Last weekend Tech Crunch published Marc Andreessen’s crazy manifesto, something about torching ships. It sounds really great, but it’s simply not possible:
Marc Andreessen had a really good idea when he invented the first popular browser for the web, but his latest notion – that newspapers should walk away from a business grossing more than $30 billion a year – is just plain nutty.
The data show that the $3.1 billion in interactive advertising collectively sold by newspapers in 2008 accounted for 8% of the industry’s $38 billion in ad sales. If you assume papers generated another $7.5 billion in circulation revenues in 2008, then some 93% of the industry’s $45 billion in sales were associated with the legacy print product. Even though ad revenues probably fell $10 billion in 2009, print-driven newspaper revenues sill are running at better than $30 billion a year.
It doesn’t take a certifiable Silicon Valley genius to see that no business can walk away from some 90% of its revenue base without imploding. Andreessen should know this better than most, because he watched Netscape, the pioneering browser company he helped launch, go from supernova to black hole in a few short years.
Netscape kicked off the tech boom when its valuation as a public stock broke all kinds of records by climbing to $2.2 billion in its first day of trading in 1995. The company rapidly grabbed some 90% of the nascent browser market as the Internet rocketed from science labs into the mainstream. Within five years, however, Netscape was well on its way to becoming a footnote in tech history.
Why? Because it was forced to stop charging for its innovative software when Microsoft flooded the market with a free browser that did the same thing. With its business model mortally threatened, Netscape cleverly sold itself in 1998 for the implausible sum of $4.2 billion to AOL, which was besotted by its own early success and excessive market capitalization,. The Netscape name limped forward as an obscure and underfunded division of AOL until the plug mercifully was pulled in 2007.
What I think might be possible is focusing on video content, because that fetches 10x the ad rates, and combined with newspapers and magazines’ premium text content (which is indexed better by search engines), then over time as video advertising grows to surpass search advertising and overall web advertising grows to surpass TV (it will surpass print this year), then traditionally print-centric/based media companies might have a shot at survival. For that to happen, you need a lot to change, but that strategy I think can work - not Andreesseen’ pyromaniac recipe for disaster.
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WatchMojo NewsletterThis year in the US, web advertising finally surpassed print advertising:
U.S. advertisers will spend more on digital marketing than on print this year for the first time, boosting overall ad sales, according to research company Outsell Inc.
Print will make up 30 percent of total advertising and marketing spending in 2010, compared with 33 percent for digital, Outsell analysts Chuck Richard and Sheila King wrote in a report released today. Last year, print spending accounted for 32 percent of the total, compared with 30 percent for online.
Spending on Web sites and other digital media will rise 9.6 percent to $119.6 billion this year, Burlingame, California- based Outsell said. Print expenditures will drop 3 percent to $111.5 billion. Total ad spending will jump by 1.2 percent to $367.9 billion from $363.5 billion last year.
This is nothing new, in fact, in the UK, web ads have not only surpassed print, but TV too.
Our number-crunching suggests that by 2021, TV will be surpassed by Web ads in the US.
From Tim Armstrong, CEO of AOL:
Armstrong, a former Google executive, told Reuters on Wednesday AOL aimed to close the gap between fast-growing methods of distribution on the Web including search and social networks, and media content created for a previous era.
“In reality, the distribution’s bigger than the content now. Quality hasn’t caught up,” he said in an interview at the Abu Dhabi Media Summit, adding that there was a huge opportunity to attract advertising to sites publishing quality content.
“I believe there’s about a $20 billion gap between where advertising is and where customers are.”
Read more. Here’s something I wrote on the The Commoditization of Distribution and Scalability of Content. That was back in February 2007…
