Online Content Is Not Worth Very Much

"The Answer Factory: Fast, Disposable, and Profitable as Hell," Wired magazine's recent profile of online content machine Demand Media, dovetails nicely with my last post.

Bob Garfield analyzes online ad valuation from an inventory supply-side economics perspective. Demand pursues their business model from a content supply-side perspective. Both arrive at the same inevitable conclusion: cheap, fast, good enough, and at volume is the only way to earn money from the Internet—and perhaps all digital communication networks.

Demand Media crunches multiple streams of search data through several algorithms that eventually churn out search engine optimized titles that they predict will attract hits—a combination of high traffic but little competition. The result is thousands of mostly how-to articles, listed content, and informational videos that aren't high on style or even valuable content, but fill a voids that their data says the public is increasingly searching for.

Their process is getting so refined that they are ramping up to produce 1 million pieces of content per month, which the article's author Daniel Roth notes is "the equivalent of four English-language Wikipedias a year." Roth later writes:

To appreciate the impact Demand is poised to have on the Web, imagine a classroom where one kid raises his hand after every question and screams out the answer. He may not be smart or even right, but he makes it difficult to hear anybody else.

The result is a factory stamping out moneymaking content.

For the privilege of stamping out the actual content, writers, editors, videographers, and other creatives are paid on a scale to rival minimum wage. The videographer Roth features to begin his article, for example, gets paid $200 total for 10 videos he shoots in one day.

The moral here is that content is, once again, not king. It's barely even a serf. And we see this medium and all it transmits for what it is: cheap and fast. But is it really good enough?

The Advertising Glut

Last Thursday, I listened to a fascinating episode of the NPR program On Point with Tom Ashbrook titled "What's Next for Advertising?" You can listen to it yourself here.

During the program, Bob Garfield made a truly insightful point that I've yet to hear anywhere else. He thinks that online advertising is unsustainable. The Web is a limitless platform, offering limitless advertising space. However, There is not limitless advertising demand or inventory. There will always be a glut of advertising space or supply, which according to simple economics means prices will always be driven downward.

Therefore, the advertising business model as it currently exists cannot support the cost of creation of even small amounts of premium content, because the Web's open content creation and distribution ecology is also a leveler of content quality—the cream will always rise to the top, but it is all still there to see and fulfill niche tastes and tendencies.

This is bad news for Internet advertisers of all stripes—both the content creators and those who'd try to sell ads against their content. The only way, in this scenario, to make money is through monopoly. Which would explain Google's profits and push to grow their market share.