The New Media Consolidation

There is a massive wave of media consolidation going on, but it’s very different from how media companies traditionally scaled.

The archetypal consolidated media company was, in many ways, the newspaper chain, which consolidated monopoly media channels across non-competitive local markets, guaranteeing that the whole would exceed the sum of the parts. But on the web, EVERYONE competes with EVERYONE. You buy one website and it steals traffic from another that you own.

How can media consolidation possibly function in this zero sum game for attention online, with hyper-fragmentation, long tails, and people creating media here, there, and everywhere? It’s tempting think that the media business is no longer about scale.

But media has always been — and always will be — about scale, and there is only one trend in media now that matters — the only trend that has ever mattered — consolidation to achieve scale. What’s changed is not that scale has stopped driving the media business — what’s changed is HOW you achieve scale.

Google is the only REAL media business success story of recent years — arguably of this century — because they figured out how to consolidate and monetize the ENTIRE web, by consolidating the attention of media consumers who are searching for other companies’ content — and then they extended the monetization through the AdSense network to sites where that attention went. Google’s announcement today that YouTube is now a platform for distributing video content and associated ads through the AdSense network is part of that consolidation.

The media industry didn’t see Google coming because traditional media companies didn’t recognize that the web had fundamentally changed the dynamics of scaling and media consolidation. But that is beginning to change, at least among the savviest media companies.

The new media consolidation includes:

  • Buying and selling links to influence search traffic — a practice Google is cracking down on to protect its own consolidation
  • “Citizen media” sites like the NowPublic, AssociatedContent, and the recently acquired Newsvine, which consolidate independent content creation activity
  • New York Times bringing the Freakonomics blog onto its domain and cranking out new blogs (over 40 now) in order to crank out more and more content at a fraction of the cost of its traditional print content operation
  • Vertical ad networks that comprise mostly niche sites you’ve never heard of but that get tons of traffic from search
  • Traffic networks — a larger strategy that encompasses ad networks, blog networks, affiliate networks (e.g. Glam, Reuters’ new Affiliate Network) — networks like CNN’s partnership with Internet Broadcasting’s local TV sites, which created the largest news “site” after Yahoo News

These represent one of two principal new media consolidation trends, i.e. the consolidation of content creation. The second trend is consolidating the power to decide WHICH content gets attention.

Search is the leading edge of this second wave of consolidation — what we might call the consolidation of “attention allocation,” to give it a larger frame than search.

What Google discovered was that consolidating all of the search behavior on the web is actually a form a media consolidation. It used to be that the content and the distribution were one and the same — newspapers, magazines, TV networks, etc. — Google was the first media company to successfully arbitrage the separation of content from distribution.

But search is only half of the equation. Search has consolidated the allocation of attention for people who know, generally or specifically, what they are looking for. The other half of the attention allocation equation for media is people who don’t know what they are looking for — they just want to know what’s NEW. I may be interested in technology, or celebrity gossip, or foreign affairs, but I’m not looking for anything in particular. I just want the news.

This is why the online news market is heating up. This is why Google has started to develop the Google News product after letting it run on automatic pilot for so many years. This is why Digg has captured everyone’s imagination — it has the attention allocation power of search, but applied to news.

But there’s a problem with these two approaches to media consolidation — they remain separate.

In one corner you’ve got all of the capacity to create content, from traditional media brand networks to citizen media consolidators, all the way down the long tail to independent blog publishers.

In the other corner you have the aggregators, from search to audience-powered social news, increasingly dominating how attention gets allocated to all of this content.

It seems unlikely that the the big media players are going to be content with half the pie.

And so this separation is starting to dissolve, e.g. Conde Nast acquires Reddit, Google starts hosting news wire content, Forbes acquires Clipmarks, Digg hosts massive comment threads that dwarf what you find on the original content items.

This is where consolidation converges, where content creation meets attention allocation — new media companies are realizing that they have to do both.

But Digg has introduced an interestingly disruptive element into that equation, because it has empowered the people CONSUMING the content, i.e. the audience, readers, etc. — to allocate attention. And that still leaves the people who consume content acting separately from the people who create content.

But what if the content creators, the people with the deepest involvement and stake in media, powered the aggregation? This is what Google achieved implicitly by capturing the link votes of web content publishers. But what if you could do it explicitly? You see this on small scale in bloggers’ del.icio.us links — but what would it look like on a large scale?

Scott Karp

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