Archive for the 'coase' Category

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 wsj.com. 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.

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In “Plug ‘n’ Play” Journalism, Plugs Very Expensive

Pondering the Future of News, Steve Boriss asks, “if it is financially viable for TV networks to embed advertising into individual programs then make them available for download on any web site, why can’t independent reporters do the same with their stories, particularly those involving video?”

The answer is very high barriers to entry that come by way of transaction costs, which are just too high relative to potential ad revenue for it to make sense for buyers of ads. There’s a guy—a guy in fancy clothes sitting in his glass-paneled office on Madison Avenue—who’s got to make decisions about the best uses of his time. It doesn’t make sense for him to buy $1000 in ads from Joe Regular.

That’s where advertising networks come in. Putting google ads on your site will help you out, for instance. For the time being, however, google pays too little because it has little competition but also, more importantly, because its targeting isn’t good enough yet. The ads aren’t actually worth enough.

Coase-based advertising in which users auction their attention stream to advertisers by way of a grand platform is the way to go.


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