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10 years past, 10 years forward

by drm on December 23, 2009

10 doesn’t sound like a big number, but when you start looking back over a decade, 10 years of an ever-expanding and innovating world, 10 years feels huge and unwieldy.

At the beginning of this past decade (the first decade of the 21th Century…how cool!) I was working with an Internet company called Themestream, started by a group of engineers out of Netscape.  They had made up the core team that  built the Open Directory.  Their vision was to take the human-filtered experience of the Open Directory and put simple content tools in the hands of the people who had the energy and vision to create content. This was an early blogging and community model. We weren’t successful: too many parts of the web were still undeveloped, but foundation assumptions of that initiative, as envisioned by Bill Turpin and Rafhael Cedeno, were dead on.

Fast forward 10 years later and the world of media and marketing is still grappling with the issues of content and community in a digital, interactive world.

The thing is, we’re at an inflection point where everything is possible. The tools are easy and effective. Consumers are willing to use them. The underlying processes of doing commerce, building online inventory, managing databases, driving audience have all been refined and tested. The challenges we all face now are how to apply these tools in logical and simple ways in order to create business models that offer sensible pricing to consumers and allow for acceptable profit margins to creators.

I think it’s really exciting.

Impressions of a decade

When I sat down to jot down some themes for this post, I could see it getting out of control. The notes have lots of questions about what was the scale of the Internet in 1999 and 2009; who were the biggest Internet companies then and now; what were the biggest themes.

Here are some of the highlights:

  • US internet usage doubled in the decade to something over 160 million users. Worldwide internet usage topped 1 billion users.
  • AOL acquired Time-Warner in 2000 for $117 billion. AOL had 21 million subscribers in 1999. In 2009, Time Warner spun AOL to shareholders for a fraction of the 2000 value.
  • Yahoo acquired GeoCities in 1999 for $3.6 billion. GeoCities closed in October 2009.
  • In the 2000 Super Bowl, 17 Internet companies spent more than $20 million to advertise. This year? Go figure.
  • At the end of the decade, a handful of companies had established what appear to be embedded positions in the infrastructure of the web. Google, Amazon and Facebook are the big three, covering information, commerce and community.

Are these companies likely to have the same positions at the end of the coming decade? The early history of the web teaches us that the ubiquity of access create few obstacles to consumer switching from one service to another. Market leaders have to sustain their positions through innovation, optimal service and an unerring focus on consumer benefits. Of the three big market footholds occupied by Google, Amazon and Facebook, the only one that can create value out of creating a highly transparent and efficient engagement with the consumer is Amazon. Google and Facebook rely on inefficiencies in the consumer experience to create value.

So, here are the notes that I made as I tried to organize my impressions of what happened and what lies ahead.

First, the decade of change.

The greatest change? Connectedness.

The Dispersion of Geekiness. Technological facility isn’t a pejorative any longer.

Fidelity. I think this phenomenon doesn’t gain enough attention. Media companies of that past controlled distribution in part because they had access to tools of production that created high-fidelity replications of content, whether it was music, video or photography. Today, everyone has access to easy-to-learn tools that allow them to create true fidelity: they perform into digital formats and are able to mix, clean, assemble and share high-quality content. This trend is only going to accelerate. As a result, distribution platforms are exploding: beneath the behemoths like YouTube there are all kinds of specialty platforms for sharing high-fidelity content. Today, you can build a simple blog and use multiple plug-ins to create an exceptional sharing platform. Media companies are going to have to demonstrate the ability to add value beyond production, replication and distribution.

Composition. The idea of what a composed media experience is has changed radically. A magazine, or a magazine article, is one artifact within a wide panoply of content types. A CD is the same. A song is the same. Consumers are changing the definition of composition, shifting it to include all kinds of types. Here’s a sample. In writing, there are standard artifacts: a short story, a novel, a poem, an epic poem, an essay, a review, a sketch. Writers who wanted to reach an audience needed to define their work within artifacts that were largely dictated by the production requirements of the media provider. Today, a writer can explore new modalities of composition, gather their own audience around their own content imperative. The publishing world can’t really replicate the unique experience. Want an example? Go look at Boing Boing. It’s all there.

The value of audience. All of the economics of media in the 20th century were embodied in the value of audience. It cost a certain amount to aggregate an audience in various media. That cost was passed along, with a markup, to advertisers or to content creators. The ability to amass audience and deliver content was at the core of creating economic value. That equation has been disrupted by the rapid shape-shifting of audience on the Internet. Google and Amazon are the exceptions over the past decade to a brutal lesson: Audience aggregation is ephemeral and doesn’t support long-term brand value on the web. I believe this was a transitional phase, and that we’re moving into a new ecosystem where the concept of audience will be replaced by a community of connections. [Not an original thought, by the way.]

What’s next?

Here’s what got scribbled down on the next page in the notebook.

Mobile. Mobile doesn’t just mean place-based. If you want to understand the next iteration of the interactive ecosystem, spend time with your iPhone. That’s the whole thing, all bundled up, right there. It is the first truly futuristic device of the Interactive revolution. Think about it. The guys on Star Trek couldn’t even have imagined what the iPhone does, how it works, how it becomes the operating system for your life. Mobile beens portable and interoperable. It means adaptable and intelligent. It means instantaneous and flexible. It’s a synthesis of all of the beneficial functionality that has been developed on the web over the past 20 years. Mobile is so big that it isn’t even its own thing: it’s the ultimate expression of everything.

OK. Get ready for this, because I wrote it down, but I’m not a 100% sure what it means, even though I’m a 100% sure it’s right.

Information/Entertainment/Content as the operating system.

This is the reverse engineering of the mobile experience onto the web. My iPhone interface, in its modularity and integration, is superior to anything that I’m able to accomplish with my laptop. The entire operating system is designed around the I/E/C paradigm, with an emphasis on easy functionality. The iPhone is the fastest adopted media platform in history. It’s lessons are more than Mobile; they are about what is necessary for ubiquitous consumer adoption.

Identity & Community. The trends that we see in social networks today are a point in time of a long-term evolution. These trends will continue to evolve because they satisfy a kind of use that all of us are looking for in our personal technology: How can it help me communicate easily across multiple shifting communities, without having to make radical changes in my behavior and while still managing my personal boundaries within the multiple groups.

Filtering. Get all this information and all these people connected in all these ways and the concept of filtering becomes more and more important. One of the most interesting developments of the past 12 months is how primitive Google has come to look. Google’s search is nowhere near as elegant or as filtered as the output of a well-developed social graph. We’re at the beginning of something large in filtering. How large? Imagine if I were able to search all of the content consumed by my social graph, with the different results coded against the different cohorts that I am connected with. I ask a question about media trends, and I first see the results of content that people in my social graph have accessed and consumed, possibly rated by them as well. The results are weighted by the frequency of my interaction with certain people. And then, when I look for an accountant in Fairfield County, CT, I see results that are filtered through another prism of my social graph. I would know that everything that I am looking at has been favorably interacted with by someone that I have a connection with. That’s an elegant filter.

And then, the last one:

The Quantum Theory of Content.

For companies to establish connections with consumers that can result in some economic benefit to both parties, the entire process of creating and distributing content will change. If you’ve read this far, you probably have read other things I’ve written, and you are familiar with some of the crude thinking I’ve done along these lines. Content needs to be conceived of on a molecular level, with the understanding that this content will combine and re-combine with other discrete content objects. The force that will drive this recombinant nature of content will be the interactive consumer. [This phenomenon includes marketing content as well.]

The content imperative of social media is the starting point for this re-envisioning. What it will look like in 10 years is anyone’s guess.

This isn’t the death knell of long-form content. It’s not the end of traditional media formats. It’s not the end of advertising and marketing.

However, if you want to be a relevant content brand in the next decade, you need to have direct connections with consumers — you need them to invite you into their social graph. The art will be in the kind of content that you share, the way that you share it and the degree to which the consumer feels that the sharing is open and conforms to their habits and needs. If you are able to do this, you’ll have the kind of access to consumers that will support your overarching business goals.

There you have: some impressions of what the themes of the next 10 years will be. I’m looking forward to sorting out practical applications for my businesses. I’m looking forward to being creative in this milieux. And, I’m especially looking forward to experiencing the vast realm of things that I didn’t see coming.

Have a Happy New Year.

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Shirky, Sulzberger, Veblen — Reinforcement and validation

by drm on March 16, 2009

Clay Shirky’s blog presents us with the same clarity and impact that his ideas do.  He has thought and rethought basic truths about the evolution of media in an interactive age, has stress tested his concepts in real life and has the patience and intelligence to provide the valuable historical context that helps to clarify the inexorable direction of change.

His most recent post has flamed a fire of discussion across the web.

The crux of his argument is captured at the end of his article.

Society doesn’t need newspapers. What we need is journalism. For a century, the imperatives to strengthen journalism and to strengthen newspapers have been so tightly wound as to be indistinguishable. That’s been a fine accident to have, but when that accident stops, as it is stopping before our eyes, we’re going to need lots of other ways to strengthen journalism instead.

640CF10E-5B12-43DE-A9C7-4B3BCE89022D.jpgWhen we shift our attention from ’save newspapers’ to ’save society’, the imperative changes from ‘preserve the current institutions’ to ‘do whatever works.’ And what works today isn’t the same as what used to work.

Using the analogy of the invention of the printing press in 1500, and the ensuing tumult of innovation and discourse that follows, Shirky points out that in today’s changing media landscape we can easily define what is being lost — the traditional newspaper model — but we can’t easily define what is being found.

During the wrenching transition to print, experiments were only revealed in retrospect to be turning points. Aldus Manutius, the Venetian printer and publisher, invented the smaller octavo volume along with italic type. What seemed like a minor change — take a book and shrink it — was in retrospect a key innovation in the democratization of the printed word. As books became cheaper, more portable, and therefore more desirable, they expanded the market for all publishers, heightening the value of literacy still further.

The essay is exceptional reading.  I recommend it highly.

From Shirky to Veblen

One of Shirky’s points in his essay is that in the pre-digital model, control of the printing press created a significant advantage and a significant cost for a publisher. The imperatives of the machine drove the overall organization and economics of the enterprise. (I’ve touched on this relationship in an earlier post about the economics of specialty media — content is a relatively small part of the overall cost structure, although it is the most important element of building the community that drives business results.)

The premise is closely aligned with Thorstein Veblen’s observations about the power of machine processes in organizing and expanding markets.

The scope and method of modern industry are given by the
machine. This may not seem to hold true for all industries,
perhaps not for the greater part of industry as rated by the bulk
of the output or by the aggregate volume of labor expended. But
it holds true to such an extent and in such a pervasive manner
that a modern industrial community cannot go on except by the
help of the accepted mechanical appliances and processes. The
machine industries — those portions of the industrial system in
which the machine process is paramount — are in a dominant
position; they set the pace for the rest of the industrial
system. In this sense the present is the age of the machine
process. This dominance of the machine process in industry marks
off the present industrial situation from all else of its kind.

Veblen would also have appreciated the tension between the current stewards of the newspaper industry, who recognize the forces at play around them and who are trying to adapt their current economics to highly disruptive shifts, and the engineers who are building new systems for distributing, enhancing and creating content that replicates much of the newspapers core principals….the 14-year old boy on Shirky’s essay.

C1299FDA-708F-477C-8CB0-46548DD95701.jpgI was reminded of Veblen because of an ironic citation in Boing Boing on Sunday. Veblen light-heartedly points out that the imperative of a newspaper is to generate as much value as possible to its advertisers from its circulation, and that the focus of the editorial team is easily swayed. I’d venture that the relative pressures of content integrity and commercialism are better regulated today than at the turn of the century.

The first duty of an editor is to gauge the sentiments of his readers and then tell them what they like to believe. By this means he maintains or increases the circulation. His second duty is to see that nothing is said in the news items or editorials which may discountenance any claims or announcements made by his advertisers, discredit their standing or good faith, or expose any weakness or deception in any business venture that is or may become a valuable advertiser. By this means he increases the advertising value of his circulation. The net result is that both the news columns and the editorial columns are commonly meretricious in a high degree.

Sulzberger: A Clear and Uncertain Sightline

At the same time that Shirky’s essay on the epochal transition in media hit the web, Arthur Sulzberger, publisher of the New York Times, was giving a speech about the present state of newspaper at Stony Brook University. The full text of the speech is here.

Sulzberger speaks specifically and pragmatically about the situation facing newspapers. It is closely aligned with Shirky’s assessment, and a good primer for the business problem that needs to be addressed.

For years, we hoped that financial success would just come from making our products more accessible, informative and entertaining. The idea was simple: work harder, be more creative and thoughtful, and the revenues will return in force. Regrettably, there were larger, more complex forces at work and we are now confronting some hard truths:

* Let us start with the fact that a deep, cyclical downturn has dramatically affected key areas of commerce, including the real estate, employment, automotive and retail industries, the lifeblood of American newspapers and local television.
* The Internet has proved to be a far superior advertising platform for listings. The classified businesses are disappearing from newspapers and are unlikely to migrate in any significant way to news Web sites.
* Selected display categories are also subject to secular shifts as users move from print to digital consumption. Beyond that, marketers are growing skeptical of the ability of display ads on any platform to capture the consumer’s attention in a fragmented media landscape.
* And, Internet businesses have proven incapable of replicating the economics of print. Few people have been willing to pay for online news. Advertising rates for online inventory are relatively low. And news Web sites are poorly organized to take advantage of the contextual advertising model that dominates the Internet.

With this in mind, there are now all kinds of solutions and tactics being offered up to allow online news sites to adapt financially to the changing conditions, but it is a little bit like the banking crisis. We know there is an answer out there somewhere, but we are not sure what it will turn out to be.

So the immediate response of journalism organizations, including ours, to all this economic and technological disruption, is to make substantial expense reductions. These have included closing production facilities, creating new methods of distribution, reducing the size of our newspapers and layoffs.

This creates a paradoxical situation, summed up by Sulzberger as the mystery of increased demand at decreased value.

As I noted earlier, the demand continues, but we are still left in the paradoxical position of having a product that an increasing number of people use, but which has decreasing revenues and profitability. This, coupled with radically different user experiences, argues for new goals and initiatives.

The moment has come when Veblen’s theory of machine-driven economics, which has propelled the newspaper industry for more than five generations, is face-to-face with the economics of the digital age, where audience and production are distributed commodities, and economic value is driven not by reach but by results.

Sulzberger’s anchor point for the future is three-fold: a belief that print will remain a relevant part of the media mix, which will sustain the economic imperative of the traditional newspaper, albeit at lower levels; a conviction that by identifying the scale necessary online to generate effective revenue levels, the underlying economics of the content-generating organization can be sustained; and a generational faith that journalism is a necessary and contributing part of society. The essence of the business challenge is to protect journalism.

The speech is good and fair. It is compelling. And it is a better validation of Shirky’s observations than any other commentary on blogs, in conferences and on message boards could possibly provide.

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