content farms

Content farms will eat themselves

August 9, 2010 By Dan Thornton

The leading example of web publishing dubbed ‘content farms’ is Demand Media, which has just publicly filed registration for an IPO, and as a result has made it’s financial records public for the first time.

There was some surprise that content farming doesn’t currently make Demand Media profitable – last year it turned over $198 million in revenue, but still managed to lose $22 million. This year is looking better – a $6 million loss on $108 million so far… but it’s also important to note that a sizeable percentage of revenue is actually coming from Demand’s web registrar business, eNom, rather than content farming.

Content farms will peak this year:

I definitely think this is the right time for an IPO, as I honestly believe that this year could be the peak of content farming as a sustainable model for big business – for years, small companies and individuals have gone around creating targeted landing pages, and I still think there are ways to make this work effectively, but sizeable companies dominating the space are going to struggle.

What content farms rely on:

There are two things that content farms rely on for content creation – Search and Advertising. Essentially they’re creating content to respond to popular search queries to arbitrage advertising revenue (sold direct or via networks such as Google’s Adsense). In Demand’s case, it currently has deals with Google which are set to end in 2011.

They’re able to produce this content by farming the work out to a legion of online writers who are submitting for a low cost.

The shakey foundations of content farms:

Search – Traffic comes from responding to search queries. If the nature of search changes, by becoming more personalised and from social recommendations, then the traffic to search query specific sites drops.

This is likely, because the search content is often on sites which have no focus on owning an area with quality content – which is the sort of thing which is more likely to be shared on social networks (It should have also been the sort of content more likely to be highlighted by Google – maybe in 2011?).

Advertising – Ad networks, affiliate deals, and particularly advertising linked closely to search works, such as Google Adwords. If you can optimise a page for traffic and response by targeting people actively searching for it, and it’s something which advertisers will happily bid a significant amount to advertise against, you’re in business.

But the nature of the internet, and relatively open networks like Adwords (which have no minimum barrier to entry), means that there are always going to be an increasing number of options for advertisers. And while there will only ever be a handful of sites getting sizeable traffic from a position on page one of the search results, Adwords is keyword-based, so in aggregate you can achieve a similar scale more cheaply if you start digging into the results (as more people will – search advertising is relatively old in terms of internet revenues, but still a newborn for most advertisers.)

Content creators: Content farms can exist because there are thousands of people who are willing and able to churn out enough content to make a worthwhile return for them despite the relatively low reward – in comparison to traditional freelance costs for someone working in the media. Partly this is because it’s easy – relative to establishing a successful blog in a niche and achieving the same level of earnings for example. And partly it’s down to a lack of options – if you’re not one of the ‘elite’ with a job for traditional media, and you’re not building your own property, there’s an apparent limit to your options for contributing for payment

The earthquakes of algorithms and competition:

Google, (and Bing, Wolphram Alpha, or any other search product) uses software which can be tweaked and changed at any point – and if content farming is producing terrible writing (I’m not saying that’s the case across all companies and articles, but potentially en masse), then that software algorithm can be adapted.

Plus the social web is having an increased effect on both filtering and discovery. Google News is experimenting with human editors, whilst the likes of Facebook and Twitter have made social recommendations more mainstream than the previous traffic drivers of Digg, Reddit and Stumbleupon, because suddenly my none-digitally addicted friends have a quick and easy way to share links beyond their email connections, and for everyone else to pick up on them and repeat them.

And content farming is not a new concept – the segment of bloggers who focus primarily on making money have long looked at search data and advertising as the way to isolate niches which are most likely to make them a reward… So there’s nothing which is protected from unlimited competition, particularly when the likes of aol and Yahoo have also started to use search as a tool for article creation.

Finally, there’s a big element missing from content farm advertising. I’ve spent a long time working for media companies, and whatever you may believe about the media industry as a whole, I’ve seen an enormous amount of respect and faith from audiences for traditional media products. There are flaws in traditional display advertising, but you’re not just buying the ‘last click’ – indeed several attempts have been made to quantify the branding and awareness benefit you get from advertising with a big media brand.

Indeed, the same is true of advertising with a small niche blog in many ways – if I’m actively accepting advertising (which I do), and promoting affiliate products (which I also do), I have a vested interest in vetting them beforehand to avoid losing any trust, respect and loyalty from anyone who visits my site. I’ve never made a direct recommendation for anyone to purchase something I haven’t sampled first, and I take a similar approach to the advertising I sell directly. Only those adverts served by Google Adsense are independent from any editorial judgement, and that hopefully means that the implicit or explicit links mean that there’s an element of trust there.

Whereas people writing solely for search aren’t building that same level of engagement – they’re writing whatever they’re assigned, and that’s not going to translate to the social web effectively. I don’t pay to promote myself – I submit my content to several other locations, and then it’s down to the people who either know me, or see it and like it, to reward it with recommendations, links and traffic.

And there’s a final thought – at the moment there are several big sites allowing you to contribute on a huge range of topics without necessarily benefitting you financially. Wikipedia is one example, but others, for instance, Squidoo, allow you to donate any earnings to charity, for example. At the moment most of the open or non-profit approaches aren’t as prominent in the minds of many people, but as time goes by, more and more people seem to be following the notion of establishing a knowledgeable online presence in order to benefit indirectly, rather than monetising it at the source – Cory Doctorow often quotes Tim O’Reilly as saying ‘ the greatest enemy of a new author isn’t piracy, it’s obscurity’, and the same could be true on monetisation. More and more people seem to be contributing and building elements of online empires to establish reputation over monetisation, and these non-profit approaches could become another source of competition.

So what can content farms do?

In my eternal optimism, I think there’s a future for an evolution of content farming – to establish the leverage to provide a platform which correctly rewards people for displaying a high level of knowledge and engagement, so that those wishing for a direct financial reward can be recompensed, and advertisers can confidently invest in the branding and trust benefits of being associated with them.

But the challenge is that it’s an area in which media companies have existed for years, and they’re coming to the web from the opposite angle as they are getting more and more digitally savvy (there’s still a long way to go, but there’s probably more movement in digital from a lot of big media companies in the last year or so than in the last 5 or 6). If they don’t fall into only developing expertise in a closed application ecosystem, but also continue to invest, experiment and build, then content farms could actual be inspiring and paving the way for traditional brands to have a resurgence.

The death of the Open Web has been somewhat exaggerated

May 23, 2010 By Dan Thornton

I’ve just been reading through a short and interesting piece by Virginia Heffernan referring to ‘The Death of the Open Web‘.

She compares the move from open websites to the walled garden of apps to the move from cities to suburbs, and with some justification. After all 55 million+ people with an iPhone or iPad are app users, alongside the Murdoch-led impetus for content paywalls to once again attempt to block off certain areas of the web for certain companies.

But I think there are arguments against her two points – and a more pressing threat to the continued life of the open web.

Noone denies the success of the application approach for the iPhone and iPod Touch – the small screen means that applications have proved hugely successful at utilising a smaller space and handheld processing power to achieve great results. And many people are actively downloading enough applications for it to be an income stream which many individuals and businesses have, and will continue, to invest in.

But the iPad? There have been initial sucesses with some applications, but at the same time, many people are reporting that they’re increasing using the fast browser to surf the web just as effectively – if not moreso than many of the lacklustre apps rushed out for launch. A lot of websites are now utilising HTML5 (Including my employers, Absolute Radio), and the built-in connectivity of the open web (I’m thinking hyperlinks as much as social bookmarking) carries a lot of advantages over the application approach.

By the same token, the rise of the paywalls doesn’t mean that everyone will follow, or that they’ll be a sustainable success. Certainly the like of The Guardian will stand to benefit in traffic by remaining open, and for many pieces of content, a free, open alternative will always exist – if not by an existing rival, then from one of the myriad of new people seeing a paywall-created opportunity.

As an example, check out the investments being made by Demand Media, Yahoo and AOL to invest in trafic acquisition by content at the same point as major mainstream news organisations are retreating into their shells.

But the real threat?

That comes from the infrastructure of the internet – one which is not inherently open or closed. And that infrastructure could be increasingly dictated not by evolution or the needs of users, but by the attempts to inforce legality and particularly copyright.

I’m not suggesting that artists and industries don’t have the right to profit from their endeavours, but that the way in which those efforts are currently being enacted could result in effects far beyond the intention to protect content-creators.

For a more comprehensive explanation, I highly recommend Code: Version 2.0 by Lawrence Lessig

That’s the real threat to the Open Web and all the benefits that it brings to the world as a whole.

Content farms most threaten UK media firms

December 14, 2009 By Dan Thornton

The ‘content farm’ strategy of building huge numbers of writers producing content for relatively low payments has been receiving increased coverage as aol concentrates on becoming a content firm rather than a technology firm.

It’s a tactic also being used by the likes of Demand Media and Answers.com, and has also been utilised by companies such as Yahoo. The fear is that a few thousand writers will produce enough content to severely distort the internet ecosystem and lead to a web ruled by low-quality content which targets the lowest common denominator.

Aside from the irony of bloggers using ‘low quality content’ as a criticism of another internet content strategy after the label has been unfairly levelled at them for years, I’m sure that it’s not the blogging companies and individuals that have most to fear.

It’s traditional media companies that will be hit first by another broadside – they have formal structures which will be impossible to change in time to respond to a new threat.

Based on my experience working for the largest UK magazine publisher for many years, (talking to many other people reveals most companies aren’t too far removed), the structure hasn’t radically changed for most people with print taking the majority of resource (Including designers, sub-editors, etc), and the digital teams still fighting to either gain parity or integration as the inequality between print and digital revenues continues to hold them back.

Now they’re about to get hit by an army of content writers. More importantly, this army will be hitting SEO-friendly articles in a more effective way than print teams have managed, and they’ll also have the benefit of significant resource and big brand names/internet properties as bases to build from.

If any large print company radically alter what they’re doing in a timescale of less than 6 months, it’d be a miracle.

If they want to take on this threat head-to-head, it’d require a complete focus-change and retooling within days and weeks.

And UK media companies are in an even worse position than their generally more evolved US counterparts, with a smaller geographical area and audience, less subscription-based revenue, and a small pool of extremely low-cost freelance talent if they were to try this route.

Meanwhile I actually think most blogs will be fine – the most general sites may experience problems, although I think the likes of Techcrunch and Mashable mix size and flexibility well enough to adapt as needed. And individuals who are producing far more specific niche content should have an advantage in producing articles which not only target SEO traffic, but also provide far greater value – and they’ll also be able to get more specific as necessary. Yes, they’ll have far bigger challenges to grow their readership, but they’ll be able to differentiate with higher-quality, longer, more in-depth displays of their specialist knowledge, and hopefully many of them will finally embrace and prove the ‘1000 true fans’ theory.

Bloggers of all sizes also have one huge advantage – they’ve built their success on a personal brand, whether it’s Mike Arrington, Pete Cashmore, or someone writing about collecting vintage bottle caps. This is something that is difficult to replicate or attack, and means that existing audiences are likely to show greater loyalty, whilst also being more likely to commit to sharing via word-of-mouth and social media.

The widespread belief seems to be that Google will solve all of this by putting more weighting on real-time sharing of content, and less on generic content of the type which has seen spam blogs tackled to some extent. While I think this will happen, it’s going to take some time, and some Twitter users are susceptible to Retweeting anything with a snappy headline.

So what can UK media companies do? Well, they may get a brief window in which to change, bearing in mind all the content farms are primarily America, so certain differences in language should preserve a reasonable amount of UK traffic.

They have to personalise their content producers and their brands, produce numerous niche sites with extremely small editorial teams, and prepare for low profit margins for the foreseeable future.

Besides the fact I’ve worked for a number of traditional print-based companies for years, and spent a long time at one in particular, I’m confident about the possibility to still be able to build a thriving online property around content – so much so that I’ve committed to a new side-project with a couple of great people which will hopefully reinforce my point. Expect more details on it shortly!