pazzomundo.com

Old school financial media and the information explosion

Posted on 10 November 2009

Once upon a time, life was simple for a media mogul.  Apart from adjudicating on the occasional territorial dispute between the offspring, there was little to fuss about.  But ever since this pesky internet made stone tablets redundant, things just haven’t been arights.

Everyone’s a content creator

Early signs of trouble came with the democratisation of content.

The internet enabled modern man to participate in the coverage of world events in a way that was not possible before.  This created a problem for a media whose job it was to ‘break the news’ to the masses. Consider the case of Tiger Woods enforced layoff.  His gap year was first announced on twitter – Nike’s share price responded accordingly – before the traditional media got hold of the story (Paul Kedrosky at Infectious Greed summarises the timeline neatly).  No longer was the ‘old’ media the only conduit for our news.

But it didn’t stop there of course.  The internet had also given birth to the ‘noble amateur’ – the humble citizen blogger that created content for free.  Whether such analysis and commentary was equal in quality to the journalism that it effectively competed with is a moot (yet hotly debated) point.  The real problem was that the creation and distribution of all this free content was happening beyond the traditional media’s control.

And it was not only the ‘amateurs’ that were creating free content, former advertisers started to migrate to the web as de facto ‘media owners’.  Consider the example of Babycentre.com – the online self-help tool for expectant mothers (and fudders).  Johnson & Johnson bought the website for US$10m in 2001.  According to web monitor Alexa.com, Babycentre now has in excess of 1m daily visitors with approximately ~10% of users going to the online store.  (Not that this has impacted J&J’s advertising spend – it’s annual advertising budget is in excess of US$2bn.)

Financial media following these same trends – just differently

Trend #1 – new conduits for breaking news

This is a big topic in the financial sector as ‘breaking news’ can, at times, assume epic proportions.  Additionally, it is often synonymous with data (changes in prices, indices, rates etc).  As such, it is a topic all of its own that we will return to at a later date.

Trend #2 – amateurs as content creators

The financial sector is awash with content that has been created by those outside the mainstream media.  Leading the revolutionary rabble are blogs like Naked Capitalism, Mish’s Global Economic Trend Analysis, The Slope of Hope, The Pragmatic Capitalist and Zero Hedge (to name a few of my favourites – for a longer list have a look at The Periodic Table of Financial Bloggers).  These sites have daily circulations that would make a respectable money magazine blush with envy.

Then you have content delivered by websites like Seeking Alpha that publishes over 250 articles daily from a list of over 2500 contributors with around 40 million page views per month.

Perhaps, it is a bit rich to call all these blogs the creation of ‘amateurs’ in any event – the quality of their content often belies the author’s roots as a participant in the industry they are ‘reporting’ on and they can sometimes provide a greater depth of insight than can be found in the mainstream financial press.  Also consider the blogs of the likes of Paul Krugman, Brad de Long, Michael Pettis and Steven Keen – all practicing experts in their fields.  Finally when a global quango like the IMF and even the US Federal Reserve embrace the technology, you can begin to understand why there has been an alarming rise in irritable bowel syndrome amongst our media moguls.

One other notable feature of these types of sites is that they have also given a voice to the communities that have coalesced around them.  Typically, these blogs can boast vibrant networks with membership based a on willingness to participate.  The media machines of old have difficulty adapting their gears and levers to take this type of interactive relationship with readers into account.

Trend #3 – advertisers as content creators

As to advertisers jumping the virtual fence, the response of the finance sector has been varied at best.  There are a number of reasons for this – the trenchant conservatism of the sector, the conflicts that abound, the lack of clear benefit, the fact that the sector is so bloody crowded from big to small.

Early adopters in creating and distributing free content have typically come from the funds management industry in its many guises (from hedge fund to financial planner).  Unlike the clone army, that is always looking for a quick clip of the ticket, this sector typically draws it income over time.  Not only must they perform but, importantly, they must demonstrate their expertise and build a relationship based on trust.  The interactive blog format is ideally suited to this end.  It is perhaps for this reason that they have been at the forefront of adopting these technologies.  While still in its infancy in Australia, there are a legion of fund managers globally that are representative – consider the examples of Jeremy Grantham, Bill Gross, and John Hussman.

It’s reasonable to expect this trend to permeate further into the industry as corporate websites become increasingly irrelevant as a destination.  The real-time interactive aspects of the internet will mean that advertisers are increasingly likely to find conversations about their products happening in ’social media’ forums.  The challenge for the product owner will be to participate in these conversations – whether directly or by promoting them to link to their own content.

Conclusion

In summary the financial sector, while perhaps lagging others in some respects, is participating in the explosion of content that now sits outside the traditional media sector.  In the next instalment we will explore what avenues the media mogul has to coral this content and recapture the initiative. Till then, it’s cod liver oil and more roughage I’m afraid.

Postscript – 24/7 Wall Street published a list today of the 25 most valuable blogs in the US – they value Seeking Alpha at US$16m…