In the content business, what's your competitive advantage?

Most of the time time when I hear an entrepreneur talk to a venture capitalist about starting a "content business," it seems like the same topic comes up.  In a content business, what's your competitive advantage?

This question highlights an area of competition that most technologists do not feel comfortable about.  VCs feel great about distribution businesses.  They like services that distribute ads, blogs, videos, music, or anything that can be turned into bits.  Hosting and sharing and mobilizing are great too, especially if there's some form of lock-in for customers.  Fortunes have been made turning proud media creators into "content."

You can host create blogs at Six Apart.  You can share videos at YouTube.  You can stream music at Last.fm. The brilliance of the Facebook newsfeed is that just by showing up, installing apps, adding friends, and sharing photos you create "content." For them. There are no touchy actors or expensive special effects.

The public markets recognize a similar value gap.  Businesses that search, share or recommend media are valued much more highly than those that create the media itself.  Google has dramatically higher margins, and market cap, than, say, TheStreet.com, home of Jim Cramer, and Disney, creator of (among many others) Lion King, Hannah Montana and High School Musical.

But can you build a great business creating the media that other companies are attempting to commoditize?  If so, what are the elements of a great content business?

It's worth looking at what's been funded lately.  The recent slew of new HowTo sites like 5min provide a model of discoverable video amenable to advertising.  Comedy sites like FunnyOrDie and Comedy.com aspire to entertain and create community.  60Frames and OnNetworks help finance independent, high-definition videos for distribution on other services. The assumption in building these companies - still an open question - is that low-cost production can create great quality underneath, or at least alongside, the current high-cost model.

In Seattle, companies like BuddyTV are creating original stories about new television shows that both drive traffic and help build a social network.  Zillow is increasingly building a community of buyers and sellers around its core real estate data. These communities would not come together if the content wasn't there.  Almost all of these services rely on the same inexpensive overseas labor that has driven down the cost of software development.  Bits are bits.

I think Comcast understood the relative value of content compared to distribution when they made a failed attempt to buy Disney.  FIOS can't take value away from Cinderella.

I was recently part of a roundtable discussion with online marketers about how to drive traffic through SEO.  One business marketer commented that traffic to their site was increasingly coming through their blog.  Traffic has increased dramatically since they added a full-time person to create "content":  not just blog entries but also videos, photos, and news entries.

What's becoming clear to me is that everyone who has an online presence is, in some form, in the media business.  If you want to get traffic, you have to be interesting.  You may not be making movies or publishing music, but if what you're putting on your site is boring or amateur, people won't pay attention.  So invest in content:  it's much more valuable than you think.

Comments

[RAGZ]

Hey Brian,

“But can you build a great business creating the media that other companies are attempting to commoditize? If so, what are the elements of a great content business?”

I think my business will get your attention when you review my very recent submission with Madrona. I believe that Twitter is similar to my business in terms of application framework, and a great example of a company that breaks the mold that you speak of in your question.

"With Twitter, you can stay hyper–connected to your friends and always know what they’re doing. Or, you can stop following them any time. You can even set quiet times on Twitter so you’re not interrupted.

Twitter puts you in control and becomes a modern antidote to information overload."

Twitter is a mashup of web media and communication content that produces a single new media and communication content. I understand if I am not clear enough. Simply put, I think Twitter is the example you ask for when you said "can you build a great business creating the media that other companies are attempting to commoditize?"

My business is a much better example. :)

Cheers.
--
Aziz

[Brian Goffman]

Hi Aziz,

I'm looking forward to hearing more about your plan!

I agree Twitter a great example of a new communication system. It clearly carries content. But I wouldn't call it a content business.

Brian