Offering online content for free is unsustainable and will die out as a model in the next few years, says a report from consultancy Cap Gemini Ernst and Young.
The report, called Business Redefined, includes data taken from interviews with 128 CEOs and a follow-up round of interviews with 50 more.
“Most internet content plays are unsustainable because they don’t charge for the content,” says one respondent.
The report shows data on the market capitalisation of “pure-play internet content producers” and follows the decline of such free providers since the middle of 1999.
“Content packagers are the ones surviving,” says the CEO of CGE&Y’s telecom media networks division in Asia Pacific, John Edwards.
“Content packagers are gatekeepers if you like between millions of businesses and consumers and the information or commerce they want.” Being simply a content provider, or at the other extreme simply providing bandwidth, will cripple your business, says the report. Already pure bandwidth providers are discovering their product is commoditised - the same thing will happen to content producers. Users go to fewer and fewer sites and the reason is two-fold: a lack of time and a lack of trust.
“People need content packagers because they can’t find the content they want and don’t trust the content they find” writes one CEO. CGE&Y believes being a content packager or aggregator creates a “positive feedback loop” that builds up the business.
“Top content packagers enjoy ... a large, loyal user base which attracts content developers and advertisers, which in turn increases the appeal of the site, which creates more users.” As new technologies come onstream, like mobile devices with broadband capabilities, that model will only get faster.