Redefining Media

What is media today?

We’re used to thinking of media in terms of yesterday’s categories - largely focused on either inert information or passive entertainment.

But do they apply anymore?

LinkedIn, for example, has just raised a final round of financing, before a long-awaited and long hoped-for IPO. LinkedIn is very much a media business - but it doesn’t fit neatly into yesterday’s categories.

Here’s a more radical example: Carbonlimited, the first C2C carbon trading market. It’s media too - but doesn’t fit into yesterday’s categories at all.

Why is expanding the definition of media important? Because it’s only by fully understanding new categories of media that we can begin reinventing media strategies and business models.

It’s hard to imagine Carbonlimited utilizing orthodox media revenue streams, like simple, unidirectional advertising. And LinkedIn learned to rely on different revenue streams entirely, like subscriptions from recruiters.

Redrawing the boundaries of value creation doesn’t begin with CPMs - it begins by understanding the relationships between supply and demand across a new world of media.

The highest-value forms of media tomorrow may not look much like those of yesterday - especially if Google and Amazon realize their visions, which will radically alter the balance of supply and demand across  traditional media markets.

There’s a deeper truth there. In an interconnected world, media is everywhere: it’s the stuff that plugs consumption and production together. The opportunities for value creation are greater than ever before - but we must expand our vision of what media is to begin realizing them.

Thinking Strategically About Search

Microsoft just made an interesting move: offering cashback to consumers who buy goods via it’s search engine. On the surface, that’s pretty clever - because searches for products are some of the most lucrative, and generate a disproportionate share of search revenue.

So has Redmond just outsmarted the Googleplex by essentially subsidizing consumers to search?

Not so fast. There’s a big problem with Microsoft’s big idea: adverse selection. Those sellers who are willing to discount the most heavily are the most likely to be selling lemons. Though the market seems biased in favour of consumers, from an economic point of view, it’s actually biased against them. Anyone can offer a discounted price, especially on the www - but can they deliver on time, will they refund damaged goods, how painless will the transaction really be?

The real problem in a world of hyperfragmented sellers isn’t finding information about prices: it’s finding information about sellers. There’s a simpler word for that: relevance. Those dynamics mean that, over time, Microsoft’s closed marketplace is likely to fill up with less and less reputable buyers - it runs the risk of becoming a kind of vipers’ den for consumers.

Because Microsoft’s solution doesn’t address that problem, it’s likely that the market it’s trying to launch will be dominated by adverse selection. Google is the master of markets - and if there were value to created via refunds and rebates, it’s a simple enough tactic that they would have likely tried it before.

But there’s a deeper truth here. The single most fundamental challenge facing the media industry is reinventing brands, for the simple reason that branded ads are the highest value form of communication, and brands are the key source of advantage media and marketing create for corporations. Without next-generation brands, there is no next-generation media industry: all media is just a commodity if industrial-era brands and the promises they make continue to become irrelevant to consumers.

Paying consumers for interacting with us isn’t just destructive, naked price competition: it’s damaging because it actively stops Microsoft - and all of us - from rethinking what brands must become if they are to thrive again in a world of cheap information.

Side payments to consumers create the opposite of authentic, enduring loyalty: antagonistic, opportunistic transactions between producers and consumers. If Microsoft really wanted to challenge Google, it would be better off solving the problem of next-generation branding, rethinking relationships - not simple transactions - between consumers and producers, and helping define a new basis for loyalty, trust, and love.

Commoditizing brands further is, in other words, a strategic error. Because in that race to the bottom, no one wins - least of all Microsoft. Consider for a second that Microsoft earns little from this new service. What’s a bigger share of a lower and lower value search industry worth? That is, perhaps not a game worth playing.

Welcome to the Media Lab

Hi, and welcome to the Media Lab!

Why the Media Lab?

We think it’s pretty clear that ongoing industry volatility - and stagnating value creation from startups and incumbents alike - demonstrates that the media industry lacks valid and accurate economic insights and concepts that can help drive powerful new strategies and business models.

Even today’s most successful media revolutionaries - social networks, like Facebook and Myspace - are finding it difficult to explode the bounds of value creation with meaningful business models and strategies.

At the same time, even in those rare instances where the media industry develops groundbreaking new ideas, it’s also held back by steep pioneering costs: currently, the only way to experiment with new business models, revenue streams, and strategies is through acquisition or investment, where the stakes begin at $5-10m and rise fast. As a simple example, to test the validity of a new pay-per-call revenue stream, eBay acquired Skype for billions - with disastrous results.

We hope the Lab can help address these challenges, and help make everyone better off.

How?

The Lab is an incubator for ideas.

As a thinktank, we’re going to discuss the future of media strategies, business models, and innovation both here on the blog and by publishing articles and papers.

But we’re going to help incubate those ideas across a network of partners, made up of corporations, investors, and startups. We’ve already kicked off the network - what do all the members have in common? A shared interest in revolutionizing media to explode value creation. The goal of the network is to address the challenge of innovation in today’s mediascape: to seed and run experiments, helping everyone learn big by failing small - bringing next-gen strategies and business models to life.

If you’d like to read more about our ideas, stay tuned.

If you’d like to join the network, please drop us a line to set up an introductory chat.