Traditional media companies may have been launching plenty of Web sites to keep up with the dotcoms, but they haven't been aggressive enough in the right areas, according to News Corp. Executive Vice President James Murdoch.
"The pace of development of new services has been more driven by technology companies, and the media companies have raced to make products to compete in a landscape that may not have been defined with their well-being in mind," he told a News Corp. New Media Workshop last week.
The goal should not be rolling out new services but rather building the customer relationship: "In this highly competitive multimedia world, the customer relationship isn't one of many factors. It is the Holy Grail," he stressed.
In a way, the workshop, held during the networks' fall season upfront, was an online "upfront," with News Corp. executives laying out the company's global vision of the role Internet products will play in its future.
Although Murdoch may consider the customer relationship the Holy Grail, Wall Street investors-increasingly frustrated with Internet companies that build customer relationships at whatever cost-are more interested in an Internet business strategy that makes money. It's one of the reasons CBS President and CEO Mel Karmazin said he is holding off spinning off the CBS Internet Group.
Murdoch acknowledged that the "casual conflation" of services that get thrown under the "blanket rubric Internet" has produced an environment that judges success by the number of trucks leaving the farm. Real success, he said, is based on the number of milk bottles delivered as efficiently as possible on the highways, through the air or by train.
"We view the Internet as simply one distribution method, and perhaps the most efficient one, only for a subset of our businesses," he said. "What we do and have been doing is not just about Web sites on the Internet, per se, although that is a big part of our work."
Murdoch's words echo the sentiments of other media players. The emphasis on brand, he explained, can allow media companies to form an emotional bond with the consumer, creating loyalty, trust and value.
"In a digital environment, media plays a more powerful role as a transaction facilitator and can therefore create more value out of the consumer relationship that it builds: for the marketer, for shareholders and for the consumer."
News Corp. sees transactions facilitated on three levels: mass market, location-based and one-to-one. "In order to fully maximize the business of connected media," Murdoch noted, "sophisticated, multilevel relationships with marketers in every category are a must."
Technology, however, enables reaching these three markets. Wireless home networks, for example, will enable new services to penetrate every part of the home, "from couponing and shopping electronically directly through your refrigerator to downloading digital satellite radio directly to your portable audio player."
And traditional media companies, already owning reach and content, hold the advantage. "These are the kinds of services we see as part of the networked marketing and e-commerce environment that only a massive scale of subscriptions and rapid pace of innovation can realistically deploy, empowering consumers and benefiting our shareholders at the same time," he explained.