The major book publishers know that their industry is under threat from the internet, digitisation and the explosion in mobile devices, yet their reaction has been very muted. I can only believe that the changes so far have been so gradual they have not felt the need to radically transform the way they operate.

This reminds me of the story of the frog in boiling water. If you put a frog in a pan of boiling water it immediately jumps out. But if you put a frog in a pan of cold water and place it on the fire, the water warms so slowly that the frog doesn’t notice the gradual change in temperature until it is too late and it boils to death.

The book publishers have no excuse for this complacency; they have had the benefit of being able to watch the music industry self-destruct.

 

What Can the Book Industry Learn from the Music Industry?

Senior executives in the book publishing industry protest that books are very different to music, and the book publishing business is very different to the record business. They highlight the way the two products are consumed, the different formats, their primary audiences, etc. By arguing these differences they are ignoring the valuable lessons that can be learnt from focusing on the similarities. Businesses in both sectors essentially do five things:

• Talent spotting – Act as a quality filter to separate the wheat from the chaff
• Improvement – polish the raw talent
• Production – convert content into a physical (or digital) product
• Distribution – distribute via wholesalers, retailers and websites
• Marketing – let the world know about their products

The large record labels, who for decades lorded it over their artists, are discovering that these, once unique and valuable activities, are quickly becoming commoditised and available to everyone.

Facebook, MySpace, Twitter and dozens of other music-related sites are uncovering talent far faster than they can. Peer-to-peer recommendations, social commerce, reviews, ratings and crowd sourcing are far better quality filters than a handful of A&R guys scouring the pubs and clubs on a Saturday night.

A PC with $100 software package can now produce similar results to a $100k recording studio.

Songs can be distributed online digitally for zero cost or sold via iTunes, Amazon or dozens of other music sites for a 30% revenue share. Traditionalists who still like to own a disc can easily be catered for using one of the many companies that burn, package and send out CD’s on demand.

Music marketing has always been about building a core loyal fan-base and using these evangelists to spread the word. Today it is the same, except social media has put the process on steroids. The power of the online crowd can enable a song to become a global hit in days or even hours, and the record companies have no control over this process.

So what do the record companies offer to bands and musicians today that they can’t do themselves? Not a lot, but inertia keeps them going. Most musicians are still programmed to chase a record contract with an established label rather than trying to go it alone. However, this is changing top down and bottom up. Superstars, including Madonna, the Eagles, Prince, Faithless and Radiohead, have all very publicly walked away from their record labels. This is sending a message to thousands of unsigned bands that they don’t need a record deal; all the tools they need to manage their own destiny are available on the internet for free or a nominal cost.

 

Reaching Customers

In the world before the internet it was very difficult and expensive for a band to reach a big audience.  They needed the music industry’s marketing machine to enable them to breakout of their local market. A chasm existed between the artist and their potential global customers. The record companies and retailers provided a bridge across the chasm but the toll for crossing was 80%-90% of the revenues.

The internet has changed that; today musicians have a free and accessible way to reach their customers. MySpace, Facebook, Soundcloud and dozens of other web services have created footbridges across the chasm. These footbridges are becoming roads and the roads will become highways. There will still be costs and tolls to cross the chasm but they will be a fraction of what the record labels charge.

In the world before the web bands and musicians needed a record contract as a platform from which to reach their audience and build a fan base. Today record labels only want to sign artists that can show they already have a solid online fan base, but if they have an online fan base why do they need a record contract?  Every day the record labels are becoming less relevant to the artists they need to sustain their businesses and future.

 

Apple are in the Driving Seat . . . and they Own the Car

The internet presented the record companies with the greatest opportunity in their history. They had a once in a lifetime chance to build a relationship directly with their end customers. This would have given them a sales funnel through which they could have sold music, merchandise and event tickets, taking the retail margins for themselves.

But instead of embracing this amazing opportunity they chose to focus their attention, resources and energy on suing and alienating their customers. This left the door wide open for a computer manufacturer, Apple, to steal their market from under their noses. It will go down in history as one of the greatest land grabs ever achieved.

Today Apple remains in the driving seat and there is nothing the record labels can do about it. Apple controls access to the customer and the devices on which music is stored and played. If the music industry makes waves, Apple could simply start signing artists directly and cutting the record companies completely out of the loop.

 

The Book Industry is at a Crossroads

The book industry is at the same crossroads that the music industry was at a few years ago.

All the activities that make up their value proposition – talent spotting, editing, production, distribution and marketing – are being commoditised or replaced with alternatives.

Excellent editors, proofreaders and designers, many whom use to work for the big book publishers, can be hired from online marketplaces.

Ebooks are easy to create. Physical books can be formatted, printed and distributed through on-demand services like CreateSpace.com and Lulu.com.

Reaching the end customer can be done via Amazon, other online retailers or via an author’s own website.

Marketing can be done via social networks, forums, Amazon referrals,  email newsletters, blogs and Google.

But more than anything else, what has brought the book industry to the same life-changing crossroads as the music industry, is the mass-market take up of the Kindle and iPad. This signals the start of the mass-digitisation of books. The digitisation of music led to an explosion in piracy and the introduction of the iPod and iTunes destroyed the album.

The digitisation of books will inevitably lead to an increase in piracy and the iPad greatly reduces two of the most important attributes of a paper book; convenience and portability.  How the book publishers react to these changes will have a great bearing on their future. Will they adapt to the new marketplace or will they resort to lawyers and lobbyists to try and get the marketplace to adapt to their world?

 

Change is Unstoppable

As happened in the music industry, a quiet rebellion is starting in the book industry from the top down and bottom up. Some big name authors including Stephen Covey, Seth Godin and J.A. Konrath have walked away from their publishers to manage their publishing activities on their own. More bestselling authors are likely to follow. Writers like Paulo Coehlo have four million Twitter followers who they can promote their books to with the click of the mouse, why do they need to give 80% of the money they make to third parties? Established authors also want to squeeze more revenue from their back catalogues without having to pay unjustifiably high fees to their book publisher. Barbara Cartland and Ian Fleming’s estates have both chosen to release their back catalogues in digital-only format without any involvement of their publishers.

From the bottom up self-published authors are starting to be treated equally on the online retail sites. On Amazon self-published books sit alongside those published by Random House, Simon & Schuster and Harper Collins. This year I bought two books, “A Year in Mudville” by David Bagdale and “Four Steps to the Epiphany” by Steven Gary Blank, which I later discovered were self-published. They were every bit as good as those published by the big names.

As in the music industry, the internet has flipped the book market on its head. It used to be that an author needed to publish a book to create a platform on which to build their reputation and following. Now the internet enables an individual to build a following, which is the platform they can use to launch and sell a book. In this upside down world where does the book publisher fit in? Publishers want authors who already have an audience, but if an author has an audience why does she need a publisher? Amanda Hocking is a good case in point. This 26 year old blogger and independent writer sells 100,000 Kindle eBooks a month to her teenage fans for between $0.99 and $3 each. This year she will make over $2m, yet no one, apart from her loyal fans, knows who she is: http://www.businessinsider.com/amanda-hocking-2011-2

In reality, most authors would prefer to have a publisher. The internet is still a scary and challenging environment for many writers.  However, they are not prepared to sign a book deal at any cost; they know they have alternatives.  Book publishers have been pushing authors to accept lower advances, do more of the editing and undertake most of the promotion, yet the royalties have not changed to reflect this new split of tasks.

 

 

Amazon is Ready to do an Apple

Amazon is very aware of what is happening and they have quietly been putting in place all the services they need to step in and take over from the book industry if it makes sense to do so.

• CreateSpace.com provides everything an author needs to get their book edited, formatted, designed, digitised, issued with an ISBN and distributed via Amazon

• Amazon Encore takes self-published books, which readers, reviewers and the social networks have identified as winners and adds the professional touch. They give them a re-design, promotion and international exposure in exchange for a bigger revenue share

• Amazon Crossing uses their data to spot successful books in one market, which could be successfully sold in other markets. They then facilitate the international expansion

• And of course Amazon’s network of websites give them access to every online consumer on the internet

 

All the pieces are in place for Amazon to attract authors directly. To test their readiness in 2009 they signed a deal with Stephen Covey to distribute his books without a book publisher being involved. Then in November 2010 Amazon bought a small publisher, The Toby Press, which gave them the rights to 121 books. By Amazon’s standards this was a very small deal, but that was the point. They wanted to test their services and processes on a greater number of titles without ruffling too many feathers.

Today Amazon has everything they need to disintermediate the book publishers, and they have built it in a way that will enable them to keep costs low, offer authors more attractive royalties and increase their own margins.

 

Can Book Publishers Change Quickly Enough?

When Kodak realized the impact that digital cameras and inkjet printers would have on their company, they resolved to completely transform their business. Within a few years, from a standing start, they were the world’s biggest manufacturer of digital cameras and had a significant share of the inkjet printer market.

If the senior management teams at the big book publishers accept the magnitude of the threat they face there is time to change and potentially reap massive rewards.

From top down they need to embrace the internet, digitisation and mobile devices. It should be as natural to create a website for an author as it is to design a book cover. Every employee should have an iPad or Kindle, or both.

Every employee should have a deep understanding of social media – Facebook, Twitter, LinkedIn and online reviews – so they can build it into their planning and educate their authors.

Every employee should be encouraged to experiment with new digital formats, online revenue streams and new ways of crossing the chasm.

Every process and activity should be scrutinized to see if it could be removed, improved or automated.

They must see authors as their partners and recognize the work they do, and reward them for this contribution with a greater share of revenues.

And finally – but most importantly – book publishers must use this newly-discovered web knowledge, internet skills and digital marketing know how to build a direct relationship with book buyers. They need to own a strong direct channel to their market if they want to be on the ball park and not left in the car park.

Over the last few years the music industry have not missed an opportunity to miss an opportunity. They decided to sue their customers rather than build a relationship with them, which left the door wide open for Apple. They have never recovered from not owning a direct sales channel to the end customer. The decisions the book publishers take today will determine whether they lose their industry to a third party, or build the foundation on which they will prosper for decades to come.

 

The World Would be a Worse Place Without The Big Publishers

From my personal point view I’ve written this article as a plea to the big publishers to get off their butts, realise the size of the tsunami that is coming their way and take action to reinvent themselves.

Despite their shortcomings year-in, year-out book publishers produce thousands of fantastic books and provide revenue streams for hundreds of authors whose work would otherwise be unpublished.  They set and maintain the high standards that all new authors and publishers have to achieve if they want to compete. In a world without their quality filter, production capabilities and distribution, thousands of potential writers would not write because the challenges of self-publishing would be too daunting.

So the message to book publishers is the water is not too hot that you can’t jump out of the pan, but it is heating up quicker than you seem to realise.

 

 

News Corporation’s release of the first figures from The Times online paywall experiment has reignited the debate about free versus paid content, and advertising versus paid subscription.

At SubHub we’ve worked with small content creators for more than five years, helping them to develop multiple ways of making money from their content online. We think those “Davids” of the online world have a lot to teach those “Goliaths” like News Corporation.

Supporters of free content shout loudly that people online won’t pay for content, yet they acknowledge that advertising revenues are insufficient to cover costs.

The paid content lobby maintains that professionally created content has real value that customers should pay for, but they acknowledge that it is very hard to charge for information if prospects can get it for free elsewhere on the web.

The free, advertising-driven model was not proving sufficient for the The Times online, so they switched to a pure paid model with all content behind a paywall. But recently released numbers from News Corporation suggest that The Times websites are probably making less than £200,000 per month — not enough to hire Rupert Murdoch’s yacht for a week’s holiday. Not a success by any measure.

So if neither model is working what is the alternative? As many of SubHub’s customers will tell you, the answer is not black or white, it is shades of grey. A successful money-making website will feature some free and some paid content, some advertising, and several additional revenue streams such as affiliate links, or events. Paid subscription can work, but only for niche content which does not have free alternatives.

Instead of relying exclusively on his big media braintrust, maybe Rupert Murdoch should talk to people such as our client John Gallagher, who runs the highly successful HerbMentor.com website out of his home in Washington State. John would probably tell Mr. Murdoch about how he’s built a strong community that’s caused thousands of people to join his website for $9.99 each per month. He’d also likely describe how he’s expanded his activities to include training courses, physical goods, and even a television network.

It’s a pretty safe bet that John’s revenues from HerbMentor.com are comparable to Mr. Murdoch’s from TheTimes Online, and a lot more profitable. That’s why the final thing John would probably do is offer Mr. Murdoch a strong cup of herbal tea to help calm his nerves over the whole paid content debate.

So how can Mr. Murdoch apply some of the lessons from HerbMentor and many of the other Davids we’ve had the pleasure of meeting through SubHub who are leading the way in figuring out how to monetize content? If News Corporation followed the lead of those Davids, how much might they earn from TheTimes Online and how could they do it?

First, take down the paywall. News and opinion are commodities, and they’re not what people will pay for.

Bringing down the paywall opens the sites back up to advertising. Based on approximately 20 million monthly unique visitors and 80 million pageviews before the wall went up (ABCe audit Feb 2010), at a £15 average CPM the site could be generating £1.2 million per month in ad revenues.

Specialised advertising products can generate addititonal revenue. A jobs board with 3,000 listings at £150 per month can bring a further £450,000 per month in revenue. A classifieds directory of gifts and websites, similar to those found in the Sunday Times magazine, could generate another £400,000 with 2,000 listings at £200 each per month.

Sponsors for each of the 10 categories on TheTimes.co.uk and SundayTimes.co.uk could generate another £400,000 at £20,000 per month each.

The Times can also create affiliate deals for dozens of products and services which would be closely aligned to their readers needs and naturally fit within their content. These could include financial products; holidays and travel; wine, beer and food; books and magazines; event tickets; betting and fashion. If one in every 1,000 visitors makes a purchase that generates an affiliate commission, and the average commission is £10, the Times could generate another £200,000 in revenue.

Ecommerce represents another revenue stream to exploit. By marketing Times-branded books, reports, online services, professional services and the like, the times could generate as much as £300,000 if only one in 1,000 visitors were to buy an item or service at an average price of £15.

Events offer great potential as well, as the Times can market co-branded conferences, exhibitions, workshops, seminars and webinars. The exact revenues would depend upon the events offered, but there is no reason to believe this couldn’t also be a six-figure opportunity at least on an annual basis.

Finally, as our SubHub clients can attest, the potential for paid subscription revenues is significant if the content is suitable. As News Corp is currently proving, people will not pay for access to commodity information that can be found for free elsewhere on the web. However they will pay for scarce information that makes or saves them money, saves them time or is related to a passion or interest.

The Times could use their free content to segment their audience and promote many paid niche sites. The paid sites could include wine tasting (e.g. www.jancisrobinson.com); investing (e.g. www.t1ps.com); small business advice (e.g. www.lynda.com); business book summaries (e.g. www.getabstract.com) and many other niches. Undoubtedly the talent to develop valuable niche content already resides within the halls of News Corp.

Assuming that 15 niche websites are launched with 5,000 members each paying £100 per year, that’s £625,000 in further monthly revenue.

Total monthly revenues for The Times websites if they were to implement the revenue strategies above would be more than £3 million — probably 15 times what their current strategy is achieving.

Before sharpening your pencil and rushing to the comments to challenge my figures and assumptions, let me make one more point. The actual numbers are not important; my intention was not to create a business plan for The Times, but to move the debate beyond advertising versus subscription.

In the print world, people choose a newspaper because of the quality and relevance of the content. Therefore the value is derived directly from the content.

In the online world that content attracts an audience many times bigger than the offline readership, but very few people in this audience are prepared to pay for this content. In the case of the Times, less than three percent. So if the content cannot be sold, but it can build a huge audience, the value has to be derived from the audience.

The tired advertising versus subscription debate is as pointless as two bald men arguing over a comb. Traditional publishers have proven they can build and retain big audiences online by giving their content away for free. Now the energy, discussion and creativity should be focused on how to turn these audiences into multiple revenue streams.

It’s great to be a Goliath, but eventually Goliath was brought down because he was big and clumsy. In the digital media environment, as we’ve seen at SubHub, it’s probably better to be a David who has lots of stones ready for his slingshot.

Over the last couple of years I have spoken to dozens of traditional publishers who are trying to work out how to reinvent their business for the digital age.

Nearly all of them are making ONE big mistake.

They are looking at their own industry for the answers.

They listen to Rupert Murdoch. If he says the solution is paywalls and condemning Google they nod in agreement.

They go to industry conferences and reinforce their existing views by listening to people with the same views.

They get industry new letters which have case studies from their own industry.

The old saying rearranging the chairs on the Titanic, springs to mind.

Who Are The Right Role Models?

The right role models are born-digital publications, gaming websites and, dare I say it, porn companies. Research in the latter may have to wait until after work!

Born-Digital Publications

Businesses that have started, grown and survived online know what content to provide, how to provide it and, most importantly, how to make money from it.

I recently followed an online conversation on PaidContent between Ashley Friedlien, CEO of eConsultancy, and Andy Oakes, Publisher of New Media Age. Andy was defending his decision to lock more of their online content behind a paywall. Ashley was giving his detailed thoughts about why this decision won’t work.

I think New Media Age is a great magazine, but it is seeking inspiration for it’s online strategy from the print industry. Ironic as it’s sole raison d’etre is reporting what is happening in the online world. Other print titles within the new media/marketing  niche are failing; just take a look at Revolution, Media Week and Brand Republic. They have all tried the same strategies and they have all failed.

Ashley, on the other hand, founded and runs a profitable online content company in the new media space. It grew by 30% this year, opened new offices in New York and has a 90% renewal rate.

Andy should be hiring Ashley as a consultant, not wasting time defending a broken strategy, borrowed from a troubled sector.

Print publishers must stop navel gazing, if they want to survive. Businesses like eConsultancy, Huffington Post and MarketingSherpa provide a roadmap to online publishing success. They should study what these sites do, and copy them if the want to prosper.

Gaming

Gaming companies lead the way in hardware, software and the internet. Whatever happens in the gaming world will eventually end up in the broader technology world.

It is similar to Formula 1 motor racing. New technologies are developed for these cutting edge cars. This technology then slowly finds its way into performance road cars and eventually family saloons.

If you want to understand how the world of online content will develop, you observe what is happening in online gaming.

Here are a few trends you should keep an eye on:

• virtual currencies
• micro payments
• user control over their experience
• levels and reward for achievment
• interactivity increasing with skill and competence
• facilitating recognition amongst peers
• strong interactive communities
• real-time user conversations
• pay for features, lives, weapons, etc which save time, improve chance of success, help gain recognition, etc
• high quality multimedia
• cross platform – PC, TV, mobile
• innovations and surprises
• free basic versions. Simple upgrade path to paid

Coming to content websites near you soon!

Adult Content

Porn drove the early market for videos and video players.

When the internet came along it was porn that drove early adoption.

Today adult content is the most competitive online sector, yet revenues continue to grow year on year. To achieve their impressive results the industry has had to continually innovate and be highly creative.

Some of the trends you look out for (so you don’t have to your own research):

• coopetition – working with competitors is more profitable than competing
• nichification – breaking content into very small niches
• affiliate revenues over advertising
• live video content
• micro payments
• multi-site passes
• downloadable content
• user generated multimedia content
• levelling – sophisticated and flexible upgrade paths

Some of the tactics and strategies that the adult content industry uses are disgraceful and no legitimate publisher would want to use them. However every publisher should be aware of them because the chances are these tactics will be used by competitors in every sector.

Conclusion

I want to reiterate; I love print magazines, including New Media Age. I want them to survive and thrive.

However based on the conversations I’ve been having with publishers, they need to wake up and smell the coffee.

There are no simple or easy solutions for print publishers moving online. The market has been turned upside down and will never be the same again.

However choosing the right role models can greatly increase the chance of success.

Traditional publishers who follow other traditional publishers could just be booking their ticket on the Titanic. Or as Aaron Savage wrote in the comments on the article mentioned above “There is a danger amongst publishing in general that everyone decides to follow a particular path that ends with lots of lemmings throwing themselves off a cliff”

It’s a statement of the obvious, but the best way to increase the chance of success is to learn from those who are successful. Many born online publications have discovered formulas that work and many are rapidly growing in one of the worst recessions the world has ever seen.

These are the role models that traditional publishers should be following.

And the most successful online publishers are themselves continually learning from the real innovators – online gaming and adult content sites. If you want to know what trends are coming down the line, this is where you will find them.

This simple quote from Mike Arauz, a strategist with Undercurrent, sums up the tough truth about the future of brands.

“If I tell my Facebook friends I like your brand it is

because I like my friends – not because I like your brand”

Marketers no longer define their brands; they are defined by the ratings, recommendations and referrals of their customers.

All marketers can do is listen and learn, and ensure they deliver products and services which meet their target market’s needs. Their customers will tell them if they get it right.

Ever since the internet started, newspaper editors and journalists have protested that online publishers and bloggers have a lack of accountability, transparency and conflicting interests. They have warned internet users to be wary of trusting what individual experts write on their websites.

Well today a government report brings their smug, self-satisfied argument crumbling down around their ears.

The report, called “A More Accountable Press”, was produced by a panel of experts for the UK government to assess whether self-regulation of the press is working. At the heart of the report is a survey which measured the public’s perception of the press.

The results are pretty damning:

• People who trust upmarket newspapers has fallen from 65% five years ago to 43%
• People who trust mid-market newspapers has fallen from 36% to just 18%
• 75% believe that newspapers print stories which they know are untrue
• 70% said they didn’t think editors could not be trusted to act in the public interest
• 73% believe the government should intervene to prevent intrusion of privacy
• Just 7% of people said they trust newspapers to act responsibly (a lower trust score than the banks)

The report sums up by describing the current system as “characterised by a lack of transparency, a lack of accountability, conflicting interests and inadequate resources”. Sound familiar?

As the old saying goes “Why do you look at the speck of sawdust in your brother’s eye and pay no attention to the plank in your own eye?”

This is the best and clearest video I have seen about how the internet started. Worth a few minutes of your time to understand the background to the remarkable world wide web.

History of the Internet from PICOL on Vimeo.

I was clearing out my inbox over the holiday and I came across an email which included the request:

“We would like you to put together a proposal for building our company’s reputation on the internet. We have put together a list of the values that we would like associated with our brand”

The email was sent from the Marketing Director of a midsize publishing company.

Boy, do some companies have a lot to learn about the way business is done on the internet.

In the offline world you can hire a marketing agency that can put together a marketing strategy. This usually includes pushing messages at your target audience through ads, PR and direct mail. If you push the same message frequently enough, it will start to stick (hopefully).

On the internet people don’t listen to corporate messages.

They use Google to search the web to find out what your customers, bloggers and your competitors are saying about you.

Your brand and reputation is the aggregation of all the comments and conversations they find.

The days of “launch and walk away” marketing on the internet are gone … if they ever existed.

Today you have to become part of the conversation about your company, website, product or yourself.

You have to read and absorb criticism. If it is valid you need to address the underlying issues. If it is not valid you need to explain why (in a positive and objective way).

You need to understand the positive comments and expand on the points they make, without bragging or exaggerating.

This all has to be done in real time by real people who understand your business. You have to create a culture of rapid response.

But rapid response is not enough.

The responses themselves must be honest, passionate and without corporate doublespeak.

This advice is as valid for the one person business as it is for the global corporation.

So remember your company’s (or your own) reputation on the internet is the aggregation of what is being said by bloggers, customers, reviewers, forum contributors and competitors. You’re either part of this conversation or your brand is a hostage to what is being said.

It has been a busy year at SubHub. We have launched hundreds of websites and the pace continues to accelerate.

The recession is driving more entrepreneurs and small businesses online … and with good reason. The setup costs are falling, the audiences are growing and the opportunities for making money continue to increase.

So to help those people who are considering going online and to offer some thoughts to those who already have a website here are 10 observations I’ve made over the last few months.

Observation #1 – Free is unsustainable, but you’ve got to give something away for free

It may sound like a statement of the obvious, but no company can survive by giving everything they create away for free. Unfortunately advertising alone will not provide a big enough income for 90% of content websites. They need multiple revenue streams.

However all content websites need to give away some content for free to drive traffic, demonstrate their knowledge and build authority. The judgement you need to make is how much should be free and how much should be paid.

Observation #2 – Subscription revenues are the best income, but you need authority

Subscription revenues provide website owners with a regular and sustainable income, but no one will pay for content unless it is from a credible and trusted source.

All paid content website owners must focus on building their reputation with their target audience.

Observation #3 – Brands will win

The internet is becoming a breeding ground for false information. This will lead internet users to seek out names and brands they trust. This does not mean they will always going to the New York Times or BBC websites. Indeed many traditional media channels are less trusted than the leading bloggers and independent content sites.

However you must become a trusted brand to build a loyal audience. To achieve this you have to regularly publish unique, accurate and timely information that is highly relevant to your audience. Quality finds its way to the surface.

Observation #4 – Most ad-based content websites get worse not better

The best ad-driven content websites offer consistently great content.

However the majority of ad-driven websites often start with great content, but when advertising goals are not achieved the quality of the content deteriorates. The vast majority of websites publish complete rubbish.

If you publish bad or average content your website will fail.

Observation #5 – Registration barriers for free content rarely work

Marketers continually tell me: “Visitors to my website understand that the price of getting access to our free content is giving us their contact details”.

Trust me, most visitors don’t understand this.

Typically only 10% of visitors will bother giving you their details for access to free information.

Observation #6 – Online success always takes longer than expected

Whatever timescales you build into your business plan, double them. Websites are easy to launch, but audiences are slow to grow.

Like with most start-ups persistence will pay off when setting up an online business.

Observation #6 – Anyone can build a profitable online content business

Having been involved with the launch of over 300 content websites for people all around the world I can say with confidence there are no typical characteristics of successful online publishers.

I’ve seen Ivy League MBA’s crash and burn, whilst watching a bankrupt astrologer living in a caravan make $20,000 a month.

The only common traits are focus, determination and the desire to learn what works.

Observation #7 – Content publishing for profit is in its infancy

Because there is so much information on the internet, people assume that online publishing is a mature industry.

Nothing could be further from the truth.

This industry is only just starting. All content that can be digitised will move online; books, reports, magazines, newspapers, courses, images, videos, films, directories, instruction manuals, etc.

As Bacchman Turner Overdrive said in their famous song of the same name “You ain’t seen nothing yet!”

Observation #8 – Multimedia is no longer the exception

Most of the best content websites have multimedia content; video clips, audio streaming and downloadable podcasts. Users are coming to expect this type of content.

The good news is it is continually getting easier and cheaper to create video and audio content.

Observation #9 – Publishers have to go to where their audience are

I used to say to content owners focus all your effort on creating one really excellent website. The search engines would do the rest.

My advice has fundamentally changed. Creating a great website is still critical, however it is now also very important for website owners to spend a good deal of their time hanging out in the places their target audience go including forums, blogs, social networks and bookmarking sites.

Being part of your community is essential.

Observation #10 – There is no better business in the world

Talk to any successful online publisher and they will tell you there is no better business in the world. Work from anywhere in the world, decide your own hours and get paid doing something you love.

Its hard work, but worth every minute.

Earlier this year Chris Anderson, who is best known for his book The Long Tail, wrote an article in Wired Magazine called ‘Free: Why $0.00 is the future of business’. As the title suggests it is about the “inevitable move towards a price point of zero” for content and services on the web.

Whilst I have a lot of respect for Mr Anderson, this new prophecy clearly comes from the mind of someone who has never run their own online business and someone who clearly doesn’t understand the difference between value and price.

The article was published at a time when the economy was booming. VC’s had their cheque books out and online advertising revenues were growing at 20%+ a year.

Now the wind has changed direction, sentiment has taken a 180 degree turn.

Online companies offering their content and services for free have always thought that the light at the end of the tunnel was advertising revenues or a healthy profit from being acquired. They now realise that it is the light on the front of a high speed freight train.

Free is not looking like such a clever business model anymore.

Paid Versus Free

The last time that analysts and web ‘gurus’ predicted that all content on the web would be free was in the late 90’s just before the bubble burst.

Then between 2001 and 2002, when the bubble burst, the focus changed to paid content.

As the web economy started to pick up, free became fashionable again.

Now guess what?

We’re in recession and paid content is back on the agenda.

Wall Street Journal and Mt Murdoch

When Rupert Murdoch acquired the Wall Street Journal earlier this year he made it public that he intended to make all of the content on WSJ.com free and rely on advertising revenues. He put a team together to investigate the implications and the result…?

The pay-wall has remained in place.

Why? The team investigation revealed:

• There was no real evidence that advertising revenue would fully replace the $75 million + subscription revenues
• Membership preserved the brand’s exclusivity
• With a premium service they could maintain high advertising rates because they have a high quality known audience
• They could preserve the value of the print paper for longer
• Subscription revenues are far more predictable than advertising revenues during recession
• Having a login helps protect content from plagiarism. When content is free, people assume there is no copyright
• It keeps all their options open. Once they go free, it’s almost impossible to go back to paid

The decision to remain paid was a big blow to the ‘web should be free’ campaigners like Chris Andersen and Jeff Jarvis.

However it brought the truth about the paid versus free argument to the fore, which in one sentence is:

“You get what you pay for”

Every business, big or small, needs a healthy and regular revenue stream to maintain quality and continually improve what they do. Running a content website is no different. As Warren Buffet famously said “only when the tide goes out do you discover who’s been swimming naked”. As the recession bites, there will be a lot of website owners covering their shame.

The Good News

The good news is a lot of the rubbish on the web will disappear and the quality content will become more visible. This content will attract increased visitors and any site with a big loyal audience can become a sustainable business.

The key to success is generating multiple revenue streams.

Every content website should provide free content. This will drive traffic, help build credibility and, of course, generate some advertising income.

Affiliate marketing will become more important in bad times as merchants try to get more bang for their marketing bucks. Online publishers need to hook into this lucrative market.

Ebooks, research and other downloadable products should be sold.

Events, webinars and courses should be created and promoted via the site.

And last, but not least, every website owner should strive to find a way of getting monthly subscription income to give their site financial stability.

Free content is good, but you need paid content to survive.

Conclusion

The recession will lead to thousands or maybe millions of free content websites closing down.

I think this is a good thing.

As Eric Schmidt, the CEO of Google, recently said the internet is a cesspool of false information.

A major clearout will give oxygen to quality content and allow it to float to the surface.

If you are already an online publisher producing quality content for a niche target audience, keep going, your time has come.

If you are considering setting up a niche online publication, I would say there has never been a better time to get started, since the internet began …. provided that:

• You focus on creating fantastic content
• You know your audience
• You plan on making multiple revenue streams (including, if possible, subscription revenues)
• You understand that it will take hard work and persistence

As an entrepreneur I don’t know whether I should laugh, nod in agreement or get mad about this quote from Guy Kawasaki.

…I think I’ll just laugh and nod, and be glad that there is at least one VC who understands the challenges that entrepreneurs face.

Quote from the New York Times article “The Care and Feeding of Entrepreneurs”, 22nd October 2008:

“Q. You dedicate a few amusing chapters in “Reality Check” to lies told by entrepreneurs, venture capitalists, lawyers, engineers, business partners and C.E.O.’s. With all this rampant lying, are you suggesting that artful lying and lie-detecting are part of the game that entrepreneurs need to master?

A. If an entrepreneur’s lips are moving, she’s probably lying — though she may not know it. Part of being an entrepreneur is that you have to lie — first of all to yourself. You have to tell yourself that you can create something, people can build it, customers will buy it and you can collect the money.

If you cannot ignore the naysayers who tell you that it can’t be done, it shouldn’t be done, it isn’t necessary, you can’t be an entrepreneur. One of the best ways to ignore is to lie and deny.

The challenge is that once you do ship, you have to remove the lie-and-deny shields and listen to what your customers are telling you. Flipping this bit is one of the hardest things for an entrepreneur to do.”