It’s time to question the Faustian bargain big and small media companies keep making with fast-growing technology platforms.
This week, reports surfaced that publishers including BuzzFeed, CNN, Time and ESPN are in talks to contribute to a new part of Snapchat that will showcase professional content.
Snapchat is wise to court these publishers—the company will get more engagement inside its app at no upfront cost. But media companies chasing Snapchat’s more than 100 million monthly users—aka following the shiny new tech platform of the day—could benefit from a history lesson.
No established media company has built a new business off the back of a technology platform.
At best, some new brands have grown their audience and ad business by amassing traffic through social media, drawing more views to customized ad campaigns (BuzzFeed, Vice).
But even then, it’s a dicey equation that leaves those brands very dependent on tech companies whose interests aren’t aligned with theirs. The key thing media executives need to understand: Tech companies don’t believe in the unique value of premium content over the long term. (More on that later.)
Lessons from the Past
The long-term track record of media companies that place big bets on new platforms is poor.
Take the Washington Post, which invested heavily in its “Social Reader” that pumped out content tailored for Facebook users’ News Feeds. It launched the product with much fanfare, only to pull it from Facebook after the social network changed its algorithms amid complaints that the service was “spammy.”
Or take television networks, that have yet to make meaningful new revenue from integrating with Twitter. Even media companies licensing content to Netflix are striking a dangerous bargain: a short-term bump in revenue in exchange for emboldening a platform likely to cannibalize their business—and, of course, compete with them (House of Cards).
Hunter Walk, a venture capitalist at Homebrew and a former YouTube executive, says media brands get caught up in the idea of a “potential virtuous cycle” of using technology platforms to grow their audience, burnish their brands and then eventually make money. But most get caught along the way.
People tend to single out startups as the exception, but the picture is rarely rosy for them either. “The best case scenario is they rise and then they get acquired. It’s pretty rare that you can grow to scale on the back of a single platform,” he says.
For example, Machinima, the anime video creator that was a well-known early mover on YouTube. The one-time gaming site amassed hundreds of millions of followers by investing in content for YouTube channels. Google even backed it. But it hasn’t made enough money through advertising to build a good business, in part because Google takes 45 percent of its YouTube ad revenues. After rounds of layoffs, its future is unclear.
It’s easy to see why media companies keep falling into the same trap: fear of missing out. They’re losing their direct audiences as consumers flock to aggregators like social networks, and there can be short-term benefits to being early on new platforms. Plenty of journalists gained hordes of followers on Twitter by being among its earliest users, for example.
In the words of CollegeHumor co-founder and IAC executive Ricky Van Veen, “You need to be where the audience is.”
Mr. Van Veen, whose CollegeHumor has invested heavily in content for YouTube, sees a “symbiotic relationship” between technology companies that need premium content to draw higher advertising rates and media companies that need audience. And he notes there’s no harm in trying new platforms.
The Media-Tech Misalignment
The problem is even an experiment takes time and resources, costs that exceed the benefits of a very one-sided “symbiosis.” Tech companies simply have different interests than media companies.
To start, tech companies want leverage. The last thing they want is any one content partner getting too big.
And their timetables for building revenue features and turning a profit don’t match media companies’. Emerging companies and their investors are happy to wait.
The biggest issue: While these ad-driven platforms want engagement, they don’t care what people watch or read to get it. In other words, they want to commoditize content.
No tech executive would say that publicly. Instead, he or she would talk ad nauseam about needing the ESPNs of the world to charge more for advertising. And in the near term, while tech companies try to lure dollars away from television, they know it helps to have higher quality video content that advertisers are used to buying against.
But privately, executives at Snapchat, Facebook, Twitter and YouTube believe that advertisers want engagement above all else. Over the long term, they don’t care whether their billions of users are watching their friends’ skateboarding videos or a cooking show from the Food Network as long as they are watching something.
I’m not advocating that media brands ignore these platforms outright. But instead of rushing to do deals and crossing their fingers the money will follow, media executives should be far more strategic.
A good first step would be to fire any executive with “digital media partnerships” in his or her title. Those people need to do deals, good or bad, for their résumés. Next they should do everything possible to go direct to consumers.
What not to do is what most do: Chase whichever tech companies boast fast-growing audiences and pivot to create content for them, betting the business will follow. There’s undoubtedly money to be made in the major shift underway in how people consume media. But it’s clear that tech companies, not media companies, will capture the majority of it.
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