Monday, April 10, 2006

The Business of Other Peoples Content

Google has made a fortune from algorythmic search. Taking websites created by other people and serving snippets to people that search for answers. In return the websites get traffic. Seems like a fair deal to me. The challenge for new search engines is to build an audience to serve other peoples content to that is large enough to make make the business work. Search engine CPMs are some of the best around, but the competition is fierce and unlike TV - where audiences are fragmented across a zillion channels, Google, Yahoo, and MSN already have channels in the Billions. Consider these search engines the remote control. It's going to be hard for other players to get users to turn on the TV so to speak with a different baby.

Next, you have the aggregators. These are folks like and memeorandum. These are sites that take snippets of content from other sites and organize it. The most successful have been the players that focus on hot trendy topics of the day. Some times so hot and new that search engines haven't indexed them so they really fill a need. People that want to be in the know hit the refresh button all day long. Is automated organization better than human submitted? I'm not sure. Maybe it doesn't matter. The challenge of these things is the business of matching ads doesn't work quite as well since the info is hot. It's not like searching for Las Vegas Hotels where many bidders line up to pay for the click. It's still a good deal for the content provider since they get the traffic for free, but I see these businesses as more challenging for two reasons. First the CPM's are lower than search, and secondly they send the user off their network.

The third play is platforms and tools. Challenges to these businesses tend to be keeping the tools relevant to the next adoption curve. Blogs today, wireless tomorrow. Each tools set is unique. There are two types of business models that have emerged for platforms. First is subscription. Outside of the enterprise, we think this will continue to be a smaller, but good business. The largest opportunity is advertising support platforms. Get as much content on a platform and match it with ads. In this sense, there is a double partnership. First, with authors. The tools have to be good and improve the content creation process. The second is with traffic partners like search engines and aggregators. These people will use the content in exchange for traffic. Again, this is a good deal.

The interesting thing is none of these actually create content. Search engines and aggregators organize it, and platforms enable creation. Several good and interesting businesses will be formed based on these models. Hubpages is a platform that allows for any type of stuff to be created. It also organizes the content like an aggregator. Our gut is that many other aggregators and search engines will supply the majority of the traffic. What Hubpages does really well, is it allows anyone to create a page in minutes. Collecting, and aggregating content from many sources. Some sources are purely informational, while others can be used for earning money. The key is it is very simple. In minutes anyone can create their first page. I'll let you know how the business is working out once we are live.

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