The Guardian: Rise of the news aggregators
First take someone else's work, then charge others to read it... As pure content sites collapse, David Rowan looks at the rise of news aggregators.
Here's a neat economic model for the new economy. First, wait for a leading media company to invest in high-quality journalism - an (ahem) incisive piece of analysis like this, for instance - and to give it away on its website. Then steal that rather excellent headline above it, which you make available on your own website, something that copyright law allows. Next, charge leading companies £1,700 a month each to get access to that headline, if it leads to the sort of piece they want to read. Finally - and this will crack you up - tell the Guardian it must pay you £20 each time 1,000 people look up its own story from your site.
Oh, and then collect $21m from investors who think your site is so cool it is worth between $60-$100m.
Far-fetched? Not if you are Moreover.com, one of the growing number of "news aggregators" building up market valuations as fast as "pure content" websites are collapsing. Last week, Moreover.com completed a funding round from Reuters and Atlas Venture, among others, that it hopes will let it feed other people's headlines to 400,000 websites by the start of next year. At present, Moreover.com is harvesting headlines from 1,500 sources, headlines that it gives away in category-based feeds to 50,000 sites - which can choose, say, to offer a feed about biotech news or space-science news. Users click on headlines to read the full stories on the originating sites - which can sell advertisements against those page views. The company is now working on providing auction feeds and last-minute flight feeds.
The timing of the funding will not have gone unnoticed at Salon.com, TheStreet.co.uk, and other editorial-content sites that have recently been forced to examine their own business models. Last week, as staff at crime-news site APBnews.com were working for free in the hope of salvation, thebullet.co.uk, a UK media site, announced it had "shut down day-to-day operations" while it considered its future.
Nick Denton, a former FT journalist who is Moreover.com's chief executive, believes his low-cost, high-value service has a business model that content sites cannot match. It makes money at both ends of the content-transfer process: banks and private companies pay for custom feeds that serve their own needs; at the other end, it charges content sites for the traffic it delivers to them - which can be far greater than advertising or search-engine positioning would bring.
Typically, a news aggregator such as Yahoo! charges 1-3 cents to a publisher's site every time a headline is clicked through from Yahoo!'s news pages. Some publications will pay up to 10 cents a click; and a financial site such as E-Trade might pay a dollar a click. Moreover.com charges in the range of 2-6 cents - which Denton says is "about a hundredth of the cost of the clickthrough from banner ads". "There's an incentive for content sites to pay to promote," he explains. "We've 1,500 sources. No one publisher is an absolute must-have." (Guardian Unlimited, which runs its own free content-distribution service to other websites, does not pay Moreover.com or other aggregators for referrals.)
The challenge for content-based websites is finding a way to pay for all that expensive original journalism. Consumers have rarely been happy to pay to read articles online, unless, as with the Wall Street Journal, it might help them make more money. Banner advertising is rarely the answer even for the larger sites. Denton sees only three options for pure-content websites. First, pretend to be an aggregator by linking users to relevant pages on other people's websites.
Second, syndicate everything - taking a cue from the ubiquitous Reuters, or mapping companies such as Mapquest. "If it costs too much to get visitors to your site, get your content out where the viewers are," advises Denton.
Third, go offline as well as online. Tech-news bible the Industry Standard subsidises its loss-making website with a hugely profitable weekly print magazine, whose ad revenue is more than $100m.
It's clear who the real winner will be in online media, says Denton: "Yahoo!, the world's most rapidly growing media company ever, doesn't produce an ounce of original content. The Yahoo! effect is immensely powerful. Add up the market valuation of all the information aggregators out there, and they've got 100 times the combined market value of every pure original content site."
But you don't need to be a media giant to be a successful aggregator. Take Jim Romenesko, an Illinois journalist whose fascination with industry snippets led him last May to rise before dawn to compile his daily mediagossip.com digest of online papers' must-reads. The popularity of his one-man site, not just among hacks, led to an approach from the Poynter Institute, a journalism school where he now runs its site, MediaNews. Some big players would envy his traffic and "brand recognition". "I ran mediagossip.com for several months before Poynter came to me," Romenesko says. "If I knew anything about ad sales, I could have probably made a living on my own. The sites that will succeed will be lean and not beholden to Wall Street."
Inside.com, a new media-industry site established by top US magazine journalists including Kurt Andersen, could hardly be seen as lean. Having raised $25m, it has hired writers from Vanity Fair, Rolling Stone and the Wall Street Journal to offer the inside scoop on the publishing, film, broadcast and music industries. Subscribers are asked to pay $199 a year to catch the buzz - a controversial business model, given recent re-valuations of content sites. But Andersen, who has edited Spy and New York magazine, dismisses this year's depression in content-sites' values, which he feels is "as extreme and unthinking as 1999 mania".
Yet he, too, admires the aggregators' strategy. "The brilliance of Yahoo! is that it's national and it's local, it's cheap to produce and it gives its audience real depth. The big problem facing Salon, which is essentially a national alternative newspaper produced every day, is that it's national, and has no local advertisers to whom it can deliver futon buyers or concert-goers."
Critics of Andersen's site, however, raise questions about its own business model. Journalists are expensive and troublesome to employ. Moreover.com, which employs 33 staff, claims its 10,000 daily headlines could be handled by four people. Romenesko doubts whether users will pay money upfront: "Web users simply demand that content be free. Porn they'll pay for, but news and features they won't."
Nick Denton sees Inside.com as doomed. "I'm gobsmacked," he says. "After this incredible catalogue of failures in subscription-based content, to set up a site like that in 2000 is quite an amazing venture whose timing could not be worse."
Andrew Ross, executive vice- president of Salon.com, argues that content providers and content aggregators need each other. "There is no question that when, say, AOL or Yahoo! - the pioneers of content aggregation - turn on the hose, a content provider's traffic can go through the roof. At the same time, content aggregators need content - and, as more websites emerge and grow, so, presumably, will the demand for both of our services."
Ross's fear is that those who control the portals to content will merely rely, lazily, on the "usual suspects - the traditional wire services, the branded old media that do little more than shovel up their pre-existing content in 'digital' form - at the expense of those who are delivering original, web-based content. Right now, there are an encouraging number of producers and editors - like Denton of Moreover - at the content aggregators who seem favourably disposed to the kind of original content that a provider like Salon.com produces on a daily basis. But that takes judgment, intelligence, and person power - all of which can easily fall victim to the deadening forces of mediocrity (and 'consolidation') that hovers ceaselessly over journalistic enterprise and enterprises."
On the web, no content-originator is an island. As the aggregators and web-loggers have learned, users rarely want to stay at one site if the article they want is on another. If your site does not help lead them to it, they will find less reason to visit your site next time - even a well-resourced, quality editorial site as produced by traditional newspapers.
(The Guardian, June 19, 2000)
Here's a neat economic model for the new economy. First, wait for a leading media company to invest in high-quality journalism - an (ahem) incisive piece of analysis like this, for instance - and to give it away on its website. Then steal that rather excellent headline above it, which you make available on your own website, something that copyright law allows. Next, charge leading companies £1,700 a month each to get access to that headline, if it leads to the sort of piece they want to read. Finally - and this will crack you up - tell the Guardian it must pay you £20 each time 1,000 people look up its own story from your site.
Oh, and then collect $21m from investors who think your site is so cool it is worth between $60-$100m.
Far-fetched? Not if you are Moreover.com, one of the growing number of "news aggregators" building up market valuations as fast as "pure content" websites are collapsing. Last week, Moreover.com completed a funding round from Reuters and Atlas Venture, among others, that it hopes will let it feed other people's headlines to 400,000 websites by the start of next year. At present, Moreover.com is harvesting headlines from 1,500 sources, headlines that it gives away in category-based feeds to 50,000 sites - which can choose, say, to offer a feed about biotech news or space-science news. Users click on headlines to read the full stories on the originating sites - which can sell advertisements against those page views. The company is now working on providing auction feeds and last-minute flight feeds.
The timing of the funding will not have gone unnoticed at Salon.com, TheStreet.co.uk, and other editorial-content sites that have recently been forced to examine their own business models. Last week, as staff at crime-news site APBnews.com were working for free in the hope of salvation, thebullet.co.uk, a UK media site, announced it had "shut down day-to-day operations" while it considered its future.
Nick Denton, a former FT journalist who is Moreover.com's chief executive, believes his low-cost, high-value service has a business model that content sites cannot match. It makes money at both ends of the content-transfer process: banks and private companies pay for custom feeds that serve their own needs; at the other end, it charges content sites for the traffic it delivers to them - which can be far greater than advertising or search-engine positioning would bring.
Typically, a news aggregator such as Yahoo! charges 1-3 cents to a publisher's site every time a headline is clicked through from Yahoo!'s news pages. Some publications will pay up to 10 cents a click; and a financial site such as E-Trade might pay a dollar a click. Moreover.com charges in the range of 2-6 cents - which Denton says is "about a hundredth of the cost of the clickthrough from banner ads". "There's an incentive for content sites to pay to promote," he explains. "We've 1,500 sources. No one publisher is an absolute must-have." (Guardian Unlimited, which runs its own free content-distribution service to other websites, does not pay Moreover.com or other aggregators for referrals.)
The challenge for content-based websites is finding a way to pay for all that expensive original journalism. Consumers have rarely been happy to pay to read articles online, unless, as with the Wall Street Journal, it might help them make more money. Banner advertising is rarely the answer even for the larger sites. Denton sees only three options for pure-content websites. First, pretend to be an aggregator by linking users to relevant pages on other people's websites.
Second, syndicate everything - taking a cue from the ubiquitous Reuters, or mapping companies such as Mapquest. "If it costs too much to get visitors to your site, get your content out where the viewers are," advises Denton.
Third, go offline as well as online. Tech-news bible the Industry Standard subsidises its loss-making website with a hugely profitable weekly print magazine, whose ad revenue is more than $100m.
It's clear who the real winner will be in online media, says Denton: "Yahoo!, the world's most rapidly growing media company ever, doesn't produce an ounce of original content. The Yahoo! effect is immensely powerful. Add up the market valuation of all the information aggregators out there, and they've got 100 times the combined market value of every pure original content site."
But you don't need to be a media giant to be a successful aggregator. Take Jim Romenesko, an Illinois journalist whose fascination with industry snippets led him last May to rise before dawn to compile his daily mediagossip.com digest of online papers' must-reads. The popularity of his one-man site, not just among hacks, led to an approach from the Poynter Institute, a journalism school where he now runs its site, MediaNews. Some big players would envy his traffic and "brand recognition". "I ran mediagossip.com for several months before Poynter came to me," Romenesko says. "If I knew anything about ad sales, I could have probably made a living on my own. The sites that will succeed will be lean and not beholden to Wall Street."
Inside.com, a new media-industry site established by top US magazine journalists including Kurt Andersen, could hardly be seen as lean. Having raised $25m, it has hired writers from Vanity Fair, Rolling Stone and the Wall Street Journal to offer the inside scoop on the publishing, film, broadcast and music industries. Subscribers are asked to pay $199 a year to catch the buzz - a controversial business model, given recent re-valuations of content sites. But Andersen, who has edited Spy and New York magazine, dismisses this year's depression in content-sites' values, which he feels is "as extreme and unthinking as 1999 mania".
Yet he, too, admires the aggregators' strategy. "The brilliance of Yahoo! is that it's national and it's local, it's cheap to produce and it gives its audience real depth. The big problem facing Salon, which is essentially a national alternative newspaper produced every day, is that it's national, and has no local advertisers to whom it can deliver futon buyers or concert-goers."
Critics of Andersen's site, however, raise questions about its own business model. Journalists are expensive and troublesome to employ. Moreover.com, which employs 33 staff, claims its 10,000 daily headlines could be handled by four people. Romenesko doubts whether users will pay money upfront: "Web users simply demand that content be free. Porn they'll pay for, but news and features they won't."
Nick Denton sees Inside.com as doomed. "I'm gobsmacked," he says. "After this incredible catalogue of failures in subscription-based content, to set up a site like that in 2000 is quite an amazing venture whose timing could not be worse."
Andrew Ross, executive vice- president of Salon.com, argues that content providers and content aggregators need each other. "There is no question that when, say, AOL or Yahoo! - the pioneers of content aggregation - turn on the hose, a content provider's traffic can go through the roof. At the same time, content aggregators need content - and, as more websites emerge and grow, so, presumably, will the demand for both of our services."
Ross's fear is that those who control the portals to content will merely rely, lazily, on the "usual suspects - the traditional wire services, the branded old media that do little more than shovel up their pre-existing content in 'digital' form - at the expense of those who are delivering original, web-based content. Right now, there are an encouraging number of producers and editors - like Denton of Moreover - at the content aggregators who seem favourably disposed to the kind of original content that a provider like Salon.com produces on a daily basis. But that takes judgment, intelligence, and person power - all of which can easily fall victim to the deadening forces of mediocrity (and 'consolidation') that hovers ceaselessly over journalistic enterprise and enterprises."
On the web, no content-originator is an island. As the aggregators and web-loggers have learned, users rarely want to stay at one site if the article they want is on another. If your site does not help lead them to it, they will find less reason to visit your site next time - even a well-resourced, quality editorial site as produced by traditional newspapers.
(The Guardian, June 19, 2000)
posted by David Rowan at Monday, June 19, 2000
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