The Destructive Web Transduction System

The Destructive Web Transduction System

ICT brought productivity gains across industrial sectors, delivering immense values to companies. However, Internet is going to destroy the values in many sectors. The transfer of most of the values, from the physical world to the digital one, will not be optimal. Some values will be “dissipated” during the “transduction”, the process of converting energy from one form (meatspace) to another (online).

At the early phase of Internet publishing, many digital publishers made money when Google AdSense (Google product that helps websites show ads) made much sense. But over time, it has become increasingly difficult to earn any decent income on digital publishing, especially when your contents are not premium to command subscription. When you engage in click-bait, people can live without you unlike WSJ which drives news that move billions of dollars around the world. So financial and business journalism will be fine in the age of digital subscription, but generalists will be totally commoditized. Even fighting for more users will not save the generalists. Why will you pay subscription to read Punch Nigeria when more than 80% of the contents are in either Sun or Vanguard?

Some brands are going through what I have called the Diminishing Abundance of Internet. I explained: “It is a construct that some companies become poorer even when they are growing in numbers of customers reached. That applies to industrial sectors like publishing and telecoms. The lesson here is that risk, in any business model, must be examined from the lens of this mirage abundance, which Internet has provided in some sectors”. One company that is going through that at the moment is the very popular Mashable which has evolved as a technology blog to anything-blog platform.

Yes, Mashable has agreed to sell itself to trade publisher Ziff Davis for $50 million, compared to its earlier $250 million valuation.

Digital-media firm Mashable has clinched a sale for the company — and it’s not for a price that founder Pete Cashmore or investors including Turner were looking for.

Ziff Davis, a tech, gaming and healthcare publisher, is buying the New York-based company for about $50 million, the Wall Street Journal reported, citing anonymous sources. That’s 20% of Mashable’s valuation of $250 million following a $15 million round of funding last year led by Time Warner’s Turner.

Mashable has been trying to sell itself or raise additional outside capital for months

That is a very small amount for a digital blog pioneer. It used to have so much influence until Facebook started abstracting publishers in the consciousness of readers.

The Transduction System

When meatspace systems and processes move online, value is always destroyed. When we started chatting via WhatsApp over using SMS, value was destroyed for companies like telcos that used to make money via SMS. When Skype took up the telcos, the same happened. The only good news is that the customers save, even when getting better experience. But the enterprises at the centers always struggle. You can call this disruption.

Yes, something is destroyed and disrupted. But most times, the company destroying does not really make so much money while redesigning the industry: it simply destroys values for the enterprises in the sector, as you do not pay Skype for the money you did not pay the telcos for the one hour Skype call from Lagos to New York.

Note that Mashable is not losing readers, at scale. Unfortunately, more users may not help it. The ad revenue model does not just add up any more unless you have a big syndicated ecosystem like the type Ziff Davis commands which allows it to push adverts across its platforms. That scale helps it win contracts from advertisers. And that is why they are looking for properties.

Yahoo, TechCrncuh and HuffPost parent, AOL, enjoys the same. The old era of one popular blog in the general category with strong revenue base is challenged. Those sole blogs decimated print publishers, but the unconstrained and unbounded Internet is now after them. In the unbounded Internet, aggregation becomes critical. Selling to enterprises like AOL and Ziff Davis is a quasi form of aggregation as that helps abstract the platforms, focusing on the gatekeepers who have scale.

Everything goes back to Facebook and Google which have emerged as top publishers without budgets for contents. Any digital business that does not examine how Google and Facebook will affect it does not have a comprehensive strategy. What happened to Mashable will keep happening. Gizmodo has since sold to Univision which added six to help it has scale to command ads. You just wonder how this transduction process from the physical world to digital will play out in ten years, even for the digital natives.


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