Whatcha Gonna Do With That Duck?: And Other Provocations, 2006-2012 (49 page)

It seems to me, then, that the best time for a marketer to grow is when clients have to pick something. Seeking these moments out is inexpensive and productive.

A business model is the architecture of a business or project. It has four elements:

1. What compelling reason exists for people to give you money (or votes or donations)?
   
2. How do you acquire what you’re selling for less than it costs to sell it?
   
3. What structural insulation do you have from relentless commoditization and a price war?
   
4. How will strangers find out about the business and decide to become customers?
   

The Internet 1.0 was a fascinating place because business models were in flux. Suddenly, it was possible to have costless transactions, which meant that doing something on a huge scale was very cheap. That means that #2 was really cheap, so #1 didn’t have to be very big at all.

Some people got way out of hand and decided that costs were so low, they didn’t have to worry about revenue at all. There are still some Internet hotshot companies that are operating under this scenario, which means that it’s fair to say that they don’t actually have a business model.

The idea of connecting people, of building tribes, of the natural monopoly provided by online communities means that the Internet is the
best friend of people focusing on the third element, insulation from competition. Once you build a network, it’s extremely difficult for someone else to disrupt it.

As the Internet has spread into all aspects of our culture, it is affecting business models offline as well. Your T-shirt shop or consulting firm or political campaign has a different business model than it did ten years ago, largely because viral marketing and the growth of cash-free marketing means that you can spread an idea farther and faster than ever before. It also makes it far cheaper for a competitor to enter the market (#3), putting existing players under significant pressure from newcomers.

This business model revolution is just getting started. It’s not too late to invent a better one.

I’ve never written those three words before, but he’s never disagreed with Chris Anderson before, so there you go.

Free
is the name of Chris’s new book, and it’s going to be wildly misunderstood and widely argued about.

The first argument that makes no sense is, “should we want free to be the future?”

Who cares if we want it? It is.

The second argument that makes no sense is, “how will this new business model support the world as we know it today?”

Who cares if it does? It is. It’s happening. The world will change around it, because the world has no choice. I’m sorry if that’s inconvenient, but it’s true.

As I see “free,” there are two forces at work:

In an attention economy (like this one), marketers struggle for attention, and if you don’t have it, you lose. Free is a relatively cheap way to get attention (both at the start and then through viral techniques).

Second, in a digital economy with lots of players and lower barriers to entry, it’s quite natural that the price will be lowered until it meets the incremental cost of making one more unit. If a brand can gain share by charging less, a rational player will.

Condé Nast (publisher of
Wired,
Chris’s magazine, and yes,
The New
Yorker,
Malcolm’s magazine) is going to go out of business long before you get sick, never mind die. So will newspapers printed on paper. They’re going to disappear before you do. I’m not wishing for this to happen, but by refusing to build new digital assets that matter, traditional publishers are forfeiting their future.

Magazines and newspapers were perfect businesses for a moment of time, but they wouldn’t have worked in 1784, and they’re not going to work very soon in the future, either.

We’re always going to need writers, but the business model of their platform is going to change.

People will pay for content
if
it is so unique that they can’t get it anywhere else, so fast that they benefit from getting it before anyone else, or so related to their tribe that paying for it brings them closer to other people. We’ll always be willing to pay for souvenirs of news, as well—things to go on a shelf or badges of honor to share.

People will not pay for by-the-book rewrites of news that belongs to all of us. People will not pay for yesterday’s news, driven to our house, delivered a day late, static, without connections or comments or relevance. Why should we? A good book review on Amazon is more reliable and easier to find than a paid-for professional review that used to run in your local newspaper, isn’t it?

Like all dying industries, the old perfect businesses will whine, criticize, demonize and, most of all, lobby for relief. It won’t work. The big reason is simple:

In a world of free, everyone can play.

This is huge. When there are thousands of people writing about something, many will be willing to do it for free (like poets), and some of them might even be really good (like some poets). There is no poetry shortage.

The reason that we needed paid contributors before was that there was only economic room for a few magazines, a few TV channels, a few pottery stores, a few of everything. In a world where there is room for anyone to present their work, anyone will present their work. Editors become ever more powerful and valued, while the need for attention grows so acute that free may even be considered expensive.

Of course, it’s ironic that sometimes people pay money for my books
(I view them as souvenirs of content you could get less conveniently and less organized for free online if you chose to). And it’s ironic that I read Malcolm’s review for free. And ironic that you can read Chris’s arguments the most cogently by paying for them.

Neatness is for historians.
For a long time, all the markets for attention-based goods are going to be messy, which means that there are going to be huge opportunities for people (like you?) who are able to get that most precious asset (our attention) for free. At least for a while.

There was an attention drought for the longest time. Marketers paid a fortune for TV ads (and in fact, network ads sold out months in advance) because it was so difficult to find enough attention. Ads worked, so the more ads you bought, the more money you made, thus marketers took all they could get.

This attention shortage drove our economy.

The Internet has done something wacky to this situation. It has created a surplus of attention. Ads go unsold. People are spending hours on YouTube or Twitter or Facebook or other sites and not spending their attention on ads, because the ads are either absent or not worth watching.

When people talk about the problem with free online, they’re missing the point. Free is creating lots of attention, but marketers haven’t gotten smart enough to do something profitable with that attention.

Hint: funny commercials with chimps won’t be the answer.

It turns out that the almost infinitely long tail of attention varieties is what will kick open the monetization of online attention.
Yes
, I will give my attention to an ad, but only if it’s anticipated, personal, and relevant. We still give permission to marketers that earn it, but so few marketers do.

Simple example: ten years ago, there was nowhere for a company like Best Made Axe to advertise. Today, with billions of tiny micro-markets, it’s not hard to imagine many audiences of one or two or three or ten that would be delighted to know about their products. Right now, there’s no easy way for a marketer to conceptualize that effort, never mind execute it, though it’s surely coming.

Big companies, nonprofits, and even candidates will discover hyperlocal, hyperspecialized, hyperrelevant—this is where we are going, and it turns out that this time, the media are way ahead of the marketers.

I was talking with a few executives from one of the biggest technology companies in Europe, and they were explaining how their hands were tied in moving forward on the Internet. They were doing the best they could under the circumstances, of course, but there were units in their organization that needed to be protected, prices that needed to be supported, sacred cows that couldn’t be touched. After all, they argued, how could they wipe out their current business just to succeed online?

This conversation happens every single day at organizations large and small. You want to do the new thing, but of course you must do it in a measured, rational way.

Which is great, unless your competition doesn’t agree.

When you have someone who is willing to accomplish A without worrying about B and C, they will almost always defeat you in accomplishing A. Online, of course, this scenario often leads to doom, since there are many organizations that are willing to get big at the expense of revenue, or writers willing to be noticed at the expense of ethics or reputation. But in the short run, the single-minded have a fantastic advantage. And sometimes, their single-minded focus on accomplishing just that one thing (whatever it is) pushes them through the Dip far ahead of you, and then yes, they make a ton of money and you’ve lost forever.

Newspapers, magazines, TV stations, hardware companies, real estate brokers, travel agents, bookstores, insurance agents, art galleries, and five hundred other industries need to think hard about this before it’s too late.

The Web knows something, but it’s not telling us, at least not yet.

The Web knows how many followers you have on Twitter, how many friends you have on Facebook, how many people read your blog.

It also knows how often those people retweet, amplify, and spread your ideas.

It also knows how many followers your followers have.

So, what if, Google-style, someone took all this data and figured out who has clout? Which of your readers is the one capable of making an idea break through the noise and spread? Bloggers don’t have impact because they have a lot of readers; they have a lot of impact because of who their readers are (my readers, of course, are the most sophisticated and cloutful on the entire Web).

If you knew which of your followers had clout, you could invest more time and energy in providing personal attention. If we knew where big ideas were starting, that would be neat, and even more useful would be understanding who the key people were in bringing those new ideas to the rest of the world.

Back in the old days, we had no idea, so we defaulted to big newspapers or magazines or the TV networks. But now we know. We just need to surface the data in a way that is useful.

This might be the most subtle yet important shift that marketers face as they deal with the reality of new media. Marketers aren’t renters; now they own.

For generations, marketers were trained to buy (actually rent) eyeballs.

A media company assembled a large amount of attention. A TV network or a magazine or even a billboard company found a place you could put an ad, and they sold you a shot at reaching their audience.

You, the marketer, don’t care about the long-term value of this audience. It’s like a rental car. You want it to be clean and shiny when you get it, you want to avoid getting in trouble when you return it, but hey, it’s a rental.

And so when we buy ads, we ask “how big an audience?” and then we design an ad with our brand in mind, not with the well-being of the media company or its audience in mind. And if we get a 0.1% or even a 1% response rate, we celebrate.

A trade-show booth is an example of eyeball thinking. The trade-show organizer assembles attendees, and your job at the booth is to grab as many as you can.

Old media was not the same as old branding. Media companies built audiences, and then brands rented those audiences.

Suddenly the new media comes along and the rules are different. You’re not renting an audience; you’re building one. You’re not exhibiting at a trade show; you’re starting your own trade show.

If you still ask “how much traffic is there?” or “what’s the CPM?” you’re not getting it. Are you buying momentary attention or are you investing in a long-term asset?

Now, when you buy something (that thing you used to call “media”), you’re not paying for eyeballs, you’re paying for a platform. A platform you can use to build your own audience, one that you can nurture, educate, and ultimately convert. You’ll take care of this audience differently, measure them differently, and have a different sales cycle. This isn’t natural, but it works.

Two steps: buy a platform and then fill it with people. Some examples:

Authors have traditionally relied on publishers to bring them readers. The author gives up the majority of the income, and the publisher brings them the readers. But then you see someone like Frank at PostSecret, who builds his own audience for his (sometimes NSFW) content. He owns a platform; it’s not something he rents. Now, using a publisher is a choice, not a necessity. Just about every successful author going forward (except for the lucky exceptions like Dan Brown) will own her own media channel. And not just authors, of course.

Consider the local real estate agent. She can spend money to run ads every week in the local paper, or she can use the same money to start a legitimate media channel, a digital magazine, say, one that cheers on the school and gives the local paper a run for its money. And oh, yes, the only houses listed for sale are hers. It might take a lot of work and even some money. But what does she get? A platform forever.

Traditionally, a clothing brand has to give up income and control to a retailer, since the retailer has the eyeballs. The Web allows a brand like LittleMissMatched to build their own platform and their own audience and thus bypass all those gatekeepers. LittleMissMatched invested in a
product that told a story, instead of investing in giving Walmart a cut. Boring products can’t do this.

Or consider the local chiropractor. He can spend money on a Yellow Pages ad, or he can invest in a platform, creating a local running club and coaching its members.