Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Wednesday, May 11, 2005

Why the Huffington Post Blew It

Examining why lots of folks think the Huffington Post suxxx so much is kind of instructive. It nicely illustrates how radically Media 2.0 econ differs from Media 1.0 econ, and why using tactics like celebs and talking heads - marketing-driven strategies - are doomed to surefire failure.

Let's start by discussing blogs. Blogs are a weak form of peer production: communities of prosumers or pro-ams producing goods more efficiently than firms can. Peer production is more efficient than either firms or markets in some domains, because of a special kind of economy I've called distributed economies of scale.

Essentially, what this means is that in the real world, coordinating thousands or millions of people to contribute tiny chunks of hyperspecialized labor is impossible - costs are too high. But in a zero coordination cost world - the notorious Web 2.0 - communities can realize massive gains to specialization.

Gary Becker, the Nobel laureate (and my Dad's thesis supervisor), noted the economics behing this in a fairly seminal paper from the late 80s (reading it is what got me thinking about how peer production econ works). His point was that coordination costs bound specialization gains - the implication is that, in the real world, hyperspecialization is only beneficial when it can be assigned in large chunks, for which coordination costs are low (ie, full-time jobs).

The natural result of distributed economies of scale is Warhol's fifteen minutes of fame - most people are hyperspecialized in something, and they'll get recognized for it. That's why we read blogs - to check out those bits of hyperspecialized knowledge that we find cool, informative, or insightful.

Now, in a mass media world, the opposite is true. Things like blockbusters and celebrities happen because mass media players realize scale economies in marketing - not in massively distributed production. Production doesn't scale, because coordination costs are (really) high, and retail and distribution are scarce - so the dominant strategy is to reuse expensive content, putting as much marketing muscle behind it as you can.

The radical difference between these two economics - Media 1.0 and Media 2.0 - I think, is why the Huffington Post seems so fundamentally backwards to so many people. What Media 2.0 really means is that I'm not interested in David Mamet's thoughts on computers because he's hyperspecialized in plays - I'd rather read Don Park on tech. Since mass media economics don't hold on the Net, I don't have to realize this kind of loss in utility. Those few posts that are cool are those that are specialized - Larry David being funny, for example.

In fact, the Huffington Post seems to have kind of missed the point that the entire reason that things like blogs, vlogs, podcasts, tags, and playlists are so cool is that, at the limit, they end mass media phenomena like celebs, blockbusters, talking heads, and 'Contemporary Hit Radio'. And that's a good thing, because such phenomena limit hugely the amount of utility you and I derive from consuming media.

I think these lessons should be valuable for a lot of Media 1.0 players feeling their way slowly to Media 2.0. The point that I think is worth remembering most is that Media 2.0 value creation and capture are inverted - it's almost exactly the opposite of most Media 1.0 strategies that will gain advantage. Of course, this creates competences traps for most Media 1.0 players, but that's a story for another day...

And, yes, I'll be back to writing more regularly soonish.

-- umair // 3:13 PM // 3 comments


very nice post, interesting read!
// Anonymous Anonymous // 9:26 AM

Thank god !! I think this has been the longest absence period so far.

// Blogger Rajan // 12:21 PM

Nice article. But what about blogs that create their own celebrity? I think the blog can create celebrities out of non-specific nobodies, simply because they look at the world with their voice. It works the same with Media 1.0 in that people who watch O'Reilly aren't looking for news, they're looking for a vitriolic perspective.
When I read Wonkette its for an obscene voice about the news, but god knows if I could tell you AMC's credentials (I guess the same goes for O'Reilly, doesn't it?)
// Blogger whb // 7:48 PM

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