Tag Archives: scarcity/abundance

Online news – Not whether to pay, but how to pay


It should be abundantly clear by now that the news industry is in all sorts of trouble. Just the kind of trouble you’re in when your business model has recently collapsed in front of you: less people buying newspapers and less companies finding it in any way affordable or effective to place ads in these newspapers. And it’s also the kind of trouble you have when the new business model you’re going for isn’t working: more and more people consume their news for free on the internet, but online advertising doesn’t quite cover the costs. Yes, there are exceptions to the failure of both the old and the new newspaper business model, but overall, that’s the picture we get at the moment.

I’m an optimist. I’m convinced that 15 or 20 years down the line, two managers will sit in a pub, and one will say to the other, “Hey Paul, remember those days when we didn’t know how to make money on the internet?” And Paul will say, “Yeah, those days were crazy… we really thought those ad banners were gonna save us. Thank goodness we came up with that direct payment system where people pay for some of the articles they read.” And then they will recapitulate how the newspaper industry reinvented itself, briefly mourning those thousands of staff who got fired in the process and all those papers who didn’t make the transition quickly enough.

You read it, you pay for it

But how will they do it? I’m also convinced that in the next few months, newspaper companies will figure out a way to make people pay directly for (some of their) online content. They have to (see trouble above). And it’s also legitimate that they do. Information is a valuable good, especially in this so-called information society. News companies produce this good at quite a cost, since quality journalism doesn’t come for free. Hence, they should receive revenues for providing this good.

So far, news companies have predominantly played around with indirect revenue models, such as advertising, providing the news for free. The problem is, I can’t tell you much about these ads because my browser makes them disappear. I have also heard and read from a number of people in the industry that it takes a lot more online visitors than newspaper readers to generate the same amount of advertising revenue.

In light of these problems, news companies such as Murdock’s News Corp. or Germany’s Axel Springer Verlag are right to consider direct revenue models, i.e. making people pay for some of the online content they provide.

What’s the problem?

My guess is this: There are enough people out there who would be willing to pay for online news, just as they were willing to buy a newspaper or a magazine. Right now, there’s one major obstacle though. Paying for stuff online is terribly, terribly inconvenient. If we find an online payment system that alleviates this problem, a whole new world will open up (sorry, got carried away there, but still…).

Paying with credit cards on the internet is shit not a good way to go. Reading news online is a very quick process. It’s not like buying a washing machine. So when I want to pay for an article that I come across, I don’t want to punch in an entire credit card number or fill out a form.

Some websites like amazon have invented one-click payment systems. Fair enough, that makes it a bit easier, but I would still have to fill out a form and register with the news website. I firmly believe that having to fill out registration forms is currently one of the biggest constraints in e-commerce of any sort. When I go shopping in a mall, I don’t have to register with the candy store to buy my sweets. Why would I have to do that online?

Open standard e-wallets

While searching around for some more convenient online payment system, I came across the idea of digital wallets, or e-wallets, again. There must have been a bit of talk about these in the late, late nineties, as you see here. I don’t quite know what happened since then, but it doesn’t look like e-wallets have been very successful. However, they may offer a solution for the troubled news industry.

Let’s say I’m surfing around the web to get up-to-date on what’s going on around the world. On most news websites, I get the basic information for free. Every now and then, I want more in-depth information about a topic. Whatever news website it is, it shouldn’t take me more than one click to pay for it and it should always be through the same payment system. No credit card numbers, no registration form, no nothing. Just a click and the website charges me 10 cent, or whatever it is.

I’m not an e-commerce or software specialist, but it seems to me that what we need is an open industry standard that is compatible with most, if not all, news websites. This standard would allow the reader to have a payment account that she manages like she’s managing her Skype calling credit. The service would be web-based but the reader could download a little task bar icon that quickly tells her how much credit she has left – much like the printing credit on university computers.

You may say, I’m a dreamer

Sure, there are services such as PayPal, which are similar to what I have in mind and it would be very worthwhile to understand what’s good and what’s bad about them, especially with regard to security and fraud. For me personally, an online news payment system would have to be a whole lot more convenient and simplistic that PayPal currently is.

The greatest problem, you may think, would be to get enough news companies to agree on an open industry standard. You’re right, that will be quite difficult. But hopefully, they will realize that such a standard could help them get their direct revenue system off the ground. It would also make it easier to sell the idea to the readers. “Look, everybody’s doing this now so it’s okay for you to pay a few cent for this article…”.

Always say “Yes and No”

When somebody asks you whether you think the Internet is about to change life as we know it, say “Yes… [hesitate a bit]… and no”. With that sort of answer you can never go wrong and it also makes you sound smart because apparently you’ve taken all kinds of perspectives into account. Besides, it’s probably the correct answer. If people aren’t happy with it, add something like “…but everything’s faster now and there’s more of it, too.”

Here’s an example. It was never true that the person who buys a newspaper will be the only one reading it. He/she will forget it on the bus, throw it over the fence to the neighbors in the afternoon. He/she may even cut out an article to show to someone else. In fact, that’s what my grandpa still does – complete with the newspaper name and the date handwritten in one corner. So that’s how it used to be done.

And what would my grandpa do if he was using the internet? He would go to his Google Reader or newspaper website (Kieler Nachrichten, by the way), find something interesting, and show it to someone else – now complete with the link and a nice little comment. Not much new there, just a bit more digital. The difference is, he would do it all the time, with many of his Facebook friends, across the entire Universe, and with instantaneous delivery. That’s why you can add “…but everything’s faster now and there’s more of it, too.”

I really meant to write about how and why people share online content with others, but I guess I got carried away… oh well, next post.

Broadband on the Beach

Mauritius Beach

I think I found the perfect vacation place for all managers, geeks, and internet addicts. It’s called Mauritius. Mauritius is a tiny little island off the coast of Madagascar, which is itself just off the coast of Southern Africa. 1.2 million people and “almost 11 times the size of Washington, DC” according to the CIA World Factbook – lovely comparison. Anyways. Why is it the perfect spot for managers, geeks, and internet addicts? Because in 2005, it became the “Cyper Island“, or the first country worldwide to have complete nationwide broadband wireless access, on the beach and everywhere. Isn’t that awesome?!

I found out about this little paradise in the India Ocean when I interviewed a Mauritian student in London for my dissertation on online content sharing. She proudly reported that since the broadband was installed on the island, internet use has really taken off. Her mom is crazy about it. So this might not only help the managers, geeks, and internet addicts from abroad, but also the local population and their businesses. Isn’t that awesome?!

Under the sea

Indeed, according to some more recent report by the BBC, Mauritius is well equipped in terms of technology. It had the first 3G network in Africa, “making possible services like streaming mobile TV and remote video camera surveillance” (is the latter a big thing in Mauritius?). Now they are even upgrading to HSDPA (like really fast stuff).

There’s a bit of a problem though with having high-speed wireless technology on an island somewhere off the coast of some other island off some other coast. You somehow need to get the signal onto the island in the first place. Allegedly, the fiber optic cable linking Mauritius with the rest of the world has delivered only slow speeds so far, seriously inhibiting the potential of Mauritian connectivity.

Apparently, according to this account, there’s also a problem with the subscription fee, which has continuously increased. Mauritius Telecom/Orange holds a monopoly as an Internet Service Provider on the island.

What to do with it?

Obviously, managers, geeks, and internet addicts wouldn’t have any trouble putting their island internet connection to good use. And those 1.2 million already living on Mauritius? Unlike the parents of the student I interviewed, not all of them quite know how to use a computer yet. Should managers, geeks and internet addicts pay for their holidays by teaching some courses on online literacy (I would love that, actually)?

The government had a better idea. They sent out “cyber caravans” – buses converted into mobile internet cafes – to teach everyone from housewives to agricultural laborers about the use of computers and the internet. I am not sure how successful they were but it’s definitely something worth following up on. I have also heard of similar initiatives in India… anyone got some information on that?

So yes, given the prospect of sitting on the beach with my laptop, well connected to some 3G network, sipping on some cocktail… who wants to go?

Dear Mr Anderson…

(Flickr user "The Rusty Projector")

Read why C. Anderson says we should be like dandelions (Flickr user "The Rusty Projector").

The following is copied from a letter I sent to the editor of Wired, Chris Anderson. In his recent article, he argued that computing power is now abundant and that we need to change our business models and mindset accordingly. While I think he’s to some extent right with that, he (and wired.com in general) like to forget about all of those who don’t keep up with the latest innovations and technologies.*

Dear Mr Anderson

let me first say that I am some sort of fan of yours. You are one of the most articulate proponents of the view that technology will radically change business models and markets to empower the customer and satisfy previously unknown demands. Whatever limitations there might be to this view – I was convinced by, and enjoyed reading, many of your arguments.

However, as I came across your latest essay on wired.com – “Tech Is Too Cheap to Meter: It’s Time to Manage for Abundance, Not Scarcity” – I couldn’t help but voice come critique. This is not to refute your argument entirely, but rather to introduce some balancing perspectives.

Not everything about computing power and its use is abundant. And although a lot of things may seem like they are, we must not forget the scarcities. I will just touch upon a few of them here, hoping that these points will find more mentioning in your future work.

Computers in every home?

I personally cannot imagine life without a computing device somewhere near me. Yet, for many people this is still the case. Just to give one example, the General Household Survey 2007 in the UK found that “only” 71% of all households had a home computer (disregarding for now that those without might still be using a public one).

So my first objection to perfect abundance is that we do not “have computers in every home—and in every pocket and car and practically everywhere else”, as you suggest.

One of the reasons why we don’t is still cost. Without being too fussy, long distance calls on cell phones are not entirely free on cell phones, as you suggest. They require a cell phone to begin with and at least some form of contractual agreement with a service carrier. And while most of us have some form of cell phone today, only a small minority enjoys the services of a smart phone. The same goes for sufficient broadband bandwidth to enjoy the the internet to its full potential.

The regular folks

I also had to stop for a second when you said that “we changed the world by finding applications for [computers] that the technologists had never dreamed of” (original emphasis). Who is “we”? Who are those “regular folks [who] found new ways to use computers”?

I believe it is open to debate how many of those with access to computing technology are actively driving the development of new applications. Admittedly, this share seems to be increasing in times of the App Store and open source software development.

But from a more sober point of view, those “regular folks” don’t seem to be that regular after all. It seems that many of us are still trying to catch up with everyday desktop software when your website is already praising the latest cloud computing service. The skills to use these services, or even to become “a filmmaker”, are unevenly distributed.

Paying the bill

To be fair, the points I mentioned so far might be irrelevant to somebody who’s business or publication targets the large share of the population with sufficient access and skills to enjoy a bit of abundance. Inevitably, innovation will always leave some people behind.

But maybe businesses find it difficult as well to fully embrace the abundance narrative. Is it really “artificial scarcity” when a cell phone company restricts the size of my voicemail inbox? Or does voicemail traffic actually drive the fixed cost on their balance sheet?

I wonder how many businesses – especially in their early stages – can afford to go through “a lot of fruitless minima” before they hit the jackpot. Youtube, as the classic example, has spent several years and billions of dollars, only to be loss-making until today. Without subsidies from Google, such a financial record would be the end of any other business.

Scarce filters

Finally, I would like to pick up on a point that you stressed in The Long Tail – the incredible importance of content filters and aggregators. These are crucial to sift through the abundance of web content out there.

The problem with them is obvious: there is only a few of them which control a massive share of the market. A few companies and their websites control the mechanisms and algorithms that help us find what we’re looking for. You may be right that they help us explore the end of the Long Tail, but how they do it is largely unknown.

And so…

As I said before, the points I tried to make do not serve the purpose of rejecting your argument completely. I believe you provide a nice description of some of the transitions that are currently going on.

What I’m getting at is that a lot of stuff related to computing powers is not abundant. As you are responsible for driving and reporting many of the advancements in technology, it is important to keep that in mind.

* For all of you who’ve studying at LSE with me, the arguments of this post will sound pretty familiar. Please comment if you like to add anything.