Evan Williams, for whom the name doesn’t ring a bell, is the co-founder of Twitter and has been one of its largest shareholders so far. It might surprise many users of the 140-character messaging service that Mr. Williams is currently is working on a project that represents quite the opposite: Medium, a newspaper-like forum that contains primarily thoughtful essays and substantiated open letters. In this setting there’s no such thing as a maximum word count and more importantly, there’s no opportunity for third parties (read: Governments) to censor the website’s content.
The question is; will Medium become as a commercial success as did William’s last venture? According to investors it definitely should, whereas over $120 million has been invested in the website over the past years. However, the increase in the number of Medium users is falling short compared to its superficial competitor, momentarily amounting to circa 30 million monthly users (versus a 300 million Twitter users). We must note however, that the larger part of Medium’s reader base consists of well-endowed US coastline citizens. This fact entails an interesting trade-off: does their higher income level compensate for the significant difference in user quantities, in terms of revenues?
On first sight, the obvious answer would be a straight ‘no’. However, Evans and Schmalensee (2008) argue that the primary driver that determines the advertisers’ willingness to pay, is the value they can extract from the other group that is active on a certain platform (the readers on Medium). The user base on Medium is fairly homogenous compared to Twitter and as such, it might very well be that advertisers can more accurately identify the readers’ needs. Also taking into account the superior purchasing power of this group, there’s a possibility that the pay-per-click revenue model yields a far larger markup for Medium.
Unfortunately for Medium, a revenue model that is primarily relying on advertising fees is still just a fantasy. Presently, it asks publishers of sponsored content for subscription fees, mainly being smaller enterprise. This straightforwardly narrows down the scope for revenue generation. But if larger companies step in, this might pose a profitable business opportunity. Before this happens, it remains questionable whether the direct network effects (from readers) and indirect network effects (from the smaller enterprise) are strong enough to lure the larger players onto the platform. Depending on the amount of information these firms can acquire, they are willing to join the new movement. One may then wonder; is Medium ready to overthrow its current business model to chase the big money?
Sources:
http://www.economist.com/news/business/21707261-co-founder-twitter-betting-he-can-revolutionise-digital-publishing-once-again-three-hit
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1094820
