Difficulties of the content business
Mark Goldenson writes interestingly about the reasons his startup failed (via Tom Raggett's blog). The most interesting part for me is the advice he was given that a content business was incredibly difficult to start - "do it for love and expect to lose money". Undeniably true - content generation can be expensive if done well.
A new content business must therefore
This is better with an example. Let's assume your content goes out with occasional errors. Say it would cost you an extra $250k a year to proof/edit all your content to perfection . Let's say you're a subscription business and your current conversion rate of content browsers is 2% of 5000 new visitors/month (you're doing OK!). How much conversion rate is your lack of perfection costing you? Let's say it's 0.5%, so that's 25 users per month. Let's say that the $250k spent wisely over a year can bring in an extra 2000 users per month. You'll convert them at the old rate, so that's an extra 40 users per month. The nice thing about this sort of puzzle is that you can actually play with the variables in real life. One month try the proofing. One month try the marketing spend.
It boils down to a simple rule - spend your money on the business not the content.
As soon as you are prioritising the content over the business you're a goner. Sure, the business needs the content, but the business doesn't exist to produce the content, it exists to make money.
You have to handle this rule carefully - if your products are expensive and your brand depends on accuracy, you have to get as near perfect as you can to maintain the brand.
Feeling this way, I was completely unsurprised to see that Goldenson's firm failed because it didn't spend enough on marketing. If you start a content business, users are knee-deep in free content. You have to reach them. If you're going to rely on word-of-mouth, you really have to be offering something no one else is in a space which people talk about socially. Otherwise it's advertising all the way. If you're in the business space not the consumer space, and you're not in a place free from competitors, you're really going to have to think about old-fashioned marketing and even person-to-person selling (gasp!).
On an unrelated note, the same blog post links to some interesting numbers around startup costs - obviously these only apply to the US.
A new content business must therefore
- be scalable - only produce enough content to satisfy your current and immediately prospective userbase. Consider therefore growing niche-by-niche.
- produce as little content itself as possible - get other people to produce your content, preferably for free. Start by creating a genuine community around content you generate and then try to pick off the best contributors to the community to generate more content
- be in a space where people are willing to pay or be able to generate volumes large enough for advertising-based survival. Few will pay for news or entertainment (unless highly immersive) any more.
This is better with an example. Let's assume your content goes out with occasional errors. Say it would cost you an extra $250k a year to proof/edit all your content to perfection . Let's say you're a subscription business and your current conversion rate of content browsers is 2% of 5000 new visitors/month (you're doing OK!). How much conversion rate is your lack of perfection costing you? Let's say it's 0.5%, so that's 25 users per month. Let's say that the $250k spent wisely over a year can bring in an extra 2000 users per month. You'll convert them at the old rate, so that's an extra 40 users per month. The nice thing about this sort of puzzle is that you can actually play with the variables in real life. One month try the proofing. One month try the marketing spend.
It boils down to a simple rule - spend your money on the business not the content.
As soon as you are prioritising the content over the business you're a goner. Sure, the business needs the content, but the business doesn't exist to produce the content, it exists to make money.
You have to handle this rule carefully - if your products are expensive and your brand depends on accuracy, you have to get as near perfect as you can to maintain the brand.
Feeling this way, I was completely unsurprised to see that Goldenson's firm failed because it didn't spend enough on marketing. If you start a content business, users are knee-deep in free content. You have to reach them. If you're going to rely on word-of-mouth, you really have to be offering something no one else is in a space which people talk about socially. Otherwise it's advertising all the way. If you're in the business space not the consumer space, and you're not in a place free from competitors, you're really going to have to think about old-fashioned marketing and even person-to-person selling (gasp!).
On an unrelated note, the same blog post links to some interesting numbers around startup costs - obviously these only apply to the US.
Labels: content startup business
posted by rmcubed at 1:41 pm
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