Old media: The end is near

November 12, 2007: 5:15 PM ET

By Josh Quittner

It's not exactly news that Web has slowly been killing off traditional media. Over the past decade, the music, publishing and video-broadcast industries have been scrambling to find a perch in a new world where consumers expect to get everything for free online.

But here's an alarming thought for those of us who still draw paychecks from traditional media companies (and hope to send all three kids to college some day): The end could come much sooner than anyone thinks.

That's the theory anyway, of a pal I had dinner with last week in Palo Alto. My buddy is someone who's been involved in many of the Valley's more interesting deals during the past decade, so he knows, intimately, his history. He pointed out what should have been obvious to me: That Web 2.0 companies are doing to Web 1.0 companies what Web 1.0 companies are doing to traditional media companies. According to my friend: Think of traditional media as kind of the top layer. The Web came along and settled in just beneath it, where it began to erode old media's foundations—subscription, pay for play, traditional advertising, etc. But during the last five years, with the rise of the social web and Web 2.0 companies, many of the companies who formed the vanguard of the Web, are themselves at risk. And if they disintegrate, the old media companies that so tenuously rest upon them, could collapse.

Yahoo (YHOO) is a great example, my friend said. Aside from its acquisition of Flickr, in 2005, Yahoo hasn't adjusted particularly well to the social web. By contrast, everything about Google (GOOG) -- from its advertising model to its creation of the OpenSocial alliance, pretty much defines the social web.

It's telling, actually, that Facebook isn't gunning for Google so much as it is trying to take out Yahoo, whose search engine has long been sputtering and wheezing. With it's foray into social ads last week, Facebook may well have jumped the shark, as some are suggesting. But if social ads work and Zuck & Co. harness the power of friend-to-friend recommendation—you can bet that online advertising money will flow like the Nile into Facebook. Why would anyone continue to advertise on Yahoo?

And that's where the end comes sooner for traditional media companies, who for years have been relying on traffic deals with Yahoo. Yes, I know that traditional media companies still derive the lion's share of their revenue from traditional advertising and subscription models. But the rate of decline is advancing, even as many of these companies look for support from their Web 1.0 partners. And if the venerable Web 1.0 companies collapse? Then the old media companies that rest on their seemingly strong shoulders, must, too. Unless of course, they start embracing the social web.

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