Content Lives to See the End of Its Heyday

LOS ANGELES -- Content is dead. Long live content.

Battered and bruised, content on the Net has suffered through its worst few months since the concept first began trickling into the popular imagination five or so years ago. Companies with high-quality content, like APBNews.com, have all but collapsed. High-profile names like Salon (SALN Quote) attract scant attention from investors. Newcomers like Inside.com get short shrift. Even big-media-backed operations like MarketWatch.com (MKTW Quote) (a competitor of TheStreet.com) and NBCi (NBCI Quote) are far from not-so-distant market glory days.

Which brings us to Internet Content West this past weekend. What a time to hold a conference focused on content! Turnout was better than I expected -- more than 500 participants, one of the organizers told me with a mild note of surprise. But the place didn't have that crushing flavor of conferences that took place as recently as three or four months ago. No uncomfortable shoving to get to the food table, few gaggles of intense youths networking in the corridors. Plenty of cell phones at work, though one wonders why so many people took calls when business could be had in the hallways. "Did payroll go through? Great. Got to get back to our booth."

Through it all, the standard interaction occurred. I'd ask the head of some dot-com content provider how it was going, and he'd say: "Oh great, we just can't keep up with everything!" The conversations provided for elegant dipping and dancing as everyone sought to assure that the widespread trouble in the space certainly had not touched their business. It was a brave performance, but it felt forced. The wild-eyed enthusiasts of February seemed far away.

The exhibit hall, if it can guide our future thinking, was packed with broadband plays -- audio, video -- and security companies offering secure ways to get people to pay for content. And, like the one hot vein in the Net space right now, everyone was an applications service provider -- a business-to-business play focused on helping all those business-to-consumer folks out there do better at reaching their audiences. Apparently the pain in B2C land hasn't quite trickled up to the B2B2C ASP aces. Away from the exhibit hall, the wonders of email (!) dominated discussion among conferees.

Though nobody would say it, the pain in the sector lumbered through the room like an elephant. Panelists were late or didn't show -- some listed experts didn't really have a company to go home to any longer. "Oh, Joe's not showing up, but we've found a replacement..." The crowds were attentive, if a little sparse in places. But the new mood had its benefits. "You know," said one attendee, "It's kind of nice. All that cockiness is gone."

The entire affair recalls one of the most intriguing concepts in the investing world: sentiment. Climb the wall of worry! Too many bears -- good for the bulls! Heavy short interest? Good, because those shorts will have to cover. Oh, everyone's bummin' -- so it's time to start hummin'! Well, the content space is one major test for contrarian sentiment indicators. The negativity is heavy like the dark smog. You can see it when even people like TheStreet.com's Jim Cramer lament the broad negativity, with his wife, the Trading Goddess, arguing that the sentiment is saying time to buy. The sellers are done.

But can sentiment sometimes simply be right in the stock market? That's the nightmare scenario for content players. That would mean the hundreds of Internet content players that entered the fray are just so many gnats that will fade from the conversation with each passing day.

I don't believe that content on the Web is dead, which shouldn't surprise anyone. Last year things were too orgiastic. This year we've become too pessimistic. Good ideas and bad ideas -- and there's no shortage of bad ideas out there -- are all lumped together in the same, stinky bag right now. A few -- a hearty few -- will emerge from this era in powerful positions, reaping the benefit of the competition's demise. Some companies will gobble, some will get gobbled, many more will outright fail.

Right now, the risk-reward equation might favor taking some gambles in the content space. It's beaten down, hard, mitigating some of the downside risk. But investors also need to understand that content companies take time to build. Goodwill must be established, trust developed. Building quality content on the Web isn't like Lotto -- and investors would be wise to take the same approach.