Big Media Companies Are Betting The Web Will Be Key To How We Entertain Ourselves.
By Rana Foroohar | NEWSWEEK
Sep 26, 2005 Issue
The scramble to entertain you has unleashed the second coming of dot-coms. This time the business plans are written on legal paper (not napkins), the prospects are measured in dollars (not hits) and the focus is on media companies (not Anything.com). Recent deals include Dow Jones's acquisition of MarketWatch.com ($519 million) and The New York Times's purchase of About.com ($410 million). But the biggest buyer is Rupert Murdoch, who recently declared that his News Corp. empire has "no greater priority" than expanding on the Internet.
Murdoch has done just that, spending more than $1.2 billion in recent months on three major dot-coms: Scout.com (a college-sports site), Intermix Media, which owns MySpace.com (a lifestyle portal), and earlier this month, IGN.com, which makes online games. Of course, the first dot-com boom also featured big buyers, but much has changed since then.
First, the majority (or at least a sizable minority) of the population in key markets like the United States, Europe and Asia now has access to broadband connections. So these graphic-heavy media sites actually work for many consumers. Second, online advertising has come of age. Online ads now take in $14.7 billion per year in the U.S., according to Forrester Research, and are growing 23 percent per year, while traditional advertising is flat or falling.
Finally, the creative process is now bottom up, as well as top down. Web users are as important as the old media gatekeepers in the production of online information and entertainment, and they are pushing the market where they want it to go.
As with so many things on the Web these days, this couldn't have happened without Google. Formerly, a site had to be narrowly focused to attract big ad bucks (it's no accident that CNET.com, a technology site with sections devoted to various gadgets, was one of the few to hang on to its ads after the crash). But the Google model makes it possible for even very broad-based news or entertainment sites to make money.
Sites that want advertising invite Google to scan their web pages. Google boils each page down to key words (say, dating and romance), then offers them up to its advertisers, who may decide to run their ads alongside those pages. If, while viewing a page, you click on one of those ads, Google collects the money (perhaps 20 or 40 cents a click) and splits it with the various sites that have attracted the advertising. Google keeps anywhere from 25 to 50 percent. The deal enriches Google and the content sites, which have thus gained appeal as takeover targets.
Entertainment sites are also building an edge using free labor. Sites like MySpace rely heavily on messages, stories, music mixes and photos made by users, and often this self-generated entertainment is better than what the Web editors come up with. Gambling sites like PartyPoker.com and Betfair.com, as well as photo-sharing sites like Flickr.com, take advantage of users who are, in essence, entertaining themselves. While News Corp.'s recent deals may look like a mishmash, Ross Levinsohn, president of the company's interactive division, says that each site had "a strong community of very passionate users" that the company was eager to tap.
Not all self-postings will be worth something. The real value will likely be in more nuanced tools to sift through it all. Levinsohn has been chatting with numerous specialty search companies, though he denies the rumors that News Corp. plans to acquire the London- and San Francisco-based video-search company Blinkx. Late last week, News Corp. was just beginning its second ever companywide Internet strategy conference on how best to exploit the recent acquisitions, and what to buy now. The second coming of the dot-coms has clearly begun. And it looks to have more staying power than the first.
By Rana Foroohar | NEWSWEEK
Sep 26, 2005 Issue
The scramble to entertain you has unleashed the second coming of dot-coms. This time the business plans are written on legal paper (not napkins), the prospects are measured in dollars (not hits) and the focus is on media companies (not Anything.com). Recent deals include Dow Jones's acquisition of MarketWatch.com ($519 million) and The New York Times's purchase of About.com ($410 million). But the biggest buyer is Rupert Murdoch, who recently declared that his News Corp. empire has "no greater priority" than expanding on the Internet.
Murdoch has done just that, spending more than $1.2 billion in recent months on three major dot-coms: Scout.com (a college-sports site), Intermix Media, which owns MySpace.com (a lifestyle portal), and earlier this month, IGN.com, which makes online games. Of course, the first dot-com boom also featured big buyers, but much has changed since then.
First, the majority (or at least a sizable minority) of the population in key markets like the United States, Europe and Asia now has access to broadband connections. So these graphic-heavy media sites actually work for many consumers. Second, online advertising has come of age. Online ads now take in $14.7 billion per year in the U.S., according to Forrester Research, and are growing 23 percent per year, while traditional advertising is flat or falling.
Finally, the creative process is now bottom up, as well as top down. Web users are as important as the old media gatekeepers in the production of online information and entertainment, and they are pushing the market where they want it to go.
As with so many things on the Web these days, this couldn't have happened without Google. Formerly, a site had to be narrowly focused to attract big ad bucks (it's no accident that CNET.com, a technology site with sections devoted to various gadgets, was one of the few to hang on to its ads after the crash). But the Google model makes it possible for even very broad-based news or entertainment sites to make money.
Sites that want advertising invite Google to scan their web pages. Google boils each page down to key words (say, dating and romance), then offers them up to its advertisers, who may decide to run their ads alongside those pages. If, while viewing a page, you click on one of those ads, Google collects the money (perhaps 20 or 40 cents a click) and splits it with the various sites that have attracted the advertising. Google keeps anywhere from 25 to 50 percent. The deal enriches Google and the content sites, which have thus gained appeal as takeover targets.
Entertainment sites are also building an edge using free labor. Sites like MySpace rely heavily on messages, stories, music mixes and photos made by users, and often this self-generated entertainment is better than what the Web editors come up with. Gambling sites like PartyPoker.com and Betfair.com, as well as photo-sharing sites like Flickr.com, take advantage of users who are, in essence, entertaining themselves. While News Corp.'s recent deals may look like a mishmash, Ross Levinsohn, president of the company's interactive division, says that each site had "a strong community of very passionate users" that the company was eager to tap.
Not all self-postings will be worth something. The real value will likely be in more nuanced tools to sift through it all. Levinsohn has been chatting with numerous specialty search companies, though he denies the rumors that News Corp. plans to acquire the London- and San Francisco-based video-search company Blinkx. Late last week, News Corp. was just beginning its second ever companywide Internet strategy conference on how best to exploit the recent acquisitions, and what to buy now. The second coming of the dot-coms has clearly begun. And it looks to have more staying power than the first.
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