Big media versus cyber surfers
Dotcom mania returns: Big media versus cyber surfers
There’s no doubt about it, the big media companies are in a spin. They are under threat from a growing band of small, fleet-footed upstarts who are creating websites of user-generated content.
The problem with these sites for Big Media is that they are proving such terrific social networking platforms that they are attracting young people in their millions and are quickly becoming their preferred media option above the traditional formats of newspapers and TV.
Needless to say, the likes of News International, Trinity Mirror, Emap, Daily Mail and Pearson, along with the large media agencies such as WPP, are struggling to work out how best to react to this phenomenon. They are facing a market where their audience of the future is drifting away in their droves.
Evidence of the seriousness of the situation was the move by the mighty Rupert Murdoch to purchase social networking site MySpace last year for $580m. At the time this was regarded as a pretty full price but in recent months it has been called the deal-of-the-century by some media industry professionals.
This is because, compared with the recent $1.65bn that Google splashed out for the video sharing website YouTube, it may well be a steal. Whatever the potential of such sites you cannot escape the fact that these are ludicrously high prices to pay for businesses that have yet to generate any meaningful revenues.
Big media versus cyber surfers: Broadband internet taking TV and print audience
It might not be too off-the-mark to suggest that these social networking sites are as insanely valued as any of the dotcom stocks that roamed the virtual planet of the late 1990s. We have entered another period of internet land grab where the biggest pockets initially prevail, but also run the risk of paying a high price for their actions. Witness yesterday’s hot website, old pals get together, Friends Reunited. Bought last year by ITV for £120m, now it is falling fast in consumers’ affections, according to a recent YouGov Brand Index poll.
Murdoch famously missed most of the boat on the dotcom boom-and-bust luckily avoiding pumping too much of his cash into helping further inflate the bubble.
But this time he is pretty gung-ho about investing in internet businesses.
And so he might because it is a sensible countermeasure to put in place as the media industry is undergoing a seismic shift with consumers moving from the print and TV channels and onto online platforms. Research from Credit Suisse found that households with internet access watched four to five hours less TV a week than those without, and for 12-to-24-year-olds the internet is now the dominant entertainment source.
But let’s not forget that a marriage between old and new media can end in tears as we have seen all too clearly before. Remember the Time Warner purchase of AOL – what a disaster that was. And then there were the internet purchases by German-based media giant Bertelsmann by its Chief Executive Thomas Middelhoff who had designs on creating a world leader in new media. This time around the company prefers to cautiously develop its own social networking site rather than splash out on a costly bolt-on acquisition.
What we are really questioning about these moves by Big Media today is that they are paying too high a price for social networking and user-generated-content businesses when there are scant traditional metrics available to calculate their true worth.
Big media versus cyber surfers: Youth market tough to crack
Yes, we admit that they do draw in millions of youngsters who are spending increasing amounts of their time on such sites – sharing stories, videos and music with their new like-minded “friends”.
And we also admit that this young demographic has become ever-more important to advertisers in recent times as Big Media doesn’t want to run the risk of entirely losing their links with this audience who are choosing to shun traditional media channels. But in all this frenzied activity there seems to have been a few points missed. For one thing, while these sites attract many millions of young people, there is very little cash spent when they get there. This is because one of the most appealing aspects of these sites is that they effectively represent free entertainment. This makes the prospect of monetising them all the more difficult for their Big Media owners.
They are seeking to engineer revenue from them in a way that avoids rocking the boat and pushing them too much towards being a corporate entity. If this were to happen then we would undoubtedly see a migration of many of their users to the numerous other sites that are springing up and are deemed to be of a more cutting-edge and less corporate bent.
It is therefore a mighty fine line that Big Media treads in trying to extract cash out of these people who are not only difficult to find, but when they are found then they are very reluctant recipients of advertising. They are therefore a particularly expensive group to access.
OA by Glynn Davis: http://www.dailyreckoning.co.uk/article/221120063.html