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Summary:

AOL’s recent acquisition of the Huffington Post for $315 million has centered a lot of attention on its content strategy — automating and standardizing content that attracts search-related advertising. While there are some clear benefits to this “content farm” approach to content, there are also significant disadvantages.

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The recent acquisition of The Huffington Post by AOL for $315 million has focused a lot of attention on AOL’s content strategy — a big part of which is the ongoing attempt to automate and standardize the creation of web content to attract search-related advertising. Companies that do this have come to be known — somewhat disparagingly — as “content farms” because of the low rates they pay the people producing their content and because of the factory-style atmosphere of some ventures. And while there are some clear benefits to this approach to content, there are also some significant disadvantages.

The key companies in this space are Demand Media, Associated Content, AOL (with Patch and Seed), About.com, HubPages, Examiner.com and Suite 101. The main benefit to their approach is a cost base that is dramatically lower than the typical offline content-production business delivered by newspapers, magazines and TV networks. Demand and its competitors save money on production and distribution costs, but they also spend far less on writers and editors than a traditional media company. In some cases, writers are paid as little as $5 for a 500-word article, something that a traditional newspaper or magazine would pay between $100 and $800 for.

In addition to sharply lower costs — not to mention time-to-publishing and raw volume — content farms can also generate higher revenue from their content than a typical media company. Since the content is chosen based on the potential advertising appeal of an article, each piece of content that is written (or photographed or filmed) is designed to produce the maximum amount of revenue possible. Much of the content that appears in newspapers and magazines is chosen for reasons that are only indirectly related to monetization potential, and therefore the revenue-generating ability is reduced. However, printed and televised media still commands much higher advertising rates than web-based content produced by Demand and similar companies.

But there are two main risks to the content farm model: search and saturation. To answer criticism of the quality of its search results, Google could change its algorithm to drive down the frequency with which results from these content farms appear. That would decrease — possibly dramatically — the amount of revenue these companies can generate. Google recently released an extension for its Chrome browser that enables individual users to block sites that produce search results they consider spam. That blocking info goes back to Google, where it could be incorporated as input into results ranking. It is unlikely Google would completely blacklist a site like eHow — though search startup Blekko does — since some of the content there is useful to many, perhaps less sophisticated, searchers. But Google could refine its source credibility rankings by topic.

The other main risk to advertising-driven content creation is that by flooding the web with hundreds of thousands of articles of relatively low quality, Demand and other companies are creating an oversupply. Impression- and keyword-based online ads already face pricing pressures due to the breadth of the Internet and the efficiency of ad networks and optimization. Adding more and more articles just ensures a greater supply of pages on which to advertise, driving down the price of advertising. This is a classic case of the “law of diminishing returns.”

The so-called content farm model is a risky business in its current incarnation, but it is evolving. To read more about how, and to see in-depth profiles of the aforementioned companies, check out a new research note at GigaOM Pro (subscription required).

Image courtesy of flickr user Klearchos Kapoutsis

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  1. The Internet as a whole, is rpidly expanding the number of pages that can host Google AdSense ads, what the content farms do is but a drop in the bucket.

    Thjis is why businesses with purely advertising models are in for lot of pain becuase you need ever more traffic to generte the same returns.

    But with Demand, etc, they haven’t yet begun to work on other forms of monetization. Demand has a lot of upside.

    And if Google wanted to filter out Demand and its ilk, it would be easy. Google is fighting a much more troublesome foe — the thousands of sophisticated spammers that change their techniques on-the-fly.

  2. I’m the CEO of HubPages. HubPages is very different than the properties above for three main reasons. First, HubPages’ authors choose what they write about. While some writers produce content that surfaces in search engines, others write poems and non commercial content. Second, members of HubPages own their content and stand behind it by interacting in the comments. Third, and most importantly, HubPages is a community connected by shared interests.

    From our perspective, HubPages is most similar to YouTube where each Video page is analogous to a Hub (magazine like article) and content producers can edit and remove their content at will.

    1. Thanks for the comment, Paul.

    2. Paul, indeed we pointed out that your creators own their content and write what they like in the longer analysis over at GigaOM Pro. Matthew and I wanted to cover a variety of perhaps loosely related business models in our report. (I know About.com doesn’t like the term “content farm,” either.) Keep us posted on HubPages’ progress.

  3. The Ticker: NYT’s Topic pages; Gov. Walker, punked; Content farms; Toyota recalls; Foremski, unfollowed – PRNewser Thursday, February 24, 2011

    [...] gigaOm:  The Benefits and Risks of Content Farms [...]

  4. About.com is not a content farm, and as one of its Guides, I am getting increasingly resentful that uninformed writers keep lumping it in with these other sites. About.com Guides are hired based on their expertise about a certain topic and undergo an “audition” period to make sure that their work and expertise is up to standards. Furthermore, they are paid far more than the typical content farm – some Guides are able to make their entire living on their About.com salary.

    1. Jessica:
      You say that About.com “Guides” can “make their entire living on their About.com salary.” About how much would that be a month?

      The Wall Street Journal ran an article stating that the NY Times was interested in buying Demand, but back off when they realized it would compete with About.com. The Times braintrust probably concluded that the two aren’t that far apart

  5. You’re right, About.com doesn’t like the term ‘content farm,’ either. Because we aren’t a content farm. About.com writers are hired based on their expertise in a given field, and we aren’t paid piecemeal. We aren’t assigned content topics based on search. We have full editorial control over our content, and we build our topic sites based on our expertise, on knowing what readers interested in that topic would want or need to know. We write, we facilitate a forum, we answer emails, and we work very hard to build an online community around our subject matter.

  6. Colleen Vanderlinden Thursday, February 24, 2011

    About.com is definitely not a content farm. The main goal of a content farm is getting as much content up, as quickly as possible. The quality and accuracy of the content is less important than just having lots of it, from the perspective of those who run content farms (Demand, which I’ve written for in the past, is a perfect example of this.)

    About.com writers are vetted experts in our individual topics. We go through a two week intensive try-out to earn the position, followed by a three month probationary period, during which, if we fail to produce quality work, we are let go. It happens. Yearly, we receive performance reviews from our editors. Working at About is a real job. It is not dashing off some poorly written, error-riddled piece of content so you can earn your $15 fee and lose all rights to your work.

    Big difference. Just because a site produces a lot of content (there are over 600 guides) does not mean they are a content farm. You have to look at the people who are producing the content.

  7. Great insights. I am struggling with this shift to farm out content. Still believe there is value in original content, no matter how it is consumed. Thanks for posting.

  8. I’m glad that Google is pushing the content farms lower in the search results. That does include about.com – one of the first and most enduring content farms. If I notice that a click is about.com, I skip over it. If I press on one, then I get a link farm spam space and also click out.

  9. Google demotes ‘content farm’ sites « The BAT Channel Friday, February 25, 2011

    [...] the search engine has come under fire for allowing content farm sites like Demand Media – which produces thousands of articles a day based on popular search terms – to "pollute" its [...]

  10. I was a little surprised to see Hubpages lumped in with the actual content farms like Demand Media and eHow.

    By your own definition Hubpages is not a content farm and it’s a little unfair to put them in the same category as some of these sites which are little better than an internet version of a sweatshop.

    Like a lot of writers I’ve also had the chance to write for both of those sites but choose not to, I value my time and name a little to much to have it linked to a site like Demand Studios.

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