The Bove and Rhodes Report
Insight on computers and media | by Tony Bove and Cheryl Rhodes | Jan. 4, 1997

Web Content Sites: Down in the Flood

While service-oriented Web sites are doing well, the failures of some of the content-oriented sites are getting a lot of publicity. The spin on these content site shutdowns is that the failed ventures were noble, but overreaching.

The Ferndale soap opera, the Utne Lens, and AT&T's HealthSite failures, covered in the Dec. '96 issue of Webmaster magazine ("Noble Failures" -- only in the printed version as I write this), were examples of the following problem, thought to be inherent in content sites for the Web: The cost of creating original, timely content is much, much higher than advertising and sponsorship revenues.

My interpretation: the venture's business model still looks and feels like a magazine, with huge startup promotion costs (transferred from direct mail to the Web, but still high). Cash flow is different: there are zero revenues up front from subscriptions, and zero expenses for printing and mailing. A site's owner must build the site as a major attraction and hope eyeballs will show up, then sell the eyeballs. All of the "choice locations" are taken by brand names. The stakes are a lot higher than they probably should be.

So, a startup Web site devoted to content is very much like a magazine, only harder to start. I know magazines that started by collecting subscriber revenue first (with a low-cost promotion), then paying for printing and mailing a few months later. You can't really do that on the Web.

And yet, original content is everywhere on the Web. Arrogant pundits like to point this out -- that "small-fry" content providers are thriving while large corporations suffer losses. Whoopee, here comes the revolution.

Not so fast. The small fry are getting eaten alive or quietly going under. Many of the content sites that still exist have gone stale. Corporate sites that are little more than advertorials are also being cancelled, but that is not as tragic a situation -- losses to a corporation are simply writeoffs for the stockholders. For a person or small group engaged in something entrepreneurial or some labor of love, and for the people in those corporations whose jobs are lost, the losses are staggering.

To me, this is a devolutionary process of selection. Only the fit survive -- the fit being those who have the largest warchests to promote their brand name content sites. While any dangerous looney can start a Web site and keep it going, the ones that might have potential to reach a large, interested audience are going begging for funding and getting lost in the noise.

Most of the "liberated content" of the smallest of the content providers goes out on the Web without any promotion whatsoever. Some of it without focus. Most of it can't last long without some form of financial support. Some of the best "editorial link" pages have already failed or are going stale.

(There are many promotion brokers that will promote your site for a fee. Where, oh where, are the advertising brokers that can bring in revenues for very small, one-person content providers, for no fee? If anyone out there can act as a broker and really do the job well, stand up and contact me. Take my site, please! I'll report on the success or failure as it happens.)

Most web developers I talk to are hoping that ad and sponsorship revenues will simply increase as the Web goes mainstream, consigning the major Web failures to the distant memory banks holding the failed software companies of the early 1980s. A rising tide will soon come to lift all boats.

But, as the servants say in Jamaica, "soon come." Don't hold your breath, unless you're inhaling.

I sense a rising tide of doubt, which leads me to the second type of failure reported in the press: failure to impress.

For example, the recent Esquire carried a story on the "milking" of Madison Avenue and why the site that carries the "Milk... it's on everybody's lips" advertising campaign is so pointless. Soon (if not already) there will be Leno-Letterman jokes about corporate Web site disasters.

The spin on Web advertising in the mainstream press is that the Web publishing industry is hallucinating. There will be no major long-term increase in Web advertising and sponsorship, just short-term blips as the corporate world jumps on the Web with little more reason than just to be there.

The conventional wisdom on Web advertising, if I may presume to know it, is that the advertisers are mostly other Web publishers. There's a whole lotta trading going on, but cash revenues are not high. (A chart in a recent Wired showed a list of top ten Web advertisers next to a list of top ten Web publishers, and the lists were nearly identical.)

So, if content by itself won't make it, how about content for all those service-oriented sites? Fortunately there will be a major increase in the need for the production of helpful content or advertorial content for those useful sites. The rising technology tide lifts those boats, as the Internet and intranets go mainstream.

Even so, these productions are not likely to be extravagant. The service-oriented sites, especially those that offer merchandise like books or music CDs, have to compete in price. The margin is already razor-thin. The proprietors of these sites will think, let the customers do their research by browsing all those other free sites, then come back to buy at the lowest price.

Content providers, well... Anyone can provide content, right?

-- Tony Bove, Jan. 3, 1997. Comments?

Update: Apple Posts Huge Loss in Confidence

Since the writing of our last report, the tension in the Macintosh community has racheted up a notch in preparation for the speeches at the Macworld Expo in San Francisco this coming week (Jan. 7-10).

The number 1 question is, what is Apple's future direction? This question includes the many sub-questions, such as: How long will the Mac System survive? How long will it be before Apple's NextStep runs Mac applications, if ever?

The number 2 question I hear is, so what? So what if NextStep becomes the next Apple operating system? The Internet is still the only platform that offers a guaranteed customer base, and Windows 95 represents the largest customer base and is still growing.

Microsoft let a bit of air out of Apple's tires by releasing a statement that offered no commitment to the future NextStep operating system unless it proves itself to be a viable platform.

Apple, keeping with tradition, let go a torrent of bad information right before Macworld Expo, with the announcement of the $150 million loss for the next quarter. Expect another round of punditry and predictions, most of it meaningless. The company really doesn't know where it's heading, but with the NextStep deal, at least it is trying to do something. That's better than last year.

-- Tony Bove, Jan. 4, 1997. Comments?

Other pages to visit:

Backstage Laminate for past Report editions and more articles on computers and media.

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Copyright © 1997 Tony Bove and Cheryl Rhodes