Showing posts with label AOL. Show all posts
Showing posts with label AOL. Show all posts

7/27/12

Facebook's business problems are symptomatic of many large digital firms

Facebook is wrestling with a business challenge more traditionally found in legacy media: how do you translate consumers that don’t think they have a commercial relationship with you into relationships that that other firms will pay for?

Despite 955 million active users and increasing revenues, the company has lost a third of its share value since its IPO in the spring.  The exuberance that surrounded its IPO and overpriced its shares has worn off and investors are realizing that being big isn’t enough to ensure business success. Its latest earnings reports show the firm lost money, $157 million, in the second quarter on income of $1.18 billion.

Facebook’s challenges are symptomatic of a long line of “successful” digital firms that are experiencing monetization problems, including Yahoo, You Tube, AOL, and Twitter. Despite large numbers of users globally, they still lack effective business models to generate revenue levels congruous with their size. They may provide great communication functions for users, but they are not transforming very well from innovative users of technologies to highly profitable commercial enterprises.

Part of their challenge is that they have to focus so much effort on non-paying customers and those customers think of the services as personal communications—making them resistant to many efforts to monetize them. This problem has long plagued traditional media, but they are conceived as mass rather than personal media and have been around so long that many people are now used to a certain level of commercial exploitation. They also have a proven track record of return on advertisers’ investments that digital media have not yet been able to deliver for many types of advertisers.

Large digital players will continue to evolve and can be expected to improve their financial performance over time, but it will take a good deal of innovative thinking about the business rather than about the technologies and social value of their services.


12/2/10

Content Farms and the Exploitation of Information

A growing number of firms are aggressively pursuing the market for information by providing material that answers online searches and employing strategies so their material appears high in search results.

These enterprises are providing high quantity, low quality material on topics designed to produce many search hits and driven by the desire to make money from advertising received as high traffic sites. Some are proving quite successful.

Demand Media, for example, uses about 13,000 freelance writers to produce about 4000 articles a day for which it gains about 95 million unique visitors with more than 620 million page views monthly. Its eHow.com site alone gets about 50 million users. Ask.com, Yahoo and AOL are also engaging in the market.

When you make a search and are taken to answer.com, dictionary.com, wikianswers.com or hundreds of other sites providing such information to the public, you encounter this mass produced content. The business strategy is working and many of the sites are among the top 25 sites in the U.S.

These producers and a whole range of similar organizations are producing material in content farms that rely on freelancers who are paid as little as $1 an article or get no payment except for number of page views for their specific work. It is a throwback to the penny-a-word days of journalism in the 19th century. The firms are increasingly seeking video producers, photographers, and graphic artists to provide similar material at similar levels of compensation.

Even established news organizations and other enterprises are starting to use the syndicated material produced by such content farms. Organizations such as Hearst publications and National Football League are relying on them for some content that appears on their sites, for example.

The implications of these developments on the quality of Internet information and the prospects for professional writers are clear and hardly encouraging.