Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

The advantages of new “new media” companies…

Posted by Tom Foremski - January 10, 2005

by Tom Foremski for SiliconValleyWatcher.com

There are significant competitive advantages for the emerging “new media” companies--those that are producing original content.

Their characteristics are that they are “blog” based, they make use of the richly diverse blog format to publish a wide variety of media content; they also use commonly available blog software; and they make use of online advertising networks open to anybody.

Most of the new media companies are being set up by professional journalists that have spotted what I like to call a discontinuity in the fabric of things. It’s what entrepreneurs have done for hundreds of years--spot a deep and fundamental shift in the economics of certain commercial endeavors and jump in and take advantage of it. Yes, shift happens :-)

Here are the advantages of today's “new” media company:

+ No need to spend very much on brand building--you leverage the brand of well-known marquee journalists and editors. If you produce online content that is compelling/relevant to your readership, your audience will find you very quickly. If you aren’t producing content that is compelling/relevant to your readership, no amount of brand building promotion/marketing will bring a lasting audience.

By definition, marquee journalists are well known and have large audiences. In the past, they used to leverage that position by changing employers. These days, they can do it for themselves…which is essentially what I have done, becoming the first journalist from a top tier publication (Financial Times) to voluntarily leave a well-paid job to become a professional blogger.

By the way, it still amazes me that many print publishers haven’t realized what is happening when they let their journalists set up their own blogs, covering much the same subjects. In some cases, the journalists are getting more online traffic to their personal blogs than their employer is getting! All while their employer is encouraging them to blog away, and is paying them a salary while they build up a formidable personal brand with "F* You" walking privileges! Unbelievable… Which is why I chose to avoid any such issue/conflict and do it honestly, leave the full-time job, then start to blog.

Other advantages of today's new media companies:

+ Great journalists and editors can be hired for very little money. Salaries are terrible after more than four years of extremely tough times for media companies.

+ Publishing professional, dynamic web sites is cheap and easy. No need for multi-million dollar content management systems.

Server-side software such as Movable Type is an extremely sophisticated and powerful content management and online publishing system--don’t even think of it as “blogging” software. And it is all built on open source/industry standard software and hardware. And because of this, it is extremely cheap AND there is a huge talent pool to draw upon.

+ There is no need for an IT department to publish news or any other online content. You can get away with an IT department of one person, and a couple of web monkeys. Most of the publishing and admin tasks are done automatically by the “blogging” software. And the pay rates for IT people are well below the $150k to $200k IT salaries we used to see during the dotcom boom years.

+ There is no need to build an IT infrastructure and maintain it. Web hosting services are cheap, cheap, cheap. In fact, I will claim that my web hosting and bandwidth fees are essentially free. That’s because the support forums at Total Choice, our hosting service, are incredible. In the early days we had a steep learning curve in combining the open source server-side software with the blogging software and making it all work together--you need at least one or two people that speak Geek. The support forums on Total Choice have always come to our aid quickly and effectively, providing a value of hundreds of dollars more per month than we pay in hosting fees.

This means our online content management and publishing and distribution platform is free. That is a huge, massive advantage over the traditional media laden with it's legacy IT infrastructure and many other costs. And it is also an advantage over the "new-ish" new media companies/organizations created more than five years ago, pre-dotbomb, many of whom have their own data centers, several internal content management systems, large IT departments, etc.

+ There is no need for an advertising sales staff to go around knocking on doors, making presentations about reader demographics, entertaining clients in expensive restaurants/locations, etc.

Today, a new media company can sign up for Google Adsense, or any of the many other blogging advertising and affiliate networks being formed. These advertising/affiliate networks will accept anybody that can deliver them clicks or customers. (There will also be less need for such advertising networks as the “new” new media companies get going...I’ll explain in a future article.)

+ No need for large offices in expensive downtown locations. I still think you need to be in, or close to the media district if you are a media company, it’s just that you need several desks rather than several floors of an office building.

+ No need for a large operational staff. There are plenty of tasks that can be outsourced or done through web services. And there is less need for a large admin staff.

+ No need for printing presses, paying for expensive newsprint, delivery trucks, newsstand boxes, etc.

That’s why there will be many successful “new” new media companies, and that’s why Dow Jones buying “new-ish” media company CBS Marketwatch is not a good deal for Dow Jones, IMHO.

But it’s a great deal for the “new” new media companies emerging, because the old guard will be distracted and have its hands full trying to integrate the acquisitions. And it’s not just Dow Jones-- there were huge numbers of acquisitions in 2004.

Look at this recent posting, “Digital Deal Notes.” , on PaidContent.org by Tolman Geffs, managing director of The Jordan Edmiston Group, a New York-based investment bank focused on the media and information industries.

There were 103 online media and services deals in 2004 valued at $7.3 billion, as tracked by The Jordan Edmiston Group (JEGI). Online deals doubled in volume and tripled in value vs. 2003. And the fourth quarter proved a strong finish with 24 deals valued at $1.8 billion. 2004 deal value was boosted by blockbusters like Cendant Corporation's $1.5 billion purchase of Orbitz; Yahoo's $575 million acquisition of Kelkoo; Dow Jones' $519 million purchase of MarketWatch; and AOL's $435 million acquisition of Advertising.com. Monster was the most active acquirer with four deals for Tickle, Job Pilot. Military Advantage, and DefenseTech.org. AOL, InteractiveCorp, Jupiter and TechTarget were also very active with three acquisitions each. Finally, a broad swath of mid-sized players bought and sold in 2004.

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