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“How does it make money?”

As Joe Marchese reminds us in this week’s edition of Online Spin: Investors And Advertisers Playing A Dangerous Game — Again that’s a million dollar question right now. And its also the question on everybody’s mind these days, when considering a move from traditional to digital media. It’s a simple question, and yet there are many a complex and contrived answer when it gets posed to many of the current leading content providers, publishers, aggregators and portals. Almost each of them have a different vision of how their content services will be sustained over time, but the bottom line to all of them seems to be an Ad based model.

As was hinted at in this week’s Video Insider: http://blogs.mediapost.com/video_insider/?p=181, they’re trying to answer the question on someone else’s terms, and as a result they’re scrambling to come up with the right answer, or, the answer they think that Marketers, Retailers and Advertising Agencies alike want to hear. Trying to compare apples to oranges, coloring the apples orange and the oranges red or yellow, doesn’t really change the fact that their presumptions upon which they base their answers are flawed. People assume that digital will and should play out just the same as traditional media, but they are greatly mistaken.

The problem is they’re answering the wrong question, and, conversly, investors and those with the ad dollars to spend are also asking the wrong question. It should not be how does it (the business idea or content buy) make itself presentable enough to pull existing money in, rather, how does it give existing money away and sit in the middle of that exchange, or facilitate the creation of new money.

If you have no idea what I’m talking about, I will comment on some key exerpts of the two articles below and hopefully you can figure it out:

“As technology becomes faster, better, and more accessible, it creates more choices, which in turn creates fragmentation.”

- So find the right fragment, and don’t try to reach them all as you once did in the traditional media.

“Seventy-five percent of all Internet users are viewers of online video, and that will increase to 88% in the next three to four years. According to ComScore, Internet users in the U.S. watched 11.5 billion online videos in March 2008, up 13% over February 2008 and 64% year-over-year. “

- When the tipping point is reached and New surpasses Old (and some say that could be as soon as 2011-2012),

“One big thing that will still be left to the vendors to decide is which ad formats to place with which content, whether that’s three single, :30 unit commercial breaks during an hour-long program on ABC.com, or a :15 pre-roll unit before a two-minute clip on Hulu. “

- We need to get beyond pre/post rolls, they have a maximum life of, well… until the tipping point mentioned above is reached. Best start planning now for alternative brand building opportunities and relationship marketing as opposed to the traditional buyer-seller, broadcaster-viewer mentality.

“In order to create some order within the chaos, the Interactive Advertising Bureau worked with a series of publishers and agencies to begin to establish some standards on how advertising messages should be delivered within online video content, short and long-form, professional or user-generated. The guidelines are meant to set a framework for publishers to sell advertising that will be more consistent across sites or video players for agencies and marketers to be able to evaluate, buy, produce creative assets for, and measure.” … “Standardization helped us better compare and contrast media opportunities and streamline production. “

- What comes after standardization? Placement (or use of, that standard, within an existing framework). And this is where the real opportunity is, for those who are bold enough to approximate and do some guess work on how the standards will look, and instead focusing on hose to place them now.

“How does it make money?” As Joe Marchese reminds us in this week’s edition of Online Spin: Investors And Advertisers Playing A Dangerous Game — Again that’s a million dollar...