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Tech Industry

Content: A rising star

Content companies, particularly those with proprietary content, may now be back in vogue.

    Content companies, particularly those with proprietary content, may now be back in vogue.

    As the stars of content companies rise, doubt has been cast over the future of Web portals that aggregate others' content. The history of media clearly indicates that consumers are loyal to content, not the people that collect it--thus fans are loyal to ER, not NBC. Proprietary content will ultimately be critical, but aggregation for the Web will always be more valuable than in traditional media.

    Why are content companies gaining fans? Recent and expected initial public offerings for content companies are certainly helping raise the profile and resources content companies can use to compete more effectively. The shift in consumer Web usage and the value of content as a differentiator, however, are more important factors.

    Up to this point, broadly focused aggregator sites have offered the greatest value to Web users, but as the population of experienced Web users grows, consumers are spending a greater proportion of their time at narrowly focused sites. Why? Because answers to questions are most often found in vertically focused, and not horizontally focused, sites.

    The effectiveness of the Web as a source of information has exacerbated this migration. The search for information on a mortgage for a new home may start at Yahoo, but the detailed information needed to make a decision will be found at a financial or real estate site. This is the risk portals face.

    There is value, however, in the aggregation and integration of services, particularly due to the personalization capabilities on the Web. This is the approach Yahoo is pursuing successfully, with the objective to become the single source to find anything or anybody. Infoseek, with its Disney partnership, is betting on the importance of strong offline brands and promotion. Lycos is morphing into an e-commerce powerhouse with the product breadth and fulfillment capabilities of Home Shopping Network.

    Differentiation is the other key factor driving the renewed emphasis on proprietary content. How many sites offer stock quotes, news, weather, and homepages? It might be faster to count the sites that don't. Sites that have chosen the more cost-effective approach of aggregating content instead of developing their own minimize losses in the short term, but may do themselves a disservice in the long term. Differentiated content generates loyalty, a concept that is more important on the Web where competitors are just a click away.

    Proprietary content is clearly becoming more important, but in a narrowband environment, developing unique content is a challenge. Stories covered on the nightly TV news are generally the same across networks. Personalities, however, draw TV viewers to one station over another. The value of content ownership really becomes clear in a broadband world when rich media content such as video is possible. Today it is difficult to distinguish sports stories or scores at ESPN from CBS SportsLine. In the future, if one of those sites had exclusive broadcast rights for the Final Four, college basketball fans would certainly have a clear preference.

    Compelling proprietary content is undoubtedly becoming more important. Today, however, given the display limitations of the Web, it is not enough to ensure a company's success. Strong brands, excellent distribution, and broad-based aggregation are still more critical to building lasting relationships with consumers.