While I was spending the weekend at holiday parties, there's been a really smart discussion on business models and investment strategies in citizens' media. Jeff Jarvis puts together a great summary, with his own comments. Or jump to picks by Steve Rubel, Tom Watson, and fellow VC Fred Wilson.
On the whole, I'm in Fred's camp (surprise!). VCs bet on the change, which means they have an affinity toward the most differentiating and innovative parts of a trend. From my point of view, the most differentiating characteristics of citizens' media are low barriers to entry, and precision. They are the two faces of the long tail phenomenon: Low entry barriers enable the creation of diverse content by diverse people, precision in access lets readers find matches to their tastes without unendurable overhead.
Low entry barriers on content are problematic to most venture investors; it puts the determination of winning and losing into a domain of marketing and audience taste that we are usually ill-equipped to judge. Unless we're going to do an entire fund around content, it's difficult to use the portfolio model of risk management that is the core of our business. (Caveat: This is a somewhat Silicon Valley centric view. The Valley has never done content well, and we usually know it. About once a decade there's enough new blood to get up a movement in that direction; shortly the market slaps us down and normality returns.)
Low entry barriers are also a characteristic of most of the software supporting citizens' media authoring and basic hosting. Part of this is due to its evolution on open standards and during the rise of open source. A portion is inherent in the need for simplicity: Hang enough bells and whistles on the blogging system, and it's no longer simple enough to be real citizens' media. Shifting to the services business model somewhat addresses the business model implications of low barrier, but it doesn't necessarily address the VC's need for an exit model in what will likely become a market share game.
So I'll take my stand on the precision side, which makes me lean towards the same sort of things as Fred: content discovery, advertising targeting, data exhaust analysis, and so on. The scale of the problem, and the multiplicity of needs and approaches guarantee an interesting landscape, in both business model and defensible technology. It's way too early for certainty on industry structure, value chain, revenue extraction and lots of other essentials to understanding how the game plays out. I have a couple of touchstones that I will share:
* Enhance the value of the long tail, and extend it further
* Every ad a wanted ad
A precison creating play that pushes in both of those directions is probably not wrong. As for the rest - have a smart team, get close to the market fast, listen to the music and dance like mad.
Update: Comments have been opened on this post.
Update 2: Ed Cone says VCs make him nervous (Boo!), but it's OK as long as I don't talk about 'monetizing eyeballs'. Um, no. If your level of appeal is to the undifferentiated eyeball, you're legacy media - I don't care what your bizcard says. Offer some value to the brain behind the eyes, that's another deal.