Way back in summer of 2011, we brought to your attention the challenged business model of renowned content farm Demand Media. Its share price was already down to $15 at the time, from its early-2011 IPO high of $27.
Here’s an excerpt:
“…[this] is why Demand Media’s stock might continue its ride downward. It doesn’t generate ‘heavy readers’ or ‘fans.’ Just ‘fly-by’ Web searchers. DMD’s advertising-based business model requires millions of ‘fly-bys.’ And a million-plus-one the next day, and so on.”
A year-and-a-half later, it’s clear the business can’t scale. DMD's stock price continued to fall all the way to $5, and for the past year has found a home around the $8 - $9 range.
And so, a year-and-a-half later, Demand Media management has decided to try a revenue stream outside of the ad-supported content model. The old “go to” of PAY AS YOU GO.
That’s right...the revenue model that all the digital-content experts claim won’t work, because all Web content wants to be free, should be free, must be free. The revenue model that’s working a la “paywalls” for many newspapers. The revenue model now being pursued by “hot journalists going independent” like Andrew Sullivan.
Demand Media’s first foray into “pay for content” (e.g., rather than banner ads) will come via its recent purchase of Creativebug, a crafts site, where you can pay on the average of $1 a minute to watch “how to” videos of such mindbending topics as “How To Create A Family Journal.” Or you can pay $17 a month, and see every minute of the dozens of videos about quilt-making.
Scary, no? Americans will gladly pay for “Drawing With Thread,” but NOT ONE GOD DAMN PENNY for news analysis from The New York Times.
But, lest you think the ad-supported revenue model is passé in the future digital landscape, let’s take a look at YouTube.
YouTube, as we told you here, also plans to pursue the “pay for viewing” model. With a vengeance. But it obviously feels the ad-supported model is still viable long term, with just a few tweaks. A month or so ago, DigiDay reported this:
“YouTube is increasingly selling its advertisers longer ad placements that smell a lot more like content than they do advertising…Some of the placements are as long as five minutes.”
That’s no typo. Pre-roll video ads that last FIVE MINUTES. Think about that next time you go browsing YouTube for the millionth (60-second) rendition of the Harlem Shake.
This divide in approaches to making “digital money” shows that despite all the blowhard prognostications, no one – no one – has any idea what is going to work.