Show Me the BUSINESS MODEL!

Robert Young provides the latest example of the unbearable lightness of 2.0 business strategy, arguing that media companies should create American Idol-like platforms for individual self-expression:

Think of this way… what if “American Idol� had been produced solely by the capabilities of the contestants themselves, without the expertise and talent of the show’s producers, directors, writers, etc. As talented and entertaining as the contestants are, the resulting production quality, the level of emotional engagement, viewership/ratings and monetization potential of the full package would likely be far inferior to what we all see on the air today. Well, social networks should be seen in a similar way… people want to express themselves and the platforms that allow them to do so with the most creativity and production value, are the ones that people will flock to.

There are two huge problems here:

1. What if people don’t care about production values (and other such Old Media standards)? Look at MySpace — it has perhaps the greatest compilation of poor production values in the history of media, and yet it has 70 million users and a gazillion page views (at least for now).

2. **What’s the business model? ** As Nick Carr points out, “American Idol works in the context of traditional television, but most self-commoditization occurs on the web itself, and even highly popular platforms, like MySpace and YouTube, have yet to prove they can turn an attractive profit.”

If the business model is “gather audience, sell advertising,” that’s not a recipe for innovation or growth, given that it’s now everyone’s recipe for growth.

All Robert is really advocating is a new — free — way to create content for the same old paid media advertising model.

But paid media advertising is on the decline.

Consider Vonage vs. Skype:

Vonage

In 2005 alone, it lost about $210.3 million, nearly quadrupling losses from the previous year. It currently has a deficit of about $467.4 million. Most of the loss stems from an aggressive marketing program that plasters the orange-and-blue Vonage logo in national TV advertisements, on Web pages and throughout print magazines.

Skype

Putting aside all debates over who pays for what and whether Skype was a smart buy for eBay, there’s no question Skype is one of the great word-of-mouth stories. As CGM goes, this is a brand that’s left an unprecedented trail of what I’d call “digital lipstick.” These love prints dot every corner and crevice of the Internet with enthusiastic, if not religious, tributes to Skype.

Vonage has nearly killed itself on the cost of paid media advertising — it’s like standing in quicksand.

Robert is right that consumers are the new medium — but unlike Old Media companies, they’re willing to deliver your message for free.

So I’ll keep asking — where’s the BUSINESS MODEL?