Last week, Google launched a customizable map product that many said would put the kybosh on competing services that used Google’s map API.
Now…
The lesson, everyone said, was “don’t rely on another company’s technology platform because if you grow, they will shut you down.” Alexaholic, if you can call it a company, was another recent high profile example (that’s not a knock, I mean it was a service or tool, and not a company per se).
Today, MySpace added Photobucket to the list of companies whose widgets it was blocking off of its massive social network, joining a plethora of companies ranging from Vidilife to Revver. Rupert Murdoch gets a bad rep, some of it deserved frankly, but this made total sense. It is, after all, a business he paid $580M for, he invested to help it triple in size, seeing any other company build a business in MySpace’s back is simply unacceptable.
As the debate raged on the blogosphere as to whether MySpace was right or wrong to do this, a few things became apparent. Om Malik does a good job of recapping five lessons from this fiasco, the main theme being, much the same way you cannot build your service on another site’s API and expect to make it into a viable, long term business, you cannot expect to build your distribution on another company’s traffic.
What Web 2.0 was also all about, in addition to mixing/mashing and sharing, was user generated content. What we are seeing in 2007 is that user generated content is not the holy grail. I’ve written about this countless of times, but while advertisers will embrace user-generated content, they will use it on their own terms. That’s a very big difference. This applied to comments, something that boosts user time someone spends on a site but that does little directly to get traction with advertisers; no one really advertises on a message board, my old employer could not give that real estate away. Point is: don’t look solely outside for content either. Do not get me wrong: MySpace, YouTube and Facebook have all built valuable enterprises thanks to user generated media, but their success had a lot to do with broader macro level trends and not user generated content alone. Each one is the leader in their respective segment. It was not, in other words, like every single web company that parlayed user generated content was a winner. There’s roadkill in every segment.
Then…
Back in 1994-2000, content, distribution and technology were obtained either by in-house resources or through partnerships. Trust me, many partnerships, like Esquire reportedly paying a quarterly $300,000 slotting fee to AOL for traffic was unwise; my old company got the distribution from AOL - and MSN - pro bono in exchange for content. But the fact remains, those were business development partnerships that took - sit down folks, get ready and brace yourself - time and effort to close. To be fair, I saw a commenter (Peter Caputa) on Om’s article mention “business development is back” which got me thinking more and more about this. I am stating this not only to give credit where credit is due, but also to showcase that some elements - like in this case comments - are great… but taken to the extreme they become double-edged swords.
And, like comments, other web 2.0 traits, tools and features such as user-generated content, APIs, talk of disaggregation is plain misguided. Of course, it’s misguided in hindsight…
The sixth lesson, perhaps then, is business fundamentals do not change over time.
Technology
It was clear to me, in Fall of 2005, that we could not continue to build a search business MetaMojo.com on Yahoo!’s API, so we dropped that for an open source search engine software to develop our own index and crawler. The smart guys in the room told me it was a mistake, but the flip side is that I do not have to wake up every day and ask myself, did Yahoo! drop us?
Content
Furthermore, when we launched our online TV station WatchMojo.com in January 2006 because of the huge opportunity in video, we knew user generated would not win in the end… right now, a year after launching, everyone and their grandma thinks we’re onto something. Great, I’m glad you thought of it.
Distribution
Last but not least, we have a pretty simple distribution strategy: we develop the WatchMojo.com media property to build an audience, generate advertising revenue and showcase our skills to other partners and clients. But that’s just half of the equation: we have also signed up distribution deals with YouTube, NBBC, GoFish, Roo, etc. We are also on the verge of naming a couple more soon.
The point is: we do not rule out either startegy, not do we count on any single partner. If we did, we’d be out of business. Moreover, while we’re big on viral video and what not, we also realize that while current “business development” deals consist mainly of “email me your RSS feed.”
Last year, Richard Parsons told the media world that Time Warner was looking for more video, both from TWX properties and partnerships, so I emailed AOL Video. Their answer: “send us your RSS feed.” That won’t make video develop into its potential. Dave Winer, please don’t kill us for saying that, we’re big fans of RSS.
Slowly but surely, good old fashion dealmaking that makes sense from both a common sense and dollars and cents perspective is making a return. I can’t divulge the details, but we are seeing that with YouTube.
The web was built by humans, technology alone is never sufficient.
Sales
Lastly, this raises the point of sales. VCs all denigrate companies that rely only on Google Ad Sense but the truth is so many of these companies get venture funding that makes me scratch my head. Much the same way that a publisher needs to be in control - either via in house development or actual partnerships - of technology, content and distribution, they also need to be in control of their advertising revenue. Remember one thing: ad networks don’t make money for publishers, they make money for ad networks.
The good thing, frankly, is that unlike the Web bubble exploding, this reality check won’t lead us into a nuclear winter of inaction. It’s a soft landing that eliminates the bad business models.
In fact, every day, there’s an opportunity to separate the men from the boys and start building profitable, sustainable and valuable companies based on good old fashion business fundamentals. Remember those?
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