Wednesday, June 1, 2011

The Gang of Four

Google's Executive Chairman Eric Schmidt spoke recently about the new gang of four that includes Apple (devices), Facebook (social), Amazon (commerce) and Google (search.)  Though these businesses are migrating into companion spaces, they are all robust platforms in their own right.

What actually caught my attention was his remark that together these companies are valued at about half a trillion dollars, give or take. This is on the same day that Hearst is said to be closing its just-under-a-billion dollar purchase of Hachette. No wonder there is a growing chorus about another digital bubble.

I will agree that digital valuations are over-the-top (the no revenue Flipboard valued at $200 million?) but I don't see a digital bubble. This is not 1998 all over again. The fact remains that the tech companies mentioned above, and many others, are sitting on tons of cash and take huge risks with it. Publishers, not so much.

Russell Adams had an interesting piece yesterday in the WSJ, interviewing CEO Chuck Townsend on the new business model at Conde Nast. The interview was sober and illustrative of the challenges facing the magazine industry. When asked whether we should expect a big, splashy acquisition, Townsend responded, "Zero chance of that."  He also acknowledged that an acquisiton on the order of the $325 million Hearst paid for iCrossing, a digital advertising firm, was not likely. He did acknowledge some regret about not going after, an "obvious misfire." 

The "gang of four" mentioned above also happen to be partners to publishers. Ten years after the tech onslaught, content remains a huge differentiator. The current tech landscape has forced many publishers to focus on agnostic digital content channels that can scale, protect the brand, be monetized and provide data. This is absolutely the right business approach and will become more meaningful when the previous conditions are met. That remains the rub.

Publishers should be hard-nose about where they go with their content but in this climate, deeper relationsips with tech companies are both necessary and inevitable. Publishers can't go it alone. They can't build or buy their way into a digital future of consequence.

This will come through tech partnerships. 

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