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and added tables and graphs to the CD. Video and

sound were to make their appearance even later. This error in

trend analysis left the field wide open to the likes of

Encarta and Grolier. The Britannica failed to grasp the

irreversible shift from cumbersome print volumes to slender

and freely searchable CD-ROMs. Reference was going digital and

the Britannica’s sales plummeted.

 

The Britannica was also late to cash on the web revolution -

but, when it did, it became a world leader overnight. Its

unbeatable brand was a decisive factor. A failed experiment

with an annoying subscription model gave way to unrestricted

access to the full contents of the Encyclopaedia and much more

besides: specially commissioned articles, fora, an annotated

internet guide, news in context, downloads and shopping. The

site enjoys healthy traffic and the Britannica’s CD-ROM

interacts synergistically with its contents (through

hyperlinks).

 

Yet, recently, the Britannica had to fire hundreds of workers

(in its web division) and a return to a pay-for-content model

is contemplated. What went wrong again? Internet advertising

did. The Britannica’s revenue model was based on monetizing

eyeballs, to use a faddish refrain. When the perpetuum mobile

of “advertisers pay for content and users get it free”

crumbled - the Britannica found itself in familiar dire

straits.

 

Is there a lesson to be learned from this arduous and

convoluted tale? Are works of reference not self-supporting

regardless of the revenue model (subscription, ad-based,

print, CD-ROM)? This might well be the case.

 

Classic works of reference - from Diderot to the Encarta -

offered a series of advantages to their users:

 

1. Authority - Works of reference are authored by experts in

their fields and peer-reviewed. This ensures both objectivity

and accuracy.

 

2. Accessibility - Huge amounts of material were assembled

under one “roof”. This abolished the need to scour numerous

sources of variable quality to obtain the data one needed.

 

3. Organization - This pile of knowledge was organized in a

convenient and recognizable manner (alphabetically or by

subject)

 

Moreover, authoring an encyclopaedia was such a daunting and

expensive task that only states, academic institutions, or

well-funded businesses were able to produce them. At any given

period there was a dearth of reliable encyclopaedias, which

exercised a monopoly on the dissemination of knowledge.

Competitors were few and far between. The price of these tomes

was, therefore, always exorbitant but people paid it to secure

education for their children and a fount of knowledge at home.

Hence the long gone phenomenon of “door to door encyclopaedia

salesmen” and instalment plans.

 

Yet, all these advantages were eroded to fine dust by the

Internet. The web offers a plethora of highly authoritative

information authored and released by the leading names in

every field of human knowledge and endeavour. The Internet,

is, in effect, an encyclopaedia - far more detailed, far more

authoritative, and far more comprehensive that any

encyclopaedia can ever hope to be. The web is also fully

accessible and fully searchable. What it lacks in organization

it compensates in breadth and depth and recently emergent

subject portals (directories such as Yahoo! or The Open

Directory) have become the indices of the Internet. The

aforementioned anticompetition barriers to entry are gone:

web publishing is cheap and immediate. Technologies such as

web communities, chat, and e-mail enable

massive collaborative efforts. And, most important, the bulk

of the Internet is free. Users pay only the communication

costs.

 

The long-heralded transition from free content to fee-based

information may revive the fortunes of online reference

vendors. But as long as the Internet - with its 2,000,000,000

(!) visible pages (and 5 times as many pages in its databases)

- is free, encyclopaedias have little by way of a competitive

advantage.

 

Will Content Ever be Profitable

By: Sam Vaknin

 

THE CURRENT WORRIES

1. Content Suppliers The Ethos of Free Content

Content Suppliers is the underprivileged sector of the

Internet. They all lose money (even sites which offer basic,

standardized goods - books, CDs), with the exception of sites

proffering sex or tourism. No user seems to be grateful for

the effort and resources invested in creating and distributing

content. The recent breakdown of traditional roles (between

publisher and author, record company and singer, etc.) and the

direct access the creative artist is gaining to its paying

public may change this attitude of ingratitude but hitherto

there are scarce signs of that. Moreover, it is either quality

of presentation (which only a publisher can afford) or

ownership and (often shoddy) dissemination of content by the

author. A really qualitative, fully commerce enabled site

costs up to 5,000,000 USD, excluding site maintenance and

customer and visitor services. Despite these heavy outlays,

site designers are constantly criticized for lack of

creativity or for too much creativity. More and more is asked

of content purveyors and creators. They are exploited by

intermediaries, hitchhikers and other parasites. This is all

an offshoot of the ethos of the Internet as a free content

area.

Most of the users like to surf (browse, visit sites) the net

without reason or goal in mind. This makes it difficult to

apply to the web traditional marketing techniques.

What is the meaning of “targeted audiences” or “market shares”

in this context? If a surfer visits sites which deal with

aberrant sex and nuclear physics in the same session - what to

make of it?

Moreover, the public and legislative backlash against the

gathering of surfer’s data by Internet ad agencies and other

web sites - has led to growing ignorance regarding the profile

of Internet users, their demography, habits, preferences and

dislikes.

“Free” is a key word on the Internet : it used to belong to

the US Government and to a bunch of universities. Users like

information, with emphasis on news and data about new

products. But they do not like to shop on the net - yet. Only

38% of all surfers made a purchase during 1998.

It would seem that users will not pay for content unless it is

unavailable elsewhere or qualitatively rare or made rare. One

way to “rarefy” content is to review and rate it.

2. Quality-rated Content

There is a long term trend of clutter-breaking website-rating

and critique. It may have a limited influence on the

consumption decisions of some users and on their willingness

to pay for content. Browsers already sport “What’s New” and

“What’s Hot” buttons. Most Search Engines and directories

recommend specific sites. But users are still cautious.

Studies discovered that no user, no matter how heavy, has

consistently re-visited more than 200 sites, a minuscule

number. Some recommendation services often produce random - at

times, wrong - selections for their users. There are also

concerns regarding privacy issues. The backlash against

Amazon’s “readers circles” is an example. Web Critics, who

work today mainly for the printed press, publish their wares

on the net and collaborate with intelligent software which

hyperlinks to web sites, recommends them and refers users to

them. Some web critics (guides) became identified with

specific applications - really, expert systems -which

incorporate their knowledge and experience. Most volunteer-based directories (such as the “Open Directory” and the late

“Go” directory) work this way.

The flip side of the coin of content consumption is investment

in content creation, marketing, distribution and maintenance.

3. The Money

Where is the capital needed to finance content likely to come

from?

Again, there are two schools:

According to the first, sites will be financed through

advertising - and so will search engines and other

applications accessed by users.

Certain ASPs (Application Service Providers which rent out

access to application software which resides on their servers)

are considering this model.

The recent collapse in online advertising rates and click-through rates raised serious doubts regarding the validity and

viability of this model. Marketing gurus, such as Seth Godin

went as far as declaring “interruption marketing” (=ads and

banners) dead.

The second approach is simpler and allows for the existence of

non-commercial content.

It proposes to collect negligible sums (cents or fractions of

cents) from every user for every visit (“micropayments”).

These accumulated cents will enable the site-owners to update

and to maintain them and encourage entrepreneurs to develop

new content and invest in it. Certain content aggregators

(especially of digital textbooks) have adopted this model

(Questia, Fathom).

The adherents of the first school point to the 5 million USD

invested in advertising during 1995 and to the 60 million or

so invested during 1996.

Its opponents point exactly at the same numbers : ridiculously

small when contrasted with more conventional advertising

modes. The potential of advertising on the Net is limited to

1.5 billion USD annually in 1998, thundered the pessimists.

The actual figure was double the prediction but still woefully

small and inadequate to support the internet’s content

development. Compare these figures to the sale of Internet

software (4 billion), Internet hardware (3 billion), Internet

access provision (4.2 billion in 1995 alone!).

Even if online advertising were to be restored to its

erstwhile glory days, other bottlenecks remain. Advertising

encourages the consumer to interact and to initiate the

delivery of a product to him. This - the delivery phase - is a

slow and enervating epilogue to the exciting affair of

ordering online. Too many consumers still complain of late

delivery of the wrong or defective products.

The solution may lie in the integration of advertising and

content. The late Pointcast, for instance, integrated

advertising into its news broadcasts, continuously streamed to

the user’s screen, even when inactive (it had an active screen

saver and ticker in a “push technology”). Downloading of

digital music, video and text (e-books) leads to the immediate

gratification of consumers and increases the efficacy of

advertising.

Whatever the case may be, a uniform, agreed upon system of

rating as a basis for charging advertisers, is sorely needed.

There is also the question of what does the advertiser pay

for? The rates of many advertisers (Procter and Gamble, for

instance) are based not on the number of hits or impressions

(=entries, visits to a site). - but on the number of the times

that their advertisement was hit (page views), or clicked

through.

.

Finally, there is the paid subscription model - a flop to

judge by the experience of the meagre number of sites of

venerable and leading newspapers that are on a subscription

basis. Dow Jones (Wall Street Journal) and The Economist. Only

two.

All this is not very promising. But one should never forget

that the Internet is probably the closest thing we have to an

efficient market. As consumers refuse to pay for content,

investment will dry up and content will become scarce (through

closures of web sites). As scarcity sets in, consumer may

reconsider.

Your article deals with the future of the Internet as a

medium. Will it be able to support its content creation and

distribution operations economically?

If the Internet is a budding medium - then we should derive

great benefit from a study of the history of its predecessors.

The Future History of the Internet a Medium

The internet is simply the latest in a series of networks

which revolutionized our lives. A century before the internet,

the telegraph, the railways, the radio and the telephone have

been similarly heralded as “global” and transforming. Every

medium of communications goes through the same evolutionary

cycle:

 

Anarchy

The Public Phase

At this stage, the medium and the resources attached to it are

very cheap, accessible, under no regulatory constraints. The

public sector steps in : higher education institutions,

religious institutions, government, not for profit

organizations, non governmental organizations (NGOs), trade

unions, etc. Bedevilled by limited financial resources, they

regard the new medium as a cost effective way of disseminating

their messages.

The Internet was not exempt from this phase which ended only a

few years ago. It started with

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