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Tuesday, December 27, 2005

Citizen's Media -a Business Opportunity



The more I talk to people, the more I am convinced that in this world of convergence, he who controls user content is the one who controls the money.

Last afternoon, I spent a wonderful few hours validating a new business plan with a Silicon Valley executive with an illustrious past who is looking at starting his own thing in this ‘Citizen’s Media’ space. Obviously, I cannot comment on his plans, but would like to talk about my view of ‘Citizen’s Media’


What is ‘Citizen’s Media’ ?

The marketing world always needs a catchy phrase to describe any new technology that hits the market, be it an evolution or a revolution. ‘Citizen’s Media’ essentially refers to the concept of involving a wide network of participants who in addition to ‘reading information’ also act as ‘contributors’ of information. So Wiki, Blogging, Podcasting and similar are all examples of ‘platforms’ that fall under the Citizen’s media space.

Citizen’s Media (CM) as a concept has been covered and iplemented in various places. Backfence.com is one example which is a community based site that allows community residents to share and discuss information for others, constantly adding to ‘live news’ for others to read. There are many more such examples.

Forbes, however, asks a relevant question: ‘Is there money in this space ?’. There is no question that blogging, podcasting, RSS feeding et. al. are the new wave communication mechanisms that define “Web 2.0”. However, who is really making money off this ? To address that question, let's discuss what Citizen’s Media addresses and the business models around it.

TV vs. Internet

Imedia has an interesting report which details the trend of online-advertising vs. advertising on TV. In short, online ad revenue has increased 33% last year at $9.6b. Compared to this, the Pay Per View and TV advertising is $60billion but its not growing. In other words, it looks like online advertising is steadily eroding ad-money from traditional channels. And why not: the same article reports that viewers spend 34% of their media consumption time on the internet. In my previous article, I had also provided some references to broadband adoption which is very healthy.

The fact that TV advertising is not growing much and that online advertising is growing very fast is a clear trend that content providers recognize the online medium as a revenue generating space. A growth rate of 33% with an existing revenue of $10b is enough for me to think there is money for us to play, eh ?

Modelling a business around it

Every business is eventually a derivation of the classical producer-consumer paradigm. In the case of Citizen’s Media, there are some basic questions to answer:

  1. Who will use this service ?
  2. How do you attract producers to contribute quality time & information & consumers to participate ?
  3. Who are the value-chain participants ?
  4. What is your risk mitigation strategy ?

Who will use this service ?

An important demographic to model around. Are you targetting the top 5% of the earning market or the bottom 30% of the middle class market or the vast mid-section of teeny-boppers ? Existing Citizen Media solutions have been embraced by what I call the 2nd tier of enthusiasts – those who are not professional, have free time and don’t have the money nor network nor agents to approach a Comcast or a DirecTV for a slot. This represents the vast majority of producers of this CM space.

There are ofcourse, savvy professionals who have seen the profits and the reach of such a system, such as Om Malik’s GigaOm blog (which is a good read, by the way) , but they represent a very small percentage of the larger producer space of today.

In terms of consumers it really depends on the content being fleshed out. Teeny Boppers have a lot of time and inclination to stick to CM blogs, podcasting and similar. Don’t trivialize this market – they were solely responsible for ensuring that digital camera equipped phones outsold digital cameras by a good margin. At the same time, blogging and podcasting draw many professionals, many of whom spent at least 4-5 hours a day on these forums. So my take is that the age group of 15 – 35 is the target space for the CM space as far as consumers go.

How do you attract producers to contribute quality time & information ?

Quality of Service ,revenue and outreach: Provide them a platform where it is easy for them to create their shows and take care of marketing, viewer base and quality casting for them. Use the right tools and platforms and build on existing technology instead of starting from scratch. There are lots of innovative social network platforms such as Ning and similar that already have a good amount of work put in to build on top of. Make a simple to understand business case that does a what-if analysis for them. Show them, how, via ads, via content selling as well as providing premium services they can make money (By premium services, I mean, let the basic show be free, but when people get stuck on it, provide, say, an ‘advice channel’ hosted by the producer, where consumers can pay $2.99 for 1 session and take advice from the host – just an example). Also strike the right partnerships with the right OEMs and service providers who can market your service. For example, tie up with a Verizon and have them push this new service onto their OEM phone manufacturers.

Who are the value chain participants ?

In any successful business that survives more than a few years, everyone in the value chain needs to profit. Remember you are trying to run a business. So keep profitability in mind. Identify the players:

The providers (you) – This is a captial intensive game. Your network must be wide and your quality of hosting superior before you get into the market. Strike the right partnerships. Talk to the right content distributors (remember, you are a provider not a distributor). The success or failure of a service is more often than not dependant on how well you market the solution. Marketing ! Marketing ! Marketing !

The Producers – your first line customers. Make sure their entry price to use your service is not high for them to shy away. Remember, they are 2nd level amateur users for the most part. Deploy a risk-reward model. Modulate your subscription cost as a function
of the popularity of their content. Let them make money by getting a chunk of what you earn from them. Let them set up their own innovative ways to manipulate their content for secondary revenue streams.

The Consumers – the people who are eventually responsible for everyone else’s revenues (just like TV viewers are to TV producers). Spend enough time striking the right partnership deals for maximum distribution of your selected demographic. First choose your target market and go hell-for-leather in marketing to that segment. Don’t try marketing to the wide world – different demographics have different sweet spots.


What is your risk-mitigation strategy ?

A colleague of mine recently told me that to stay alive in this industry you must continuously re-invent yourself. Even if you are the first to deploy a solution, eventually the giants of content will wake up. How do you protect yourself from being trampled all over, undercut and oversold ? There are many mitigation strategies including:

  1. Defining how you will stay ahead of the others in terms of technology and consumer expectation mapping
  2. Expect to get bought over by one of the goliaths who want to ride on david’s shoulder – sell out, make your money, do something new
  3. Striking the right partnerships to ensure that a collective force which is in a win-win relationship can offset hostile takeover bids
  4. Keep your opex under control – if you don’t want to sell out to bids, expect serious profit margin erosion when the biggies step it. Opulent opex at that time swings back to slap you hard.
  5. Create a ‘we are not your competition but your partner’ targetted pitch for different ‘people’. The first people to get scared would be the Payperview TV goliaths. They already see their billions slipping – but they are not really your competition, since they are a distribution channel. Make this pitch clear to them and identify areas you can work together. Leverage their network further with a possible partnership. The same holds true for other identifed ‘friend or foe’ market.

Conclusion

Infrastructure exists. The Market Exists. The failure or success of making the CM space into a profitable business is certainly possible but needs good planning and of course, a lot of luck. However, if you don’t do it, someone else will. So I’d be watching the folks in this space. If you are a VC and find a good team trying to play in this market, Invest !

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  1. [...] Citizen’s Media - a business opportunity - a take on the new market segment of Citizen’s Media - what it means and what it takes to be a player. [...]

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