Monday, September 04, 2006

A False Dichotomy

We’re constantly reminded about the battle between “new” and “old” media. How often have you heard that the old media just don’t get it? How often have you seen the leader of an old media company on the cover of Time, Business Week or Fortune? Increasingly, however, new and old media are acting the same, pursuing the same business models, and are even becoming the same companies.

The real dichotomy isn’t between “new” and “old,” it’s between advertising-supported and non-advertising-supported media. If you make your living by selling advertising, it doesn’t matter if you’re “new” or “old” media—you’re competing for eyeballs to sell to advertisers. By that rule, Google and Yahoo are in the same boat as News Corporation and The New York Times. All these companies also have non-advertising-related revenues, but the old media companies have several orders of magnitude more than the new media ones. CBS and Paramount are in two almost entirely different businesses—one makes its money through advertising, while the other makes its money through leasing and selling television shows and movies. Thus, we got the CBS/Viacom split, which acknowledged that the real difference is whether your business is or isn’t supported by advertising.

Google and Yahoo both successfully transitioned from free services to advertising-supported media. MySpace is now part of News Corporation, and is moving quickly to being advertising-supported. YouTube has to either pick a model soon or find an acquirer who’ll pick a model for it. The same is true of Digg, which has stuck its toe half-heartedly into the advertising-supported arena.

The question of “How will you make money?” is often seen as being crass, but ultimately, every Web 2.0 startup that hopes to survive has to either make a choice, or find a buyer who’ll make a choice for it. In the harsh light of reality, new and old media companies look remarkably alike, because they all make money in the same ways.

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