Great post by Chris Dixon discussing Google and Newspapers. In particular he says -
As a “buyer” of web content, Google has incredible dominance, so much so that the price they pay for that content is zero.
For the moment, and for the foreseeable future, newspapers (and all content sites) just happen to be in a dreadful bargaining position with respect to Google.
Lets put aside any loyalties and focus on the situation just as an exercise in the importance of the pipeline.
Google controls the starting point and hence the pipeline for online content.
- The Search Engine is the starting point of the pipeline and thus controls the pipeline.
- The content i.e. websites, news sites, etc. provide the content that users actually look for.
In terms of core utility, this is the value each provides -
- Google lets you find what you are looking for i.e. the right site for the information or service or data you want.
- The content site (or service site) provides the actual data or service that you want.
As things stand, because of Google being the dominating search engine, they can dictate terms i.e.
- They get to decide what’s right and wrong.
- Sites are evaluated based on their algorithm.
- They even have criteria for which of the sites paying them money get shown first.
In a way Google is giving instructions to content providers on what they should do and what sort of website they should create. They’ve turned their control of Search into dictating the direction website owners should take.
Is Content now less important than the Pipeline?
There’s only one way to test this out -
A huge percentage of the newspaper sites and blogs ask Google not to index them for a period like a year.
What happens to traffic on those sites and what happens to traffic on Google would provide a good answer. It would have to be 50% or more of the big newspapers and blogs.
However, we would have a definitive answer for whether newspapers can survive without Google.
At the moment, its pretty clear that the Pipeline is considered more important. Look at the profits (or lack thereof) of content creators.
The Pipeline ends up commoditizing the product
Think of any system where a company gets control of the pipeline. This domination of the pipeline leads to great competition between product producers and their profits eventually tend to zero.
The iPhone App Store is a great example. As is Search.
It suits the pipeline owner to keep escalating competition between content/product creators and keep devaluing the value of content/product and shifting more and more profit to the pipeline.
Lets say you and me managed to become the sole store in the world selling diamonds, and we were a company focused on making profits (the very definition of a company).
It would be to our benefit to claim that 90% of the value provided by a diamond is us selecting the right diamonds and letting people find the right diamond.
It would also suit us to claim that diamonds are not really worth much and to encourage as much competition between diamond suppliers as possible.
This might seem extreme - however, it’s exactly the direction in which a profit focused company that controls the pipeline will take the market.
- Look at the App Store and developers who are willing to spend 3-6 months and then sell their App for $1 hoping to make back money by becoming a hit.
- Look at Search where people either pay for advertising (including ridiculous things like Amazon buying the #1 spot when someone searches for amazon.com books) or provide ‘quality content’ that feeds Google and which Google rewards with ‘good search engine rankings’.
These are two great examples of companies that control pipelines shifting all the profit to themselves.
Fundamentally, if there is just one pipeline in a system, the profits and power flow to the company that owns the pipeline.
Filed under: content Tagged: | content, the pipeline
