This is totally off-topic from what I normally write about, but a quick mini-post on what I’m thinking about this…

I’m at UGCX listening to a panel on the demise of the news industry.  The basic narrative, here and elsewhere, is that the web—through sites like eBay and Craigslist—killed the business model that supported news for a century.  In other words, the profits from classified ads paid for, or subsidized, the news gathering and distribution.

If that is true, then why does it have to change?  The companies performing certain roles have changed, but why does the overall economics of the situation need to change?

In other words, what if we placed a special tax on online classified ads and those monies were redistributed to news organizations?  Or, what if the government simply nationalized eBay and Craigslist.

I suppose that’s politically impossible.  But, if news is important to our society, maybe we need to think radically about how we save it.  I’m just sayin’…

I would be interested in hearing your thoughts in the comments.

This post, originally written for the Journalism 2.0 blog, is the basis for the presentation I’m giving today at UGCX.

In my view, Cheezburger and news journalism are both in the media business. Although news journalism is arguably more important to society than LOLcats (arguably!), the business models are basically the same: we acquire content (either through licensing or by hiring people to create it), and then monetize that content, typically through advertising and subscriptions.

Compared to traditional humor and entertainment media companies, by relying on user-generated content to harness the wit and intelligence of our community, Cheezburger has found a way to acquire content at a lower cost. This is a significant competitive advantage for us. At the same time, thanks to the power of crowd-sourcing, the content is higher in quality and more relevant than what we could create on our own.

But there’s a catch: the important lesson from Cheezburger’s success with user-generated content is that while content costs less, it is not free. That is, even though we do not pay our users for the content they contribute, there is still a cost associated with acquiring and managing that content. Why? Because only a fraction of the content submitted to us is of high enough quality to be used.

As a result, we incur significant expense to sift and filter and sort through the submissions to find the best. Specifically, we employ a four-stage review process — two phases leverage the user community to help us filter content and two phases of review are done by moderators employed by our company.

Whether employees or users, all of our content moderation is done by humans which is not cheap. We have developed technology to streamline that process, thereby lowering the expense, but we have yet to find an effective way to automate it completely. (Truth be told, we haven’t actually tried that hard to automate it because the primary content on Cheezburger is video and images which are very expensive to machine process. Perhaps it will be worth the investment in the future.)

Regardless, even including the moderation expense, the resulting content costs us less to acquire and is undoubtedly of higher quality. This fundamental win-win is the promise of crowd-sourcing and user-generated content. By committing to the model, Cheezburger has built a profitable business, “something that few others online—not even YouTube—have been able to pull off”. [Slate, March 20, 2009]

Recently, I wrote two guest blog posts for Journalism 2.0, Mark Briggs’ project that explores the future of news journalism.

In the first, The Catch with User-Generated Content, I discuss the pitfall that many web sites make when they foray into UGC:

But there’s a catch: the important lesson from Cheezburger’s success with user-generated content is that while content costs less, it is not free. That is, even though we do not pay our users for the content they contribute, there is still a cost associated with acquiring and managing that content. Why? Because only a fraction of the content submitted to us is of high enough quality to be used.

As a result, we incur significant expense to sift and filter and sort through the submissions to find the best. Specifically, we employ a four-stage review process — two phases leverage the user community to help us filter content and two phases of review are done by moderators employed by our company.

In the second post, What can journalism learn from I Can Has Cheezburger?, I talk about how the introduction of UGC is shifting the role of a news reporter:

There is still value for news reporters and organizations to be “source leaders.” I am one who believes that there is an important role for the professional news reporter in our society. But it is clear to me that user-generated content or crowd-sourced information is a valuable addition to news journalism because it can yield more and better information, and often faster.

However, as I’ve illustrated, that information comes with a cost which is finding ways to separate the signal from the noise. The task news reporting has shifted toward filtering. My view is that winners in the Internet era of news journalism will be the people and companies who, like Cheezburger, ReadWriteWeb and Amazon, develop systematic ways of filtering the flood of user-generated content and sources down to those with the best content. The result will be higher quality news and information, that is more relevant and on target with the audience, at a lower cost.