This morning I read something interesting on the dilemma entrepeneurs face between selling and building. Having myself been faced with such a decision just last week, I wanted to mull the topic over and then write my two cents on it without divulging too much. When I got back, I came across Scott Karp’s insightful and accurate observation on content creation vs. content aggregation (ie. technology platform, basically) and could not help but see how these two themes were inter-related these days.
Of course, when we think of companies who did not sell when they should have, we think Friendster. And when we think of companies who in hindsight are happy not to have sold, we think of Google. In the former, Friendster was a company with way too many cooks in the board who thought too high level and did not actually think of the nuts and bolts that users wanted. Furthermore, Friendster adopted a controlled environment whereas MySpace embraced an anything goes mantra. Last but not least, MySpace really took off thanks to indie, underground bands whose own long tail (I hate using buzzwords but in this case it applies) fan base helped MySpace take off. Friendster/MySpace and other in the social networking space are perfect examples of technology platforms that aggregate content and do not create any.
Similarly, Google is essentially a platform to index and organize the Web’s content, it does the aggregation, not users, as is the case of MySpace.
What is key to note with both, however, is that when it comes to aggregation tools, saying that these can scale is misleading. In other words, are they the leaders in the space because they scaled or did they scale because they are leaders?
The difference between content creation companies and content aggregation, technology platforms is that with content creators, you need not be #1 or #2. However, with aggregators, you do need to be #1 or #2 to succeed, and basically, be relevant.
Think about it, a content creator can succeed with a somewhat limited user base. Online this is even more applicable than offline (online magazine vs. offline magazine). But with a social network like MySpace, unless it reaches a critical mass, it’s not relevant.
There’s also plenty of talk today about the west coast being the new media capital. That too is misleading. Sure, Google sees $1 out of every $4 spent on online advertising in the US go through its door, but look at the challenges Google is facing with its YouTube subsidiary YouTube when it comes to wooing Viacom, CBS etc. Over time, technology has disrupted media quite a bit, and for the better.
But much the same way that 2006 was all about file sharing user generated media (at least in video), 2007 is shaping up to be the year of original content. Why?
Technology platforms are having a helluva hard time monetizing traffic. YouTube, MySpace, Digg and company are all great in many ways but their revenue per user is immaterial, at best.
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