The Guardian has a report which tells us (apropos my previous post) that there isn’t enough money in advertising to fund tiny startups. Which rather begs the question why anyone thinks there’s enough in it to fund entire newspapers…
I suppose the central dilemma for creators on the internet is how hard it is to get paid. Becoming popular, unfortunately, doesn’t often equate to becoming rich. This is a bit odd, and one of the key differences between “old media” and the internet, and I think it’s also the central challenge.
I mentioned previously that one of the oft-suggested ways of addressing this dilemma is to use creative output as the loss leader for something else. People who download your tracks might come to a live performance. People who read your blog might book you to make a keynote speech.
The other way, far more common on the internet, is to sell advertising. Use your popularity to serve up more pages, more pages equals more ads, more ads equals more money.
Sounds fine in theory, but works less well in practice. There is a detailed financial analysis to be done by someone more that way inclined. If I find it I’ll link to it.
But my view on this is quite simple and based on experience and logic.
Experience is that ad revenues don’t grow, in reality, anything like as quickly as traffic. The actual amounts of money to be made are quite pitiful when viewed against the amount of consumption.
Logic says that if everyone relies on advertising to fund their creativity then there isn’t going to be enough money to go round.
Both of these lead to the same outcome: the winners in the ad-funded content game are those who pay little or nothing for content. The investment has to be scaled down to match the size of the opportunity – and when the opportunity is only marginally above zero, the winning model will be the cheapest.
We all know who those winners are – endless sites serving up scraped or “farmed” content, with more investment going into SEO than anything else to maximise traffic. Or the big search and advertising giant itself, Google.
There’s plenty of analysis and de-constructing of this to be done, and doubtless I’ll do more of it at some stage, but actually the simple logic doesn’t require any understanding of the internet at all.
Traditionally creativity, and the huge success of the creative industries, has been funded by a combination of advertising and other revenue sources – principally from actual customers paying for the creative output.
If it is now going to be just advertising, and given that the advertising market is by-and-large static in overall size (or at least doesn’t grow in line with audience and consumption), it means less money is going to be available to invest in creativity.
In my view, more investment in creativity is a good thing. More opportunity for creative people is a good thing. Popularity leading to success is a good thing. So a shrinking opportunity is a bad thing and this is the dilemma which needs to be solved.
For this reason, I think anyone who believes that an ad-funded model leads to good outcomes for creators (and therefore for users) is a mite delusional. Of course, it has its place and always has.
But even if you choose ad funding, rather than having it forced upon you, it’s a pretty tough market. When ad spending moves from offline media to online, a whole load of it gets swallowed by Google and other intermediaries. The bit that’s left is competed for by thousands of new, zero cost, competitors who ae mainly gaming search algorithms to acquire traffic.
But media overall has always thrived on having other sources of revenue too, often direct from the consumer. Some form of cover price. For the most part, and for the time being, these are simply unavailable online.
Charging for content is still a controversial idea, and conflicts with the desire to reach a large audience. This is seen by many as a good thing – cheap is better than expensive, free is better than cheap.
I don’t agree with that, and I think the outcome is the obvious one – you get what you pay for.
How we can move the internet away from the obsession with free is for another post (another few hundred posts). But this much I know: advertising isn’t a viable way to fund creativity online. It wouldn’t be even if every penny of ad revenue went straight to creators.
But with pathetic dribble of revenue which remains after the scalpers and middle men have taken their disproportionate cut, the idea that it can sustain serious enterprise is ridiculous.