Publishing Is To 2007 As eCommerce Was to 1997

Brian Halligan
Brian Halligan

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The industrial structure of the publishing industry is at an interesting historical point.   The internet, search, social bookmarking sites, blog software, Google Adsense, and RSS in combination are acting as a disruptive technology to the publishing industry by lowering the barrier-to-entry (no printing costs!) for new entrants and improving consumption patterns for consumers (more specialization).

 

This industry disruption is potentially bad news for established content producers, such as the The Boston Globe, The USA Today, and the LA Times.   The industry disruption is good news for the social bookmarking sites like Digg and YouTube; the (very) few top bloggers that can aggregate enough traffic to make the economics of advertising work; and the plumbing suppliers like Feedburner, Google, etc.

 

This industrial structure in the publishing industry in 2007 is a lot like the industrial structure in the retail industry in 1997.   In 1997, ecommerce software and the internet were a disruptive technology to the "brick & morter" retail industry by lowering the barrier-to-entry (no stores!) for new entrants and improving consumption patterns for consumers (from home).   Many predicted that the disruption would wipe out the brick & morter retailers (i.e. Barnes & Noble) who had much to lose and give rise to a slew of ecommerce giants and plumbing vendors who had much to gain.

 

The reality is that the mom & pop retailers were dramatically impacted by the ecommerce disruption.   However, the major corporations (Target, Wal-Mart, Barnes & Noble, Gap) weathered the storm by eventually figuring out how to leverage the technology and combining it with hard to acquire strengths in inventory management and logistics to fight off new entrants.

 

The disruption lead to very few new eCommerce giants.   Amazon certainly stands out, but relative to the amount of new company formation (and venture money spent on super bowl ads), there were very few large, sustainable, profitable corporations created by this industrial structure disruption.

 

It is hard to say how we will look at the current publishing industry disruption from 2017, but I suspect it will look similar to the way we look at retail in 1997 today.  

 

Most large newspapers and magazines will eventually weather the storm by figuring out how to leverage the technology and combine it with their hard to acquire editorial strengths.   In the process of weathering the storm, these l arge publications will face some layoffs (i.e. Boston Globe shuttering overseas bureaus), end up experimenting with interesting business models (i.e. USAToday releasing web2.0 features), and take medium-term market cap valuation haircuts.   I suspect the smaller players at the margin with less editorial resources will have a hard time competing because they do not have hard-to-acquire resources (high barriers to entry) and will not be able to figure out the technology in time.

 

I suspect that many of the independent bloggers selling ads on their sites will end up going away as the economics just won't work and this will be our publishing equivalent to the sock puppets.  I suspect there will be a few new large media players created, other than Google.   I think of it as Google is to Publishing is to 2007 as Amazon is to eCommerce is to 1997.

 

 

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