With the dramatic ascent of YouTube and other video sharing sites these past two years (was it only last October that YouTube was acquired by Google?!), and the ensuing shift in video advertising dollars away from traditional cable and TV outlets, it's instructive to look at the challenges that another traditional advertising industry faced by an interactive upstart and how they responded.
The industry and respective challenger I refer to is the newspaper industry with Craigslist.
If you think back almost 10 years to 1998, Craigslist was still a relative newcomer to the online-postings scene and really wasn't yet considered a threat to newspaper classifieds (Craigslist didn't really start generating revenue from a "traditional" classifieds per-posting model until 2004 when it started charging $25 for job postings in New York City). However, many online classifieds sites had launched and newspaper executives were keenly aware of the threat posed by these sites -- it just remained to be seen which of the online-only classifieds sites would get the model right and do the most damage to the traditional newspapers.
To summarize the known threats that online classifieds posed to newspaper classifieds revenue in 1998, they were:
- Virtually no barrier to entry for a new classifieds site to launch (either a national site or a local site). Some expertise in classifieds software was needed, but even in 1998 this was relatively inexpensive.
- No distribution costs for online classifieds vs. newspaper classifieds, which meant that a classifieds site could be VERY profitable with minimal staff and low posting fees if only they got enough traffic. This opened the door to the idea of keeping most classified categories free in order to drive traffic to categories such as jobs, autos, and real estate ("while you're here looking for a date or a used sofa, why not browse our job listings?").
- Very low acquisition costs for the classifieds postings -- Craigslist doesn't run a 'classifieds department' or ad manager that has to take credit card payments manually or vet each posting for obscene language. Up until recently, Craigslist was run by only 20 or so employees out of the founder's house in San Francisco.
- National and international presence became simply a matter of setting up additional classifieds sites after initial success in one area or market (Craigslist is now live in over 50 countries and 450 cities across the world).
- Traditional newspaper sites remained focused and linked to only one main city or geographic area, so that if a user moved from city to city there was no continuity in the classifieds solution they might use. This is not true of Craigslist.
Unfortunately, the newspaper industry reacted to this threat by counting on the dominance of their local newspaper brand, promotional ability, and history as the best place to look for classified jobs and autos. Very few sites, if any, even took the step of allowing users to post free listings in categories such as "used furniture" or even "unpaid internships." And, even worse, there never appeared to be a newspaper industry-wide consortium that came together to promote a common classifieds platform or format that each newspaper could own in its respective market and still link out to other city sites from. (Until very recently, that is, with Yahoo's effort to pull together disparate newspaper groups ... too little, too late?)
The rest is history. Users flocked to Craigslist, and analysts can only estimate how much classifieds advertising Craigslist has pulled away from traditional newspapers. We all know it's a big number, but aren't sure of exact revenues given that Craigslist has never gone public or taken investment such that they'd need to disclose numbers. Must be a nice position to be in if you are Craig Newmark (the founder of Craigslist).
What's instructive about this is that the challenges faced by the TV industry by the likes of YouTube are identical to what was faced by the newspapers:
- No barrier to entry for video sites to launch
- Very low distribution costs for online video vs. maintaining a traditional TV station and sales force. Bandwidth is getting cheaper and cheaper, and online video sites are able to generate revenue from nearly every video play now.
- No acquisition costs for content as it's mostly user-generated or short-form content (compare this to the cost of syndicated promoting (programming?) or even reality program shows).
- National and international presence for these sites is simply a matter of driving enough clicks.
YouNews is Broadcast Interactive Media's attempt to facilitate the formation of a consortium of TV broadcasters that "own" the YouNews brand in their respective market, but are linked together by a common underlying platform from which they can all generate revenue and share content. YouNews gives our clients all of the advantages listed above that the video sites have over a traditional TV station, and still allows them to leverage their core broadcasting asset to retain dominance in their respective DMAs.
It is my sincere hope that YouNews can be a key reason why TV broadcasters do not face the same fate (and the same Wall Street valuations) as the newspaper industry is currently facing.