Over a year and a half ago I started blogging on a regular basis after hearing one of my ex-clients consistently mention the names of writers that I was completely unaware of. Today, names like Mike Arrington, Om Malik, Rafat Ali, Richard MacManus and more recently Matt Marshall and Henry Blodget have become common for many in the industry.
Over the past couple months, many wondering whether or not these sites would ever amount to something big have received validation for their visions. ArsTechnica was sold for $25 million and then last week PaidContent was acquired for a rumored $30 million. Now Kara Swisher reports that Techcrunch could soon sell for between $20 and $30 million.
Many believe (as well as myself) that this is only the beginning of a continuing trend of consolidation. Considering the downturn in the economy, consolidation makes a lot of sense nowadays. So when all is said and done and the consolidation is “complete” with the technology blogs, who will really end up the winners?
Still an Incestuous Community
Today I sat in a deli chatting with a girl who’s studying in a university program entirely about social media. While it was difficult to believe that there are actual programs for social media, she appeared to be unaware of sites like FriendFeed, Twitter or any of the new iPhone applications. We did engage in a great conversation though about the future of media and it was clear that this was a topic that she regularly discusses.
As usual, the university was successful at teaching much of the theories but much less effective at teaching practical things. This isn’t a dialogue about effective educational strategies though. What became clear almost immediately was the little bubble that I exist in. I have a few hundred friends on Twitter, FriendFeed and Facebook that I regularly discuss the hottest trends with which are being published on my blogs and larger sites like Techcrunch, Read/Write/Web, Venturebeat, etc.
Nobody else is part of this conversation though and while some people that were less vocal in the community become more active an more noticed, there are few people (in my own opinion) that are rapidly joining the conversation. Instead, we continue to have our watercooler talk about the hottest new trend in the valley (and other emerging hot-spots). Rather than the watercooler though, we hang out on FriendFeed, Twitter, Facebook and for me occasionally Plurk.
The watercooler talk only builds personal value though, giving many of us a strange sense of belonging. At the end of the day though, my FriendFeed really doesn’t add much value to the world and thus cannot easily result in money.
Where is the Value?
So if the various online social activities I’m involved in don’t really build much value outside of personal gratification, where is the value? Well, it’s clear that there was value in the larger blogs that were acquired but what where was the actual value? For Ars Technica it was clear that the site has a substantial amount of traffic and they obsessively cover technology. That was their value. The company is simply a technology publication though.
Compare that to PaidContent.org where the traffic may not have been as substantial but it attracted the right audience. The company also regularly hosted events including conferences and mixers which generated a substantial amount of sponsorship revenue. On the surface it appears that events are a much more lucrative business for the company. It also appears that they don’t have close to the amount of traffic that Techcrunch or Ars Technica.
PaidContent’s value? They obsessively covered and connected the digital industry.
Two Winning Strategies
So no matter which way you look at it, obsessive coverage of a specific niche or industry is a pre-requisite to building a successful new media entity. The second component is where strategies can differ.
If you want to build up a substantial following and consistently grown in numbers you must always be breaking news. In Glengarry Glen Ross, Blake (played by Alec Baldwin) says “Always, Be, Closing.” Mike Arrington on the other hand would tell you “Always Be Breaking.” Techcrunch and a number of other sites are in the business of breaking news.
Breaking news will generate a substantial following and will help you attract temporary boosts in traffic. The problem with this model? You’ll never sleep … ever. It’s unsustainable (unless you are Mike Arrington) and there is no end.
Connecting An Industry
The second model, which in theory could be merged with the first model, is connecting the participants in an industry. Hosting events and providing platforms for people to connect in an industry is the second most important component. Tech newsletters have been able to compete in this regard as they have a substantial reach (30,000+ subscribers for the large ones) and regularly produce events. The newsletters don’t have the requirement of breaking news though.
The offline component of media companies has practically become a necessity. The smaller more targeted media companies end up finding themselves producing events more regularly whereas the large media companies have the luxury of traffic generating enough revenue.
So where is all this going? It’s pretty clear that consolidation will happen quickly. The old media giants can snap up the new media competitors easily as they sit on a ton of cash. Within the new media companies, I believe that we are going to also begin to see consolidation. Breaking internet tech news has practically become dominated by Techcrunch.
A few other companies can compete but ultimately consolidation among the remaining news-breaking sites would help create a viable competitor to Techcrunch. While Mike Arrington’s Techcrunch could have somewhere between $2 – $4 million in the bank (complete guess), it won’t be enough to snap up the competition without a round of funding.
The old media companies are looking to acquire companies that compete in terms of content, traffic and have a hold on their industry. The next 12 – 18 months are going to be interesting because we are going to start seeing consolidation in the smaller sites which I believe will help to form no more than 5 to 7 technology media giants.
Do you agree that this will happen? Do you think the smaller entities will be able to put their egos aside to allow consolidation or does everybody want to run the large giant tech media publications?