The bigger implication of all these recent mergers and acquisitions, if you ask me, is that we’re finally seeing the dying gasps of the page view model of monetizing information on the web. And it’s about time.
I can’t believe it’s taking so many smart people so long to figure out that page views are essentially worthless. Facebook and Twitter figured this out a long time ago, of course, but the rest of the world still thinks that tossing in ads at pennies per view is still a good way to monetize content on the web. It’s not.
Didn’t we learn this lesson at the end of the first Internet bubble? Apparently not.
It’s becoming a very predictable cycle. Web startups give everything away for free, training their audience to expect everything to be free. Venture capitalists throw millions at these companies, because they have a lot of money and love to stroke their egos thinking they’re going to be responsible for the “next big thing.” A few years go by, and suddenly someone realizes that they eventually have to figure out how to make money. So they run to their old friend, the web ad. They start with one or two ads, then five or six, then they split the articles into several pages to have more ads, then the ads start blocking the view of the content, and then the ads BECOME the content. At this point, the users start flocking to other sites with fewer ads, or they start using news aggregators, RSS readers, Instapaper—whatever they can to view the actual content and avoid the ads. Because they still think that everything should be free. And why not? That’s what you told them.
Right now we’re seeing the next phase of the bubble cycle: the big mergers and acquisitions. The previous generation’s dot com survivors, the Yahoos and the AOLs, start buying today’s generation of successful startups, in a vain attempt to get some of their old mojo back. But what usually happens as a result of these buyouts is that one or two people get rich, while the company that was bought gets poisoned by the old establishment bureaucracy. (Delicious, anyone?) Everything that made that smaller startup successful, the passion for success, the devotion to the content and the users, suddenly gets overtaken by the sole focus on making money.
Sooner or later, the venture capitalists losing money lose interest in the Internet, and start putting their money back into “safer” investments. The whole thing comes crashing down, leaving a few recognizable brands to become the next bubble’s old establishment.
The first bubble saw the birth of Amazon, Google, AOL, EBay, Yahoo. Just a handful of companies that survived the armageddon. This time, we’ll surely see Facebook, Twitter, maybe one or two others. Everything else will be a footnote in history. A Pets.com, if you will.
And I’d be surprised if some of the “established” companies from the last generation survive this one. AOL is surely flailing in desperation, although it’s been here before. Yahoo is on its way out.
And, I’d argue, probably very controversially, that Google is in big trouble this time around, too. All of Google’s income is tied up in web ads, so if web ads become worthless again, where does that leave Google? Not to mention that people are just starting to come around to the idea that Google’s main product—Search—ain’t what it used to be. Rather than improving their search, they seem to be hell bent on criticizing competitors, accusing them of copying their ideas, etc. Never a good sign.
There’s a scene in “The Social Network” where the Zuckerberg character tells his partner that they can’t put ads on Facebook, because “then it won’t be cool anymore.” People recognize the hard sell, the blatant product placement, and they immediately think you’re lame. And then they stop showing up. They go somewhere cooler. That’s what we’re seeing here.
The future of monetizing the Internet is the soft sell.Recommendations from a friend are always going to trump the used car salesman approach. The sooner people figure that out, the sooner this next bubble is going to burst. And the sooner we can get on with the next big thing, whatever that is.
