Content Syndication 2.0

I’ve always disliked the term Web 2.0. It’s become an overused term whose indiscriminate, often incorrect, use has rendered it practically meaningless. I mean, can you name a popular website or application that doesn’t claim it’s Web 2.0? What does it really mean? Is there some Internet governing body verifying these claims? Umm, no.

At the same time, I understand the term’s necessity. You see, it gives business and creative people the ability to describe this new class of capability and functionality without having to actually understand the underlying technology. It’s a euphemism that levels the playing field. (For those who care, Tim O’Reilly actually coined the term Web 2.0 in a seminal essay in 2005.)

Despite these protestations, I’m going to introduce my own numerical euphemisms in the nascent content syndication space. I feel justified because the distinctions I’m about to demonstrate represent a true paradigm shift in digital content distribution fueled by some underlying technological developments. But you be the judge. First, some background:

If I haven’t already told you, Reset Media Partners (of which I’m a Principal and paid employee) is a Branded Digital Entertainment Company (the etymology of this phrase should probably be the subject of a future post). Simply stated, we help media companies (our clients) create sponsored content offerings, package their video content with sponsorship integration and then distribute that “branded” (advertiser funded) content across our content syndication networks.

At first blush, it may not sound all that simple. But in fact, it’s just a new spin on a concept that’s been around since the beginning of television. Advertiser-supported content launched the television industry – Texaco Star Theatre, soap operas, quiz shows and the seemingly unstoppable Hallmark Hall of Fame Series were all paid for by advertisers. Today, reality TV shows like the “The Restaurant” (in full disclosure, my partner Tracy Dorsey was a co-executive producer on this show) are the latest productions to be advertiser-financed. Reset Media has simply taken the model, tweaked it slightly and applied it to the web.

So now let me describe what content syndication looks like today. The large media networks (NBC, Disney, Viacom, Fox, etc.) already distribute their premium video content across multiple websites within their company-owned networks. There are many advantages to this approach but 3 stand out:

• The networks can generate significantly more digital revenue by attaching ads (pre-rolls/overlays/player skins/etc.) to the content and distributing it to the user bases of multiple sites.
• Production costs can be amortized over a greater number of impressions thereby increasing the profit margin on each additional impression.
• The networks can reward their websites by providing them with premium content not available outside the network and, in effect give their sites a perceived competitive advantage.

To view this from an economic standpoint, the networks can use syndication to increase their overall profit margin on their video ad inventory. For example, a pre-roll ad in front of a Lost: Episode Recap may draw a CPM of $35 whereas the same pre-roll ad in front of According to Jim: Sneak Peaks may only garner $25. From a purely economic standpoint, you’d much rather have online users watching LOST than According to Jim and will probably decide to syndicate LOST to other websites within your network.

So once you’ve figured out the right syndication mix within your company-owned network and have begun to maximize the profit on those eyeballs, how do you continue to grow your revenue? You syndicate your content outside of your company-owned network to sites like AOL, Yahoo, MSN, YouTube, Hulu and a host of other smaller video sites. Most media networks are now doing this as well. The good news is that you’ve increased your revenue by monetizing the traffic that these large sites generate; the not-so-good news is there are also some significant costs:

• You lose control of the advertiser/marketing relationship.
• Your margins have decreased significantly – instead of the $35 CPM you were getting on your network you now receive 50% of the host website’s NET revenue (NET meaning less hosting, administrative, sales and production costs).
• Someone else’s sales force is now selling ads on your content and they care a lot less about who associates with your content than you do.
• · Your control of the distribution is limited to the options provided by the portal. Said differently, distribution offerings are created to maximize the site’s profit and not necessarily to serve the content owners’ myriad other objectives – cross-promotion of other content, network branding, etc. - without significant additional cost.

So wouldn’t it be great if you could get all of the benefits that content syndication brings without all of the costs?

And that brings us to what I call Content Syndication 2.0 – the distribution of sponsored content across an ad hoc network of contextually and/or demographically targeted websites.

To effectively execute this we need to mash-up (to use a Web 2.0 term) some technology and cool applications with our video content: enter widgets and RSS. In a previous post: “Widgets: What’s in a Name”, I defined a widget as a portable content window that can be used as the basic building block of digital distribution networks. In Syndication 2.0, widgets, RSS feeds and the concept of packaging content with sponsors are critically important.

Before I go any further let me be explicit and concise about the benefits of content syndication in general:

• Within company-owned websites - Increased revenue and margins on digital video advertising.
• On third-party video portals - Incremental revenues (with lower margins).
• Increased awareness and promotion potentially resulting in new audiences for your content both digitally and on other platforms like print and TV.

Though I’ve already listed the primary issues with 3^rd party syndication above, it’s important to emphasize the most critical issue – media companies make their money by controlling both the advertiser relationship and the distribution. Content syndication’s greatest sin to date is that it requires media companies to surrender control of the advertiser relationship to the portals. And the limited formats and packages offered by the portals serve to reduce the content owner’s control of the distribution.

Content Syndication 2.0 addresses these issues by putting content owners in control of the advertising relationship, the packaging and placement of the advertiser within the content, and the ultimate distribution of the so-called “sponsored content”.

So here’s how it works. I’ll make up an example using Access Hollywood (an NBC Universal property). According to Compete, AccessHollywood.com had just over 500K unique visitors to its site in April 2008. The site’s key demo – W25-54 is highly sought after by Guarnier Fructis. In its current campaign, Guarnier Fructis would like to garner 75MM impressions against women in this category while also maximizing its reach over the coming quarter.

Unfortunately, with its respectable - but modest - site traffic, AccessHollywood.com cannot fulfill Guarnier’s digital campaign requirements on its own. So here’s where content syndication comes into play. Just to make this more interesting, I’m going to apply some made-up numbers to better illustrate the scenario:

• Maximum quarterly impressions available for Guarnier Fructis on the AccessHollywood.com website – 3MM (more than this will look like Guarnier has taken over the site)
• Avg. on-site CPM - $28
• Max on-site revenue – $28 * 3,000 = $84,000

So if AccessHollywood.com wants to service the entire campaign they need another approach, like content syndication. With some help from a company like Reset Media, AccessHollywood.com can assemble an ad hoc network of contextually relevant and demographically targeted sites to carry its sponsored Guarnier Fructis content. And with some creative packaging, AccessHollywood.com can assemble a sponsored widget offering (see below) that actually garners a higher CPM. So let’s look at the numbers now:

• Maximum impressions available – 75MM
• Sponsored widget CPM - $32
• Cost of distribution across the 20 site ad hoc network - $14
• Max. Revenue - $18 (net CPM) * 75,000 = $1,350,000

So that’s quite a difference. The obvious question is why aren’t more media companies doing this? The answer is simple – they will. If you question why Guarnier Fructis would pay more for off-site reach, have a look at the additional value and increased brand association they get in the example widget here:

In this example, AccessHollywood.com offers “Breaking News” content (updated by the minute via RSS) in a Guarnier Fructis sponsored widget. The widget can be embedded on gossip enthusiast’s personal sites and deliver impressions beyond the initial syndication purchase. Because this widget is controlled by AccessHollywood.com, once it is embedded by a user, the content can continue to be updated regularly and the advertiser can be swapped out once the initial 75MM impressions are delivered – a pretty compelling opportunity.

Content Syndication 2.0 - the distribution of sponsored content across an ad hoc network of contextually and/or demographically targeted websites – can be deployed as a complementary strategy to current, large portal syndication efforts. It can be part of an overall media syndication mix that includes:

• Company-owned network sites,
• 3^rd party video portal sites, as well as
• Ad hoc syndication networks

In summary, the benefits of Content Syndication 2.0 are compelling and include:

• An almost unlimited supply of high value advertising inventory via contextually relevant and demographically targeted 3^rd party websites
• Incremental revenue from monetizing the traffic of 3^rd party websites while maintaining control of the advertiser relationship.
• Decreased marginal costs - Content production can be amortized over a greater number of impressions thereby increasing the profit margin on each incremental impression.
• Increased awareness and promotion of company-owned content. On 3^rd party websites this means potentially generating new audiences for your content digitally and on other platforms like print and TV

I’ve only hinted at the longer-term consequence (and big opportunity) for media companies that incorporate compelling content and useful applications into widgets. In a future post, I’ll explore the syndication endgame that is emerging for media companies - creating content (and advertising) channels direct to their consumers via embedded widgets.

Feel free play around with the sample widget. I’ve disabled it’s embed capability so it can’t be re-syndicated.