If you believe in laments of media moguls, those that complain so bitterly about others “steeling their content” and therefore not being able to profit form the news as they used to, you would be quite surprised to learn that writing and publishing articles can still be a very lucrative business venture. U$1.9B valuation of Demand Media is a proof that writing text and producing short videos on trending topics, and publishing online for free, can be indeed a very good business! The company is making close to $200 million a year in advertising revenue from 22 million daily page views of their free content (or $12.60 per thousand page views). The business can thrive thanks to online search engines that push that content to the top of search results and thanks to online advertisers that pay high price for trendy keywords.
Purist would argue this is “demand driven rubbish” (or close to it) and a lot of negatives have been said about this business model and its “sweatshop like” manufacturing of content where 13,000 contributors are paid from $15 to $20 an article to produce up to 10 pieces a day (hmm… this is actually not a bad price for hobby journalists – I don’t get anything near that amount for what I publish on this blog!). Alan Kohler from Business Spectator (amongst other things) has just published a very interesting commentary on Demand Media and AOL which is another media player embarking on the same strategy (and has just purchased Huffington Post blog for reported $315 million!). I would gladly provide a link to the full article but it is now behind a paywall so, no point…
There is a hint in this story for all the aspiring online media barons – “content is a king” but not in the sense Mr Murdoch and the likes would like to think – it is not quality but quantity that matters the most! I have written about this before and success of Demand Media is just another point in case. I also have some anecdotal evidence that there is actually a negative correlation between the quality of content and a number of clicks on the ads (ie. readers are more likely to click on a related ad if they cannot find all they are looking for on a page). I noticed that the page that gets quite a lot of clicks on my website is one that frequently does not have any content at all (ie. because of third party service data is not working). I didn’t deliberately set it this way and I discovered this phenomenon by accident but it well explains why Demand Media is making so much money… the content does not have to be perfect, just have to have enough trendy keywords to attract visitors and when they cannot find all the information they are looking for, they will click on a well paying ad that goes along with the article. This used to be a tactic applied only by dodgy online operators but now it is filtering through to the mainstream online media portals.
Therefore, one of the most important resolutions for 2011 should be to create more, and trendy, content!
Related posts:
The golden rule of online business – traffic, traffic and traffic
Law of “exponentialism” of online advertising revenue and online business value