Strategies for a discontinuous future.

Thursday, January 19, 2006

How Not to Manage the Edge: Washington Post Case Study

Let me try and illustrate for a sec (more) why Media 2.0 isn't a simple subset of Web 2.0.

WaPo ombudsman says something egregiously not true. Commenters have a field day pointing it out on a totally unrelated blog.

Post's response? To delete the comments. That doesn't stop commenters, who keep commenting, and point out the deletion. Post restores the comments.

Ombudsman responds in a different blog, commenters point out the intellectual bankruptcy of her response.

Post's response? To "shut off" comments, and claim a technical error has led to the deletion all the comments on all the posts of all the blogs that were critical of the ombudsman. Note that retrieving these comments is technically trivial; the net has a long memory - they're mirrored here.

There are deep lessons here. Forget about whether you agree with the politics of the situation.

1) The value's in the conversation.

2) If you can't have a conversation, you can't create much value in the attention economy.

2.5) Pretending a conversation never happened isn't just kind of infantile, it's actively destroying value.

2.75) Now, I'm not saying that lunatics should be given free reign to comment. But neither should editors and execs think they have, anymore, totally free reign to dictate how the resources of the firm are used. In many cases, they're much better off thinking of those resources as common resources - in this case, editors are much better off thinking the paper belongs to both readers and writers.

3) The lines between public and private are necessarily blurred in a conversation. It's not rigidly controlled business meetings that takes place in communities, markets, and networks, at the edge. It's raw, sometimes a bit brutal, often full of crap conversations - but from an economic point of view, they're hyperefficient.

3.5) Not to learn how to leverage this is going to be fatal - you can't fight an economic discontinuity. What you can do is find new strategies which dominate it.

4) Let me put this in context. Imagine a DJ who plays a really, really crap track. Everyone stops dancing. What does the DJ do?

The point is that the old information asymmetry that dominated media is gone. The connection between the internal and external is live, real-time, and direct. You can't run away from it, or "manage" it. The DJ can't say (insert beancounter voice here) "folks, let's have a meeting, and figure out how to manage your dancing".

You have to join the conversation - not kill it. You have to not be (how can I put this nicely) so beancounterly. You have to be willing to overturn the orthodox assumption that firms talk, and consumers...well, simply consume.

This is not wishy-washy management advice. This is razor sharp strategy. The basic economics of consumer industries are being inverted; new market leaders are learning how to create value at the edge, by innovating how they manage the universe of value external to the firm.

Postscript: the Post.com's exec editor later held an online chat to discuss, which is admirable. But I don't for a second buy the claim that comments were yanked because they were nasty - I read them, they weren't.

In fact, it's the opposite; the commenters did more fact-checking and research collaboratively than the Post's ombudsman did - that's the power of coordination economies.

Let me simplify some of these thoughts to crystallize some further key points:

1) Newspapers need commenters (read: connected consumers) more than commenters need newspapers. The simple economics of attention scarcity dictate this. The same equation holds true across consumer industries (esp media).

2) That is, you have to leverage and co-opt your readers, audience, etc, before your competitors do. Competing for their attention is a zero-sum game.

3) The big problem with the Post's move is that it's a barrier to learning: it stops it from learning how to leverage connected consumption - which is exactly the force that's hypercommoditizing media. Learning to leverage the edge is a kind of judo. But if you're not in the ring, by definition, you can't learn how to play.

4) Imagine a Post that did the opposite: highlighted in big letters on it's front page the raging discussion, actively driving attention to it.

Would the result probably have been a flame war? Sure. Flame wars mean your market, community, network, is working.

Would the Post have learned a lot more about how to leverage the edge? Absolutely.

-- umair // 10:05 PM //


Media 2.0

Scott K has a very nice post on a theme I've been going on about lately - Media 2.0 is not a subset of Web 2.0. I've talked about this quite a bit in the last few weeks.

Largely, this is because VCs (with a few notable exceptions) and media are not a great fit - they don't get media, they're a bit scared of investing in media, and they often treat it like tech. So, IMHO, the community of people who should be disrupting the media value chain aren't getting the right guidance and feedback.

-- umair // 8:13 PM //


Yahoo 06

Before reading too much into Yahoo's earnings, you should:

1) Read the conference call.

2) Understand why we've been predicting that Yahoo's dominated for a very long time now; because it doesn't have any edge competencies.

3) Note that one quarter of barely missing earnings is not hugely strategically meaningful, not least because of myopic expectations.

4) Note the following quotes, which givs us very rich clues that Yahoo will continue to stumble:

"...There are many exciting opportunities in our brand advertising to advance our strong leadership position. We are developing a brand advertising system to more efficiently deliver new forms of advertisers such as video formats, increasing our targeting capabilities and enable advertisers to buy larger campaigns more efficiently."

Bubblegen: This is dominated - the whole point of the current ad revolution is that branding 1.0 is kind of obsolete.

"...You would also see an increasing emphasis from us on delivering more comprehensive content experiences by beta integrating head and tail content and aiding discovery through community tools."

Bubblegen: Wrong. To see communities as "tools" which only create value by enabling "discovery" is the biggest single mistake media players will make in 06. Communities create value in far more powerful ways than simply slashing search costs.

"...In 2006, we will...fill strong relationships with carriers and device manufacturers and explore new initiatives to enhance the consumer experience even further"

Bubblegen: "Fill strong relationships" is a nice way of saying Yahoo's not interested in disrupting the media value chain - it wants to recreate it, with Yahoo at the edge. The problem is that the media value chain is now economically dominated and obsolete. This is evidence of deep strategy decay on Y's part.

"...we look at content in on those 3 different buckets through 3 different ways. So firstly we talk about what we�ve been doing as a company forever, licensing and do aggregating contents to others...We also talk about user generated content to a large degree, we�ve entered those markets twice as already is time to grow more and more, whether its somewhere between a flicker and blogging worlds and other worlds...Also Yahoo has always done some producing or some making of its own stuff if you will, and its been that way since the beginning,.. So we have the audience, we have the capabilities we have the platforms, and we have the desire to in effect help distribute and help introduce their products..."

Bubblegen: This is possibly the least strategic way to think about the role of content in the new media value chain; IMHO, this is a huge error. Content has many kinds of strategic value in the emerging value chain, none of which are discussed or even recognized here.

-- umair // 8:34 AM //

Wednesday, January 18, 2006

Politics of the Day

So let me get this straight: when the mayor of Nawlins says something stupid, it's apartheid, but when generations of institutionalized racism which create massive poverty traps lead to disproportionately hugely more not white people being affected by a natural disaster (not to mention a government that seems totally uninterested in helping them) ...it's not.


That makes so much sense.

About as much sense as, I don't know, intelligent design, attacking Iraq, or Barbara Walters.

-- umair // 10:37 AM //


Conversational Media

Conversational media is more bloggy than blogs...interesting perspective.

I disagree; I think the conversation is indeed happening - it's just massively distributed, not centralized...

-- umair // 10:31 AM //


Media 2.0

A nice article about the cultural impact of the death of mass media.

-- umair // 4:45 AM //


Top Ten Sources: Replication Wars Redux

So a few months back I asked if everyone thought Top Ten Sources was ripping people off. Nobody answered - because I guess Top Ten Sources was more than a little off the radar.

Now, it's a big deal, and John Palfrey has issued a kind of defense basically saying, "look, permission culture, you know".

That's all well and good. In the bigger picture, part of the problem is the opacity of the revenue model - I couldn't figure out what the revenue share really was, and it seems like neither can others.

-- umair // 3:55 AM //


Managing the Edge, Simulation Economy Edition

Learning to manage the new modes of coordination that exist outside the boundaries of firms is no mean feat - it's much bigger than simply publishing (which is just the most visible example).

Consider this example - "gold farmers", or essentially, organized arbitrageurs, on WoW. How can firms "manage" this?

It's not enough just to kick them out; the economic forces at work are powerful, and create strong incentives for arbs to keep on arbing at even a relatively large cost to themselves.

What's needed, I think, is a deep understanding of how different these new modes of coordination - in this case, a virtual economy - really are from firms. You can't really "manage" them - at least in the traditional sense of the word. That's the starting point - and it's why more corporate players find themselves unable to create value at the edge.

-- umair // 3:50 AM //

Tuesday, January 17, 2006

Leveraging Edge Competencies

It shouldn't come as a big shock that Google's moving into radio ads.

Now that Google's built an edge competence in making ads and content plastic and liquid - essentially, in harnessing the power of markets and networks that underlie them - it is going to leverage this competence across as many media markets as it can, as fast as it can.

You shouldn't see Goog as the world's information organizer. It's more accurate to say that it's the world's ad allocator.

And worrying about the numbers here is totally missing the point. Because Google has an edge competence - because it leverages the universe of value external to the firm - it can by definition make advertising hyperefficient across nearly all media markets.

For all those who keep wondering what the difference between attention allocation and information organization is - here it is. From an economic POV, they are in direct conflict with one another.

Finally, IMHO, you should note the power of an edge competence. Contrast Google with Yahoo. Yahoo doesn't have any edge (or core) competencies; so it can't leverage anything into new markets.

Despite it's huge, ongoing investment in the edge - Yahoo's picked up most of the major edge players - it still, amazingly, hasn't learned how to create value at the edge, and so all it's edge investments are trapped in silos, because Yahoo's afraid that touching them will devalue them. That's a vicious circle: it would indeed mess them up...but only because Y doesn't understand strategy at the edge.

This example should make that crystal clear.

-- umair // 9:43 PM //


Edge Competencies

How not to...courtesy of Steve Jobs.

Interestingly, you'd think it would marketing droids that would get the edge. Not so - they're more into control than anyone else. It's geeks that get the edge, but most geeks have no idea how to make it productive...you need both sides (which is why this whole edge thing is taking ages, really, to kick off...)

-- umair // 8:24 AM //


Cultural Wasteland, pt 1341

If you're a teen, and you're going to clubs made for teens, I think it's safe to say you should just stay home.

This is such a lame idea, I'm in awe. It takes a kind of genius to come up with something this wack.

Could there be a less cool thing to do as a teen than go to a teen club, instead of trying to get into a real club? Uhhh...no.

In fact, if these guys understood their industry, they'd know that there's already a market for them - some clubs essentially cater to teens (legalities aside).

Talk about a dominated strategy.

-- umair // 3:39 AM //


Managing the Edge: The Editor as DJ

Another one of my 06 predictions was that this would be the year that managers at the edge would evolve to being something like DJs - that new management innovation emerged to let firms really begin building edge competencies.

The meme is already starting to take shape (and this).

The delicious irony is that all this is coming from a fun blog called Publishing 2.0, by Scott Karp, who does strategy for Atlantic Media - and one of my predictions for 05 was exactly called Publishing 2.0; the death and rebirth of the publishing industry. Very nice - Scott, if you have a min, check out my presentations :)

Of course, the call for synthesis in this post also misses half the equation - reconstructors like Memeorandum are valuable because they synthesize, or reconstruct microchunks into coherent streams of attention.

The shift away from manager at the core to DJesque choreographer at the edge is something many of us have felt for a long time; the problem, of course, has been the "cannibalization" of traditional media business models - they can't capture any value from conversation.

That's why media needs edge competencies. Management innovation has to be backed up with business model innovation, and, often, product/service innovation. Edge competencies are the unificiation of all these.

-- umair // 3:20 AM //

Monday, January 16, 2006

Brand Errors

Intel's decision to drop Pentium will go down as one of the bigger fiascos in recent marketing history.

There are a number of reasons why - the most straightforward is that when consumers discover the DRM lockdown in next-gen PCs, a trusted brand will be exactly what Intel needs to begin trying to talk to consumers about benefits vs costs...but it won't have one.

-- umair // 9:15 PM //


Why I <3 4

You know, it's shows like this that really point out just how much American media sucks.

Whenever I make the mistake of turning on the TV here in SF, I get something that's essentially the media equivalent of a K-Car; made in a boardroom and meant to be as insipid and brain-dead as possible.

-- umair // 9:07 PM //


Geeks vs Droids, pt 1341

You know, one thing I've been going on about for ages is the disconnect between Silicon Valley geekitude and the deep understanding of consumer behaviour that drives branding and marketing innovation.

I think Limbo may be a case in point.

Let me explain. It's strategies like this that make Media 1.0 suck - they exploit information asymmetries among consumers. You kept buying records you knew were sh*t because you couldn't talk to anyone and find out otherwise.

Limbo is the same - if you don't know who the sucker is, it's you. In this case, it's consumers. Limbo is exploiting asymmetrical info to push-market goods thru an obsolete mobile value chain.

Note how misaligned with industry economics that is. First, revolutionaries are doing the opposite - bringing consumers together to arbitrage these info asymmetries (the community becomes a better record label/publisher/etc - you know the score). Second, this enables pull models to emerge.

So, I think Limbo is (really) lame. Because it's dominated economically - it's marketing 1.0 disguised as 2.0, but the emperor still has no clothes.

-- umair // 8:56 PM //


The Problems With AdSense, pt 1

This nice article in the NYT talks about how AdSense is reshaping the media value chain - by redistributing revenues to peers; something we talked about quite a while ago (I think we even referenced the site the NYT talks about)

The article misses the big problem with AdSense (and it's competitors) at the moment.

Though Google's default revenue share is generous (by Media 1.0 standards) the relevance of PPC ads increases exponentially in traffic. This should be intuitive; the probability of you being interested enough to click is far greater at 1000 visitors than at 10.

So value creation and value capture by micromedia aren't aligned on AdSense. Economically, AdSense is
still inefficient.

Now, I can't connect all the dots for you, because one of Google's Big Competitors has taken to scanning my blog like the NSA on al-qaeda (guys, talk to me instead of stalking me)...but I will say that this is a huge weak spot for Google.

-- umair // 8:44 PM //



Didn't have time to write over the wknd about Gather. I think Gather is a really cool idea. But that said, there are a number of big problems with the Gather model.

1) Rights issues and adverse selection. Why wouldn't someone rip off my blog to make a few bucks on Gather?

This is not that huge a deal, but it will cause problems eventually.

2) Gather's centralized. This is kind of backwards. What is Memeorandum? A decentralized Gather. What works better in an atomized, exploded value chain? Decentralized, open access models. Why? Because they essentially become markets. Gather is a hybrid, and hybrids haven't worked very well.

3) The biggie: business model. One of the dirty secrets of the Long Tail kru (the VCs, not Chris) is that there isn't a single, simple LT business model. In fact, what's going on right now is a classic fight for the next dominant design.

So Gather's in an increasingly competitive space. There are lots of people trying to solve this problem and "monetize" (I hate that word) micromedia.

In fact, the biggest competitor to Gather isn't another play, it's an ecosystem - Memeorandum/Technorati/etc, Blogger/TypePad/etc, and AdSense/BlogAds/etc. The problem with this emerging value chain is that revenue to content creators increases exponentially with traffic - exactly what you don't want in an LT b-model.

I think all this points to Gather getting Ninged - cool idea, but a lack of clarity about the real economics of the Media 2.0 space means a limited opportunity.

-- umair // 8:29 PM //



Marketers still looking for ways to deal with attention scarcity - this time, via ads on your mobile.

The problem, of course, is deeper - the deep economics of branding as a strategy have been disrupted; social meanings are commoditized, and so these kinds of tactics won't just not work - they'll actively backfire.

-- umair // 8:27 PM //




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