Archive for the 'business plan' Category

Pure Money Gifts Are Basically a Bad Idea

The broad thesis under which I like the pwyw model is that there is a huge positive externality that goes to the payers. They look noble, the same way the endowers of chairs at universities look noble.

Now, I’m not saying that all the payers in a pwyw scheme will be rich and pay vast sums. That’s the facet of the analogy I don’t want to import. The relevant facet is that people are aspirational. We want to help the world, and we want our friends and colleagues and peers to know about it when we do. If that’s narcissism, so be it. We’re all narcissists then. There’s a reason we say “thank you.” It’s that we think we’re obliged to recognize the person who did the good thing. And there’s a reason we’re irked when we’re not thanked. It’s that we think others are obliged to recognize us when we do the good thing.

The point is that organizations charitable and otherwise have tried to tap that externality — in one way or another — for ages and ages and ages. Take the girl scouts. Delicious as they may be, people don’t buy thin mints because they deem them (the thin mints!) to be the right quality at the right price. People buy thin mints because they want to support the kids. The girl scouts organization frames the act of sales as a leadership activity for the girls. You go door to door, and you introduce yourself to strangers, and you pitch your product and your mission with poise. And cookies aren’t an arbitrary choice. Everyone knows what a cookie is. Cookies are a very easy thing for thousands and tens of thousands of super diverse children to sell all over everywhere and then some.

Which is precisely why it pisses me off when the parent sells his kid’s cookies in the office. It fucks up the whole jam. It devalues the cookies and saps the strength of the positive externality. But that’s the exact reason this example resonates resonates resonates. Would people buy more cookies if the girls themselves did all the selling, assuming that the girls were just as good at sales as their parents are? Yes, absolutely. That assumption is doing a ton of work for me, obvs. In fact, offices are basically the perfect place to sell charitable cookies for a bazillion reasons, and it’s hard for the kid to get to the parent’s office and walk cubicle to cubicle or send an all-staff email with a bubbly tone. And but so yet imagine the kid doing that, putting herself in view of her dad’s colleagues and saying, “hey, i’m a girl scout, and i’m selling yummy cookies for my troop, so what kind would you like?” Irresistible.

And not just irresistible-because-cute, although that’s the undeniable packaging. It’s ultimately irresistible because supporting a kid who’s being ambitious and working toward a goal is a good thing to do. And when one colleague shares his thin mints with another colleague, he’s saying, in part, “hey, i’m a good person who supports kids when they work toward goals.” And that’s awesome. That’s fucking close to magic. “Thank you,” says the other colleague.

And but so yet obviously the colleague who shares his cookies doesn’t actually say anything like, “hey look at how morally awesome i am!” That would be weird for reasons that are as obvious as they are complicated. That’s the whole point of the cookies! Sublimation! The cookies do the talking. They themselves are the communications vector for screaming, “i am a good person! please don’t cc my boss the next time i fuck up that weekly report you asked for!” And, really, can you imagine a better, sweeter, more delicious way to show the world how awesome you are than freely passing out charity-minded finger food that has tons of sugar to bleary-eyed and bored-stiff adults who are sick to bored to death of emails and meetings and other florescent drudgeries?!

So, at long last, it comes to this: news organizations don’t need pure hand-outs. They need their own cookies. The cookies unlock the huge positive externality. Give people something to talk about and share — something more than “hey, i just made a goddamn mensch of myself by funding the news.” Let them say something like “oh, did you hear that crazy tidbit about X? i just found that out from Jane Journalist, that one awesome expert reporter whose club i’m in.”

So, to repeat, the broad thesis under which I like the pwyw model is that there is a huge positive externality that goes to the payers. But there are all kinds of weird cultural and ethical norms around activating that externality. A great end result and donor list doesn’t cut it. Cookies work for the girl scouts because they sublimate the virtue of giving and because they’re super shareable. And, for the news, intriguing facts or interesting tidbits or smart opinions will work against because they sublimate the virtue of giving and because they’re super shareable.

People will pay to be cool or morally good. You just can’t be super obvious about it with outright pure money gifts.

Do journalists have enough time for trust?

Steve Outing’s was representative of the reactions to my proposal, which is just a deepening and an extension of Mitch Ratcliffe’s idea:

I’ve thought about that idea too, but I can’t [get] past the problem of the journalists you (reader/user) want to interact with will mostly be too busy to participate. Some do interact, but it’s more because they want to and feel some passion for engaging directly with their fans and followers and readers. Many journalists I know resist the idea because they’re “already too busy.” (Bad attitude, IMO, but not easy to change.)

At one level, Steve is obviously correct: no one wants more work, and to the extent that my proposal involves interaction between the journalist and the user, there’s more work. Fine. No one’s arguing that it wouldn’t be different, unfamiliar, tough, risky, etc.

But at another level, the journalist would be paid, potentially a big chunk of his income, by offering special access to some users. Is it really the case that journalists think of themselves as so busy that they can’t imagine a (potentially very) different way of doing business?

The actually good argument one might offer against my proposal is this: “Look, journalists only have so many hours in the day. Users will pay them for some things that don’t require additional work, but users will also expect some of their time directly. That means a journalist either loses sleep or has to cut back on reporting. Lost sleep isn’t an option. And although cutting back on reporting might seem plausible, it’s really not, because it would dilute the other side of reporters’ value proposition to their users so much that their users wouldn’t really want to pay enough anymore. The market’s just not there.”

Of course, I happen not to think that argument has much purchase. Arguing about how busy with reporting journalists are now fails to locate my proposition in the relevant context, which could look more or less radically different from now. (It all about the counterfactual conditional.)

The amount of reporting per journalist might decrease, but that’s not a reason in itself that the aggregate amount of reporting would decrease. There could simply be more reporters! So if the average reporter had to reallocate twenty percent of her time to reader interaction, a twenty-five percent increase in reporters would fill the gap.

Of course, the whole proposition is that there’s a real human value proposition, trust between creator and user, that Kachingle’s kind of charity simply lacks. So while it’s certainly true that my proposition would be a big flop in the market if it turned out that users were only willing to pay creators for interaction that amounted to BFFs, which would prevent creators from actually creating, it’s not at all clear that users wouldn’t tolerate somewhat less reporting in order for access to and some connection with creators, especially in light of the fact that trust is sorely lacking between journalists and readers today.

The upside to a bit less reporting and a bit more trust-building is that society as a whole might have more regard for journalism. The hope is that journalism experiences a net gain in readership and mindshare.

PS. This post is repurposed from a comment left at Steve Outing’s further thoughts on Kachingle and voluntary monthly content payments, which he does not want you or Alan Mutter to compare to a tip jar. That comment is awaiting moderation at the time this post is being published.

Why I dislike micropayments, don’t mind charity, but really have a better idea

A sure-fire way to think up a great idea for the future of the news is think about the fundamentals. “What’s news?” That’s a good place to start. Dave Winer gets at the fundamentals really well.

Let’s ignore most of the fundamental components of the news and focus on a couple: users and creators. Very roughly, those map to readers and writers. But “users” and “creators” emphasize that readers are active and don’t simply passively consume the news. Users want to re-purpose the news, get more out of it. We also don’t want to forget that creators aren’t just writers; they’re also photographers and editors.

inverted_jennyOne pretty important fact is that users and creators are all people. And people can trust one another. Obvious? One would think so, but there’s been a big corporate wall between them for decades now. The publication has overshadowed the writer. We viewed newspapers as the creators. Writers and photographers were faceless bylines most people ignored.

For example, we once trusted the New York Times to give us all the news that’s fit to print. It’s an awesome slogan, containing a slant rhyme and some serious alliteration, sure, but it now works much less well as a promise. I doubt its author ever intended it to be strictly accurate, but now it’s no where near artfully true anymore. Only the internet can make that promise now. It is the great disintermediator.

And so creators of news are re-emerging as real people to their users, who are also real people. That relationship, however attenuated, is a better place to locate trust. Let me put it another way: there’s greater potential trust in user-creator relationships than in reader-newspaper relationships. Humans are built to trust other humans, personally.

Now, we certainly also have relationships with groups. I’m no anthropologist, but it would certainly seem that, as humans, the concept of group identity runs deep. We can trust a person because he’s part of a club or a tribe. It’s a good thing, then, that appreciating user-creator bonds doesn’t demand that we deny the existence of reader-newspaper bonds. The internet may erode—but it doesn’t destroy—the concept of a traditional brand, anchored in a group of people who share a common purpose. The internet supplements, or unlocks, the concept of a personal brand.

Why all the fuss about brands and user-creator relationships and, ultimately, trust? Simply put, trust is an economic good. It’s worth something. It makes markets work more efficiently. As a trader might say, trust is positively accretive to value. This is not just about peace, love, and harmony. Trust creates value. Value gets monetized. Money pays journalists. Journalists save the world.

So if there’s trust to be created, there’s money to be earned. Trust is the foundation for a value proposition. All else equal, it stands to reason that users will pay more for the news in which they have more trust. If so, then it follows that users will pay more for the news they use based on a relationship with creators, in whom they can place more trust than they can in newspapers as brands.

Whew, so all that was wildly theoretical, blurry stuff. Before moving on to something more concrete, let’s sum it up. Shifting the news relationship from reader-newspaper to user-creator increases potential trust, an economic good, and unlocks value, which people may pay for. But even the strongest value proposition does not a business model equal.

So let’s move to the concrete: the business model. How do we monetize this theoretical value tucked away in user-creator relationships?

You do it with an idea I’ve been flogging the past couple weeks. You do it with Mitch Ratcliffe’s idea, in which users pay creators for “added convenience or increased interaction.” Note the elegant fit: increased interaction between one person and another is what fosters relationships and trust. Giving paying users otherwise exclusive twitter access to the creator could work. SMS updates could work, as could a permission only room on friendfeed. Even something as simple as a gold star on paying users’ comments—a symbol that they support the creator financially—would provide incentive for the creator to reply. Tiers of stars—bronze, silver, gold—are possible too.

There’s a social network lurking not too far below the surface. Because we’re in the business of fostering trust, transparency is paramount. So this social network would do best to require real identities. Users would have to be clear about whom they support, and creators would have to be clear about who supports them. Both users and creators would have personal pages of their own, identifying whom they support and who supports them and what dollar levels are being exchanged for what levels of interaction. This way, creators would have the ability to avoid potentially conflicted supporters. (Of course, a person could be both a user of some news and a creator of other news, paying for some and receiving too.)

Paying users of different authors would eventually form their own communities, if creators nurtured them well in the context of a supportive information architecture within the social network. Done right, membership in a community, which could suggest and debate tips for the creator, would represent its own value proposition for which users would be willing to pay up. Creators could have multiple communities, populated by groups of users characterized by different interests, areas or expertise, or even locations.

Creators would set their own prices, reaching their own equilibria between cost and numbers of paying users. Users would tend to pay less to a creator who offered less-value-added interaction by ignoring more questions and comments. But there would tend to be more users willing to pay a smaller amount than a larger amount. Users and creators would have to think about their elasticities of supply and demand. Over time, individual users and creators will find a balance that strikes her fancy. On the one hand, some creators might prefer a smaller set of users who pay more money and enjoy more interaction. Other creators, concerned about possible undue influence, might prefer a larger set of users who pay less money for a thinner relationship. And on the other hand, some users might prefer to be among a small community with better access or thicker relationships to the creator, while other users might prefer spreading themselves around and having thinner relationships with more creators. I don’t see any obvious reasons why a basically unfettered market wouldn’t work in this case.

Note that this represents an end-run around the problem that news is an experience good—you don’t know the value of an article till you read it. (New is not like buying a pair of pants.) This solves the problem that news itself is often nearly worthless the day after its published—yesterday’s news is today’s fishwrap. (It’s not like buying a song from iTunes. Also, ed. note: please, please, please follow that link to Doc Searls. The VRM parallels are clear and profound.) Finally, this also solves the problem that any given news article has myriad relevant substitutes—articles about the very same topic, event, or person and articles about equally interesting topics, events, or persons. (News is not like the Inverted Jenny. Yay philately!)

As with Kachingle, recently blogged by Steve Outing, this kind of freemium news doesn’t have to be the entire solution. It’s certainly compatible with advertising, though another feature might be a lack of it, just as it’s compatible with charity.

The point is that this idea and the business model on top of it are inspired by deeply human phenomona. Personal interaction and trust are constitutive of what it means to be human. They’re a large part of what makes the world go around generally, and we should look to them to save the news too. The right tools and insights can help right this airship called journalism.

News Is an Experiential Good; Or, Why it’s not like buying a pair of pants

When you buy a pair of pants, you try them on first. You want to make sure they fit. So clothing stores give up scarce retail space to enclose little spaces that are no good for displaying their trendy threads. They’re called dressing rooms, of course. If there were a store that rejected the idea that we should be able to try on our pants before we buy them, we’d reject the store. We’d protest that we’re worried about wasting our money on pants that we don’t like, and we’d threaten to go elsewhere. “Sizes and cuts and feels are too hard to predict,” we’d complain. “I really like your Sevens, but I’m not sure I’ll love them. What if I my hips are too big?”

One really seriously unfortunate fact about the news is you can’t very well try on an article before you read it. Sure, you can read the teaser, the first paragraph, or the pull quotes. Maybe there’s a cute sidebar or attractive graphics with catchy captions. But you don’t really know whether you and the article will make a great match till after you’ve already read the thing.

This is an age-old case study in brands. That’s why every issue of the New Yorker or the Economist or Cosmo or Men’s Health or Maximall seem vaguely, surreally the same, issue after issue, cover after cover, or cartoon after cartoon. High brow or low—the economics are the same. It’s their way of informing their reader that reading the last issue is a little bit like trying the new issue on for size. If you liked our work before, you’ll like it again. It’s different, but it’s really the same.

That’s one reason why Steve Brill’s “secret plan to save the New York Times and journalism itself” is flawed. I don’t have the resources to offer a top-to-bottom critique, so I’ll focus on one point. One the one hand, “All online articles will cost 10 cents each to read in full, with simple, one-step purchases powered by an I-Tunes-like Journalism infrastructure.” And on the other, “There would be a five cent charge to forward an article to someone else. Paying customers would get a license to do that” when they set up their accounts.

If the pants analogy suggests that it’s hard to charge for content before the consumer experiences it, what does it say about paying for it after? That’s essentially what this recommendation feature would be, after all. And I think it’s far from obviously crazy.

Maybe many people would be willing to pay five cents to forward the full text of an article to a pal. But it’s important to remember that what you’re doing when you recommend an article to a buddy. You’re trying it on, testing it out. You’re decreasing your pal’s risk that he’ll read the article and conclude he wasted his time. In short, you’re adding value, helping both the publisher and presumably your pal too.

This is of course ultimately why people are so hot to trot about linking, curating, aggregating, filtering, etc. It’s the economics of attention in a world of blooming, buzzing, atomized media. (UPDATE: It’s “superdistribution.”) So it would be awesome if a newspaper could get people to pay in order to add value to their content. But to the extent that charging for the ability to make recommendations will actually disincentivize them from adding that value, there’s an important bit of cost-benefit analysis to do.

Of course, people could still recommend the article without paying the five-cent fee, leaving their pals to sign up and pay ten cents if they’re not already customers, but I wonder whether that wouldn’t turn out to seem just rude in light of the fact that you and your pal probably have basically the same purchasing power with respect to five- or ten-cent articles.

Finally, I’ll repeat that this is why I’m so bullish on the proposition that journalists need to find in-demand scarce goods and services whose value is relatively easily quantified before the point of purchase. This is what I was thinking about in my recent post “Freemium News,” which was itself a reaction to Mitch Ratcliffe’s excellent thoughts on “the economics of great journalism.” My sense is that forwarding articles for free might be the kind of discrete, non-experiential feature for which someone might be willing to pay a flat upfront fee.

Freemium News

I came across two great examples of freemium news. One was a reminder, and the other felt familiar but was a bolt from the blue.

First, the one. Blodget really does an admirable job digging into the fundamental economics of why the WSJ’s porous paywall. (Cf. this naive version at CJR.)

Second, the other. Mitch Ratcliffe drills deep into the economics of news on both the supply and demand sides of the equation. The supply side—what reporters need to report—is interesting. It asks, “How much money do journalists need to give scarce journalistic value to readers?”

But for my money, I like thinking about the demand side of the equation. Here the relevant (and symmetrical) question is, “How much scarce journalistic value do readers need to give money to journalists?”

What Ratcliffe and Blodget’s answers have in common is, essentially, price discrimination and luxury. In other words, make it easier or make it better (as in more value-added).

The WSJ’s habit of forcing me to jump through hoops to read its full articles is price discrimination at its heart. I have to pay with my time (instead of money) by copying the paywalled article’s headline and pasting it into a google search (generally adding “google news” as well) and then clicking back to Then I’m behind the paywall, and not a drop of google juice is spilt.

Ratcliffe proposes “added convenience or increased interaction” in the form of twitter access to the reporter, more timely alerts, or a “social page of your own” for giving feedback to the journalist. “It doesn’t need any new tech — all the pieces are there,” he tweeted (@godsdog). “Yes, integration is hard, but it’s good not to have to invent.”

These are great good thoughts—focused sharply on the economics of news, not BS about who’s a reporter and who’s not or what’s legitimately Web 2.0 and what’s not.

This is the future of news. This is networked news. Above all, this is the power of the interwebs: connecting unique buyers and sellers of information as individuals with diverse interests. Expect more soon.

What would a post-print Times look like?

My reaction, whenever I read stuff like this great piece from Michael Hirschorn, is frustratingly simple.

It’s about trading analog dollars for digital pennies. Or, to put it another way, even if we cut out all the overhead of paper and presses and delivery trucks, we can’t pay our existing writers and editors with only our revenue from online ads.

So what’s my reaction? Up your revenue from online ads.

Maybe my reaction’s not that helpful, or maybe it’s a needed slap in the face. A wake-up call.

Newspapers need to be way more imaginative than starting with the assumption that making “a Web-based strategy profitable” must involve the fearsome numbers we see today. If you don’t like today’s numbers, change them. Newspapers need to think about how they can quadruple their online ad revenue per reader.

I believe much of the answer lies in smarter advertising: make it fit the content contextually and make it fit the reader personally. These aren’t new ideas at all. They’re just important to bear in mind because, as worthwhile as Hirschorn’s piece is, it focuses its energy on the editorial side of the operation.

Which isn’t surprising at all, and that’s the point. Even in the best, most insightful posts on the future of news, writers who cut their teeth in a newspapering world in which editorial and business sat on different floors of the office still seem to forget that they really can try to reach into the business model and rejigger the numbers if they really want to.

If you can trade your analog dollars for digital dimes, after all, things don’t look so grim.

LATE UPDATE: Bringing thinking that’s a couple notches smarter, Felix Salmon begs to differ pretty seriously with Hirschorn on NYT.

Pictures! to Accompany Words! about brands!

I won’t rehearse what I wrote before about brands and advertisers and content-producers and so forth. I just want to add a picture I’ve been sketching out in my head over the past few days.

Here’s roughly how the triangle of publishing-advertising-consumer, for instance, has worked and works now:

And here’s roughly how the triangle of publishing-advertising-consumer will come to look, to the extent that “advertising” and “consuming” are still relevant terms:

Other than the color of the magic sparkles—going from green to purple—what’s changed? Well, the direction of the arrows around them, of course!

Companies, says my interpretation of Haque, will be listening to consumers beliefs about their products. Consumers will have cause to air those beliefs, in a conversation among themselves, the publisher, and the company as well, because a publisher will “seed” that conversation and host it.

I don’t know how this will work beyond obvious examples of product reviews. But there are other possibilities that come to mind. What if an earnest politician paid an editorialist to start a conversation about some policy in order to elicit his constituents’ beliefs about it?

I may be pushing the limits of reasonability here, but what if a government paid journalists to write about its war-planning because it actually wanted its citizens’ opinions about it?

The point is to imagine a world in which it doesn’t pay to keep secrets. The point is to imagine a world in which, on the contrary, openness pays and listening pays because talking fails.

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