Internet

Commentary: Money, content breed success

Success is almost inevitable for online content providers that have sound business models, a wealth of content and deep pockets.

By Charles Abrams, Gartner Analyst, and Carol Rozwell, GartnerG2 Analyst

The recent profitability of online content providers like Disney is hardly surprising. In fact, success is almost inevitable for providers that have sound business models, a wealth of content--and deep pockets.

The highly publicized troubles of

See news story:
Cutbacks push dot-coms toward profits
the past year--the recession and the long-overdue bursting of the dot-com bubble--have distracted public and media attention from what continues to be a very positive outlook for online commerce. Gartner and GartnerG2 research shows, in fact, that online transactions will continue to grow steadily, perhaps increasing fourfold in the next five years.

E-commerce initiatives, and content sites in particular, have always been plagued by unrealistic expectations. Before the overheated dot-com hype took over in the late 1990s, "old media" content providers--publishing companies, for example--typically didn't expect to turn a profit on a new venture until five to seven years had passed. The predictions of profitability in two years or less that many new-media sites made to their investors were always wildly out of touch with reality. The events of the past year simply show that the basic rules of business apply to new-media initiatives too.

The unsuccessful sites didn't fail because of any inherent problems with the online delivery of content, however. They failed for the same reasons weak businesses have always failed: unsound business models, inadequate product offerings, or insufficient funds. By contrast, the more mature content providers--many of them, like Disney, with deep roots in the old-media world--have resources that enable them simply to wait for their more marginal competitors to crash and burn.

The resources of the successful providers are not simply a matter of better funding, though deep pockets is clearly one key criterion for success in this area. Providers like Disney also have a depth of content that they can offer to consumers--certainly far more than providers that have little or no original content to leverage--and infinitely greater organizational experience.

That last element may be one of the most important. The sound providers have made significant investments in improving the ways they do business. They've invested in personnel training, infrastructure, consumer education, the creation of a meaningful role for partners, and the comprehension of the unique opportunities offered by this interactive medium. It's all beginning to pay off.

The success of some online content providers also is driven by a newfound maturity among consumers. People are spending more time online, and they're showing an increased willingness to take advantage of the services and content offered online. E-commerce experienced a tremendous surge in the fourth quarter of 2001--a surge that can be explained only partially by the events of Sept. 11.

Whether industry observers recognize it or not, the future is bright for online content providers--at least those that have realistic business models and a clear understanding of their customers' needs.

(For related commentary on why Webvan failed, see Gartner.com.)

Entire contents, Copyright © 2002 Gartner, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.