| Spreading the Wealth
It’s a big Internet world out there, and it’s getting bigger all the time. That’s both an opportunity and a problem for everyone involved -- users, publishers and advertisers.
According to Netcraft, 50 million new Web sites were added to the Internet in 2007 -- a 47 percent increase -- and it’s on track to add another 50 million in 2008. The IAB reports that Internet advertising revenues grew by 25 percent, to $21.2 billion, surpassing both radio and cable television to become the third-largest medium after newspapers and broadcast TV.
Clearly opportunities exist -- for users to find exciting new content and for advertisers to reach them as they do so. The key is for publishers to be able to provide the content that will attract users and the ad revenue that comes with viewership.
However, while both the number of Web sites and online ad revenues are growing, they are not growing at the same rate. Advertising is merely growing very fast; whereas the number of Web sites is mushrooming. Further, ad revenues are highly concentrated in just a few Web sites. In 2007, just 50 Web sites attracted 89 percent of the advertising revenue, which left over 155 million Web sites to split the remaining $2.2 billion. While that sounds like a lot of cash, it is small relative to the number of Web sites, amounting to an average of only $15.02 per Web site -- for the year.
Of course, not every Web site is earning revenue from advertising -- many earn revenue by selling products or services -- but suppose it's 10 percent. That still means that on average, media and publisher Web sites are earning $150.20 per year. Hardly a living wage.
This is a Darwinian situation for publishers; they need good content to attract users, who will in turn generate ad revenues. But fragmentation makes it hard to afford to make or acquire the needed content. For advertisers, too, the highly fragmented nature of the Internet makes it hard to generate the number of impressions they need.
For both publishers and advertisers, Internet content syndication provides an elegant solution to the problems caused by fragmentation. In a syndication partnership, the same content is placed on a number of affinity Web sites (car reviews on automotive Web sites, for example). It provides publishers with content that will draw users to their site; since (unlike with linking) the users remain on the Web site, the publisher has the opportunity to both sell additional ads adjacent to the content and get the users to view other pages on the Web site, often while sharing in the ad revenue of the content provider.
For advertisers, syndication provides more targeted impressions than a single Web site can offer -- without the cost of seeking out the affinity Web sites.
What about the content owners? Since content drives viewership, and unique content is desirable, why would they want to share with other sites? The answer is, again, fragmentation: Even with good search engines, the crowded Internet environment makes it difficult to attract enough viewers to pay for content. So they may place it on their primary site but also place it, with embedded ads, on external sites, sharing in the increased revenues.
Syndication is proving to be an important solution even for some of the most expensive and appealing content on high-profile Web sites: video streams of network TV shows. Each of the major networks is increasingly syndicating its popular shows on multiple Web sites:
- ABC, which originally said it would be the sole distributor of its online content, announced in September 2007 that it was seeking syndication deals with Web sites including AOL, MSN, Yahoo, Comcast and Myspace. The move “signals an awareness that self-streaming won’t produce enough advertising revenue,” according to Paidcontent.org (9/10/07).
- CBS Interactive launched the CBS Audience Network, a network of over 300 Web sites reaching an estimated 92 percent of online video users in addition to its own CBS.com, in August 2007.
- NBC and Fox launched Hulu, a Web site for video streaming of their programs in March 2008. Hulu, in turn, announced in May 2008 that it would expand distribution of its content to a number of other Web sites, including Yahoo.
In an interview on Paidcontent.org, Hulu CEO Jason Kilar offered some penetrating insights into the syndication model:
“A lot of people assume that the whole thing is the destination of Hulu.com. Yes…but in conjunction with that, we want the distribution business to grow as fast because it’s important to be in the neighborhood that people frequent in their daily lives.”
Kilar noted that syndication enables Hulu to generate a return both for itself and its distribution partners, via increased traffic and their own sales efforts. “I think you’re going to see us grow that part of the business very aggressively. When you’re dealing with digital goods, you don’t have to be tied to one URL.” (Paidcontent.org, 3/11/08)
In a sign that the model is working, CBS announced in June that its MTV subsidiary will be syndicating full-length episodes of The Daily Show with Jon Stewart and The Colbert Report, hitherto seen only on Comedy Central Web sites, to Hulu and Fancast.
If syndication is proving valuable even for the most valued content such as this, it’s clear it will have a big role to play in the continued evolution of the Internet. |
Content Providers get their content distributed to carefully screened Web sites that can deliver targeted audiences -- and hence advertising revenues -- beyond what their home Web site can deliver in an increasingly fragmented environment.