Posts from February 17, 2004

Exit

Exit
: Drudge sneaks the exit polls again and says the polls were wrong: Edwards is a strong No. 2 in Wisconsin and Dean is baked bread with jam and butter on it.

: Current estimate on Fox: Kerry 39, Edwards 34, Dean 18. Much stronger showing by Edwards than predicted, much worse for Dean.

If Dean stays, he might as well support Ralph Nader.

Iraqi press monitor

Iraqi press monitor
: The Institute for War and Peace Reporting has a neat and useful feature: a daily digest of news translated from Iraqi newspapers.

Ralph Don’t Run

Ralph Don’t Run
: FoxNews just gave some exposure to RalphDontRun.net.

The coming information collapse?

The coming information collapse?
: Eli Noam, a Columbia professor, writes a most depressing piece for the Financial Times arguing that we’re headed to a market failure in the information economy — and, he says, that holds ominous implications for the economies of countries dependent upon the information economy (like Finland, with 35 percent of exports and 15 percent of GDP coming from one company, Nokia … or like America, eh?).

I’m not sure he’s right about this — I think, instead, that we are headed for a fundamental restructuring from hyperbig to hypersmall. But then I’m no economist, so let’s listen to him [via EditorsWeblog]:

…we need to recognise that the entire information sector – from music to newspapers to telecoms to internet to semiconductors and anything in-between – has become subject to a gigantic market failure in slow motion. A market failure exists when market prices cannot reach a self-sustaining equilibrium. The market failure of the entire information sector is one of the fundamental trends of our time, with far-reaching long-term effects, and it is happening right in front of our eyes.

The basic structural reason for this problem is that information products are characterised by high fixed costs and low marginal costs. They are expensive to produce but cheap to reproduce and distribute, and therefore exhibit strong economies of scale with incentives to an over-supply. Second, more information products are continuously being offered to users. And information products and services are becoming more “commodified”, open, and competitive.

The main result of these factors is that prices for content, network distribution and equipment are collapsing across a broad front. It seems to have become difficult to charge anything for information products and services. The music industry is unable to maintain prices. Online publishers cannot charge their readers, except for a few premium providers such as the FT. International phone call prices have dropped, and with internet telephony will move to near-zero. Web advertising prices have collapsed. Much of world and national news is provided for free. A lot of software is distributed or acquired gratis. Academic articles are being distributed online for free. TV and radio have always been free unless taxed. Even cable TV, at 20,000 programme hours a week, is available to viewers at a cost of a 1/10 of 1 cent per hour. Newspaper prices barely cover the physical cost of paper and delivery; the content is thrown in for free…

The reaction of information sector companies to the price declines is to cut costs, outsource, hedge, diversify and use new processes such as micropayments. They will try to innovate to differentiate their products. But there is a limit to the ability of individuals and organisations to absorb rapid change over a sustained period. Therefore, the main strategy will be to consolidate and cartelise in order to maintain pricing power. As a result, prices and profits rise (as well as media concentration), which will lead again to expansion, entry, and by the same economic logic, to a new price collapse, with a general downward trend in prices.

He’s right that consolidation is a market reaction to this trend (and that’s why government regulation of such consolidation fundamentally mucks with the market). We will see the big get bigger, like supernovas exploding.

But underneath them, we are seeing little guys grow on an entirely different scale.

And that’s where I think the professor is wrong: There is more demand for information and media than ever. The market is not collapsing. Yes, prices are. But so are costs. And so, some of this growing demand will be served in new ways. And the big guys will not be out of the picture.

: So, up from the bottom, there’s Nick Denton creating new media properties at next-to-no cost; he’s profitable already.

There’s somebody using Apple’s Garageband in a garage right now creating a future hit that (as some of us discussed at ETech) will surely be sold at Apple’s iTunes store.

There are local, even mom-and-pop retailers who are now serving the world at eBay.

There’s Vonage piggybacking on the high-bandwidth Internet to kill the gigantic telcos with VOIP.

There will be little guys selling bits of bandwith.

There will be creative people using new, easy, and cheap tools to create very credible TV products.

There will be marketing companies like BlogAds (and Technorati) using the explosion of citizens’ media to create whole new ways to reach and listen to the market.

But this is not mutually exclusive to the big guys. On the one hand, those big guys will find marketshare — not huge amounts, just irritating amounts at first — taken by these little gnats flying around their heads.

But the big guys will still control broadcast, cable access, theaters, retail, and other ways to get the benefits of volume. If they’re smart — and they are — they will benefit by finding new and far less expensive sources of content from all these new, little guys; they will take some of the successes of the little world and bring them to the big time. The big guys will also benefit from learning new, cheaper ways to produce what they produce (look at how FoxNews saves a fortune vs. the other news operations by just eliminating produced pieces).

No question that the information economy is undergoing fundamental change. It’s too soon to predict exactly what that change will bring. But it’s not too soon to try to figure it out and join in.

More than words, people

More than words, people
: G’bless Google for bringing advertising revenue — and, far more important, credibility — to weblogs and citizens’ media.

But Google is just the first step in the value chain.

For Google treats us as if we are just a collection of our words and it acts on the coincidences that occur in them: His page mentions “hosting,” so let’s put a hosting ad on it.

But we are more than coincidences and algorithms. We are people who expose our thoughts with our words and our relationshps with our links.

As Tim Oren said after ETech:

Links are not just citations. They are gestures in a social space, parts of conversations or other interactions. There’s an inherent value in looking at the dynamics of the record as it is created.

This inspired Dave Sifry, founder of Technorati>. Sifry said:

I’ve been giving a lot of thought to Tim Oren‘s succinct comments that links are a new kind of social gesture, too. I think that’s the most succint way of describing the phenomenon that we’re tracking at Technorati – behind every link, behind every post, behind every weblog is a person (sometimes more than one), and that person is making decisions on what to post and who to link to, and the linking process itself is not just a proxy for attention (as the Google guys understood) but it is a new form of social gesture – definitely something conversational, more public than email, more accountable than BBSes or Usenet News, more transparent than writing a letter to the editor. I’m still noodling over this, what the underlying metaphor is that we’re discussing…

Right. And there is a much deeper relationship to discover and forge here.

Henry Copeland’s BlogAds proves that. Look at this success story from a Congressional candidate who invested $2k in Blogads and made about $50k. That worked because it was more than a coincidence of words but was instead the building of a relationship.

That’s the next step in the value chain.

Now watch what Sifry invents next and there’ll be more steps beyond. Look at what he did with blog links to Amazon products and now imagine what a marketer could do with that: You want to predict the buzz and sales on a product, look at Sifry’s product cosmos page. You want to sell more books, track back to the blogs that link to these products and you’ll find the influencers who are talking about your products.

That’s another step.

And there are many more to come.