Online companies move toward a media model

CompuServe, Yahoo, Microsoft and their ilk are remaking themselves in the model of media companies.

CompuServe has spent the past year working to convince the world that a proprietary online service could be an Internet service provider. It will spend the next year positioning itself as a media specialist -- and it's not alone.

"We are going through a transition that will make us into a media company," says CompuServe president and CEO Robert Massey, speaking last week in Tokyo. Massey's words echo those of Jerry Yang, cofounder of search engine provider Yahoo, who in a recent interview said that his company also is reinventing itself along the same lines: "We are really trying to become a media business on the Internet, if you will."

CompuServe, Yahoo and many of their competitors, including Microsoft, have awoken to the realisation that content is king and that the future may lie in being the single stop for a broad range of services, publications and other content on the Internet. "It's now a standard tack in the playbook of all the search engine and online services," says Ted Julian, an Internet analyst at market researcher International Data in Framingham, Massachusetts. "CompuServe and a whole lot of others see the writing on the wall. Simply selling access is going to be a tough and crowded business, especially if you're not a network provider."

As a result, the next six months promise to bring a flurry of competition among players trying to convince users that the vast universe of content on the Internet is best accessed through a single front end, be it CompuServe, Yahoo or Microsoft Network. Through what he calls the CompuServe media model, Massey hopes to decrease dependency on revenues from the physical access side of his business and to focus on making CompuServe into a comprehensive collection of content.

And by positioning itself as a media company, he says, CompuServe will attract advertisers and become a venue for electronic transactions, such as those from online brokerages and travel services. In addition, it will garner revenues from "interchange", or the selling of CompuServe content to Internet service providers, as done in a recent deal to include a gateway to CompuServe in AT&T's Internet service, he says.

"All of the major ISPs are knocking on our door because they want our content, our organisation, our aggregation for their members," he says.

Yahoo, meanwhile, plans to achieve its media company ambitions by leveraging its established brand name in developing a trusting, loyal user base similar to the readerships of news magazines such as Time or US News & World Report, he says. "People trust a brand, people trust a way in which certain things are done. Maybe it's an editorial voice, maybe it's the way they write about things, maybe it's the packaging," he says.

As with CompuServe, the key to Yahoo's strategy lies in partnerships with makers of compelling content. In recent months, Yahoo has signed on major content providers including Reuters, Softbank and Ziff-Davis, Yang says. Moreover, Yahoo is trying to personalise content for users by promoting local versions of Yahoo in the US and abroad in addition to opening My Yahoo, a Web site that allows subscribers to create personalized services for collecting user-defined news and other information from the World Wide Web.

While Yahoo and CompuServe say they will stay away from the expense of creating content themselves, Microsoft appears to be jumping headlong into the media world with the recently unveiled Microsoft Multimedia Productions, or M3P, an MSN-dedicated studio for producing content.

But for all the media company wanna-bes and particularly those hoping to create their own content, the road will be rough, according to observers."They run the risk at the extreme of coming up against existing players" in the content world, IDC's Julian says. "Content creation has a totally different business model that has a completely different set of core competency requirements."

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