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You want to understand how micromedia, peer production, and personal media are atomizing value chains and transforming the media industry.

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I can help.

Details at research.bubblegeneration.com.

The Problems With Web 2.0, pt 3 - Success vs Success

OK. I think one of the biggest problems with 2.0 is that success is it's own worst enemy. In a sense, the fact that we have working business models now is a very bad thing. Now, I know this smacks of bubblism (hey, whaddaya expect?!). But hear me out.

Despite a lot of skepticism, it's not that we don't have business models - we do. The market has validated, in fact, at least several different kinds: advertising (Google), transactions (eBay, iTunes), subscriptions (WSJ, NYTSelect..just kidding), metered use (Skype).

I think the problem is the opposite: the success of these models is limiting everyone's collective vision, by letting them largely ignore to the potential of new ones.

What's different about Web 2.0 is that lightweight technologies and convergence on multiple levels create huge new opportunities for hugely cool new business models.

One family is models that redistribute revenues to peers, align value creation with capture, blah, blah. Basically, models make things cooler by making them fairer (aka, more efficient): returns for the people who create value by created shared meanings for goods, not just suits who plot strategies in boardrooms.

Try this on for size:

"...Each time a clip is downloaded by a 3 customer the performer gets paid 1p. With a potential audience of 3.2 million, the most popular clips from contributors could make thousands of pounds worth of cash."

Now - for all the growing buzz surrounding peer production business models at USV Sessions, all over the blogosphere, in boardrooms, on Sand Hill Rd, etc - that's the peer production business model. Redistributing revenues to peers. Rewarding people for the act of sharing information, creating meaning, and adding value.

Let me reemphasize this: that's the model. That's the economic innovation that will fuel the creation of more and higher-quality communities. I've been talking about this since 2003, because the radical misalignment of media value capture from value creation was the one thing that made the least sense economically, and was just asking for disruption.

In fact, we've been watching it happen since then - AdSense is a(n increasingly lame) example; OhMyNews is a much better one. So are the multitude of models that are springing up to reward people for sharing music, etc.

But here's the thing. This model is slipping under the radar. I think that's pretty interesting; that people are asking more and more often 'where's the peer production business model?' - but in fact are missing the forest for the trees.

Why is this? If you ask me, based on numerous conversations with geeks (entrepreneurs), suits (VCs), droids (uh, everyone else), it's largely because we have the reference points listed above, and it's hard to ignore them and really focus on something new.

Let me extrapolate dangerously for a sec. The point I want to make is that I see an eagerness from the geeks and suits to play with 2.0 technologies and see what cool new things they can make. But I don't see an eagerness to play with 2.0 models and see how they can really disrupt old and obsolete economics.

It's almost as if the success of the four or five models listed above have blinded geeks, suits, and droids alike to the potential for entirely, radically new models.

In a sense, this is rational, and not unexpected - success breeds imitation. But I think the reason why Web + Media 2.0 is cool is not just the technology, but the economics behind it. They're disruptive - but it's up to this community to be a little more aggressive in experimenting with them.

That's why I wanted to share the 3 blurb - I think it neatly illustrates the fact that right now, the Valley's playing with new technologies, but largely ignoring the potential of new models.

Nick Carr is (totally) wrong when he talks about the 'cult of the amateur'. In fact, as I've shown, the anomaly is the mass media industry of the 20 century, whose crutch has been artificial scarcity enforced by regulation, marketing economies, and no small amount of collusion (viz, payola, etc).

But if the 2.0 crowd really wants to help accelerate this implosion, it's got to focus as much or more on economic innovation - new business models - as it does on technological innovation.

Greatest Comment Ever

Viz, me getting qwned by Google:

"...I guess it goes to show how cheap and obvious so many of these ideas are. Maybe there's a market for another photo-sharing service!?"

I have no words for this level of awesomeness. She just insulted everyone doing anything cool, all at the same time.

Arrrrrrrrgh

I just got qwned by Google. Base is almost exactly what I have been working on for the last few weeks with a few buddies.

In fact, I just talked to a VC here who told me the idea sucked (oh, the irony).

Goddammnit, I hate it when this happens.

Memeorandum - Miniprofile & Edge Competences Case Study

Like many of you, I find myself using the new Memeorandum more and more. It's killer - an evolution of blogdex using simple threading algorithms whose time is long overdue.

Why do we all use it so much? Because it is one of the most efficient attention allocators on the market - it is one of the first true media reconstructors. It can rapidly allocate your attention to relevant mass and micromedia almost frictionlessly.

But the real insight I would like to drive is that Memeorandum is a near perfect case study in leveraging edge competences. Media 2.0 is edge competences; they are the building blocks for dominant 2.0 strategies. Two edge competences I talk about frequently to media heads are plasticity and liquidity.

Let me explain intuitively what they mean, using Memeorandum to help. Memeorandum leverages liquidity to allocate attention to plastic microchunks of media.

That is, because we can trade info about the media we're consuming - in this case, links and blog posts - Memeorandum can rank it. It's liquid and tradable, and Memeorandum exploits this to make a market out of it.

At the same time, because the media we're consuming is plastic - it can be unbundled from distribution into chunks into microchunks (http into blogs into posts, etc) - it can be rebundled, into, essentially, Memeorandum Page A1.

Together, plasticity and liquidity let Memeorandum offer you a hugely superior value proposition - a hugely greater return on attention than almost anywhere else on the www, if what you need is a high-level view of what's happening now.

Now, the question I'd like to ask is simple: why are so many incumbents failing to see this simple picture? OK, sure, since I've worked with a few, I have some answers. But it's the question that's important.

For example, the cost of building a reconstructor like Memeorandum is trivial if you are an incumbent. So why did the NYT choose to close off it's content with NYTSelect rather than internalize gains from allocating attention to the rest of the market by building a reconstructor? In which case is the return greater, even in a first-order situation (ie, with no consequences)?

I think pretty clearly, the return is far greater in the latter case, leveraging edge competences to build a reconstructor - the costs are trivial, and the potential benefits huge; you immediately begin to internalize your competitors' returns on attention. Clearly, NYTSelect can't match these economics.

Why do even erstwhile 2.0 incumbents like Yahoo choose to ignore attention allocation as the source of Media 2.0 value? I mean, it's not exactly a big deal for Yahoo to try and build a reconstructor like Memeorandum. Or is it?

I think it's difficult because, truth be told, Yahoo has not really understood how to play this game - they have no edge competences, and are not busy building any. They're more interested in, for some reason, building scope and scale economies (ie, expanding 'services' and building 'inventory'). But these economies fail in a 2.0 world, unless you can allocate attention efficiently to them.

Why didn't Technorati build a Memeorandum? After all, they were first out of the gate by a looong way. They intuitively understood the huge market gap for efficient attention allocation long before almost anyone else in the world. Or did they?

I think they chose to forgo building edge competences, which require a long term investment, in favor of shorter term gains (viz, the enterprise strategy, etc).

The point I'm trying to make is twofold.

First, there is still despite all the interest and excitement my and others' work on attention economics has raised, a huuuuge market gap for reconstructors to efficently allocate attention.

Second, to do so - really do so - requires that you leverage edge competences to provide a superior return on attenton. Not close your goods (NYT), derive 1.0 style scale/scope economies (Yahoo), or lose the focus of this intent (Technorati). I can cite other examples - choosing technology over attention economics (del.icio.us), etc, but I think that's enough for now :)

Carr vs Econ

Carr's Amorality piece seems to be getting more and more attention, viz Jarvis, TechDirt, and O'Reilly.

Guys, like I pointed out last week, Carr's argument is internally inconsistent. He contradicts himself in basic econ terms, and so his argument can't hold. It's a wash, so any debate is really superfluous.