Why are investors enthusiastic about news organizations wrapping an online community around their web presence? Investors and management at news companies are attempting to import an idea from the wider web: adding what has become known as "user-generated content"2 -- material created not by the professionals but by members of that former audience.
Sites featuring user-generated content, such as YouTube, MySpace, and Facebook have been the biggest winners for their backers in the post-dot-com bubble era:
- MySpace: This social-networking site was acquired in October 2005 for $580 million by News Corp.
- YouTube: This site, which features video clips uploaded by users, was acquired in October 2006 by Google for $1.65 billion in Google stock.
- Facebook: The management of this social-networking site turned down a $750 million dollar acquisition offer by Yahoo in early 2006; Facebook’s management hoped to get an offer as high as $2 billion.3
These valuations have prompted some observers to wonder if a new investment bubble is forming, but, bubble or no, news organizations and their backers see the many reports of surging traffic followed by huge valuations and wonder if some of that luster can rub off on news organizations. Indicators are good: local newspaper paper chain GateHouse Media went public with an IPO in October, 2006 and recorded huge gains in stock price on the first day. Investors weren’t treating GateHouse like a newspaper stock: they were treating it as an internet stock. Investors bought GateHouse’s strategy, which involved redeveloping the many newspaper sites they own into sites that feature user generated content.
Some user-generated content initiatives call to mind the most famous incident in Mark Twain's 1876 novel Tom Sawyer is the one where Tom manages to avoid the boring chore of whitewashing his aunt Polly's fence by marketing it as the most fun thing on earth to do to other local boys.
By creating a pretense -- that only special people could possibly whitewash the fence -- he actually gets the boys to pay him in the currency of kid-treasure:
"He had had a nice, good, idle time all the while – plenty of company – and the fence had three coats of whitewash on it! If he hadn’t run out of whitewash he would have bankrupted every boy in the village."
["Whitewashing the Fence," Tom Sawyer.]
More than a few user generated content schemes bear a resemblance to Tom's scheme: blogging is such a chore, let's get others to do it! And sometimes it's accompanied by an unflattering eagerness to profit on the volunteerism of people who they consider not quite as smart as themselves --"If we get lots of people to blog on our site, maybe we can make a lot of money advertising against their content!"
What these latter-day Tom Sawyers don't realize is that Tom still had the hardest job: namely, the art of making people feel good about themselves by spending their time and money in a way that benefits you or your organization.
