I got the preview of this over coffee yesterday, Tim Oren's analysis of the disruption of the media value chain, as evidenced by Rathergate, is an absolute must read:
...But from an investor's perspective, there's the possibility that one of the major value chains in modern society - media and advertising - will be rearranged, at least in part. That makes an economic analysis of the issue rather interesting...
Tim goes on to discuss transaction costs, how search cost incent bundling, which is furthered by economies of scale in traditional media. Subscriptions are bundles, a model that relies on renewing churn instead of investing into sustaining content quality. His primary assertion is that Rathergates will force unbundling because one bad item leads media consumers loose trust in the whole. Add to that the ability for consumers to create their own bundles, which begs the big question: If the winds of change have blown apart the legacy media bundles, can the value of transaction cost reduction be recreated in another fashion, and revenue extracted for it?
Tim speculates that the new media value chain could include components of:
- Google's bundling around declared interests rather than demographics (IMHO, that's a better description of the social networking ad proposition and it gives too much credit for context)
- RSS Aggregation enabling users to generate their own bundles, which Tim points out is great for delivering user value, but hasn't extracted value, yet.
- Technorati's approach for reducing search costs for micro-content: But, there's also the problem of a lacking business case. Perhaps that can be found from the advertisers' side. If promotion to demographic or general interest bundles is giving way to selling by influence, then tracking the conversation becomes of value. Technorati appears to be a radical unbundling hypothesis on both the reader and advertiser sides.
Jeff Jarvis suggest some other ways to play this game, now that its afoot: In this new distributed, unbundled, post-marketplace, molecular, commoditized media world, value can be added in many ways. It's about relationships. It's about relevancy. It's about service. It's about uniqueness. It's about perspective.
Now if this level of disruption is happening around us, traditional media would be resisting commoditization greater than it is. After all, the Innovator's Solution has been written. Rex Hammond provides a case for sustaining media value that I would summarize comes from branding. But branding is built upon trust, and Tim's first point is that its being shattered.
Someone pointed out to me today that Rathergate is unfortunately an adversarial event. Most blogged to death and fact-checked ass issues are because identities are so strong. But we have to have our victories to get a sense that participation matters.
Last night's Future Salon on the Tao of Extreme Democracy was about the opposite, how collective sense making with diverse groups works, empowering participation and driving constructive institutional change. Yin is to wikis as Yang is to blogs.
To see the future of trust in media, look how strangers are learning to trust each other by sharing control with wikis. Besides transaction and search costs falling to enable user bundling as readers, for both blogs and wikis, transaction costs are falling for users as writers and the search costs and coordination risks for finding who to write with. Both with RSS in hand are more efficient at bundling at a moment in time.
I'll assert that wikis have unprecedented ability to bundle a product whose quality increases over time. Once you have participated in Wikipedia, because the transaction costs are so low and the brand benefits of participation are so high, you never churn, you'll be back. Even Yogi Berra wouldn't say of Wikipedia: nobody goes there anymore, its too crowded.
Some ask why I am dabbling in we media and new ad models, given what my company does. A large part of it is that we are an enabler, but its also that understanding new production and distribution models of media teach you how an enterprise really works in our so-called knowledge economy. On another day I'll make it clearer that media isn't the only value chain being disrupted by social economics.
