Product is King. Content is Not.

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Photo by The Rocketeer on Flickr
Remember the bad old days of blog networks. Like when I was at b5media championing the idea of content as the great savior of the Internet, the bellwether of future journalism, the dawn of an era of online advertising as the dominant (and only) truly valuable means of creating revenue online?

Yeah… so about that.

I was wrong.

I was wrong about the idea of wide adoption of online advertising as a primary revenue source for the long tail. I was wrong about content not being a commodity. I was wrong to think that successful online startups could have successful advertising models. I was just wrong.

As recently as this week, AOL laid off it’s “freelance writer” staff as part of the recent Huffington Post acquisition and subsequent roll-up of AOL properties.

All you people thinking you can make money online using the standard advertising/content model… well, think again. You’re not.

Advertising is a commodity. Commodities, by definition, are resources that flood the marketplace, diluting the individual value of each resource. Advertising online is dominated by “remnant” advertising, which is cheap commodity advertising that costs the buyer little to purchase in bulk (think Adsense) and results in little payout to the publisher. There’s very little real money in commodity advertising. The real players are getting paid on direct sales advertising targeting big sites with high payouts (Think Apple taking out prominent advertising space on the New York Times for tens of thousands of dollars).

Content is a commodity. There are millions of bloggers. Millions of publishers. Hell, just this week, I migrated a site to WP Engine that had 11k+ sports blogs. Content is a commodity and, by definition, not valuable.

But if you want to keep thinking it’s valuable, go for it. You keep writing blog posts and giving yourself some sense of value. While you’re at it, take a look at the sky and convince yourself it’s actually orange.

Content companies are not likely to generate enough value in today’s economy. Certainly not for any kind of acquisition or exit.

I was wrong. I’m man enough to admit it.

In today’s internet economy, the real value and, in my opinion, the only viable model for successful online business is in product. Products. Real, tangible products. An iPhone app. A digital goods marketplace. A software product. A social network, perhaps. Something that has measurable customer acquisition and a real exchange of monetary value. You know, like the good old days where I pay you for something that I can, with certainty, validate receipt. I give you $30, you give me a text editor application for my Mac. I pay you $15/mo, I get an online invoicing service. I pay $0.99 and get a car locator app for my phone.

Content commoditization strategy says, I do something for you, Mr. Advertiser (put some code on my site), and you may pay me something if anything productive (click, action, impression) comes from it and, oh yeah, there’s no real measurements or guarantees for said exchange. Keep churning out content and page views will pay me.

No. That’s not how it works anymore. Why do you think Netflix built their model on a pay-for-service concept instead of intro/outro/in-video advertising? Why do you think Amazon continues to diversify their product offering with no real advertisement and certainly no content? Need a server? You can have 10 for cheap. Need music? We’ve got that covered at a competitive rate and now you can play it from anywhere. Need toilet paper? We’re partnered with retailers across the country to provide any essential product you might need and you can even have it shipped free if you pay for this other service we call Prime

See? It’s product… not content. Content is becoming significantly less valuable.

Time to pivot.

Feed Subscriptions Are So Important

When I left b5media, I had established a base of over 1300 feed subscribers on this blog. I was proud of that because, let’s face it, if you aren’t a news site breaking news all the time, people are not as inclined to subscribe to a feed.

The feed at that time was hosted via FeedBurner with whom the network had an enterprise account with. As a member blog of b5media, and one of the folks that tested and pushed FeedBurner on the network, my blog was one of the first hosted under their CNAME policy. The CNAME policy allowed us to brand feeds with b5media (http://feeds.b5media.com as opposed to http://feeds.feedburner.com).

Obviously, I had some branding concerns to deal with and I contacted FeedBurner for a solution that would allow me to take control of my feed and retain the subscriber base I had established over a period of time.

FB: Simple. We can transfer it under your Feedburner account if you’d like
Me: Yeah, let’s do that.
FB: Oh wait, your feed is under the Feedburner Ad Network and so because of financial logistics involved with b5media owning that feed URI, we cannot transfer it. But, you can burn a new feed, delete the old and use 30 day redirection to send people to the new feed.
Me: Okay, that makes sense.

And off I went. I burned the new feed, deleted the old with redirection, and looked at numbers over the next few days. My feed subscribers had dropped to almost a third of what they were (down to about 400 subscribers).

By the time I realized that I had been nipped in the bud by the CNAME issue, it was too late and all those subscribers were gone with no way to communicate to them about re-subscription.

Over the past 3 months, I have rebuilt to around 850 – still a large distance from where I was, but slowly getting there. If you haven’t re-subscribed yet, please do so now.

Takeaways

Feeds are our bread and butter in blogging. Knowing that there are people subscribed to a blog, provides direct value to bloggers. It helps us understand the dissemination of our content and the reach of our audience. We value page-views, obviously, but feed subscriptions may be the most tangible metric of actual reach available.

When you find a blogger that you enjoy, vote with your feet (or clicking finger) and add their blog to Google Reader or one of the other many feed readers (most of which are free). We really do appreciate it. It makes us feel that the work we’re putting in is actually making a difference.

Other feeds that we provide:

Walled Gardens and Business Models in the 21st Century

Walled Gardens. Defined as media properties utilizing privileged access to provide information services or content to a user. The classic example of a walled garden was AOL, before they opened up most of their services. Users paid $23.95 or whatever the access rate was and got access to the “AOL Network.”

Then there was Facebook, the walled garden social network that restricted access to college and high school students, and businesses who had a Facebook presence. In all these cases, the confirming matter was a legitimate email address issued by the legitimate university, high school or business.

Web 2.0 drastically changed the way we do “internet”. No longer do people expect to pay for these services, they simply don’t. AOL recognized this fact a few years ago when then CEO Jonathan Miller suggested to the board that AOL should drop its subscription model and open up. AOL decentralized and became an open platform, including their very popular AIM service. AIM, a formerly closed protocol, now is run via Open AIM, a service which has allowed the interoperability between Google Talk, Jabber, and .Me, to name a few.

Facebook opened up big time. They decided to let the world see what was behind the curtain and were wildly successful. Though Facebook is still a walled garden in some respect to data, the walls keep falling with Facebook apps and Facebook Connect, announced last week.

As a final example of a traditionally closed walled garden throwing all caution to the wind and embracing the open internet environment, I give you the New York Times. NYT excessively applies metadata to all of its content, opening up the door for others such as Blogrunner, a Techmeme competitor which is actually owned by NYT. More notably to the traditional media norm, the registration requirement (which is almost always free at online newspapers) to view articles was removed giving full access to NYT content.

No registration. No hoops. Profit.

The challenge, as Seth Godin is probably about to find out, is when a business model is built around paid access (or even free but registration required). I’ve toyed with the idea of premium content for RSS subscribers only here. Though I won’t promise not to try it again, I can say it did not work. There was no increase in subscribers. There was even better content and resources, yes. But it does not work.

That said… one of the things that the open content movement seems to be bringing to light is single sign in. Facebook Connect, for instance, allows users to gain access to dedicated non-Facebook resources, free of charge and without forcing yet another account.

This doesn’t solve business model. I think the Pay per Play model is flawed inherently and though some people are successfully making money on older models, I don’t think the honeymoon can last.

That’s just me, though. Curious to hear what you think the best method of monetizing premium content is.