Scott Karp: Content Businesses Don’t Scale Anymore

Excellent post at Publishing 2.0. Scott’s thesis: the long tail as it plays out in the content world — the niche-ification of publishing — means that the content-makers can’t run scalable businesses anymore. It’s worth reading in full. My comment:

“Great post, Scott. But I actually think today’s independent publishers have a better shot at scale than traditional media start-ups because, unlike media start-ups of the past, they can outsource more of the publishing work, namely ad sales, ad serving and collection of accounts receivable.

“At the low end of the effective-CPM scale, there’s Google. I’m at Federated Media, where we’re trying offer independent sites with higher effective CPMs. We do this by working with advertisers directly (human sales people) to build integrated programs and to sell each site’s unique magic. This gives us access to higher CPM brand-advertising budgets rather than the direct-response / CPC budgets that fund most of the campaigns with Google.

“Traditional print magazines and web publishing companies spend 75-85% of their budget on SG&A, the non-editorial stuff. Mike Arrington, Om Malik, the Boingers and 100 other indie publishers offload those costs to FM, while giving away (to FM) only 40% of the ad revenue. For small and mid-sized publishers, Google takes about 49%. FM’s “federation” approach gives us economies of scale that small and mid-sized sites wouldn’t have on their own. In other words, today’s niche publications can collect the premium ad prices previously only available to major media companies with funds for big sales staffs — without the same cost structure. Maybe those higher margins will enable them to publish more content, launch new publications, and reach larger audiences. Perhaps there’s hope for scale!”

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