In the world of media, content is king. Television networks with the content most people want to watch beat those with smaller audiences. Magazines with the biggest distribution beat those with smaller distribution. And in all of the traditional media, the funding and creation of this high-value content is fundamentally at the basis of their businesses; those who can create it and distribute it to the biggest audience win.
Online media has long been seen as a continuation of traditional media. Yahoo at one point went so far as to hire media legend Terry Semel as its CEO so it could try to replicate the success of traditional media in the online space. This, of course, failed miserably. Similar efforts among the biggest online media companies -- those that have focused on building "killer content" in order to attract massive audiences and monetize them -- have not done as well as they might have.
Online media is successful when the way the media is generated takes advantage of the power of software. Search engines generate incredibly powerful media because they algorithmically generate content that people are looking for. It doesn't hurt that they happen to connect advertisers and potential customers at a moment in time that is frequently far down the purchase funnel -- a spot that happens to be incredibly rare, has high competition, and therefore drives incredibly high yield. Facebook doesn't have a human editorial staff writing content; it organizes content written by humans in ways that make that content relevant and interesting to people. And it happens to do so in such a way that it collects incredibly valuable data about the people that both created the content and are consuming it -- and can sell the resulting ad inventory for very high yields.
Media companies have missed out on this type of success because they aren't technology companies. They don't understand technology, nor do they understand the people who successfully build the most powerful and disruptive technologies. They mainly fail in this area because they believe that programmers and technologists are IT people. They believe that business people, editors, and content creators simply need to tell the techies what to build, and that they will end up with a valuable outcome (which somewhere in there is about creating great content that attracts a large audience that can be sold to advertisers for lots of money.)
Amazing technologists are not "IT guys." They are brilliant computer scientists who are creative, disruptive, and inventive. They tend to be way smarter than almost anyone you ever meet in an editorial or sales discussion. This isn't said to diminish the value or intellect of editors or sales people. Rather, these software wizards are simply among the most brilliant people alive. Rather than applying their creativity and intellects to develop smart bombs, encryption software, or a cure for cancer, they have applied advanced mathematics and programming techniques to build better media models.
Sometimes they get it wrong. But every once in a while, they get it very, very right. And when they do, the results are astonishing. They create more revenue as individual companies than some entire industries -- or countries, for that matter.
And again -- I say all this in no way to diminish the value of human-created content. But simply writing good editorial will only get you so far in the online industry. You might build a great blog or even an associated blog (TechCrunch). And you might be able to attract humans with incredibly well-written or produced content online (New York Times, Hulu, The Onion, Slate). And some of the places where other people's content is curated well (MSN's WonderWall) work pretty well.
But the reality of value creation online is where you can apply the power of software to do something unexpected and valuable -- in completely new ways. The portals all have the opportunity to do this, but they've tended to take an approach to creating media that doesn't use the power of software to increase its value exponentially. Instead, for the most part, they take a tabloid-like approach, assembling hot topics for their homepages such as, "Details of Tiger's new estate," or "How to make a small room look big," or "What we learned from NFL Week 10." Yahoo seems to be in rapid decline, and Paul Graham's essay on why seems pretty telling. I think Microsoft has the right DNA, but not the right focus to pull it off (i.e., online equals search at Microsoft these days). AOL seems to be in rebound, and I'm curious to see what it pulls off in this area -- but can it overcome its brand's association with the early days of dial-up internet?
There are dozens of Googles and Facebooks waiting to be started in the halls of computer science departments across the country. And media will continue to be revolutionized. As will the way that media is monetized.