JG: The Daily Kos is an interesting example. They decided over time that they wanted to hire professional writers. They went the opposite way of what The New York Times is trying to do. Did they do it because they needed it? Probably not, they were a pretty successful Web site before and there were a lot of people who would contribute content for free, but they wanted it.

I guess the main thing to realize about the history of newspapers is that The New York Times didn’t become important because it had great content. That may be the way The New York Times remembers it, but it’s not true. The reason The New York Times became important is because they controlled the printing presses and the unions; it was the means of distribution that mattered. Given that success, they obviously moved on to what they thought was important-investigative journalism.

It was the monopoly that created the journalism, not the journalism that created the monopoly.

DD: Given that it would be impossible for such a distribution monopoly to recreate itself on the Web, would you say that it was a mistake for newspapers to get involved in the Web in the first place?

JG: If I had to pick whether the newspapers should have invested heavily in television or the Web, I would have picked television. Just because it plays more to their strengths. And some did. Hearst has a very interesting portfolio in TV. The Times, unfortunately, got in on it too late. Many newspapers—because of their nature—bought into local broadcasts, which turned out to be irrelevant because everybody switched to cable. But, all things being equal, a cable channel turns out to be extraordinarily lucrative.

Creating television content is far more expensive than creating print content. So any place where the terms of engagement require cash favors the big guy over the little guy. The streaming of video content is very expensive. The distribution of content over cable is practically free- every incremental broadcast costs very little. Every stream that YouTube gives us costs them money. So television is, believe it or not, a more efficient way of distributing (visual) content, strictly from a cost perspective. Now from the user’s perspective it’s not. What the user really wants to do is do whatever they want whenever they want. That’s why people love YouTube.

Currently, the vast majority of content that people consume on the Internet is text. That is starting to change. We can’t know whether or not the YouTubes and the Hulus of the world will survive, because their business models are not viable. The Huffington Posts and the Daily Kos’s of the world will survive—at least for a while—because it doesn’t cost that much to distribute what they distribute.

In some way, a model that’s composed of mostly volunteers creating mostly crappy content is going to make some amount of money. Will it make great dollars? Probably not.

DD: What about advertising?

JG: Advertising on the Web is still massively overvalued. In general, the fact that it’s so incredibly inexpensive to create content is a big problem for the advertisers. We’re in a very difficult place with advertising. On the basis of sharing in whatever transactional profit the advertiser makes, there is a very healthy advertising market. The problem is that it’s very difficult to create any streams of revenue.

The main problem is that the banner ad model is just completely unviable. It’s just not valuable enough for the advertisers.

DD: Is there anything out there that could be of significant value to advertisers?

JG: It’s leads. If you have the vertical baby site and you go in and type in stroller and then you can get offers from stroller guys, that you can sell for a meaningful percentage.

DD: So, if selling leads is the way to make money with advertisers, is social media the place to do that?

Diana Dellamere is a former CJR staff writer.