2.0 Business Model Doomsday Scenario
1 min read

2.0 Business Model Doomsday Scenario

It’s official — Microsoft is no longer a software company. With the launch of adCenter, Microsoft will be joining the ranks of Google and other media companies:

“Ad-supported software services are an integral part of Microsoft’s plans to give consumers access to a broader variety of digital media, whenever they want and on whatever device they prefer,” said Ballmer. “Our close partnership with the ad community is extremely important to us as we evolve Microsoft from a software company into the world’s largest, most attractive provider of online media through MSN, Windows Live(TM) and adCenter.”

This is the real “convergence” — the technology industry and the media industry have now merged. EVERYTHING IS MEDIA — software applications, electronic devices, Hollywood content, publishing content, user-generated content, etc.

And despite the success of eBay and iTunes and a few companies still pursuing paid services/content (e.g. Flickr), the focus of the new “industry” is overwhelmingly on one business model: ADVERTISING.

Microsoft’s growth strategy: ADVERTISING
Google’s growth strategy: ADVERTISING
Yahoo’s growth strategy: ADVERTISING
MySpace’s growth srategy: ADVERTISING
Nearly every Web 2.0 startup’s growth strategy: ADVERTISING
Network and Cable TV’s growth strategy: (online) ADVERTISING

The problem arises when you look at the amount that brands have spent on paid media advertising for the following marketing initiatives:

Burger King’s Subservient Chicken
BMW’s The Hire Film Series
Land Rover’s Go Beyond Channel
CA Milk Processors Cow Abduction
Wendy’s Square MySpace proifle
Nip/Tuck’s The Carver MySpace profile

You can see the pattern emerging. The network effect turns everything into a media platform, while at the same time obviating the need for media as a marketing vehicle because brands can use the network itself as a marketing vehicle.

So, you have the new media/technology industry orienting its collective business model toward advertising…at the precise moment when the paid media advertising pie may be on the verge of shrinking.

A recipe for disaster if ever I heard one.