The Fallacy of “Internet” Worship When It Comes to News

June 21, 2009

This latest Zogby poll, via the indefatigable Mark Potts:

The survey discovered 56 percent of adults nationwide would pick the Internet if they were allowed just one source for their news, while television, newspapers and radio earned the support of 41 percent – together.

Among Republicans, 56 percent would choose the Internet for their news, while among Democrats that figure was 50 percent. Seventeen percent of Democrats said they would prefer newspapers as their only news source while 5 percent of Republicans made that choice.

The partisan split is intriguing, although I’d bet that NPR proclivity accounts for much of the difference.  But I still continue to be most amused/befuddled by the terminology:  “the internet” never met a deadline or filed a story.  Broadcast tends to produce its own content; “the internet” is simply a transport mechanism (as often than not, for newspaper content).  When the responses of those surveyed produce the following result:

It also shows only 1 in 200 people surveyed believes newspapers will be a dominant source of information in 2014.

I wonder how many of them realize how much of the content they are reading “on the internet” actually emanate from newspaper stories.

This reminds me a little–actually, a lot–of the 1996-2002 time frame when the investment banking and venture communities talked about “internet businesses.”   And yes, there were a few of those which literally could never have existed sans ARPANet and what followed.  But for the most part, the web is simply the very most powerful, low-cost transmission vehicle ever invented.   Another channel of distribution, if you will, but far from”just another” channel of distribution.  Just as in e commerce, the winners in e publishing are those who optimize their cost structures and business processes for a world of exceedingly low-cost distribution.  Would you ever say that an important source of your kids’ upbringing is the U.S. Interstate Highway system, because that’s the conduit you travel to see the grandparents?  What do I know; maybe you would.  But I doubt it.

And I’ll say it again, because what rests behind the end points matters a great deal:  “the internet” never filed a story nor met a deadline.  Just like I-35 never carved a turkey on Thanksgiving or gave you socks for Christmas.  Zero-cost replication and distribution are a given; it’s what’s behind the door Grandma’s house that matters.


Price Discrimination and Paid Content

June 14, 2009

Martin Langeveld has this excellent post on the Nieman J-Lab site that summarizes some work done by Albert Sun, a UPenn math and economics student, Mouths of Babes Class of 2010.   Sun tackles a topic that’s received little treatment:  price discrimination in charging for content.  I’ve been wondering when someone would do this.  And as Langeveld points out, a lot of the things we are talking about these days can be explained by the trusty Samuelson text and our Micro 101 notes (e.g. the nature of a “public good,” the inherent instability of cartels, etc.)

And I get Sun’s arguments, for the most part.  But here’s what’s nagging me:  perhaps the central lesson of any basic microeconomics text is that in order to maximize profit, the firm prices to marginal cost.  And in a world of free, perfect copies, isn’t the marginal cost of nearly all web content……zero?

No Flocking to Kindle by Spring Chickens

May 3, 2009

This surprising (to me at least) demographic data about the Kindle, via Mark Potts:

Citing this Amazon forum, Publishers Lunch Deluxe reports:

We extracted about 75 percent of the responses on age (representing about 700 responses, taking equally from the earliest and most recent postings, which show very similar age distributions). Per John Makinson’s quip at an LBF panel, over half of reporting Kindle owners are 50 or older, and 70 percent are 40 or older. Here is the full age bracket distribution:

0 – 19: 5%
20 – 29: 10%
30 – 39: 15%
40 – 49: 19.5%
50 – 59: 23%
60 – 69: 19.5%
70 – 79: 6%
80+: 2%

The comments themselves are as illuminating as the numbers. So many users said they like Kindle because they suffer from some form of arthritis that multiple posters indicate that they do or do not have arthritis as a matter of course. A variety of other impairments, from weakening eyes and carpal-tunnel-like syndromes to more exotic disabilities dominate the purchase rationales of these posters. Which in turn explains Amazon’s pseudo-statistical case that e-book purchases are incremental/additive, rather than cannibalistic of their print sales. Countless people report being able to read much more with Kindle because it overcomes physical obstacles or limitations that had made reading difficult for them previously.

Craigslist Uber Alles

May 2, 2009

A recent Hitwise report shines a light on how thoroughly CL has changed the classifieds landscape, much to the chagrin of newspapers.  In 2008, online classifieds traffice rose 84%  (itself a pretty amazing figure), and the number of sites rose about 25% to 1,048.  Of the 100 top sites, all but three were Craigslist local sites.

It Was Bound to Happen Eventually

April 6, 2009

Really, we should have seen it coming.  The NYT totally misses the true  story behind the story on the (likely temporary) Sun/IBM breakup.  The real scuttlebut is that between them, the two sides depleted the Strategic Lawyer Reserve to dangerous levels, and the Department of Justice stepped in and made them call off the deal.

Of course, all the securities, IP, and anti-trust lawyers were already booked a couple of weeks ago, even after doubling their rates and resuming  first-class travel, all-day Spectravision, and Nobu delivery.  But Attorney General Holder was tipped off to the true severity of  the situation this afternoon, when an alarming number of family law hearings scheduled for Monday were cancelled.  It seems that even all the divorce lawyers are now working for one side or the other.    And American taxpayers positively freak out at the prospect of not being able to serve their spouses–so to speak–at the drop of a hat.

The Times did nail one piece of the story, however:

“There’s lots of testosterone going back and forth,” said a third person familiar with the discussions.”

Nooooooooooooooooooooo.  Ya think?  That’s like saying that there might be some juice flowing if Bruce Wayne Enterprises made a run at Joker Holdings.

Why Online Advertising Will (Largely) Fail

April 2, 2009

On TechCrunch, Eric Clemons explains in articulate detail what most of us have been feeling in our bones for some time:  that the web and advertising as we know it are inimical to one another.  First, he proposes an operational definition of advertising:

Advertising is using sponsored commercial messages to build a brand and paying to locate these messages where they will be observed by potential customers performing other activities; these messages describe a product or service, its price or fundamental attributes, where it can be found, its explicit advantages, or the implicit benefits from its use.

He goes on to explain what I’ve always assumed that the authors of The Cluetrain Manifesto meant when they offered their Thesis 74:  “We are immune to advertising.  Just forget it.”  Even though the authors have recently disavowed the sweep of their claim, it’s consonant with Clemons’ view:

It is frequently argued that the advertising industry will provide sufficient innovation to replace the loss of traditional ads on traditional mass media.  Again, my basic premise rejects this, suggesting that simple commercial messages, pushed through whatever medium, in order to reach a potential customer who is in the middle of doing something else, will fail.  It’s not that we no longer need information to initiate or to complete a transaction; rather, we will no longer need advertising to obtain that information.  We will see the information we want, when we want it, from sources that we trust more than paid advertising.  We will find out what we need to know, when we want to make a commercial transaction of any kind.

Think of the new world Clemons describes as being bound by 2 axes:  proximity of the user to the transaction on one, and value added by the information in the message on the other.  This is why lead gen businesses have worked and branding hasn’t.  It’s also why paid search currently rules the world, although Clemons argues (less persuasively, I think) that it’s fundamentally a form of “misdirection” which will become less valuable. 

In any case, it’s clear why online newspapers are so screwed in this scenario:  they are mired in the southwest corner of the matrix described above, whereas “transactional businesses” such as classified were their cash cows in print.  And even as branding goes, the good stuff–national advertisers–will be touched by so many intermediaries by the time they land in a local daily online that the cpm will be measured in pennies.  So local dailies are left with branding for local businesses.    Good luck funding a serious newsroom with that.

What Am I Missing?

March 20, 2009

If employees of AIG violated civil statutes, the should pay money damages.   If they committed crimes, they should go to jail.   Congress should have nothing to do with any of it, at least not in their legislative capacity.  They had their shot, which would have been to pin a ransom note to any bonus payment that preceded a nickel of TARP money changing  hands.   They didn’t do that, and do-overs are for children under five. 

As Chris Dodd straightened his tie for the cameras with increasingly obvious haplessness, Treasury raised knotty questions.    “Geithner here.  I know I don’t have any..uh…staff or anything, but I think what you guys are proposing may be illegal.  I have a catalytic converter supplier on Line 2, so I’ll have to get back to you.”

And so this truth–however inconveniently– defied  its vanishing pont:  a confiscatory tax which is purely an ass-covering and “signal sending”  legislative gesture is almost certainly illegal.   And shameful.  And positively spineless.  Why not just burn a symbolic derivatives trader at the stake?  While the pain (and the stench) would be more concentrated, the spectacle would be mercifully shorter and  roughly as productive.

It is tempting to identify as the “bigger issue” that our government has already focused far too much psychic energy on a level of lucre that is inconsequential in the grand scheme, and that the AIG bonuses are simply a vestige of financial deregulation run amok during the Bush regime.    It is also tempting to utter the following heresies:  that the bonus recipients at  AIG were, quaintly, ” doing their jobs;” that they likely didn’t get out of bed in the morning hell-bent on destroying anything; and that at least a number of them were not hiding the Mark of the Beast beneath  their $200 haircuts.  

It’s tempting, because it’s all true.  But this would miss the point.  Because the bigger issue is actually, well , bigger:  if we live in a nation  where Congress can take money from people because Congresspeople are  embarrassed, none of us should feel very safe.   Because whether or not there is, there should be a lot of Congressional embarrassment to go around.

It is of course too obvious to point out that all Congressional salaries are “public money.”   What say that anyone who voted in the majority on the 90% tax bill has his or her pay docked for that day?  

Don’t bitch, Congresspeople.  You’re getting off easy.  And you might think twice before spending your paychecks.  I have my eye on you.