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AOL, 2006 Called and Wants Its Content Commoditization Strategy Back…

Photo by jdlasica on Flickr
It was a Monday like any other Monday. After a weekend of too much drinking, low-key football-centric Sunday celebrations (Go Packers!) and an early night to bed, I woke up this morning in the way I normally do on a Monday: Cursing ye gods of Mondays past, and hoping the day would not turn into the inevitable case of the Mondays that they all do.

Wearily, I reached for my laptop to find out what the Monday morning tech news buzz was and my eyes flew open in surprise: AOL had acquired the Huffington Post for $315M in a hybrid cash and stock transaction. This only a few months after TechCrunch had been acquired, also by AOL, for an undisclosed amount.

It was a deja vu kind of moment this morning as I saw the stereotypical business model of the mid-2000s flash before my eyes. In those days, everyone thought they could make money purely on advertising and content. Crank out the content, get more eyeballs, get more ad dollars, PROFIT!

The problem was (and still is!) is that the more content that is produced, the less valuable it becomes. It’s really very simple economics. More importantly, the advertising world has two buckets… maybe three if you put Adsense by itself in the lowest bracket. You have direct-buy, expensive, high-return type ads. These are most often purchased by big companies with big advertising budgets like Apple, Cisco, etc.

The second type of advertising (putting aside alphabet soup forms like CPA, CPM, CPC, etc) is generically called “remnant advertising”. Remnant ads make up the vast majority of internet advertising. It’s cheap to buy in bulk (and in a less targeted way), doesn’t usually pay a lot and, in general, is a good way to do commodity advertising.

This is what we did at b5media. I’ve not spoken much about my time at b5media because, frankly, it disgusts me where they’ve come. We actually had a good product going and things went awry. I won’t place blame. But what I will say is… we built that company on commodity advertising, commodity content, and had a tough time growing the company. I left with over 350 blogs in a dozen “channels”, each channel being a grouping of 20-30 blogs around a topic like sports or entertainment.

It was easier to try to do ad sales for a group of blogs on a topic, than it was to do targeted, lucrative advertising.

The problem with the b5media model, along with the Weblogs Inc model that sold (ironically also to AOL), the Gawker model, the Glam model, and now the AOL model, is that the content quality sucks. When I pick up a magazine or newspaper, I would not liken most media to The Atlantic or The New Yorker, both of which are highly intelligent publications that put out content that is exceptionally tuned and academic. The quality of the content is orders of magnitude higher than most newspapers or magazines (obviously including this blog).

Those publications are rare and can get private money from subscriptions, etc. The advertising route is the cheap route, and the route that business models go when they aren’t good enough to charge for access (a more reliable revenue source).

For the record, commodity business don’t normally pay their writers anything comparable to what their “colleagues” at uncommoditized media organizations get paid. That’s because, their work is not valuable unless it is in bulk.

Going back to the $25M Weblogs Inc acquisition in 2005, AOL has gone down this road of commodity content before. They even killed off a bunch of the WIN properties keeping only the ones that were truly valuable – like Engadget. They are taking a different approach and buying individual high-productivity sites now – which is better – but then their strategy is one that involves combining these sites, at least on a content integration level, into a mass-produced, commoditized content machine.

So is it really different?

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SXSW Day 2 Thoughts

Hey guys-

Fantastic first day at SXSW yesterday. I did no less than 6 interviews in the b5media sponsored Bloghaus. Met with dozens of people. It was literally the best conference day I’ve ever had. This morning, my neck hurts as I spent my second night literally camping under the stars at the “b5 ranch”. Yes there have been parties. Mostly the main ones have been blown off by the b5 crew as we made our own. Yesterday’s impromptu party was spent as well in unison with Weblogs Inc bloggers Christina Warren and Grant Robertson from Download Squad.

Weblogs Inc Crew

SezWho is here. SezWho is a great comment and rating system. The theory is commenting on a blog builds reputation in a particular area. The more reputation you have, the more weight you carry. We’re trying SezWho out at b5. Very, very early in the process on a very, very limited scope. I have a meeting with the CEO shortly. Again, just fantastic people here.

Eddie Vedder, from Pearl Jam of course, has a Texas top-rated gulf coast style seafood restaurant. Absolutely amazing. The food that is not listed on the menu is the best along with the non-menu’d “upgrades” to the steak etc. If you’re in Austin and need a middle-to-upper class quiet venue away from the 6th St bar scene, Eddie V’s is the place to go. Check it.

Krista Playing Joey's Accordion

b5media’s new tagline, by the way: 300+ blogs, 10M pageviews, one accordion. Welcome Joey deVilla to the b5 team. This is 4th day on the job and is experiencing SXSW life for the first time. Everyone loves the accordion!

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