Posts about big

They’re meltinggggg

Chris Anderson chronicles and calculates the meltdown of big media a few days ago:

Down:

* Box Office: down by 7% this year (tickets per capita have fallen every year since 2001).
* Newspapers: circulation, which peaked in 1987, is declining faster than ever and is down another 2.6% so far this year.
* Music: Sales are down another 5.7% this year; although digital downloads (still just 6% of the business) are climbing nicely.
* Radio: down 4% this year alone, continuing a multi-decade decline.
* Books: down by 7% in 2004 (but see comments below for discussion)

Mixed:

* DVDs: sales growth is slowing dramatically, from 29% last year to single digits this year.
* TV: Total viewership is still rising, but as channels proliferate and the audience fragments the rating of the average show continues to decline.
* Magazines: Ad revenues are up a bit although the number of ad pages is flat (they’re charging more per page). Circulation is also flat, while newsstand sales are at an all-time low.
* Videogames: it’s the final few months of the current generation of consoles, which tends to the trough of the buying cycle. Sales were down 20% in Sept, but will probably pick up by Christmas with the launch of the Xbox 360.

Up:

* Internet advertising:
–Banners: Up 10% this year
–Keywords: Google revenues up 96%

Saving journalism isn’t about saving jobs

Every time we hear about another cutback in newspapers — and there are plenty of them these days — we automatically hear the notion that journalism jobs must be saved to save journalism. I’m afraid it’s time to challenge that assumption.

Saving journalism isn’t about saving jobs or even newspapers. In fact, the goal shouldn’t be just to save journalism but to grow it, expand it, explode it, taking advantage of all the amazing new means to gather and share news we have today.

Start with the real goals, which are informing society, keeping power in check, improving people’s lives, making connections (right?) and then ask what the best ways are to do that today. After that, you can ask what the role of journalists and newspapers should be.

Maybe we need fewer people in newsrooms and need to take money to hire a lot more people outside newsrooms to gather more news. Maybe we need to put resources into training those people or vetting their work. Maybe we simply need to recognize that news is no longer a monopoly business that can operate at monopoly margins and we need to prioritize where we put our resources. Maybe we need to look at online as a primary source of current news and at newspapers as a source of analysis and perspective and unique reporting. Maybe we can’t support daily newspapers everywhere. Maybe some of those journalists will become independent publishers (see: Debbie Galant at Baristanet) and newspaper companies will run ad networks.

: There’s a great discussion going on in Philadelphia about saving the Daily News and that’s why I’m asking these questions: What does it mean to save it?

It started with Will Bunch writing on the Daily News blog Attytood. Philly blog king Karl Martino picked this up and sent email to folks he knows — bloggers, journalists, educators — suggesting that we get together to help explore this with Bunch. And the Philadelphia Inquirer’s blog prince, Dan Rubin, weighed in just as cutbacks were going on in his newsroom. Bunch’s opener was wonderful. Yes, he starts lamenting the loss of journalists’ jobs — of course; they are his friends and his colleagues and the people who produce his paper — but then he goes on to see the necessity of a different, a bigger future:

As I write this, the Daily News – where even before this fall the newsroom, with its depopulated desks, looked like a neutron bomb had struck, and where management chose to not even replace three staffers who died in 2004 – is nevertheless losing another 25 journalists, or 19 percent of the total….

It’s human nature, I guess, but the first inclination is to blame somebody, and there’s plenty of blame to go around….

But assigning blame won’t save the Philadelphia Daily News. Besides, much of the blame really lies with us, as journalists. We have, for the most part, allowed our product to become humorless and dull. In an era when it seems most people truly will be famous for 15 minutes, newspapers have stubbornly avoided creating personalities…or having a personality, for that matter. In a pathologically obsessive quest for two false goddesses – named Objectivity and Balance – we have completely ceded the great American political debate to talk radio, cable TV and the Internet, where people have learned that politics is actually interesting and even fun when people are allowed to take sides.

We prefer to talk down to the public rather than talk to them. Even at our very best – and there are many, many talented newspaper journalists in America – we are more likely to aim at wooing contest judges than at wooing new readers. And we have a knee-jerk tendency to defend our narrow world of messy ink printed on dead trees, when instead the time is here to redefine who we are and what we do.

We are, and can continue to be, the front-line warriors of information — serving up the most valuable commodity in a media-driven era. But that means we must be the message, not the medium, and so we must adjust to give consumers news in the high-tech ways that they are asking for, not the old-tech way that we are confortable with.

If we don’t change, we will die – and it will be our fault.

It defies all the conventional wisdom, but I believe that the Philadelphia Daily News can be an agent of that change – and not a victim. In fact, in seeking to destroy the Daily News in a death of a thousand cuts, our corporate masters in San Jose have, unintentionally, liberated us – because having nothing left to lose is another term for freedom.

Because with a staff that is now too small to cover every news story, we can learn how to cover just the stories that truly matter to people, and cover the heck out of them….

Hence, the “norg.” “Norg” because we need to lose our old identity with one dying medium, newspapers, and stress our most valuable commodity, the one that we truly own, and that is news…without the paper. Thus, we must now be news organizations, or “norgs.” …

Everybody up off your feet and give Bunch a standing O. That is exactly the kind of attitude and imagination and determination that will, indeed, save journalism.

This is what the Online News Association meeting should have been about. This is what journalism school must be about.

This isn’t about circling wagons defensively anymore. Nor is it about cutbacks. Nor denial. Nor resenting the new guys. This is about invention.

: Meanwhile the shock therapy goes on.

A major stockholder wants Knight Ridder to put itself up for sale.

Goldman Sachs says it’s a crappy year for newspapers:

I’s official: 2005 will be the newspaper industry’s worst year since the last ad industry recession. And things aren’t looking much better for next year either, according to a top Wall Street firm’s report on newspaper publishing. “Sadly, 2005 is shaping up as the industry’s worst year from a revenue growth perspective since the recession impacted 2001-2002 period,” says the report from Goldman Sachs, adding a warning that meaningful growth in 2006 is “very unlikely.”

The Wall Street Journal says the failing newspaper industry will see consolidation (free link):

Along with steel, autos and airlines, daily newspapers would seem to be yet another mature U.S. industry that is prime for consolidation. Analysts are increasingly pessimistic about the prospects for growth as advertising revenue continues to move online. Stocks of many newspaper companies now trade near multiyear lows….

Newspapers still dominate local news and advertising in many markets. That could attract a company such as Yahoo, which has moved increasingly into original content and would like to develop its local reach. Meanwhile, Google Inc. has expressed interest in entering the classified-ad market, where newspapers have deep relationships and continue to play a dominant role. Knight Ridder is part-owner of CareerBuilder Inc., the online classified Web site that competes with Monster.com….

But Knight Ridder’s larger papers are the ones buyers are most likely to balk at. These papers, like those at many newspaper companies, are dragging down the company. Big-city papers have taken it on the chin as urban advertisers and readers have defected to the Internet. Knight Ridder has distressed papers in Philadelphia, Miami and San Jose, Calif. Circulation in those markets is falling, and big advertisers such as department stores are consolidating.

Lately, some of the most successful newspaper companies have stayed in the newspaper business by getting out of it. Washington Post Co. and E.W. Scripps Co., for instance, have both diversified into other industries….

If I owned a newspaper, I’d sell it, wouldn’t you? If I were Yahoo, would I buy it? Maybe only Yahoo and Google could consolidate the advertising marketplace to make big media work still.

I’m not going to complain about media consolidation when all this happens (though I know plenty of others will). What we’re seeing, I’ll say again, is just the dinosaurs huddling against the cold of the internet ice age. The poor, old, lumbering beasts have to stick together.

For the growth isn’t going to be on the big side. The growth is going to be on the small side, in new, ad hoc networks of content, promotion, advertising, and trust…. networks that could spring out of the one that is swarming around Bunch’s post, networks that care about news.

The goal is to save daily news, whether or not you save the Daily News.

The podcast of the crowd

One of my favorite podcasts, Schlaflos in München (Sleepless in Munich), just turned 200 (episodes, that is) and so Annik Rubens turned her show over to her audience. It’s pretty amazing: On a day’s notice, all sorts of German podcast fans recorded MP3s and phone messages and they made up the show: the podcast of the crowd. It’s also amusing to note that all the contributors is male. Annik is the podcast queen.

: A listener of hers also found this podcasting cartoon (don’t worry: it’s in English).

Dugg

It’s great news that Digg got venture funding: $2.8 million from Omidyar Network, Marc Andreessen, and Greylock partners. The wisdom-of-the-crowd news site is rivaling /. in buzz and traffic-spiking. They’ve redesigned smartly. And I’m a fan of their spin-off podcast, Diggnation (they’re soon to go to Japan to make a show). I told the Online News Association that they should have invited these guys to their confab to learn what the future of news is really about.

: And by the way, Digg cofounder Kevin Rose is a nice guy. I was supposed to meet up with him at Web 2.0 because I wanted to and because my son is a fan; he’s the one who turned me onto Digg (see Jake’s Diggs on his sidebar). My son couldn’t care less about any of the celebs I met during my career. He wanted me to meet Kevin and I blew it. So Kevin just sent Jake an autograph. Thanks, dude.

: While we’re digging, here’s one more relevant tidbit: The Diggnation guys said that as soon as iTunes started promoting vlogs, the video version of Diggnation immediately racked up more downloads than the audio version.

There is a ton of pent-up video demand out there online.

Who owns the wisdom of the crowd? The crowd.

There are lots of issues unsettled around who owns what in our new online world where our whole is worth a heckuva lot more than the sum of our parts.

Who owns my actions and attention and trust… but me? Who owns the wisdom of the crowd… but the crowd? And what about those who enable the crowd to be so smart… what do they own?

And is “own” the right verb? Or is it “control?” Or is it all just “sharing?”

This is inspired by Fred Wilson’s and Brad Burnham’s event about peer production and also by my hissyfit about my Yahoo account, below. I’ll try to come down to earth from the former and rise up from the snarkiness of the latter and discuss this on three levels: the individuals, the collectives, and the enablers.

Before I start, it’s important to say that lots of people are way ahead of me here: Seth Goldstein, Marc Canter, Steve Gillmor, Mary Hodder, and many more.

On the individual level, I want to own or control my stuff, don’t you? That is a given that too many companies and institutions forget. Thus my first law of media and life: Give us control and we will use it. The corollary: Don’t give us control and you will lose us.

So I want to control the things I create: my content (this blog); my identity (my addresses); my collections of neat things (my bookmarks); my analysis (my tags); my reputation (my eBay rating), my behavior (my history, my clicks). What does control mean? I want to be assured that somebody else can’t muck with or kill it. I want to be able to use it wherever I want — and that means I need it to be portable.

I also want to control the things I consume: my content (obviously, I pick the sites, shows, words I take in); my advertising (I’d like transparent targeting… and so should advertisers, because it would be a helluva lot more effective).

Other players may try to get in the way — keeping me from my stuff, or pushing me to this page instead of that, or showing me this ad because they get paid to do so — but, again, if I ruled my world, this is what I’d want. Less interference means less friction means less inefficiency means greater value… for everybody.

That is a hard lesson for companies and institutions built on centralized control to learn. But it is a lesson of our new economic order.

Now to the collective: The thing that’s new about this new world is that we don’t just consume. In fact, the act of consumption is now an act of creation. There are so many examples. When I search on Google, I am finding stuff for me but when I click, I am adding to the wisdom of the crowd that makes Google more effective for every searcher who follows me. When I create my iTunes playlist I am also programming my personal iTunes radio station, which I can share; that’s still individual. But when my listening habits join in at LastFM, I’ve now contributed to a collective and that collective pays me back with recommendations (hear Fred on this). When I consume content and want to save it on Del.icio.us or other such services, that’s an individual act. But the tags we create together yield amazing wisdom of the crowd that can be useful in helping people discover content, in organizing the web around topics again, in improving search results, and even in improving ad performance. See also Tagyu, which takes the tagging, categorizing, organizing wisdom of the crowd to tag and organize other content. There’s a lot of value there.

So who owns that collected wisdom of the crowd? I’d say the crowd does. Others merely borrow it if they continue to have the trust of the crowd and if they pay dividends back to that crowd. And if those others try too hard to control that wisdom, to limit its use and the sharing of it, then they not only reduce the value of it — under the theory (and it’s still a theory) that a smaller crowd is less wise — but they also risk turning away the crowd that creates this value. Here’s Om Malik on this very point:

I wondered out loud, if this culture of participation was seemingly help[ing] build businesses on our collective backs. So if we tag, bookmark or share, and help del.icio.us or Technorati or Yahoo become better commercial entities, aren’t we seemingly commoditizing our most valuable asset – time.

I don’t think it’s our time we’re contributing but, indeed, our wisdom: the way we think, the way we look at the world: That’s what’s really valuable, for it allows others to speak directly to us in our own language. Om continues:

We become the outsourced workforce, the collective, though it is still unclear what is the pay-off. While we may (or may not) gain something from the collective efforts, the odds are whatever “the collective efforts” are, they are going to boost the economic value of those entities. Will they share in their upside? Not likely!

Well, but we all get a better search engine in Google thanks to Google collecting our wisdom, no? Google then creates value on top of that in the form of highly targeted advertising and we don’t share in that. In other words, besides getting better searches, do we and should we also get money? Attention Trust would say that we should get value from our attention (though I’ll admit I still haven’t fully figured out their gospel). More Om:

Take Skype as an example – it rides on our broadband pipes, for which we a hefty monthly charge. It uses our computers and pipes to replace a network that cost phone companies billions to build. In exchange we can make free phone calls to other Skype users. I have no problems with that. I had no problems with Skype charging me for SkypeIN and SkypeOUT calls as well, for this was only a premium service only to be used if and when needed.

However, now that it is part of eBay, I do cringe a little….

It’s still just economics: an exchange of value. But the value now comes in many forms, not just money.

Which brings us to the enablers: Google, Del.icio.us, Yahoo, eBay, LastFM, iTunes, CraigsList, Wikipedia, Skype, Technorati, PubSub, IceRocket, and on and on. This is the peer production we explored at the Union Square event (and if you dare, you can read the whole transcript here.) I learned a lot at that session and it’s only now sinking in.

The question is: What do the enablers deserve for enabling? And what do we as individuals and as members of the collective deserve for creating the wisdom? What do we owe each other in this exchange of value?

Or the real question is: How do we not screw this up?

There are so many ways we can screw it up. Spam, hate, stupidity, and control can do that. But if everyone behaves the right way, then we create great whole larger than the sums of their parts; every capitalized entity above proves that. But we’re still trying to figure out what the rules are, what “the right way” means.

The truth is that we’re doing nothing less than creating a new society and we’re still figuring out what the rules and economies of that society are.

As Yale’s scary smart Yochai Benkler said at the Union Square event:

A whole set of other behaviors that have grown up in the household, in friendships, in communities, the motivations that they capture, the signals that get people to explain what it is that they desire, how they desire, what they want to do, what they’re trying to do, all of these things are suddenly becoming integrated into the core economic activities of the most advanced economists, and all of the players inside of these economies need to begin to think. It’s a new set of social competition. It’s a new set of opportunities. It’s a new solution space for ways to solve production problems. And we need to start learning how to live with, use, provide platforms for, use the outputs of without undermining this new set of social cultural practices.

In short: Life is being integrated into the economies of developed nations. It’s nothing less than that.

Some more lessons from that day:

Tom Evslin said that we are proving to have a build in “urge to cooperate:”

Anthropologically we have a much greater urge to cooperate and to do cooperative things than we knew that we had as a species. [For example] the help forums that grow up around every possible service where there’s a bunch of volunteers basically providing export because they want to. I think what happened is is that we assumed that people only did things that they got paid for doing…

But, again, we get paid in other ways: In getting knowledge back, in knowing we are building something together, in feeling a sense of empowerment and ownership, in just feeling good.

Evslin also said that if you’re going to try to build a large network — a community, collective, society, whatever you want to call it — on top of this phenomenon and using the infrastructure that technology now permits, then you’re best off building the largest network possible first without regard to profit, which will limit yourself and thus limit the network you are building.

I think lesson one is don’t try to build a business and network at the same time….

Let’s forget Reed’s Law for a moment because Metcalf’s Law is steep enough, that everyone knows that Metcalf’s Law says use networks that increase value, and everybody forgets the converse, which is small networks have no value. And so what value is there to the first few users in joining a small network. Almost none. And so you can’t extract anything in return. You can’t put friction in the way of people joining a small network. You have to make it incredibly attractive and easy. That’s the secret of Skype’s success. They only had distribution experience. Then they used that, and they didn’t introduced Skype in and Skype out because it would have been a distraction until they reached critical network mass.

So if you build openly to build as big and as fast as possible, then you’ll be in the best position to figure out where the value for you is. (And, yes, that sounds like Bubble 1.0 but the difference now is that you can build with less investment; you can build as so many of the companies listed in this post have, with very little.) So… Google built a collective search engine to build an ad company. Skype built a collective phone company to sell to a commerce company. Others (I’d list Technorati, Del.icio.us, and Craig’s List here) are still trying to figure this out.

Tim O’Reilly talked about the empowerers and how they succeed under the Evslin model by not trying to hold onto too much as you build:

A defining characteristic seems to be how much is the value of the system you try to capture. You know, if you look at something like Ebay or Google, even though they’re very, very successful companies, they’re actually pretty generous in creating value for people outside the company, and you know, versus say if you look at sort of the traditional walled garden kind of company, there’s really not that opportunity for creating value. You know, Pierre likes to point out how many people make a living on Ebay and how the social goal of getting people to trust each other is intrinsic to the value of the system at creating an economic opportunity for people.

To which Mark Pincus replied that eBay created a wall around its reputation system, not allowing people to export and use their trust ratings, and that’s screwing it up.

There was much discussion about the point at which things do get screwed up: Somebody grows by being open. Then they want to stay on top so they exert control (getting greedy about trying to keep you in or about money or information). When they exert too much control, then competitors can gang up by being more open (regaining the advantage that made the big guy big) or the public the big guy serves can desert.

All of which is to say that there are values that must be shared to succeed. But we’re still not sure what those values are; we’re still scribbling down Hammurabi’s Code. Once again, we are building a new society here.

I believe we start with the notions that:
* We all want to control our contributions.
* We all want the community to benefit if we in turn benefit.
* We expect mutual trust in the forms of transparency and honesty
* And we all — individual, collective, enabler — find uncivil behavior (spam, fraud, hate) unacceptable.

But there’s one more fundamental notion that informs this new society, a notion that big companies and institutions invariably forget because they were build in the old order:

This is no longer a centralized world, a world controlled by those institutions. This is a decentralized world, a world controlled by us.

And if you try to take control away from us, you will lose. It used to be that you could take control away from us and we had nowhere to go. But in this post-scarcity world, we can always go somewhere else for content or information or service. There’s always another news story, always another email service, always another search engine. Thus my first law, once again: Give us control and we will use it. Don’t and you will lose us.

Revisionist curmudgeons

Predictably, the backlashers are trying to make their marks and get their linkjuice by arguing that this web/citizens/blog thing just ain’t what it’s being blown up to be. But so much of the antihype is even sillier than the hype.

Take the much-linked “Amorality of web 2.0″ by Nicholas Carr, “named one of ‘ten people in business to watch’ by American Airlines’ American Way magazine.”

Amorality is such a strong word.

Like it or not, Web 2.0, like Web 1.0, is amoral. It’s a set of technologies – a machine, not a Machine – that alters the forms and economics of production and consumption. It doesn’t care whether its consequences are good or bad. It doesn’t care whether it brings us to a higher consciousness or a lower one. It doesn’t care whether it burnishes our culture or dulls it. It doesn’t care whether it leads us into a golden age or a dark one. So let’s can the millenialist rhetoric and see the thing for what it is, not what we wish it would be.

Well, guns are just a technology that doesn’t care, either. Technology is a technology that doesn’t care. Hell, printing presses are a technology that doesn’t care. But does anyone care to argue that Gutenberg didn’t change and better the world with his invention? Silly.

And this:

The Internet had transformed many things, but it had not transformed us. We were the same as ever.

Hell, the remote control changed us. And the cable box. And the VCR. And the Interstate. And the microwave. And the assembly line. And the computer. You bet, the internet changed us and our possibilities.

But here’s his real problem: Carr can’t stand the rise of amateurism. Curmudgeons are resistant to change because they don’t want to be dislodged from their curmudgeonly pulpits:

The promoters of Web 2.0 venerate the amateur and distrust the professional. We see it in their unalloyed praise of Wikipedia, and we see it in their worship of open-source software and myriad other examples of democratic creativity. Perhaps nowhere, though, is their love of amateurism so apparent as in their promotion of blogging as an alternative to what they call “the mainstream media.”…

He goes after the quality of two crappy Wikipedia entries and with them rejects the whole notion of amateurism. Except I could show him many articles in my local papers that are crappy. Does that negate the value of all newspaperdom and all journalists? Does Judy Miller. Silly.

Of the professionals, he says:

They can hire and pay talented people who would not be able to survive as sole proprietors on the Internet. They can employ editors and proofreaders and other unsung protectors of quality work. They can place, with equal weight, opposing ideologies on the same page. Forced to choose between reading blogs and subscribing to, say, the New York Times, the Financial Times, the Atlantic, and the Economist, I will choose the latter. I will take the professionals over the amateurs.

But I don’t want to be forced to make that choice.

And nor should you have to. I’m one of many who have been arguing that the professionals and the amateurs should be working together — especially as the revenue that has supported the professionals is nosediving because the customers — aka, the amateurs — reject their products and the advertisers flee.

But Carr’s real issue is unemployment for the formerly professional professionals:

And so, having gone on for so long, I at long last come to my point. The Internet is changing the economics of creative work – or, to put it more broadly, the economics of culture – and it’s doing it in a way that may well restrict rather than expand our choices. Wikipedia might be a pale shadow of the Britannica, but because it’s created by amateurs rather than professionals, it’s free. And free trumps quality all the time. So what happens to those poor saps who write encyclopedias for a living? They wither and die. The same thing happens when blogs and other free on-line content go up against old-fashioned newspapers and magazines. Of course the mainstream media sees the blogosphere as a competitor. It is a competitor. And, given the economics of the competition, it may well turn out to be a superior competitor. The layoffs we’ve recently seen at major newspapers may just be the beginning, and those layoffs should be cause not for self-satisfied snickering but for despair. Implicit in the ecstatic visions of Web 2.0 is the hegemony of the amateur. I for one can’t imagine anything more frightening.

So Carr is really saying two things: He is saying that the professionals are better than the amateurs because they are paid. I don’t buy that. And he distrusts the amateurs, which is saying that he distrusts the public those professionals supposedly serve. Which is to say that he distrusts us. Well, distrust begets distrust. So the feeling is mutual.

It’s quite simple, really: It’s all about supply and demand. When distribution was scare and made content scarce, it promoted the creation of a professional media class. Now that neither is scarce, the economics are changed. The market is free. Lots of content is free. There is more content. I believe that there is thus more good content. So media must rethink their business models, their value, their relationships to the marketplace. And I believe that is good. Carr believes disruption is amoral. I believe stagnation is unnatural.

: And now we move to Jeff Nolan, a VC who takes two posts to argue against my “kumbiyah crap.” In the first, he sums up what I said at the generally insufferable BlogOn this way:

Jarvis’ position is that companies should go out and find all the communities that exist around their product and let the influencers in that community service your customers, design your products, and so on. I’m not making this up by the way, that’s what he said.

Yes, I did. And if you’re lucky enough to have the Treo, I said, and your customers answer your customers’ questions and help sell your product and help design your next version, only a fool would pass up these opportunities to have a better, more engaged, more efficient, more profitable relationship with your market. But many fools do. Of course, the company still has to make the final decisions in all these areas, because it’s their money at risk, it’s their product, it’s their brand. But the closer you get to your customers, the better. Right? I said in his comments:

Well then why the hell do companies spend untold fortunes on focus groups, surveys, market research, product testing, and all that? To hear what customers want. When customer go to the effort of tellling you, why not listen? If it’s easier for them to tell you, why not help them? If they have good ideas, why not embrace them? If they show you what’s wrong with your ideas, why not learn? It’s that simple. If you think that’s crap, fine. I think that’s smart business.

In his next post, he argues against the notion that companies should be transparent. Yes, we all love to give our money to people who hide, lie, cheat, and steal. This is curmudgeonlliness for the sake of curmudgeonliness.

: Next to the Marcom blog, which cautions McDonald’s — the tonedeaf company whose clueless droning drove me out of BlogOn — against fraternizing with bloggers and uses me as the cautionary tale:

Let’s look at the famous ‘Dell Hell‘ case from Jeff Jarvis. Dell did eventually respond to Jeff, but the out-reach by Dell didn’t really save them any face. But what if Dell had said to Jeff, “you’re right, we’ll send you a brand new laptop and refund a portion of your original purchase price.” How many bloggers would start posting, “Hey my Dell laptop sucks too!” Then what does Dell do? Only refund the most influential bloggers? Then you would have every personal blogger screaming favoritism.

And I replied in the comments there:

Their policy should be every customer a satisfied customer. My policy is if I buy something for a few thousand dollars it better damned well work and if it doesn’t I want my money back. Has nothing to do with blogging or preferential treatment. It really is just about plain, old customer service. And if you lose sight of that, you’re lost.

What all these good people lose sight of is that they’re not dealing with bloggers. They’re dealing with people. Customers. Us. We’re just people who are speaking as we always have but now can be heard. If you don’t listen, you lose.

: LATER: Jeff Nolan responds.

: LATER STILL: Tim O’Reilly responds to Carr:

His method is what Plato described thousands of years ago as sophism, “making the better appear the worse,” not engaging in argument about the substance of what someone else is saying, but framing the discussion with straw men that can easily be demolished, arguments designed to win points rather than elicit truth.

For example, Carr focuses his argument against “collective intelligence” almost entirely on Wikipedia, ignoring all of the other examples described in my What is Web 2.0? article. And even in his discussion of Wikipedia, he makes the now-expected attack on the quality of entries with a few cheap shots rather than substantial analysis.

: DAYS LATER: Umair Haque does far better than I did at demolishing Carr’s argument.

The value of networks of trust

The most valuable and necessary networks of the next economy will be built around trust.

I just had lunch with my VC friend Ed Sim and I was boring him with my view of the future of advertising. The days of one-stop shopping for a mass of “consumers” will soon be over and advertisers will be faced with the opportunity and challenge of putting together smaller, more targeted, more efficient networks: the mass market replaced by the mass of niches. The opportunity is greater value. But the challenge is far greater effort and cost: It’s not going to be easy to put together and manage these small and ad hoc networks.

So I have been arguing that a good way to do this — once the infrastructure is in place — is to rely on human networks of trust: The advertiser or its agency can’t go and find and manage every damned little site (aka audience aggregator, aka community), so they choose a starting point: They trust me and my site (let’s say it’s a big-media site with a sales staff), and I trust you and your site (let’s say you’re a popular blogger), and we trust perhaps one more degree of separation out (let’s say those are your friends who write about the same things in more specialized but related ways). But if your friend messes up and you don’t fix it, then I don’t trust you anymore and I’ll find a new friend to trust — or else the advertiser won’t trust me anymore.

This way, we get to scale while distributing the work and the benefit with the trust. So in the end, the advertisers benefit by putting together the best networks at the lowest cost and effort and risk. And the participants of the networks benefit by attaching themselves, like atoms to molecules, to the highest value buys. (Oh, how I wish this blog had a whiteboard.)

We need some such way to operate in the age when small is the new big.

Then Ed and I were talking about similar challenges for investors and entrepreneurs in the small-is-the-new-big age: Today, it’s much, much easier to start a new company on far, far less capital than it used to be. But this also means that it’s easier for someone else to start a competitor. So speed is more important than ever: You have to develop your business as quickly and nimbly as possible to build your product and then perfect it after it’s out so you quickly establish your value. This means that the VCs need to be able to act just as nimbly to invest as quickly as possible. The good news is that the investments are smaller and the risk is thus less. But the bad news, of course, is that it costs more effort and attention to manage many more smaller investments and it’s hard to act quickly at scale. Early bird, worm, and all that.

So I wonder whether a network of trust is a solution here, too: The VC with the money trusts you to bring in deals and you trust someone else to bring in more deals and whoever brings in the most value gains the most value and grows biggest fastest. The work, risk, and benefit are all distributed.

In a way, I wonder whether that’s what VCs are doing by blogging: They’re going open-source, sort of, to state their interests and bring in more of the right deals more efficiently. But it’s still not efficient enough for a world of companies that need six figures instead of eight to succeed. And there needs to be a means to share benefit with the trust.

I think it can work in news, too: If I trust Sally’s reports on my school board more than Joe, I’ll send traffic her way and she’ll make more money on advertising from the newspaper (see Pincus’ world, below) and maybe she’ll send traffic my way for my reports on the town council if she trusts mine, too.

Where else?

: All of this is my clumsy, imprecise, philosphy-not-math-major’s re-expression of the discussion about Reed’s Law vs. Metcalfe’s Law vs. Oren’s Doubts vs. Evslin’s Postulate, none of which I understand above a kindergarten level. I was just trying to get my head around Reed’s Law, which Evslin explained to me on a napkin, when suddenly he and Wilson and Oren are abandoning it. (Cue Tom Lehrer’s New Math.)

I’ll try to summarize this badly: Metcalfe’s Law says the value of a network increases as more nodes are added to it (i.e., one fax machine is worthless, two fax machines are each work a lot more, a large network of fax machines is truly valuable). Reed says (I think) that if a network includes social sub-groups, it grows exponentially faster. All the wise gentlemen listed above are now debating whether the math works and I leave that to them.

But to me, the humanities guy with the damned liberal arts degree, it’s obvious: A network built on trust is clearly more valuable than a network built on technology.

Repeat after me, after Butterfield, after Mayfield, after Soylent Green: Web 2.0 — It’s made of people. It’s not about controlling scarce assets in a post-scarcity world. It’s about trust.

And it’s hard to chart trust. It’s hard to give it a metric. It’s hard to give it a market value. But it’s damned easy to lose.

: UPDATE: Here’s what Ed took from lunch (besides the check…).

And here’s Tim O’Reilly on both.

If he were Rupert….

Mark Pincus tells Rupert Murdoch what to do… and gives good advice, telling him to buy Craig’s List.

Only problem is, he sees newspapers as an asset and Rupert owns only one in America, last I checked. And, besides, I’m not sure how much of an asset newspapers really are in the world Mark pictures. He’s still thinking about centralizing content and advertising when they will inevitably become decentralized. Still, he’s giving good advice to any newspaper company in the country to reinvent itself. He’s suggesting ways to grow in the right places (content, community) and shrink in the right places (cost).

I don’t agree with his prescription for classifieds, because I think classifieds will become distributed — they will live wherever they live on the internet and they will be found via microformats, tags, and search. The market will become more efficient and the middlemen will choke. So middlemen will be the last people to change the business model. Says Mark:

i would work on using my newspapers to drive my online classifieds business. offer free liners (that’s the small text classifieds that use weird acronyms and are unreadable anyway) as an incentive to post online – ie. you get free newspaper placement for giving us the gift of your free online listing. maybe you can charge $5 but doesnt really matter. then i’d go for all color print classifieds for my cars and housing as that’s way better for consumers than bothering to go online – ie. a place the paper still wins.

They should only wish.

But then Mark moves onto content:

i would also transform my papers to more of an about.com model where most of my editorial/writing staff are part timers and a lot of my content is coming from other sources – ie. drastically lower my cost of content creation while increasing community involvement.

Right on.

And then advertising:

i would turn my ad people into reps for local media, both offline and online. i’d use myspace as an anchor tenant to create critical mass in local online page views to sell locally – ie. i go to philly.com and anyone else with philadelphia specific traffic and sell it as a package.

Right. The hyperlocal distributed ad network.

Multimedia?

oh, how about using my fox tv network as an inducement to get people to start creating video blog content for me for free?

The key is that you won’t make money by standing in the way, creating friction, making markets inefficient, the way newspapers and other media have. In the future, you’ll make money — less money, but the only money to be made — by enabling people to do what they want to do without the friction, in a very targeted and efficient way. And you’ll be involved in those transactions only if you truly help, if you’re needed — not if you interefere, not if you’re just a toy. That’s why Craig’s List is so valuable: Craig gets out of the way.

Mark reveals some of the research he did for Tribe, when he found the fleeting value of Friendster, which people saw as a toy while they saw Craig’s List as a utility.

myspace does risk the same extinction as friendster if they fail to convert the hours of play to minutes of utility….

so i will predict right here that if rupert and his team manage to create craigslist out of myspace they will have a massively valuable property. and i say good luck to rupert. he’s clearly having more fun than me!

In the end, what Mark’s really saying is that Rupert’s value is the power of promotion. OK. But note well that Fox TV took less time to build than, say, CBS… but Myspace took a helluva lot less time to build than Fox. Promotion isn’t the real value. Relationships are. Trust is.