February 2009 Archives

People should watch this once a week.
 

Here's a great piece in Ad Age by Peter Blackshaw about how social media is transforming marketing, accelerating innovation, increasing leverage and helping to dramatically reduce costs -- for those that participate.

Then there's innovation -- the engine of value creation and company growth. Social media is one massive feedback loop. It's chaotic on the surface, but unmistakably efficient if you consider the life cycle of vetting a good idea or absorbing the ideas of others. If you really peel the onion on what's happening across blogs, Twitter and other online communities, brands are setting up de facto listening labs that rewrite the rules of gathering and managing feedback. We're getting more ideas faster. The funnel is broadening. The filters are sharper, more immediate and grounded in deeper levels of intimacy with the product or proposition.

I met Peter in 1994/1995 when we at Red Herring -- then only a magazine with a single AOL email address -- connected with Peter and three of his peers at Harvard Business School to help us figure out our "online" strategy. We considered three options: build a community on AOL/CompuServe/Prodigy, build our own BBS, build this new thing called a "web site." It's funny to think that at first the decision was not obvious. It was relatively easy to rule out doing our own BBS, but to that point most online communities were built within the major ISPs and that seemed rational: that's where all the people were! People forget just how powerful AOL was at one time.

In one of my favorite issues of Red Herring (which sadly I cannot find an archive of on RedHerring.com or Internet Archive. Come on Herring folks, fix those 404s!) we had Steve Case face-off against Marc Andreessen about closed v. open communities. The decision wasn't easy. You didn't get as much control as you wanted with AOL, but they had the power, the audience, the tools to build your community, and the ability to help you monetize them. On the other hand, building web sites was expensive, they looked clunky, there weren't nearly as many people using web browsers (what's a web browser??) as used AOL accounts, and so much about the experience was new and untested.

Of course, we all know how this turned out. We and the HBS crew agreed that the control and freedom afforded to us by the web would far outweigh the audience, tool, and economic advantages of the big guys. We knew our own site would cost us more to build and it would be more of a challenge to get people there and to make money, but it would be ours. We could do with it what we liked and we could grow with it. The asset we were building would be our own, not someone else's.

This is why the web won and the closed communities lost. It gave people freedom and control over what they wanted to do and stimulated a diversity that drove an incredible amount innovation that one service could simply never provide. In the end, the tools got easier (witness blogging software, for example); traffic swung dramatically online, aided by search engines; and web revenues eclipsed closed community revenues.

Looking back, I think this history is extremely informative about the way forward. And history is repeating itself. The Internet necessarily gravitates towards open over closed, decentralization, and and freedom and control moves to the edges -- for individuals and organizations -- rather then the center, even when the closed systems have an advantage of audience and tools.

But the process isn't linear. It goes in waves. The wave started with AOL, and for a time centralized power won out over distributed power. But people chose their own control and freedom over the short term benefits of audience and tools, and the audience and tools then followed.

I think we are in a similar cycle now. The mainstream social networks, MySpace, Facebook, YouTube, and increasingly Twitter, feel a lot more open than AOL was, but in the end, those services have the ultimate control over their users. Their logo is on the top left of the page. They determine whether and how people can design their pages or make money. They set the terms of service. The can deliver audience, but it's THEIR audience. They have great tools to create things, but within strict limits. But in social media too, as always happens on the Internet, freedom and control will decentralize. The tools and services available to build your own social media sites, just like the tools of old to help you build your own web sites, are getting much better, easier, and less expensive. And a people, brands, companies, organizations build their own social media sites, the audience will follow.

It will be different than is was before in the sense that the centers and the edges will be much more connected and symbiotic than the binary choice of closed v. open sites of the early web, but the fundamental drivers will be the same. Companies and brands should certainly learn how to market via Facebook, YouTube, and Twitter, but ultimately it will be through their own sites and blogs where they will find their biggest returns.

Walter Isaacson, a pioneer in online publishing, points out in this free Time article that as advertising revenue slows, or even declines, the successful formula for making money online may shift more towards subscriptions than is has in the past.

Here's the problem statement:

According to a Pew Research Center study, a tipping point occurred last year: more people in the U.S. got their news online for free than paid for it by buying newspapers and magazines. Who can blame them? Even an old print junkie like me has quit subscribing to the New York Times, because if it doesn't see fit to charge for its content, I'd feel like a fool paying for it.

This is not a business model that makes sense.

The rest of the piece discusses some of the history of online publishing and business models, and points out that with such a rapid move to free/ad supported models, and the culture that you are "evil" or "just don't get it" if you charge for content, a broadly used subscription infrastructure hasn't emerged. Previous attempts, of which there have been many, have almost all failed -- though there are many specific instances where subscription models have been successful.

I believe there is something to this. Something. There is certainly a case to be made that subscription models can work even in the face of free competition -- (most) people pay for cable when TV over the air is free, (some) people pay for satellite radio as well, iTunes is a hit, and we run a successful, paid blogging service that competes with free alternatives. You can compete on a paid basis if you are bringing something unique to the table for that price.

But I suspect that in the end the mix will still be weighted more towards the ad side. Most magazines have ad revenues that far exceed their subscription and newsstand revenue, TV advertising is bigger than TV subscriptions, and while we offer a paid product, we also offer a free product and we offer advertising services that contribute to a key part of the economic engine of blogging.

I think the call for a subscription service that could work across properties, perhaps with micropayments, is useful, if not terribly new, and we'd support it. But I'd also submit that there is another model that should be added into the mix here: tickets.

Isaacson uses a lot of offline metaphors to make the case that the internet of the future should work more like the dead wood of the past. As I've said here, I think there is something to this. But the models of the past were also built around the constraints of the past, and conditions online have changed. Meanwhile, online is becoming more and more community oriented, and yet we don't think much about how you bring offline community models online. What's an "offline community"? Well, an event, for one (and the "paid" model for an event is "tickets").

So much of what happens online is looking more like conferences than magazines. Think about Time Inc. magazine, like Fortune vs. a Time Inc. conference, like the Fortune Brainstorm Tech conference.

Fortune pays a lot of money to professional journalists to write up magazine articles that are heavily edited and non-interactive. There is virtually no feedback loop (offline). Whereas the conference is an interactive experience where the editorial presence is not confined to one-way speeches by the writers, but also includes the selection of the speakers, the setting of the agenda, interviews with luminaries, often with Q & A, moderating of panels, invitations of select attendees, and of course the most important aspect is the "user generated" content in the hallways. Attendees help make a conference better -- and Fortune benefits from this -- in a way does not happen with print subscribers. Now, Fortune magazine makes a lot more money than Fortune conferences, and the logistics of physical events are difficult and expensive, but what form feels more like where the internet is going? (And by the way, conferences work on a hybrid subscription and advertising (sponsorship) model).

In short, access to communities - and properly managed and accessible communities - is something that can be sold just as much as access to content. I think this is another strategy to weave into the mix to help offline content businesses succeed online.

This is good news:

"As the president stated during the campaign, he does not believe the Fairness Doctrine should be reinstated," White House spokesman Ben LaBolt told FOXNews.com.

Here is a recent Wall Street Journal article titled "Internet Killed the Video Star" which makes the point that "Straws in the wind in recent weeks suggest that the recession may be accelerating a structural change toward free or low-cost Web video -- either television or movies -- and away from traditional delivery methods, such as cable TV or DVDs." You can read the whole thing, I guess... if you want to. OR, you can just watch this video my sister Jenny and the Whatever girls made ALMOST 2 YEARS AGO which which is much more fun...

Just read an excellent white paper curated by Steve Rubel about the Five Digital Trends to Watch for 2009. Summary from Steve's blog post:

Satisfaction Guaranteed - Customer care and PR are blending as consumers use social media to demand service

Media Reforestation - The media is in a constant state of reinvention as it transitions from atoms to bits

Less is the New More - Overload takes its toll. Gorging on media is out. Selective ignorance and friends as filters are in

Corporate All-Stars - Workers flock to social media to build their personal brands, yet offer employers an effective and credible way to market in the downturn

The Power of Pull - Where push once ruled, it's now equally important to create digital content that people discover through search

The whole paper is worth reading, but for those with short attention spans, here's what he calls "macro takeaways" at the end:

Publicly engage
Companies that put many voices online stand to gain a competitive advantage as customer service moves into social media and personal brands grow.
 
Create content
As the media landscape shifts and Google rewards content producers, companies have an opportunity to create their own media to reach stakeholders directly.

Be simple and utilitarian
Now is not the time for complexity. Simplicity rules as do online applications that are continually useful and fill a void in people's lives.

The paper starts out with "Although the economy may be slowing, the digital march keeps going," but I might change that "Although" to "Because." Hard times are compelling companies innovate on how to they approach sales, marketing, and PR, and that means going digital and being clever about it. This paper is a great guide.