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Cashing Cows: Aggregators Face
Changing Business Models for Premium Content Services |
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7 September 2004 |
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There's nothing wrong with having a cash cow, but many
content aggregators seem to have a difficult time figuring
out when and how to put theirs out to pasture to make room
for future revenue growth. In a
new research paper entitled
The New Aggregation: Models for Success in Creating Content
Value
we lay out the reasons why today's aggregation models are
falling down so often and how content aggregators can
thrive by being more selective about which aspects of
content aggregation they choose to nurture. The result may
not always be a comfortable or familiar business, but it's
a result more likely to thrive than today's content
aggregation business models. |
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A while back
I lived in more rural digs, moseying down to the local
Grange
hall to vote and walking by the nearby farms to see people and
critters in action. While I miss the lifestyle in some ways,
there are awkward moments in farm life. One day you're saying
hello to the cows down the road and the next day they're off
getting squished into a
Big Mac. So it goes. A farmer knows full well when Bossie
is worth more under the knife than spilling out milk or
fertilizer and he doesn't hesitate to do the deed. That's his
job. If only other businesses could be so straightforward about
what needs to be done at times. When I was traveling on
assignment a
couple of years ago and United Airlines was hitting me up for
$1,130 dollars to go from New York to San Diego while America
West was charging $197 from San Francisco back home it was
clear that someone was afraid to go out to the business model
barnyard and make some tough choices. Looks like
United's cow isn't very choice now, alas.
Having the human element in the loop
certainly complicates matters, but business models are not
people. Yet outdated business models sometimes seem to
have far more lives than your average cat, much less a human
being. So it seems at times with content aggregators, which is
why I wrote a new research paper entitled
The New Aggregation: Models for Success in Creating Content
Value. You can check out the table of contents and
executive summary if you'd like via the link above, but to put it in the smallest
nutshell possible a lot of content aggregators are busy
fattening up over-the-hill cash cows when the money's moved to hamburger
and heifers. They
have some new high-tech pens for the
cattle that they're using to leverage their model further, but
inside the pen it's still old Bossie dispensing the goods. Milk it for all it's worth when you can
afford to, and we'll gladly help you do that, but the truly compassionate thing
may be to consider how
to start raising next generation of content aggregation business models
- or how best to put your current one on the van to hamburger
heaven at a tidy profit.
What's to be done to build a successful
business model in the New Aggregation? See the paper for
details, but here are a few juicy patties (vegan if necessary)
to serve up with those fries:
- Turn your factory on its side.
Those of you who have seen our slides recently know what this
is about. For the rest of you, imagine Henry Ford trying to
build cars on a centralized assembly line when his customers
can contract for engineering, parts and assembly services
over the Web in a highly competitive marketplace. Clients for
content services are willing to purchase the attributes that
make up the traditional content aggregation model, so it's up
to aggregators to choose which attributes of content
aggregation are working most effectively for them - and to
cash in the rest. I think of it as turning the vertical
factory model - in at the bottom, out at the top - on its
side and allowing clients to select which specific attributes of
content aggregation services are really valuable to them -
with or without vertical integration from one supplier. You can still
integrate services vertically, but you'll need to be much
more
selective or have very good lobbyists.
- Think object-ively about products.
Except for those companies that have distribution
technologies amongst their core competencies tomorrow's money
in premium professional content centers around enabling
ecommerce for digital objects. Most aggregators don't provide
much value once their electronic content's seen on the
screen or down the feed. Think long and hard about how the digital objects
that you distribute can have life in the hands of your users
beyond the first glance and as they get onpassed from one
person to another. Yes, this means DRM in the hands of
someone, and if you're smart it will be you. It's working
great for music and eBooks and for your clients who need to
protect their own intellectual property - why not you?
- Think more broadly about
monetization. Most major aggregators of
professional content still have the lion's share of their
revenue streams locked into the concept of allowing
controlled access to a database of content. For some with
highly differentiated content this will continue to work
reasonably well but for those whose clients are finding other
ways to get at the same content via search engines on the Web
and via other methods in enterprise installations
monetization models must move beyond database access to build
long-term revenue growth. Some aggregators may view this as
being rather an oxymoron, but those that decide to move
beyond the database model and to facilitate monetization
using far more flexible models to cash in on content's value
in given contexts are already seeing strong content revenue
growth.
While the business models proposed in The
New Aggregation may not appear to apply to to some in the
business of aggregating content for business and professional
markets, or even appeal to them, the recent history of the
content marketplace seems to indicate that most major trends in
the content marketplace that "serious" content providers choose
to ignore tend to visit professional markets anyway. This time
around it's not likely that the cash cows of years past are
going to come back from the lean times without acknowledging
how today's content publishing and distribution environment has
changed the model for profitability in content aggregation
fundamentally. Please be kind to Bossie as you usher her out of
the barn, but consider doing the difficult but compassionate
thing sooner rather than later. Your investors will be glad you
did.
PS - no animals were harmed in the making of this news
analysis, nor is it Shore's intent to harm any animal. Promise.
-
John Blossom
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