Los Angeles Archive

UGC: Just a Loss Leader in the End?

Back in the late 1990s, dot coms were all about the land grab. The idea was the more eyeballs and shoppers you got- POOF!- the more valuable you were. Never mind, the advertising market wasn't quite there yet and you were selling bags of dog food at a loss. The common wisdom has been that this was irresponsible, and truth be told, none of these companies had any business being publicly traded. But, more than half of the companies started during this time, actually stayed in business-- incredibly high odds for startups. To many, that proves that the problem wasn't that too many companies were started and nor was it their unfounded business models. It was that too much money was wasted on each one, and that it was never a game the public markets should have been playing.

There was, of course, one very important benefit to that land grab and wasted millions in investment capital: All those free services and cheap bags of dog food did bring a ton of people online. And they stayed online, even as many of the companies that did survive did so by charging realistic prices and shipping if they were in ecommerce, or switching to premium services and subscription fees if they were in content or entertainment. In fact, throughout the post 2000s, nearly every Web startup pitching venture capitalists or reporters were all talking up their premium services and subscription fees. You can still see vestiges of it with The Wall Street Journal's stubborn resistance to giving away content for free and early Web 2.0 companies like LinkedIn that didn't wait for an ad market to develop, but rather charged fees for things like job posting and "InMail."

As the wet blanket of recession has settled around the Valley and startups have come under pressure to monetize what they've built, I've wondered when we'd see the same flight to subscriptions and fees. Instead we're starting to see something similar but with a Web 2.0 twist: The rejection of user generated content in favor of professional content that's more consistent, reliable and palatable to advertisers.

This is bold shift, as the whole Web 2.0 movement was predicated on user generated content and the engineer-centric idea that you could build an easy to use platform, everyday people would create content for free, and other everyday people would navigate it, consume it and push the very best up to the top. It was rooted in the conviction that you didn't need the kind of doomed content partnerships of the past between New York, Los Angeles and Silicon Valley, because Web 2.0 was democratizing media and entertainment and ultimately that platform was the future, not the content gatekeepers.

This was clearly the most pronounced on YouTube, where the viral sensations like the Evolution of the Dance and the Grape Lady (ow! ow! owwwwww!) became the lexicon of an entire generation and the myth sprung up that everyday stars of viral videos would become household names with their own movies and HBO shows. (They never did.)  Sure there were whispered claims that as much as 50% of YouTube's views were actually of copyrighted material. Still, the company never would have sold to Google for $1.65 billion without UGC.

In other words, user generated content was to Web 2.0 what free-bags-of-dog-food was to ecommerce.  But flash-forward to 2009, and there's still no clear way to monetize user generated content, either from the sites themselves or the would-be stars.

Guess what? The Web has evolved to the point where you can monetize professional content. And that's why you see most of the smarter members of the Web 2.0 elite doing the very content deals they would have rejected a year ago. First, there was YouTube's rumored deal with the William Morris Agency, and now Slide has teamed up with the Valley-addict Ashton Kutcher and his company Katalyst Media. Katalyst also launched its site The Blah Girls at TechCrunch50 and produced 24-hours-at-Sundance with Kevin Rose last month, to mixed reviews.

Under the deal, Slide's FunSpace application on Facebook will be the exclusive distributor for Katalyst's reality show about its own company, KatalystHQ. Cheetos will sponsor the show. (What's that? ACTUAL REVENUES!? Between Cheetos and BlahGirls' sponsor Vitamin Water, Ashton's poor fans are going to need gym memberships, stat.)

Liz Gannes over at NewTeeVee questioned the logic in limiting distribution to an application within a site, even if it is the highly popular FunSpace on the highly popular Facebook. That was my first question too. But, Ashton's approach to all things Silicon Valley is very hat-in-hand, you-guys-are-the-experts, teach-me-your-techy-ways. He wants to learn what works as much as he wants to make each particular project a raging success. I think that's smart. And Max, with his metrics-watching obsession, knows what works online.

I talked to Ashton and Max yesterday, and while they noted the shift from UGC to professional partnerships was real, both said "loss leader" was too harsh a term for User Generated Content. They were both careful to extol UGC's virtues. Max talked it up as an unparalleled way for sites to get a volume of cheap and frequently highly viral content, and Ashton said that professional content had learned a lot from more on-the-fly lifecasting and the interactivity of user generated video. Indeed, the content of KatalystHQ is little more than Ashton's receptionist shooting video of life around the office.

But the inconsistency and unpredictability makes UGC nearly impossible to monetize. Said Max, "It's a much easier ad sale to do product placement in professional video where advertisers can control how they want it to be. They don't really want to rely on thirty second clips of people slamming into trees."  So UGC is a tool for bringing in users and content, but not very monetizable. Hmm...Sounds like the very definition of a loss leader to me...

But I grant their point that the shift hardly means that the move to democratize content is over. It's very possible there is still a genius way to monetize UGC, we just haven't found it yet. Remember how long it took the industry to come up with paid search ads? Back when Google was founded, many VCs deemed it too late to an already mature market with no good business model. It's also very possible a huge star does arise from YouTube and actually does cross-over to traditional media. But just like in the post-March-2000-era, companies need to focus on where advertisers want to spend money now, versus trying to sell them on the future. The future, simply put, will still be there when the economic crisis is over.

But why should we believe ties between Hollywood and the Valley will finally bear all that much-promised fruit? Max pointed to nearly every broadcaster voluntarily making content available online, the surprising success of Hulu, and viewers increasingly choosing the Web as the place to consume even long-form content. "A year ago, I think (Slide's sassy head of business development) Keith (Rabois) would have spit in the face of anyone suggesting a content deal with us," Max said. "Now you can't argue against it." The wake up call for Ashton? Five years ago, if you made people chose to get rid of their TVs or computers, most of the ones he knows would have said computers. "Now, you ask the same question and hands down everyone would get rid of the TV. You don't need it anymore."

When I teased Ashton about his third splashy Valley press tour in just a few months, he added, "By the way, I'm not going away so people can brace themselves for that."

Is a deal with Twitter next?

Twiistup. LA. Feb. BE THERE!

Super excited about judging LA's Twiistup 5. I've heard so many great things about the event, and I've been looking for an excuse to head back to LA and meet with some of the startup posse. Funny story: this link calls me a "showoff judge" because the contestants are called "showoffs." Mr. Lacy thought they were insulting me-- imagine his shock when, for once, someone wasn't!

Let's plan a fun Tweet-up while we're in town, LA, shall we?

Me in LA

Here's the clip of Andrew interviewing me in LA last week. Thanks a ton to Andrew and TechZulu for a great time and a great interview! DC next!

Oh yeah! And Drink 2.0 Pictures!

There was a great, bearded photography guy running around the party last night and aside from kindly telling me where to put my beer bottle so it wasn't in the shot ala a Sorority big sister, he was snapping pictures the whole night. Here are some of my favs below; more on his flickr stream. Wish he could follow me on tour!

politely arguing with andrew...

oh! and i love this. My editor's LOL-cat-ifying of a picture where I seem particularly in awe of an entrepreneur:

Smooth.

Last night at Mixergy's Drinks 2.0 DocStoc founder Jason Nazar offered the first 25 people who linked to DocStoc a free copy of my book. Note this suave attempt! (Also, note I'm not linking. I have enough copies!)
 

Vijay has an interesting business-- and one that is jaw droppingly ambitious. Essentially he wants to make healthcare an ala carte retail system that disintermediates insurance agencies. (I met a ton of startups last night so hopefully I'm doing that justice.)

In some ways, this was a lot like many of the startups I met in LA. They weren't "me too" ideas at all really. They were very creative and even audacious. But almost every one seemed to have a huge practical business obstacle. I don't actually mean that as a knock. Marc Andreessen is fond of saying every great company started out as an insane idea, and that if an idea made perfect sense he'd never fund it. (Again, I'm probably badly paraphrasing him...)

I'm guessing this is partially due to the flashier LA culture, but I think the lack of a institutionalized startup scene means less people are telling you how much you can't do something. There's a fine line between naiveté and insanity, sure, but I'm not going to be the one to try and draw it. Selfishly, I say, thanks for making a night of listening to pitches interesting! Life is too short to hear about the next great social network or Twitter clone...

UGBT: The List

Ok, y’all. The votes are in, cities decided and dates somewhat settled upon. The User Generated Book Tour is so far eclipsing my wildest dreams with most cities hosting several events. Most of the plan is still pretty fluid so there’s time to let me know what kind of event you think would be best if your city has been selected.

Again: There is absolutely no demographic study or statistical research that went into deciding the cities. It was purely based on enthusiasm. Think of it like a school assembly "applause meter" where the principal holds his hands above people's heads and you clap and then he decides who got the most applause. This is the qualitative—not quantitative-- book tour.  And together we’ll see how it goes! Again, props to my publishers at Gotham for funding a haphazard and unconventional tour despite a general industry disdain for tours of all kinds.

The schedule on the jump!

LA Book Events: July 8!

As you know, I've already given up being a good daughter or a good friend who actually, say, calls people, stays in touch, etc. For a while, my blog and twitter were serving the purpose for me, but I've sadly dropped the ball on that too. I just got an email from my very understanding mother that read:

"Sometimes I can tell from the blog what is  happening,  I don't see anything about moving.  Did I miss it?  Is painting the red bedroom connected with moving? About needing a personal assistant--how about one less direction to be going in? Busy.  Busy."

Wow. When my Mom doesn't even know that we moved into our first house things are bad! At the very least, I need to blog more! (More on the assistant in a moment...)

First things first: I wanted to tell those of you who don't know I'll be at two events in Los Angeles tomorrow, July 8. One is at Yahoo in Santa Monica at 4:30 in the Building E Training Room, followed by beer and wine and book signing for all. It's open to the public-- details here. There are free books for the first 50 people, but anyone who has a copy and would like me to sign it is welcome to bring it!

The second event I'm somewhat crashing. It's Mixergy's Drinks 2.0 and Andrew Warner is going to interview me on camera about the book and other stuff. No books on sale at the event, but as always if you bring one I'll be more than happy to sign it! More info here. Sounds like it'll be a packed house!!

Hope to meet loads of you there!

UGBT Updates: Toronto, LA

Ok, so LA isn't officially part of the UGBT, because the ground rules exclude LA, SF and NYC in favor of places publishers never send authors. So don't worry, it's not getting one of the ten slots. But, I did want to update LA folks on my signing down there. It's not going to be this weekend (Although I will Twitter my whereabouts Friday night. As always, you show up with my book, you get a signature and a free drink. How many authors give you that deal?)

It IS going to be July 8 at Yahoo's Santa Monica campus. Say what you want about them, Yahoo couldn't be more supportive of my book which amazes me given how much the book takes me away from my job at Tech Ticker. My bosses just get the importance of brand and crossover leverage in today's media world: The more successful my book, the more it helps Tech Ticker. Frequently old media is borderline hostile to reporters-turned-authors seeing time and intelligence as some sort of zero sum game. (Although, in my case, BusinessWeek has been amazingly supportive too, but believe me, this is not the norm!)

But I digress: Yahoo Santa Monica, 2450 Broadway, 4 p.m. I'll be doing a reading, but am more interested in an interactive chat about the Web and entrepreneurship so PLEASE come with questions! Books will be available, likely for my usual easy-to-calculate if loss-leading $20 price. Please, please, please bring as many $20 bills as you can gather. The book makes a great gift for people who don't know a single blessed thing about Web 2.0. I quote @ryangraves from Twitter this morning:

"...gave my 59 year old (non-tech) dad your book for fathers day...maybe he'll get on a social network! thanks again, great read."

Ryan: do keep me posted and I'll add your dad as a friend!

Oh, and Yahoo will have beer and wine too! Hope to see all of you there!

On to Toronto: You've won my heart with Twitter responses and emails. I'm definitely adding it to the UGBT. Details to come, but please keep the comments and ideas for what kind of event would work best coming!