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Branding Laws · Internet Marketing · eMarketing · Internet Advertising · Online Branding |
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Branding Laws · Internet Marketing · eMarketing · Internet Advertising · Online Branding |
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The Impact of Internet Technology on the Online Content Sector: Value Webs in online news and music
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The Impact of Internet Technology on the Online Content Sector: Value Webs in online news and music
Cornelia C. Krueger
University of South Australia, Adelaide, Australia cckrueger@web.de
Paula M.C. Swatman
University of South Australia, Adelaide, Australia paula.swatman@unisa.edu.au
Abstract
In the increasingly complex world of online content provision, traditional providers of content – such as newspapers or record ‘labels’ – are finding that their old ways of doing business are no longer sufficient. New technology has allowed music consumers to by-pass the legal music market altogether in peer-to-peer networks and, even in the legal music download business, album sales are increasingly giving way to track-based music purchasing. In the online news sector, it has become increasingly difficult to find ways of creating value from a product which most consumers now see as free. This paper provides an overview of the literature on diffusion of innovation and eBusiness models, identifying the limitations of ‘traditional’ views of both – and suggesting that evolutionary economics, with its rejection of the concept of optimisation, its focus on markets and firms rather than individuals, and its acknowledgement of the importance of human agents in the acceptance and use of technology may well be better placed to explain what is happening in this market-space. The paper builds on the findings of a three-year investigation of the European online news and music sectors, discussing the ways in which business models in these markets are evolving; and identifying the crucial role which value webs are playing in successful and innovative firms.
1. INTRODUCTION
The past three years have been a turbulent time for the new economy generally – and for the digital content industry in particular. In the wake of the dot.com and telecoms crashes, the popular wisdom that it is the smaller companies which are failing to make the right strategic decisions (such as, for example, whether to modify their business model, or whether to buy or sell a subsidiary) may well prove illusory – many of the largest and most apparently successful companies in this industry (major newspapers, the record ‘labels’ and, increasingly, the movie production houses) are finding that a combination of technological and social evolutions are leading to dramatic losses of profit and the likelihood that they will need to re-invent themselves in order to succeed online.
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The Internet technology has without any doubt influenced traditional media firms such as record production companies and newspapers. The competitive environment has fundamentally changed, with former (technology) suppliers becoming partners and competitors (often simultaneously) in a new online content market with new products and services and ever more demanding, self-confident, technology-savvy consumers. Companies no longer operate in a well organised, well-structured value chain with well-understood rules. The Internet business is creating new ways to run the content business in a very flexible network of stakeholders, where artists can themselves become producers and distributors, and where telecommunications companies often have a more realistic view of what customers want then the traditional service and product providers.
In this paper we initially review the literature on diffusion of innovation and eBusiness models for online content, showing the emerging literature on Evolutionary Economics has much to offer researchers in this area. We then describe the background to a three-year study of the European online news and online music industry and, in section four, draw from the very rich body of data provided by that study a discussion of the way in which the online content market is redefining itself, and the importance of value webs for this sector.
2. THE EXISTING RESEARCH LITERATURE
In order to understand the impact of Internet technology on companies within the content industry, we found it necessary to review both the existing literature on innovation diffusion – to discover how new ideas and solutions such as Internet technology are spread and adopted – as well as the literature on business model development in the online content sector – to understand how far other researchers had already taken technology into account when developing taxonomies or criteria for effective eBusiness model development.
2.1 The evolving literature on innovation diffusion
One of the first researchers to deal with the diffusion of innovation (DoI) was Rogers (2003 – originally published in 1962). This seminal work has since been incorporated into and extended by theories which include (inter alia) the network theories of diffusion of innovation, such as actor-network theory (ANT) and the social construction of technology (SCOT); and significantly adapted by the evolutionary approach (EE) to economic activity and innovation diffusion.
‘Classical’ Diffusion of Innovation: Rogers (2003) defines diffusion as “the process by which an innovation is communicated through certain channels over the members of a social system” (p.9) and over the past 40 years this view has formed the foundation for a significant proportion of the research undertaken into diffusion theory. Rogers' definition is composed of four elements which comprise the process of diffusing an innovation: the innovation itself (an idea which is perceived as new by an individual); the communication channels through which the messages are spread; time; and the social system. Knowledge and awareness of an innovation are important and influence (or even initiate) the innovation
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decision process of an individual or unit. To turn an invention into an innovation1 a company needs to combine different types of knowledge, capabilities, skills and resources. This ‘classical’ view of innovation provides it with distinct and measurable features; and shows the diffusion of innovation as occurring in a logical sequence of steps, determined by the rational choices of the adopter (see, for example, Wolfe 1994 or Cooper and Zmud 1990).
Actor Network Theory: Callon and Latour (1981) believe that the process of innovation should be seen as the creation of a network of human and non-human actors, using the enrolment of allies, the mobilisation of resources and the translation of interests. A technology path should be just another possibility for an individual actor to establish a stable network. ANT describes the complex processes on which the construction, the development and the stabilisation of the social, technological and natural world are based (e.g. negotiations).
Social Construction of Technology: Bijker and Pinch’s (1984) SCOT is based on the idea that technology is socially constructed by the interaction between relevant social groups which consider the innovative technology needed to solve problems. Different social groups have different perspectives on any new technology and thus the adoption of an innovation depends largely on the interpretation(s) and definition(s) of the individual(s) or group(s) using it (Bijker et al., 1987; Bijker and Law, 1992). This view leads to the concept of the pluralism of artefacts – because a single artefact does not represent a particular form or function, but has different meanings depending on the perspective of the user(s).
None of these theories, however, contributes to the debate on how to discontinue the use of ineffective technology, or how to slow the uptake of inappropriate technology – a major issue for both public sector policy making and for smaller organisations which tend to adopt the technologies used by their larger trading partners, without necessarily considering how appropriate these might be to their own situation – and none considers the issues of sub-optimal technology adoption. Greater strides in this direction are provided by the evolutionary approach to diffusion theory.
Evolutionary Economics: Evolutionary economic theory (EE) deals with the differentiations, complexities and uncertainties inherent in economic structure – and focuses particularly upon open systems and areas of rapid change (Nelson 1995). Evolutionary Diffusion endeavours to provide a clarification of unexplained outcomes associated with technology adoption and diffusion; and deals with the fundamental questions associated with the uptake of innovative technology, such as why obviously advantageous innovations are not immediately adopted, or why some organisations always adopt new technologies later than others (Lissoni and Metcalfe, 1994). Lambooy and Boschma (2001) adapting some of the views of Schumpeter (1949, reprinted 1989) and Marshall (1961) focus on the micro-economic level (Foss 1997) and the evolutionary approach to diffusion of innovation is increasingly being embraced by IS researchers, as innovation research becomes ever more cross-disciplinary (Fagerberg 2003; Wilkins 2005). EE researchers perceive technological competition as the driving
1 Invention is the first incidence of an idea, innovation the first commercialisation of an idea. They are closely linked, normally with a time lag.
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force of economic development and EE incorporates not only the existing economic structures and their influence on actors, but also the way(s) in which actors, especially innovators, are able to change these structures over the longer-term. The EE approach stresses the on-going competition between products, services, companies and economic systems/participants; suggesting that those who wish to survive need to adapt to their environment and constantly face and react to new competitive constraints (Nelson and Winter 1982).
Specific features of EE which extend the explanatory power of ‘classical’ Diffusion of Innovation theory are “the rejection of optimisation or the feasibility of determining one ‘best’ policy, a focus on systems and markets rather than individual firms, and the acceptance of human agency in technology development” (Wilkins 2005, p.76). It is clear that EE is particularly well-suited to explaining and clarifying the often contradictory behaviour of online companies (particularly those operating in the content sector, where the management of users’ and suppliers’ perceptions can be significant).
‘If one wants a model in which it is presumed that the actors fully understand the context ... then the formidable challenge facing the ‘rational’ models let alone a supposedly ‘rational’ actor is what it means to ‘fully understand’ the context, whenever the latter depends in some complex, non linear ways on the distribution of micro decisions and on chance and is always full of surprises’ (Dosi and Nelson 1994, pp.163-164).
Dosi and Nelson’s view of a less than perfectly rational business environment, in which information overload is more likely than a paucity of information and complex decisions must be made every day, describes the online content provision market-space very accurately. Finding ways of understanding the environment is an on-going challenge for all the companies working in this space. The literature defining and analysing the business models which are evolving in this space reflects the market it portrays, in its complexity and lack of consistency.
2.2 Internet business model descriptions for the content sector
The analysis of Internet content providers’ business models is fragmented – in terms of the keywords used, the position of the company in the value chain, the identification of critical factors for a successful business model, and in the potential sources of revenue identified.
For Weill and Vitale (2001), content providers are purely the producers of content. These authors believe that content providers are firms which create and provide content in digital form to customers via third party intermediaries. The physical world analogy of a content provider is a journalist, a recording artist, or a stock analyst; and typical offerings might include software, electronic travel guides, digital music or video. A content provider offers expertise and leadership in a niche market and it is clearly important that such a provider understands customers’ needs and wants, so that s/he can create and price content appropriately.
Eisenmann (2002) takes a rather broader view, seeing the content provider as both a producer and a distributor of content. In addition to income sources such as the
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sale of advertising; charging for/licensing content; and good customer retention, Eisenmann stresses the importance of distinguishing content production and distribution from other, similar businesses if the company is to be successful.
Both Farhoomand & Lovelock (2001) and Wirtz (2001) position the content provider in the value chain as an intermediary. Farhoomand & Lovelock (2001) describe a business-to-consumer (B2C) eCommerce business model which they call “content provider” – a “web-based data host and electronic publisher of newspapers and magazines”. Web-based data hosts gather a variety of information and organise them into electronic databases, with revenue coming from subscription fees. Online newspapers and magazines seldom charge for general content, but instead change small fees for archived news and special services. Wirtz (2001) has a slightly more production-line approach, describing a content business model which consists of collecting, selecting, systematising, packaging and providing content on a company-owned platform. The user must have ready access to the content required, which may (or may not) be personalised. The E-Information business model depends on the content offered (e.g. E-Politics, E-Economics) which is focused on political, economic or social content.
For Niewiarra (2001) and Rayport (1999) only networks can be successful in the content market. According to Niewiarra (2001), networks are the key to success in content distribution. Content is used for both cross-media production and distribution, as well as for and multi-media product offerings. The increasing fragmentation of the market demands new preparation and new ways of offering content to the customer. Rayport calls his model “content business” and, writing before the dot.com crash, saw even then that the period in which everything on the Internet was free has come to an end. Users are increasingly accustomed to paying for Internet access and this revenue should be shared between the content provider and the online service provider, although the way in which such revenue is shared must be negotiated.
Picard’s more recent publications describe the business models of major online content service providers (Picard 2000) and the different business models which have been trialled over the past few years (Videotext, Paid Internet, Free Web, Internet/Web Ad Push, Portals and Personal Portals and Digital Portals (Picard 2000; 2002). Online content service providers are defined as “firms that provide users access to content of interest including news, information and entertainment, leisure activity, and other material” (Picard 2000 p.62). They not only create content, but also organise it in a useful way. Their business is therefore similar to that of the content organiser with whom they are in competition. To offer broad content and create revenue online, companies must create alliances through which they can attract new customers.
The variety of the views provided by these authors indicates how difficult it is to identify and define the role and likely revenue sources of the content provider with any degree of certainty. In earlier work (Krueger and Swatman, 2003) we suggested that Internet content providers could be classified on a sliding scale as providers in the ‘narrow’ or ‘broader’ sense. Content providers in the broadest sense offer not only both purchased and in-house content, but also added-value in terms of interpretation of content, as well as innovative technical platforms by means of which that content may be consumed more widely (a good example is
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the New York Times’ (NYT) NewsStand product, which provides access to hundreds of newspapers and magazines worldwide via a generic interface). But it is clearly necessary to move beyond theory and into the realm of empirical data gathering to determine just how online content providers are offering their products to the marketplace.
3. BACKGROUND TO THE STUDY
This paper draws on a three-year research study which investigated the impact of the Internet on business models in the content industry in 10 European countries2, studying companies in the online news and online music sectors. The initial research design for the online music and news markets included a survey, followed by more in-depth analysis through face-to-face interviews in the same countries, to provide the necessary triangulation – although we later decided to gather some scene-setting expert information from experienced senior executives working in both these sectors. These so-called “expert talks” were undertaken in the two months before the launch of the survey and were extremely useful in refining and improving the content of the survey questionnaires.
Integrating several different research methods is a strategy used by many IS researchers (see, for example, (Gable 1994; Kaplan and Duchon 1988; Lee 1991), with the sequence and combination of the research methods selected depending on the characteristics of the problem under review. The advantage of positivist research is that it can identify the precise relationships between chosen variables and analytical techniques enable the researchers to make (at least partially) generalisable statements applicable to real situations (Galliers 1991). Controlling the number of variables enables complexity to be reduced and thus allows a closer study of the variables (Lee 1991). With an almost complete lack of ‘hard’ data on either the two sectors under study, or the content industry more generally, we needed to begin by gathering empirical data upon which we could base an effective understanding of these two sectors.
The decision to include the expert talks meant an amendment of our original two-phase research strategy – which became a three-phase strategy:
1. Phase One – expert talks (scene-setting)
2. Phase Two – online questionnaire (quantitative data collection)
3. Phase Three – face-to-face interviews (qualitative data collection)
with each phase informing and adding to the next.
Phase One: Expert talks: we held detailed, face-to-face discussions with a total of 13 executives from 11 companies, mostly (but not entirely) located within Germany. The questions asked of these executives were largely open-ended and provided wide-ranging information on the structure of the two markets, the companies operating within those markets, and the activities, strengths, weaknesses, opportunities and threats facing the ‘players’ in those markets.
2 Belgium, Finland, France, Germany, Italy, Poland, Portugal, Slovenia, Spain, UK
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Phase Two: Online Questionnaire: we identified nine major stakeholders in the online news sector and eight in the online music sector, who played quite disparate roles in their respective market (although some of them, such as telcos/ISPs existed in both sectors). This led us to create a fairly complex survey structure, with separate questionnaires for each of the individual stakeholder groups + provision for the possibility that one company could be active in both sectors. The questionnaires were available through a special-purpose website and were designed to be as easy to use as possible – each question the participant answered led him/her to the next. Journalists, for example, were led seamlessly into the online news survey questionnaire and had to answer only questions related to their particular experience. This was particularly important because of the length of the questionnaire and the detail required. After much thought we decided to make the questionnaires as detailed as needed – even though we knew this would reduce the number of responses received (which it did). The information publicly available (for example, from commercial commentators such as Forrester or Jupiter) was simply too broad and general for our needs. We ultimately received 340 responses, which provided us with sufficient data to gain a thorough understanding of the two sectors – and provided the necessary basis for the design of the face-to-face interviews.
Phase Three: Interviews: the face-to-face interviews were standardised, open-ended interviews with every interviewee asked the same questions – a sampling logic, rather than a purely replication logic. We did, however, include some additional questions as we went along – the first interviews provided us with very rich data and suggested new lines of approach which we were fortunately able to take advantage of. Not all the interviews were literally face-to-face – many of the people to whom we spoke were very senior and unable to spare the time for such an approach, so we also did some interviews by telephone. This still enabled us to go into greater depth when interesting issues cropped up during the interview – see Patton’s general interview guide approach (Patton 1990). The face-to-face and telephone interviews took between 20 and 70 minutes, depending on the respondents’ time and their willingness to answer more or less exhaustively. Over a period of 10 months (August 2003 – June 2004), 112 interviews were undertaken with companies in the online news and music sectors.
In section 4 we draw on this rich body of data to sketch our view of the current and likely future state of the online news and music sectors, and the way in which business models are evolving and responding to threats and opportunities – both online and offline.
4. THE EVOLUTION OF VALUE WEBS IN THE ONLINE CONTENT SECTOR
The long-term processes of changing economic structures, the sub-optimal nature of companies’ awareness and willingness (or ability) to adopt innovation, which the Evolutionary Economics researchers describe, is exactly the situation companies in the online news and music sectors must deal with at present. The Internet and other emerging technologies (especially those now being developed or adapted for mobile business), together with new market entrants, are forcing all
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players in the online content industry to adapt rapidly and continuously to an ever-changing market and technological structures – simply to ensure their existence. The Internet calls for faster reactions in highly competitive and complex markets, where companies must not only watch their competitors’ activities, but must also keep a constant watch on customers’ demands and on the latest technological fads, in case their own products and services are affected – and this while spending less time and money as profit margins continue to slow and more and more new market entrants (ranging from telcos attempting to take advantage of the convergence of computing and telecommunications, through content creators endeavouring to by-pass the traditional delivery mechanisms, to pure-play start-ups with bright new ideas) put pressure on existing content providers to remain competitive and attractive.
The most immediate concern for digital content providers is the frightening drop in their revenues, as electronic access to music, film and news becomes accepted as a routine activity by the average person, rather than the ‘geek’ community alone; and sales of their traditional physical products decline without a corresponding increase in online sales:
• Record companies’ sales figures are declining drastically (IFPI 2004) as a result of the invention of MP3 file compression techniques (and its successors) which have reduced song file sizes while retaining sound and vision quality. The impact of the peer-to-peer (P2P) networks on record (and, more recently, film) distributors is a combination of the technical ease with which files can be copied and shared + the sheer size of the global network which makes it possible (and, indeed, easy) to identify a large group of enthusiasts wishing to access a particular digital work of art without paying royalties to the copyright holder(s).
• News companies face a similar problem because many companies took an initial decision to offer news for free on many websites in the first flush of enthusiasm for Internet technology, with the intention of attracting as many users as possible. The theory current during the dot.com boom of the late 1990s was that this would increase page impressions or site visits – and that these, in turn, would convince advertising clients to purchase more online advertising to attract the large numbers of site visitors now available. Unfortunately, online advertisers were not attracted to websites in the numbers anticipated – and advertisements in the physical press have also been declining. Despite this lack of an increasing online advertising base, newspapers and other news providers still want to keep their content freely accessible online, although print sales figures are decreasing because the Internet is now seen as the preferred source of information. Newspapers have now missed the chance to restrict their content to premium access and are now, in consequence, struggling to make money out of their content on the Net. Online newspapers and their corporate parents are increasingly caught in an income trap composed of declining advertising revenues + declining subscriber numbers (Krueger and Swatman 2002). The exceptions are those news providers which have been able to follow the example of the Wall Street Journal and charge for their premium content – or which, like the NYT, have been able to make use of
their existing technical infrastructure to offer an online sales platform to their rivals.
Both online music and online news companies were (and still are) forced to respond to the innovation “Internet” and to every subsequent related technological innovation (such as mobile technology). The decision-making processes, the adoption and the implementation processes have to keep up with fast-appearing innovations, subsequent failures and uncertainty as to which innovation suits the company’s consumers best. These changes within the news and music market have led to a complete change of economic structure – both in the value chain, as well as in the forms of competition extant in these market sectors).
What is clear about the majority of business model descriptions of the online content-creation sector is that the authors take a value-chain oriented approach to identifying the roles and responsibilities of the content providers (see figure 1). Rayport (1999) alone has a customer-oriented view of the content creation process, seeing the days of free Internet access as numbered.
Figure 1: Traditional value chain
But for content providers – especially in the music industry – collaboration is the key. For the mass market a broad catalogue is so important that every digital music provider needs access to the catalogue of at least the major ‘labels’ (unless the provider is targeting a niche market). But collaboration + cooperation between competing companies (known as ‘coopetition’) is not easy. Phonoline, a digital platform for the Internet wholesale of major and independent companies’ content run by the German IFPI subsidiary (which means that it is owned by the record companies themselves) was a failure. So independent Internet companies are now trying to sign licensing agreements with as many record companies as possible.
This suggests that it is not appropriate to create a business model for the content industry which places the content providers in a specific position in a linear value chain – partly because content providers combine a number of different business models; and partly because they act in a more complex environment than a chain,namely, in a value network or ‘value web’ (see Figure 2).
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Figure 2: New value web
Content providers are not only active in the B2C business where they try to attract and sell to customers directly through their Web site (the direct-to-customer model of Weill and Vitale (2001)), but also operate in the B2B space, by selling or licensing their content to other companies. Content providers (especially telcos and ISPs) have created a value network (Parolini 1999) where they look actively for complementary competences in other companies and try to cooperate with them to the greatest extent possible. The most important aim for content providers on the Internet is to offer and sell new products, or a greater variety of products. Where profits (sales values) are small, sales volume becomes the goal – just as it is for supermarkets.
Nelson and Winter’s (1982) explanation of evolutionary diffusion theory describes what is happening in the content market today very effectively, incorporating not only the existing market structures and their influences on participants – but also the way in which market participants themselves change these economic structures over the longer-term. In the content market there is an ongoing competition between products, services and companies, and market participants, and only those who are able to adapt to the environment and constantly face and respond to new competitive constraints can actually survive.
Our study makes it clear that companies are struggling to find the right products and services to sell over the Internet and that there is a high degree of competition between traditional content providers such as newspapers and record companies, and new market entrants such as telcos and technology providers. Traditional content providers have begun to discover that they cannot force Internet users to consume in the way they would like them to do (this is particularly clear in the case of the P2P ‘battle’ in the music sector). Today they must take a more customer-oriented view than the traditionally product-oriented perspective with which they succeeded in the physical world. This is probably the most significant
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lesson companies have had to learn from moving their activities onto the Internet, namely that the ‘customer really is king’, and that cosumers no longer have to take whatever they can get, but can now purchase in a highly selective way. The development of predominantly track-based music purchasing online, as opposed to the formerly album-based approach of the physical world, is a further example of the shift in purchasing behaviour and the growing control of customers which digital product delivery has brought about in the content market.
The four C marketing concept, or the ‘eMarketing Mix’ (Kotler et al. 1999; Strauss and Frost 2001) replaces the traditional marketing mix with a far more customer-oriented set of targets.
Customer needs and wants instead of Product
Cost to the customer instead of Price
Convenience instead of Place
Communication instead of Promotion
In earlier work (Krueger et al. 2003) we tested these concepts against two of the better-known online music providers, www.po pfile.de and the Tiscali Music Club, and compared them with some of the more successful online B2C product providers, such as Amazon and eBay, to identify whether online music providers were taking advantage of eMarketing approaches. Sadly, at that time there was little evidence that online music content providers were aware of the need to focus their offers on customer demand.
By contrast, Internet-driven telecommunications companies such as T-Online had to embrace this concept right from the start for their technological applications like Internet access, e-mail etc. and, in consequence, obtained a substantial competitive advantage over their content provider competitors/partners . From what we have learned about the news and music sectors in our study, the traditional content companies have only recently begun to accept they must take the Internet seriously as a major sales and marketing channel. The news companies seem to have realised this much earlier than the music distribution companies – or, at least, they have responded in a more positive way to the Internet than did the music labels, which appeared to see the Internet as a threat rather than an opportunity. Varying adoption times in the content industry reflect the influence of developed social structures and socio-psychological issues, for example, the influence on the diffusion process of B2C Internet business caused by dot.com crash of 2001 (Boudourides 2001).
The evolution and the adoption process in and of the online content sector are influenced through internal and external factors (Allen 1994; Metcalfe 1994; Nelson and Winter 1982). The invested capital, the product markets, technological opportunities and social influences have created the content market we see today. Capital has been invested rather more carefully by newspapers and record companies over recent years, especially since the dot.com crash of 2001. For technology and Internet service providers and telecommunication companies the situation has been very threatening – either they found new ways to sell their technologies and services, or they would simply cease to exist! And one way out of this dilemma was to extend their business to related industries such as news and
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music. And where the telcos had to invest in new solutions in order to survive, newspapers and record companies wanted to protect their traditional business in which they could sell profitable quantities of print editions and CDs. For them, the new digital products are not a substitute for their traditional market, but are merely complementary products and services.
The hesitance of traditional content providers to fully embrace the Internet did not lead to their complete destruction, because they still had substantial revenue from existing sources – although in both sectors this traditional revenue is in substantial decline and is placing them under increasing threat. But if they had not at least partly integrated the Internet into their business model(s) they would not have been prepared for the imminent mobile business environment. This is an excellent example of how existing structures and new possibilities depend on one another – and how hard it is for a company to decide how much time and money to invest in a new solution; and how to balance traditional and new business opportunities. The concept of path-dependency (Arthur 1994; Nelson and Winter 1982) is one of the more useful techniques Evolutionary Economics has to offer to online content providers and describes the natural path (and result) of technology choice where, although many outcomes are possible, the process becomes path-dependent under increasing returns.
The study made clear that there is no way back to the traditional news and music business as it existed 15 years ago. The value chain has changed as a result of Internet technology and the linear chain is no longer an effective representation of what is happening in this industry. It has become more flexible, with the ability to dis- and re-intermediate players, but also showing increasingly inter-dependent behaviours between the various companies and consumers of content, resulting in a value network (Allen 1994; Callon and Latour 1981).
5. CONCLUSION
The Internet has a significant impact on the content providers’ business models. Traditional content providers are aware of the fact that they face a new business environment and that they must adapt in order to survive. Our study suggests that, thus far, very few have realised that the Internet is not only a new delivery (and marketing) channel, but that using Internet technology they can create new offers both online and offline. As an example, the regional German newspaper RZ-Online has developed an ASP/ISP subsidiary through which potential advertisers can obtain both a reasonably-priced and fully-maintained website, as well as the chance to gain advantageous online advertising – via hotlinks in their advertisements in RZ-Online’s E-Paper which lead directly to the company’s home page – plus the further benefit of very attractive rates for advertising in the offline parent newspaper, Rhein-Zeitung.
This win-win arrangement is typical of the sort of creative business model which the more entrepreneurial online content providers are developing. It is becoming clearer that the Internet is driving offline business, as well as the very promising mobile business – and this means the overall business of a company is facing a whole new era. Traditional diffusion of innovation theory cannot account for the
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rapidity and level of change faced by the online content providers, but a combination of evolutionary economics and the emerging literature on eMarketing (particularly the eMarketing Mix) offers a potential guide to traditional companies trying to find a way through the bewildering choices available to those moving online. Technology alone is not the answer to survival on the World Wide Web, but the (sadly still rare) success stories such as the WSJ online edition, the NYT NewsStand and, of course, Apple’s iTunes MusicShop show that a judicious mixture of technology, collaboration with value web partners, marketing savvy and, above all, awareness of what the customer really wants can provide an effective business model even in this most difficult of market-spaces.
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