problems

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.