Saturday, July 30, 2005
Media 2.0 - Value Maximization
There's been a huge amount of attention focused lately on the issue of the end of distribution/retail scarcity in a Media 2.0 world. That's cool, but the real questions are much deeper.
At a recent gig, I got a lot of questions about value maximization. Folks from a Media 1.0 background are often loath to concede that micromedia can create more
value than (big-budget) mass media.
It's often counterintuitive because value creation is about economic value (ie, how utility and preferences inform demand relative to supply) - not accounting value (ie, production budgets).
Posner explains this nicely, in a recent piece about Media 2.0 econ which is essential reading (and which, strangely enough, closely follows the logic of my Media Econ presentation
"...To see what difference the elimination of a communications bottleneck can make, consider a town that before the advent of television or even radio had just two newspapers because economies of scale made it impossible for a newspaper with a small circulation to break even. Each of the two, to increase its advertising revenues, would try to maximize circulation by pitching its news to the median reader, for that reader would not be attracted to a newspaper that flaunted extreme political views. There would be the same tendency to political convergence that is characteristic of two-party political systems, and for the same reason - attracting the least committed is the key to obtaining a majority.
One of the two newspapers would probably be liberal and have a loyal readership of liberal readers, and the other conservative and have a loyal conservative readership. That would leave a middle range. To snag readers in that range, the liberal newspaper could not afford to be too liberal or the conservative one too conservative. The former would strive to be just liberal enough to hold its liberal readers, and the latter just conservative enough to hold its conservative readers. If either moved too close to its political extreme, it would lose readers in the middle without gaining readers from the extreme, since it had them already."
It follows that in a micromedia world, content can be very closely tailored to individual preferences. Put another way, in a mass media world, we each suffer some amount of disutility from having to consume mass media that doesn't closely match our preferences.
Because micromedia can cause us each to suffer less
disutility, the total amount of value that can be created in a micromedia world is greater than in a mass media world. For the folks I was talking to, who were focused on real-world effects, the point is that demand explodes relative to supply (and the equilibrium price of your content, and your margins, and, even better, such an advantage is sustainable).
This doesn't have much to do with big vs small production budgets. In fact, that's almost missing the point entirely: micromedia's happening because the cost of production is being vaporized by order-of-magnitude step changes in technology. So yesterday's big budgets become today's small budgets (think about the kind of video production you can do on a Mac today vs even five years ago).
Smart Aggregators and Efficient Attention Allocation
When I talk to people about Media 2.0, one of the questions I'm often asked is what's the difference between a vanilla aggregator and what I've termed a Smart Aggregator.
The answer's simple: the former are about syndication scale economies - grabbing and centralizing a lot of stuff - whereas the latter do that and also allocate attention to it efficiently
Now, efficient attention allocation requires some thought: it's tricky to put into practice, because old-school concepts like 'personalization' cloud the picture. Personalization is like 'broadcatching' - a nice term, but strategically kind of meaninglessness
Without going into too much depth, I think there two dimensions to what Smart Aggregators should be doing right now: filtering the right content from the wrong content (what most people in the industry unfortunately call 'relevance'), and then filtering again within the right content (for freshness, oldness, whatever).
Some folks get this intuitively, like Russell:
"... Though it's nice to see that mainstream portals are jumping onto the RSS bandwagon (lead by my employer), the problem is that all of these services generally suck.
Why? Because they all break a very simple rule: You should only see an RSS item once.
Read marks and session management is the key to aggegators IMHO. As a person who scans almost 400 feeds daily, I can tell you this is the only way realistically keep up. Even aggregators made for the general populace, who may only keep track of a dozen or so news sources, not providing this functionality is just wasting their time. Though actually, I think that many people start out with a small list of feeds and just keep adding to them. Why not give them a scalable solution right away?"
I really recommend reading his post - it's killer.
The comments also debunk a lot of not-so-sensible numbers coming out these days, which should be intuitive to people involved in this space (Yahoo dominant in the feedosphere...come on):
"...But let me throw some cold water on those Feedburner market stats. A couple of weeks ago Datamation did a deconstruction of Feedburner measurement (confirmed by Feedburner) that determined that MyYahoo's share was inflated because of the default RSS subscriptions that are loaded into every subscriber's account. Whether they know about them or use them or not. If you even the playing field by ignoring the Default 10, MyYahoo plummets to 6% and Bloglines is in the lead with about 20%."
It's amazing that Bloglines still
offers the superior value proposition, despite the resources that Google and Yahoo (etc) are throwing at becoming feedosphere players (and despite the fact that Ask now owns it). And if you think about it, even Bloglines hasn't really added much to it's value prop in a long time - for some reason, people are struggling in this space.
I think it's because most of these players fundamentally don't understand Media 2.0 economics, but you knew I was gonna say that :)
Wednesday, July 27, 2005
Mobile Industry + Record Labels = Party Like It's 1999
Some people never learn:
"...At least in the United States, music is likely to be as much as two or three times as expensive on wireless devices, with a smaller selection available for purchase, compared to services such as iTunes, analysts say.
That extra cost is in part because labels and carriers see phone consumers' willingness to pay $3 or more for ring tones--essentially phone rings customized with snippets of hit songs or other audio files--as evidence that they'll pay more than 99 cents for a full song. Carriers also think consumers may pay more for the convenience of instantly buying a song wherever they are."
Sure, the privilege of me not carrying my iPod is worth 2-3x the cost of the library I already
paid for. Riiight. There's a value prop many segments are gonna kill themselves for.
It's not for no reason I've been arguing that mobile operators are no real competition for Apple as digital media monopsonist.
Note to strategists - plasticity is about doing more stuff with media you already own, not less. This is pretty important, especially when micromedia and hw/sw convergence mean your universe of substitutes across all nodes of your value network just exploded.
On second thought, forget it. I'm gonnna have fun watch these guys make exactly the same mistake they both made five years ago: creating massive selection pressure exactly for smart users to hack them with a vengeance (viz tariff arbitrage for MNOs, p2p for record labels).
My guess is by enabling devices to do the cool things they should be doing in the first place - smart bets might be (and are already being) put on plays that enable this kind of hw plasticity (akimbo, sling, etc).
Hollywood of the Day
New Mel Gibson flick to be filmed in...uhh...Mayan.
I actually think that's pretty cool - come one, at least it's not 'The Return of Hitch' (urgh).
Fox + MySpace = ??
Some thoughts on the MySpace acq (I think Jeff C. has the best wrapup). First, obviously, the valuation, despite hypergrowth etc is rich (relative to comps). Second, most importantly, and unfortunately I can't say too much on this subject, the reason that MySpace works is exactly the reason that every other social play doesn't.
Smart players, I hope, will see what I mean (and it's not about marketing, come on). Anyone involved in the social space should think hard about the differences between communities and markets - what is it that drives people to exchange social capital? This is what MySpace capialized on, and what it's numerous competitors are still struggling hard with.
JG Ballard of the Day
Welcome to Crash
, Brooklyn edition.
In light of China's recent currency moves, you may wanna brush up on your knowledge of speculative attacks.
AttentionTrust - Dan Gillmor's nonprofit dedicated to ensuring attention rights.
Nice idea, but I honestly don't think this is really necessary. If Media 2.0 is decentralized, it should be a relatively efficient market. This means that attention rights should be plastic enough that consumers can trade them where and when they see fit.
I think this would have been a great idea in a mass media world, where attention is effectively oligopolized because of the natural monopoly dynamics across media markets (viz, local papers, radio, etc) which led to nasty dynamics like ad time hypergrowth.
Tuesday, July 26, 2005
A long post speculating on how RSS impacts the future of contextual ads. 2.5 words: profile-based ads.
Your feed/micromedia reader is going to need your preference info in order to efficiently allocate your attention. You'll reveal it because efficient attention allocation is worth a great deal to you.
Of course, reaveling this info will let smart producers aggregate detailed preference info that can serve ads targeted as tightly as adware, but without the evilness.
Profile-based ads are going to be a key (edge) competence for Media 2.0 players (as I've argued many times before). Note that RSS AdSense Google style is not
profile-based - it's just the same old competence leveraged into a new domain.
Canonical example: FeedShake. I'm amazed that players with deeper pockets, whether private or public, are shying away from reconstructors...or perhaps it's just that the innovation edge is (finally) accelerating faster than the core again, which is a good thing for everyone involved in Web 2.0.
London vs Innovation, pt 373173
Something I've talked about a lot, but Tom, in fact, writes The Canonical Post.
I think all of what he says is true; interestingly, I am getting pulled back to the Valley, despite a lot of effort to kickstart things in London.
The real problem in London, is social capital - the innovation community here has built none. OTOH, everytime I come to the Valley, my social capital skyrockets, not because I'm a superstar, but just because the Valley is superconnected, and everyone's meeting everyone else all the time - which is how cool things happen, when you come down to it.
Politics of the Day - Money, Madrassas, and Media
I don't talk politics much, mostly because I think politics sucks. But let me voice some sentiments I feel I have to.
I'm a nonpracticing Muslim. What does that mean? I go to the mosque about once a year, if that, usually on Eid. I'm also an American, who's spent a lot of time in Europe.
So, in a sense, I'm at the epicenter of...uhh...recent (tragic) developments.
Let me put my cards on the table, and then add the points I'd like to make. I supported the war, because I strongly think my part of the world needs to be exposed to post-enlightenment values, although I was afraid our current government would botch the job (which I think they are). So I'm neither a Republican, nor really a Democrat - like many of you, I suppose.
I have one simple point I'd like to make. Here's the set-up.
The bombs in Egypt killed, well, a lot of Muslims. Two of the bombs in London were at Edgware Rd and Aldgate - both close to heavily Muslim communities.
Now, what exactly will it take for Muslims to realize that terrorists are not our friends? That their slaughter is kind of indiscriminate?
Here's what I think: let's face it, all across the world, Islam, as it's practiced, is in fundamental and direct opposition to post-enlightenment values. I don't think the two can coexist: this is the heart of the problem.
So here's my point. I think Muslims have two choices. First, to find an Islam that's, well, tolerant of difference, and intolerant of violence. We make a big deal out of tolerance - when it applies to us. How about giving some back to everyone else?
The point that many Muslims live in Western countries without internalizing any of their values is absolutely, lethally, true. This is moral hazard - taking advantage of a contract; a social contract. How about giving those ideas a chance?
Rejecting them outright is not only wrong, it's idiotic. For example, why should there be Sharia law in Canada? Isn't that the entire reason that emigrants left their home countries - to escape this kind of institutionalized intolerance and violence? Not to be harsh, but are Muslims so dumb they really don't understand that embracing the economic opportunities of the West while denying the legal, political, and social structures that make those opportunities possible is trivially contradictory?
What I've wanted to see emerge, since I was a little kid, if I'm honest, is at least
a strong awareness that Islamists are like the Neo-Nazis of the Muslim world (if not worse).
Or even better, an outright repudiation of traditional religious structures. What does that mean? Well, one of the big
problems with Islam is that any moron can become a maulvi. Unlike other religions, we haven't built institutions like universities or academies which clerics have
to be certified from.
The logical effect, of course, is adverse selection: since no credentials are really required, extremist idiots are naturally attracted to becoming clerics. And the logical effect of this is that these idiots gain control over strategically important resources - like money, madrassas, and media. Now, that's the opposite of the West, where extremists mostly end up being no more than a chuckle-worthy, like this poor bastard.
The second choice, I think, is for things to continue the way they are now. But if the Muslim world doesn't wake up now, I don't think it will ever wake up.
That, I think, is why I felt I had to write this - I think it's time for Muslims to speak up and be heard, whatever it is you have to say. If there's a silent majority (I have my doubts)...let's hear what you've got to say.
I really didn't
want to write this, since it will earn me flak from Muslims and nonmuslims alike - but I think dialogue is just about the only chance we've all got to get out of this mess without even more needless violence.
Monday, July 25, 2005
Media 2.0, Preferences, and Strategy Decay
NYT piece about Spitzer ending Sony radio payola raises some interesting points..
A big part of Media 1.0's ongoing structural problems are of their own making. Most of you know centralized preference mechanisms (bestseller lists, radio playlists, etc) have been gamed for a looong time.
In the short term, obviously, you reap gains (equal to the value of the information asymmetry you've created). But in the long term, consumers aren't idiots. It becomes transparent that the information they're getting is gamed, and then you've got a big fat structural problem: a massive shift in consumer preferences, an inwards shift of the demand curve (ie, a loss of trust). Value creation isn't just minimized - value is destroyed, and, worse, stays destroyed for a looong time.
Now, this is interesting, because it's a straightforward reason for the sudden decline of traditional media, as the Net continues to cheapen the cost of accurate preference info.
How do we do this on the Net? Largely by leveraging the social: using things like collaborative filters (viz Amazon's rec system, last.fm, myweb). But of course, this begs a response from big media to begin gaming these mechanisms.
There's already quite a bit of evidence of minor-league gaming of Amazon's community. The point I really wanna make is that a huge tension to game communities is about to surface - and I think it's in nobody's
interest to give in to it. That much, I think, is pretty clear from Media 1.0's experience gaming preference mechanisms...the inevitable result is (an epic case of) strategy decay.
Best Slashdot Ever
Probably the greatest /. post in the history of the universe, explaining intuitively why evolution is a hyperefficient search mechanism. Essential reading.
Web 2.0 - Price Discrimination
Very interesting article about (pseudo) price discrimination being used by the NHL to stem some serious strategy decay. I strongly suspect we're gonna start seeing such strategies used by web 2.0 players in the very near future.
No, I don't mean Amazon style geographic/profile-based price discrimination, I mean psuedo price discrimination based on imposing an artificial supply constraint, letting the equilibrium price move up the demand curve - just like in this example, which is why I strongly recommend you read it.
Some new numbers from ask/bloglines - essential stats (no big surprises).
Microsoft of the Day
Ancient pics mean Apple campus deleted from MSN Virtual Earth...you can't make this stuff up (/.).
Shape of things to come
My Newspaper (via Unmediated)
We are witnessing Schumpeterian creative destruction of media industry in real time, folks. This is so very interesting.