The Marketplace of Content

Zurich marketplace

In an article he wrote during one of his Think Week retreats January 3, 1996, Bill Gates talked about the importance of the Internet. At the time, only a small fraction of people were online, and even fewer used what we know today as the web for work.

Gates saw that “content is where I expect much of the real money will be made on the Internet, just as it was in broadcasting,” and said “the broad opportunities for most companies involve supplying information or entertainment.” By content, he meant a very wide definition, one that included the software that continues to be Microsoft's bread and butter.

He says:

One of the exciting things about the Internet is that anyone with a PC and a modem can publish whatever content they can create. In a sense, the Internet is the multimedia equivalent of the photocopier. It allows material to be duplicated at low cost, no matter the size of the audience.

The Internet also allows information to be distributed worldwide at basically zero marginal cost to the publisher. Opportunities are remarkable, and many companies are laying plans to create content for the Internet.

For example, the television network NBC and Microsoft recently agreed to enter the interactive news business together. Our companies will jointly own a cable news network, MSNBC, and an interactive news service on the Internet. NBC will maintain editorial control over the joint venture.

I expect societies will see intense competition-and ample failure as well as success-in all categories of popular content-not just software and news, but also games, entertainment, sports programming, directories, classified advertising, and on-line communities devoted to major interests.

Printed magazines have readerships that share common interests. It's easy to imagine these communities being served by electronic online editions.

But to be successful online, a magazine can't just take what it has in print and move it to the electronic realm. There isn't enough depth or interactivity in print content to overcome the drawbacks of the online medium.

If people are to be expected to put up with turning on a computer to read a screen, they must be rewarded with deep and extremely up-to-date information that they can explore at will. They need to have audio, and possibly video. They need an opportunity for personal involvement that goes far beyond that offered through the letters-to-the-editor pages of print magazines.

He then observed that niche publications would do very well on the Internet due both to their depth and specialized audience and concludes saying that:

Those who succeed will propel the Internet forward as a marketplace of ideas, experiences, and products–a marketplace of content.

Much of what Gates said did happen, though not in the time frames he anticipated in 1996. Some of it, for example, the thoughts on the practicality of charging small amounts for subscriptions encountered some push back. Clay Shirky wrote about why micropayments systems don't work in 2003.  Citing Nick Szabo's mental transaction costs, he says they don't work, because of “the energy required to decide whether something is worth buying or not, regardless of price.” In fact, says Shirky:

Mental transaction costs create a minimum level of inconvenience that cannot be removed simply by lowering the dollar cost of goods.

Worse, beneath a certain threshold, mental transaction costs actually rise, a phenomenon is especially significant for information goods. It's easy to think a newspaper is worth a dollar, but is each article worth half a penny? Is each word worth a thousandth of a penny? A newspaper, exposed to the logic of micropayments, becomes impossible to value.

He has a point, though he might have overstated the point about creators craving attention while publishers don't. Publishers do go after attention, they just do it differently. Media's operational model revolves around keeping attention, which is why they have an editorial mission and structure to ensure strategic continuity.

On the other end of the broad content category spectrum, the creatives that crave attention these days count marketers among them in higher numbers. Marketing's model was built around getting attention — and old habits do die hard.

Shirky says that the old equation “fame and fortune” in an environment with limitless reading choices, but limited time and fragmented interests and attention, doesn't hold anymore and that free is a stable strategy.

Both gates and Shirky are right, but only in certain respects.

For example, in Europe micropayments are getting some attention. Blendle, dubbed the iTunes for news, is a Dutch startup that allows users to pay small micropayments for individual newspaper and magazine articles rather than having to sign up to digital subscriptions. All German newspapers use it and the company has attracted investments from German publisher Axel Springer as well as the attention of Shirky.

Clay Shirky tweek June 2 2015

Blendle will soon be available to publishers in the U.S. The payment system needed to catch up, as Gates said. However, the challenge on this side of the ocean will be that much of the content eligible is currently behind paywalls. Facebook's Instant Articles and similar digital newsstand products from Google and Apple are likely a concern as well. 

Which gets us to the other side of the spectrum and the development of freemium models — some content is free, other is available through subscription. This has been adopted by publishers with varying degrees of success. With limitless options anywhere in the world, even the success of the one million subscribers to The New York Times means little to other publishers, says Matt Ingram. The combination of brand recognition, credibility, and reach is hard to emulate for others.

But there is a way freemium can work for smaller publishers. For example, Ben Thompson in its third year of publishing has written 47 free articles and 180 subscriber-only Daily Updates. Thompson has built a reputation for strong and informed commentary on business news and has built a following. A niche model that serves specific readers works. Says Ingram quoting Thompson in an article at GigaOm:

Within about six months, he had over a thousand subscribers paying him $100 a year for access to his newsletter (the shorter daily posts on the website are free). That meant an annual revenue run-rate of about $100,000 — enough to make it a living, along with some speaking and consulting, and tentative proof that a “thousand true fans” model like that envisioned by Wired editor Kevin Kelly could actually work on a practical basis.

Niche readers will pay

In a response to the “blogging is dead” meme that was triggered by Sullivan’s announcement, Thompson says that he just passed the 2,000-subscriber mark, which means he now has a revenue run-rate of about $200,000 a year (the “churn” rate, or the rate at which subscribers drop off, is less than 10 percent he said). And this proves a niche model that serves a specific interest group will work, Thompson argues — as well or better than a model that relies on mass advertising revenue.

Connecting with some people who really care is still a viable path to making it as a solo blogger. Thompson calls it “the beginning of sustainable journalism” and that blogging still has a bright future despite the unbundling of functions that used to be played by blogs and are now the domain of social communication tools and networks. He says:

to be clear, when I speak of the “blog” I am referring to a regularly-updated site that is owned-and-operated by an individual (there is, of course, the “group blog,” but it too has a clearly-defined set of authors).

And there, in that definition, is the reason why, despite the great unbundling, the blog has not and will not die: it is the only communications tool, in contrast to every other social service, that is owned by the author; to say someone follows a blog is to say someone follows a person (This applies both for amateur and professional bloggers; most of the rest of this post is concerned with the latter).

Thompson has built credibility and a following through operational consistency, clarity of thought, and business sense. His long form free articles are on the must read list of diverse audiences. His commitment to a niche has made his site a destination.

In a completely different yet related direction, another blog I have been following since the beginnings, recommended, and that is thriving and expanding is Farnam Street by Shane Parrish, now with the addition of Jeff Annello as writer. The membership program is the more recent development. Parrish curates and runs three events per year and accepts a select number of sponsors on the site and in his newsletter.

When marketers entered the scene in publishing directly, they did so because it made business sense. However, they have not adopted the mindset of the publisher, which is what is allowing niche sites to thrive and much of marketing content has a long way to go before it becomes a destination.

The other side of this means that there is much opportunity for someone who has operational consistency, clarity of thought, and business sense to do better, to create something compelling, useful, and lasting. Likely the product of a different organizational model and not something that emulates the ways of already successful publishers who have been improving continuously through experiments.


[image of Christmas market inside the Zurich train station]

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