Addtention economy

I came acros this interesting article about the value of clicks on adds on the Internet. Since advertising is beginning to look (Seem) like the holy grail to keep the Internet free for use it is amazing how little data there is on how and why people click on adds and what the real effects are. The following result out of the study is interesting:

What did we learn? A lot. We learned that most people do not click on ads, and those that do are by no means representative of Web users at large.
Ninety-nine percent of Web users do not click on ads on a monthly basis. Of the 1% that do, most only click once a month. Less than two tenths of one percent click more often. That tiny percentage makes up the vast majority of banner ad clicks.

Seems a lot of research is needed to really understand how the relation between audience, click rate and real economic effects will be clear.

Long tail, small earnings?

Struggling producer? In a post from “The long tail” a small movie director has written an interesting e-mail to Chris Anderson.

But the reality at this time for me and my company is that I need to find multiple large national distributors if I hope to even come close to making a living at this game. And I need to produce fresh content on a reasonably frequent basis. In short, I am a much smaller and more struggling version of the giants that have preceded me.
Your Long Tail theory is a basic and profound truth that I happily embrace AS A CONSUMER. But as a producer and creator of Long Tail content it is basically spelling out my doom. Other than your book examples which are still basically about VERY LARGE entities and aggregators, I am finding very few self supporting examples of independent Long Tail producers.

The general idea of the e-mail is that the long tail with niche content is nice for the consumer but that it is hard for the producer. Fundamentally there are only a few customers in the long tail so it is hard to make money for producers. Since when you produce it takes almost the same amount of time and money to make a blockbuster than to make a niche product. It is a great niche product when you have three really dedicated fans but how much money will you make.
Most of the success stories in the long tail are from distributors for whom it does not matter what item they sell since their business model is based on the total amounts of all products sold together (in the end they are all bits on a platter). And fact is that due to small world effects it is the big “hub-distributors” that are getting bigger and bigger. This might mean that in the end we end up with only a few and powerful distributors since they are the only one with a large enough audience to make your niche product profitable. Somehow that has a familiar smell to it…

The Times are changing

Isn’t it funny how more and more things are being paid for by advertising while at the same time we all get more and more irritated by advertising being everywhere.
The New York Times have stopped their paid subscription service in favor of free access. This is a subscription service that made them 10 million dollar a year. They now feel that they can make more money on advertising.
Somehow I sometimes get an uneasy feeling about all those things that are being paid by advertising money. Somehow I still think this business model has it’s limits. Let’s do a thought experiment:

Imagine that more and more companies are making money by mixing ads with the service they deliver to us. OK, let’s be really wild: imagine that all services are being paid for by advertising. Would that not be great: all services are free, all we have to do for it is accept some adds (and many we can block them?).

Problem is: who is going to pay for all these ads. The companies that make their money by selling ads together with their services will of course not be advertising, at least they will advertise less than they sell ads or they will lose money. So if everybody will give their services away for “adtention”, who will pay for the ads?
I can understand the business model of Google search. Since through the search I am implying what I am interested in I can imagine that an ad on that subject is worth money. But only if the one advertising his services is getting paid cash when he sells his product or service. When the advertiser is also getting paid by ads than it is starting to look like a pyramid scheme.
And we all know where these end….

Talent and Scarcity

Open Source, Wikipedia and others attract lots of people who spent lots of time in adding information and improvements. All for zilch, noppes, nada. At least financial terms…
Some think this is the way of the future. All new paradigms first attract the idealistic people. In the first days of the Internet commerce was simply not done. Flame wars should not be stopped by imposing rules and enforcement but by netiquette. Funny thing is that many of these idealistic first users also happen to be a bit anarchistic. This seems logical because these are the people that venture into the uncharted territories precisely because of the lack of rules there. I feel sympathetic to that. While reading the book of Yochai Bankler you get the feeling that we are on a new era of the altruistic society. I would love to believe this but I don’t buy it.
In 1982 Güth, Werner, Schmittberger, and Schwarze wrote an essay with the title: “An Experimental Analysis of Ultimatum Bargaining,” (Journal of Economic Behavior and Organization, 3:4 (December), page 367). In this they laid down a special version of economic game theory called the ultimatum game. The game goes like this:

There are two players, A and B. B gets 10 euro’s and can decide how to split the money. A can either accept the offer or reject the offer. If he accepts the offer he will get what he is offered and B keeps the rest of the money. If A rejects the offer both get zilch, noppes, nada.
This of course means that whatever A is offered, he will always be better of accepting the offer because when he rejects he gets nothing.

Funny thing is that when people are offered less than 2 euro (20%) they tend to refuse the offer and therefore lower their own earnings. With the help of MRI scans during this decision process it seems that we humans do this because we wish to punish the one that is unfair to us by too low an offer. This is interesting but what has this to do with open source software and altruistic people?
Talent is scarce. Very few people are capable of making a good video, few people are good at writing and even less are good at writing good on interesting topics. But a lot of people love to watch a good movie and read a good story and are willing to pay for it…. Hey, that sounds llike a business model…!
Because some are willing to pay for a good (say, reading a blog) either directly or by being exposed to advertising than there will be people that will start to write for money. But if some schmuck who can’t write can get paid than you as an excellent writer also want to be paid. Otherwise you will feel like a loser. It’s like a virus: once it starts spreading it will develop like an epidemic. And when there is a market there will always be somebody who will act as patient zero.
Now getting back to the ultimatum game. I think that when somebody is going to make money based on the work that you or I deliver, we want a fair share of the pie. And when we do not get it, we will stop contributing (and of course be miserable because we loved contributing. But that is the essence of the ultimatum game). As long as nobody was making any money it was ok. But when somebody is making money the definition of fairness changes. And like I said, when there is a market it will be serviced.
Jeff Howe from Wired recently wrote a blog about this: Digital Sharecropping: Mesh takes on Crowdsourcing. But in his view people are motivated mainly by “respect”. But I, based on the above, think that once the virus spread more and more (talented) people will ask for payment. And once they are getting paid it will be like a normal business.
A nice example of a new business model is Crowdspirit.org. Here users can brainstorm, develop test and recommend new electronic products. Once they are succesfull the creators get paid for the work they did.