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May 19, 2006

Why Traditional Media Companies Don't Get The Internet

Can you name a single big success on the internet that was built off an already established brand? I suppose news sites like MSNBC.com, CNN.com, and NYTimes.com might qualify but even there the younger demographics that are driving the net are increasingly getting their news from blogs or links in the communities they call home.

So, why is AOL going to compete with MySpace by launching AIM Pages? I just saw a TV ad for iVillage that ended by telling viewers that iVillage is owned by NBC Universal. Does that help iVillage?

I think the biggest successes on the internet have been fresh brands. Google in search is the best example. MySpace and Facebook in community sites came out of nowhere. In video, YouTube seems to easily beating Google. Shopzilla is winning in comparison shopping not Amazon or Yahoo. It almost seems as if success on the net is driven by being (or pretending to be) anti-corporate and anti-mega-brand.

So why is it that established traditional media companies and increasingly established internet companies feel they should throw their corporate brand on everything they do online? I suspect that the executives see economies of scale for themselves, ease of use for their customers, and believe in studies that show consumers like their brands.

I think they are making a big mistake. The internet revolution is being completed from the bottom up, not the top down. It is democratic with a little d. Lots of companies have shown that you can build a hugely popular site and generate loads of traffic with no prior branding. I think the experts call it viral marketing or viral networking.

From my traditional media perspective, I would advise the companies to stop being married to their brands. Build standalone businesses with their own brands and their own users. Then worry about incremental montetization opportunities that come from synergies within the corporate umbrella.

Traditional media companies are trying to build their online revenues or diversify away from slow growth assets. Many companies are generating 2-10% of their revenue online. Look for companies that are thinking outside their brands or willing to challenge their own business models and try different things. I'd say News Corp (NWS, NWSA), Disney (DIS), and E.W. Scripps (SSP) have done the best jobs. It's no coincidence that NWS and DIS are hitting new highs. SSP has struggled recently but pull up a long-term chart and compare it to Gannett or New York Times or Tribune. The evidence is clear.

Posted by Steve Birenberg at May 19, 2006 11:15 AM in Media