Interview with Watson's Dan Wood
Subject:   Web Advertising?
Date:   2002-09-29 20:07:25
From:   timoreilly
Response to: Web Advertising?

First off, I wouldn't totally write off advertising. It's interesting that Google's style of text advertising may become more fashionable in the era of clients like Watson, since that is probably the kind of advertising that would work best in a client with tight space constraints. (And I should point out that it works pretty well on the web as well, as Google demonstrates.) And there are certainly environments in which some advertising can still flourish.

But I do think that there is also an opportunity for various kinds of paid information services. Note however, that I don't know that they will be bought on an individual basis.

I like to compare the next stage of the internet with the development of cable television. If you think about it, there are a lot of parallels. Both started out with the idea that they were "free" and that advertising was the only way to gain revenue. But in fact, the internet became a monthly subscription service much faster than television, which flourished as an advertising-supported medium for decades. Advertising and the subscription internet (in which consumers pay about the same for internet access as they do for basic cable TV) grew up at almost exactly the same moment.

Meanwhile, if you look at what's beyond basic cable, it's less individual channels than packages. The movie package, the sports package. So I keep looking for the development of the premium channels, and their aggregation into packages. (This is part of why we developed Safari as a subscription-based service, and why we're currently exploring integrating it into various software developer programs, so that it can become part of one of those premium packages I expect to see emerge.)

There is one important difference between TV and the internet, though, and that is that the content providers don't necessarily own the billing relationship with the customer, and there hasn't been enough thought applied to the ISP network as if it were a subscriber network to whom additional services could be sold. I really don't see why ISPs (apart from vertically integrated ISPs with a content play, like AOL) aren't exploited more as a distribution channel for content, just like the large cable networks are exploited by a content provider like HBO.

But back to web services -- obviously, the subscription model is a good one, and tools like Watson could be good front-end aggregators for paid services as well as for free ones.