an algorithm that identifies search subjects that are under-represented on the Web. For companies such as Demand Media this could spell trouble. Demand Media uses similar algorithms to identify topics for its small army of freelance content creators to write story-boards for VPPs or Professionally Produced Videos. So do Yahoo! and AOL. VPPs are the fastest growing segment of videos on social networking and dedicated websites and are designed to appeal to advertisers closely associated with the topics concerned.

Starting from a small base, VPPs encapsulate the changes taking place in the media business. They are doing two things. First, they are teasing open new marketing opportunities and in this sense they are exploratory. Second, they represent a new business model in the media world. In the traditional world of linear TV broadcasting, content (programs) is designed for a comparatively large but passive (laid back) couch-potato audience with breaks built in to attract whichever advertisers choose to pay the (discounted) prices on the ratings card. The greater the reach (audience covered)  and the higher the ratings (audiences actually viewing) across that reach, the higher the prices.  In this new media model, content is designed for the advertisers clustered around the known interests of small targeted (lean forward) audiences. Whether such viewing will ever translate into laid back connected TV (TV-Internet) viewing is an open question, but it would seem perfectly designed for tablet viewing. It is also ideal for hotels wanting to provide guests with in-house access to short information and entertainment videos, for example, related to sports cars or golf.

The reason why companies such as Demand Media see a problem is that if Google’s algorithm becomes widely available, entry into this nascent market, and therefore competition, will be so much easier.  But while identifying the topics for VPPs is the first step, producing entertaining or informative content is where the real skills lie. It opens up interesting opportunities for would-be media producers of the future, but rather like the online games industry which moves from story boards to PC-animated content, at the basic level content factories only avoid sweat-shop status by the addition of air conditioning. It’s the advertisers who make it seem glamorous, but then that’s their job and their skill.

On the wider stage, VPPs offer an opportunity for OTT (over-the-top) distribution. For example, watching over a mobile phone network (to a mobile handset or tablet PC) a one or two minute video on options for eye surgery or on a DIY task in the home or health care for pets, may well tap a vast market, and the long tail of the Internet makes the marginal cost of distribution negligible. On the other hand, encoding the content format suitable for a large range of handsets is a limiting factor unless or until greater standardization is introduced or local network operators decide to provide conditional access and encoding locally at a fee, either a charge to the user or a revenue share from the content provider. The other limiting factor is the relevance of the advertised product or service to a particular geographical market. Again, maybe here is an opportunity for a local operator to broker advertising deals and revenue sharing.

These are all straws in the wind at this stage, but they are pointers towards a ‘new’ new media, a professionally-charged value-add to the emerging market for consumer-generated content. Bringing together search, content creation, and OTT distribution channels and at least the possibility of revenue and service deals with access network operators, it gives a new twist to convergence.

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