Editor’s note: The following guest post is by Ashkan Karbasfrooshan, the CEO of WatchMojo, a producer and distributor of premium video content. Read his other posts here, or follow him on Twitter @ashkan
My cohort at Revision 3, CEO Jim Louderback, recently wrote an article called “Screw Viral Videos.” Why? Because according to Louderback, “viral videos deliver little or no value to anyone.” Which led me to wonder: what about content farms?
The Definition of Content Farms
While no official description exists yet, a content farm is the term given to a website or media organization that
- seeks to maximize content production output
- while minimizing production costs
- to acquire as much organic search traffic as possible
- with the main intent of converting that traffic into revenue, generally from advertising.
Over the past few years, anticipation of “content farm” poster boy Demand Media’s IPO has fueled both a lot of media cynicism and investor curiosity. No doubt, the fact that most of the content farms are seeking to disrupt traditional media organizations, in general, and journalists, in particular, explains some of the cynicism, but it does little to ask the question of whether the strategy itself is wise.
From One Dumb Idea to Another
Just five years ago, the conventional wisdom suggested that ad-supported media organizations should embrace user-generated content as a way to “scale” content offerings on their site, arguing that marketers will chase eyeballs no matter what. Today, that ranks up there as one of the dumber strategies in the history of publishing and advertising as marketers totally rejected UGC and even the biggest proponents of UGC shifted their business models to address that reality.
Back in April, I asked “Will AOL and Demand Media’s Content Farm Strategy Prevail?” and basically concluded that a “machine-gun, carpet-bombing” editorial strategy relying on a freelance model might work with articles but runs the risk of producing wildly inconsistent videos which would scare off advertisers. The important word to consider in all of this is not in fact content, but advertising, since—paywalls and iPad subscription fantasies notwithstanding—content remains largely an ad-supported game.
With Advertising, Value Trumps Cost
As Google’s CEO Eric Schmidt once stated: “advertising remains the last bastion of unaccountable spending in corporate America.” Profiting from that disequilibrium are the ad agencies who care less about costs than they do about value—getting the most bang for their advertising buck
In economic terms, what matters most to them is balancing quality with cost to provide value; not minimizing cost and maximizing output. The effort to maximize output is based on the objective of maximizing organic traffic, but as we saw with UGC, more traffic does not mean more revenue, it just means a greater supply of inventory which pummels ad rates.
Who Are Your Clients: Financiers or Marketers?
In other words, if you don’t come from a publishing or advertising background—and you’re business is supported by venture capitalists or private equity bankers while you try to woo investment bankers—then, indeed, you need to stress that you can produce more content more cheaply than anyone else. But that kind of downward spiral rhetoric will ring hollow to marketers who underwrite most of the media world.
Marketers Don’t Like Cheap Dates
Conversely, if your business aims to serve marketers and other media companies, that is not the right tone to strike: after all, should content producers really be conveying the fact that we’re cheap dates?
Being in the content business requires an understanding that you will be perpetually trying to master the art and science of production, distribution and monetization; that is an ongoing process. It is not at all akin to writing code for software that—once built—can create an infinite amount of copies and licenses to sell.
The jury’s out on whether the content farm approach will prove successful, but I am betting that in 2011, you will start to see a regression to the mean, with the very same companies who are rushing to emulate the leading content farm companies revert back towards a more balanced approach to publishing and focus on quality. Meanwhile, the firms who bet the farm on quality and focus on offering value in the form of quality content, instead of focusing on costs and output alone, will reap the most come harvest time.
Photo credit: Flickr/ h.koppdelaney