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Disintermediation, efficiency and media’s elemental particles

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One cannot conquer a perpetually fleeting concept with rigid definitions, and media is a concept that is always on its way but never where it is expected. To differentiate between new media and old media, for example, is not constructive, and since the introductions of iTunes, Netflix, Hulu, e-books, and for that matter Yahoo Finance, doing so would be altogether misleading. It is possible, however, to break down an idea into its component parts. The distances between these pieces, their relative magnitude in relation to one another, and the degree of opposition or confluence between each and each, all this may vary at any time, but the nature of respective elements will be constant. In this fashion, maybe a way to break downthe idea of media would be to isolate the following four constituent particles: information media, entertainment media, social media, and a fourth piece that has been recently gaining prominence, transactional media.

As was already indicated, such a fixed set of elements (as that used for current purposes) is not to suggest that the parts are mutually exclusive or even necessarily distinct. On the contrary, there is a great deal of overlap between the four, and some could even argue that these are all beginning to converge. It is probably not essential, moreover, that the media sector should be described as the sum of these four parts per se, because multiple other facets and cross-sections in this complex industry could suit a variety of perspectives. The reason for selecting this particular framework – of information, entertainment, social, and transactional media – is that in so doing the last piece, transactional, becomes possible to see. There has been quite a flurry of activity in this sub-segment lately – from the attempted pairing of Google and Groupon, to the actual pairing of Amazon and LivingSocial, the acquisition of Milo by eBay, and even the new venture investment into Factual – and this surge could lead some to project that the prominence of transactional media will rise, maybe rapidly, in relation to the other parts of the media sector.

It actually stands to reason that this should happen, because all industries tend to maximum efficiency, and often this must be analogous to disintermediation. If one were to observe the media dynamic through a different lens – as has been done in a previous article here – and describe the sector’s primary function as one of moving product between vendor and consumer, a function in which advertising serves an intermediary role, then direct commerce is an example of disintermediation. The Internet makes this possible, and because web advertising has been a relatively inefficient mechanism, despite (or because of) the myriad advertising networks and targeting technologies that have emerged, it is a natural phenomenon for media to begin to eliminate the inefficiency. There is as little need to pay for the placement of a display when it is possible to acquire direct access to a pre-qualified customer, as there is to pay for a full-service broker when free research is accessible and trades can be executed at minimal cost.

In a series of interviews given by Mark Zuckerberg in the past several weeks, the Facebook founder has made repeated mention of commerce in relation to social networking, and the role that Facebook will play in this evolving mechanism. Before Facebook, there was Google, which was in many ways the original web commerce platform. And before Google, there was Amazon, which was the first major media retailer. PayPal and many related processing technologies are only a stone’s throw away from online banking, brokerage, and other disintermediation pioneers. As various forms of information, entertainment, and social media have come and gone, the transactional platforms have shown formidable staying power. As the dynamic between information, entertainment, social, and transactional media continues to sort itself out, it should not be surprising to see the latter assume a dominant position. Efficiency, as always, will prevail, and for this we will be very closely watching.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.