Monthly Archive for November, 2008

The broken business model of newspapers

About six weeks ago I took a week off work to catch up on life and do some research and testing of market opportunities. I had several hypotheses I wanted to test and sent content to a closed group of friends and colleagues. My goal was to watch how they reacted to it, to understand how time-poor people consume information…and it was an absolutely fascinating experience.

As part of this excercise, I took the task of reading all the major newspapers every day. It has literally been years since I’ve given that much attention to them – I used to read them daily, but my Gen-Y ways got the better of me, and I moved online. Unfortunately, I still can’t seem to manage my online rituals to efficiently consume information (hence the research I did – turns out other people are struggling as well). Something I realised in the course of my research, is that whilst newspapers are losing circulation due to the Internet – there is a lot they could do to really improve their competitiveness.

Too much detail
I tried reading the main newspapers word for word, and it took me hours. I don’t care how much people whine that they love the newspaper experience – the reality is, the people who read the news also work full-time. They barely have time to take out five minutes in their day; the reason people don’t read newspapers is because of the complexity of life. Personally I work through lunch; and if I don’t work, I am trying to do things in my life so as to make more time for myself after work. The weekend is literally the only time I have a chance to take a time out to read the newspaper – but given I neglect people in my personal life during the week and the myriad of other things I am involved in outside of work, means I don’t even get that chance. I rarely sit down – that’s why I read the news on my phone on the train.

Newspapers contain quality content, there is no doubt about that. However, if you are going to compete in the news business, you need to understand your audience: that’s all they want. If you read any news item in a newspaper, it will be flowered with extra facts, background information, and endless perspectives to colour the central issue. For example, an article about the Central Bank in Australia dropping its cash rate by 1% had several paragraphs talking about the exchange rate. Yes, it’s valid to talk about it – but there were another half dozen articles that did the same thing in the related coverage, and quite frankly, it’s a separate issue. Another article about the impact of the rate change on local business, makes mention that 50 million pizzas get sold through Dominoes Australia. Interesting stuff – but is it relevant to the news?

A newspaper should have a headline, and literally report just on that news. I’m not saying they shouldn’t report on the extra stuff – quite the contrary I love the extra stuff – but they fail to recognise that the problem with reading a newspaper is that it takes so long, and so people can only skim it. Report just the news, and let consumers follow up on the website with extra detail through special links provided.

Newspapers can’t compete in news any more
I was able to get copies of the major newspapers between 11pm and 12.40am – as in, the night before people usually buy it. Those newspapers had been delivered by a truck, after being printed in a factory far away, with thousands of copies being loaded and distributed earlier that evening. Of course, there is a staggered distribution with some newsagents getting them through the night and early morning (about 5am), but it’s still the same newspaper delivered at 12am as at the high profile newsagents.

The timeline for reporting news is a joke. The only hope a newspaper has in reporting news uniquely, is if it breaks it. By breaking news, it has a chance to take its time and frame the flow of information. But is this that common? Most newspapers use shared agencies to pool their resources with stories, like international news. Newspapers are being ignored by consumers, because they get news quicker on the Internet. Why must these media executives continue to ignore the reality that an online news organistaion is much more efficient in distributing breaking news. That’s why newspapers existed in the past, but they no longer fill that role in society – newspapers need to get out of that role (or become “news brand”, but no longer treating print as the prime distribution for that news).

The incentives and structures can’t compete with this new world
Journalists, especially freelancers, get paid by word count.
Readers, especially time poor ones, skim through the newspaper.

See a problem there? It’s called friction. In case you are a mass media executive, let me build on it for you: the economics of information have now changed. When your industry was created several hundred years ago, information was scarce and people had plenty of time. Today, it is people’s time (or “attention”) that is scarce, whereas information is abundant. Tradition through the “art” and skill of journalism seems to drive the industry more than its fundamental economic shifts. As I remarked at the Future of Media Summit several months back after hearing a mass media journalist rant on justifying her existence: “The skill of journalism? It’s just as relevant as the skill of sword makers. It’s nice, but I prefer a gun.”

A business that does not respond to its market, will die one day. The cost structures of the newspaper (and magazine industries) are sustaining a structure that no longer suits the market for which it supposedly caters for. Instead, it relies purely on generational factors of a Luddite population to sustain its circulation, trying to make money on a model that has now been broken.

What’s so exciting about this? The traditional media don’t get it, in the same way a bible-basher won’t accept there is no God despite presenting logic suggesting otherwise. I’ve heard this from friends in the industry, from people I’ve met at conferences, and from observing my own clients who are part of a broader media group.

Denial by a legacy industry can be a beautiful thing for an entrepreneur.

Online advertising – a bubble

I just recorded a podcast with Duncan Riley and Bronwen Clune – two New Media innovators I greatly admire, to discuss what the future of media was. Unfortunately, the podcast recording came out battered and my normal analytical mind wasn’t in gear to add fruitfully to the discussion.

So Dunc and Bron, here I go: why I think advertising on the Internet has a future that will repeat the property bubble that fueled the world’s economic expansion these last few decades. (Y’know -the one that just burst.)

Advertising has been broken by the Internet
Let’s think about this from a big picture first: why do people advertise? It’s to get an outcome. Ignoring elections and government campaigns, the regular market economy has advertising so companies can make money. Pure and simple. Whether it be "brand" advertising which is a way of shaping perceptions for future sales, or straight-off-the-bat advertising pushing a product – the incentive for companies is to get a response. That response, ultimately, is to take that cash out of your wallet.

Now’s lets jump into the time machine and think about companies in the 1970s and 1980s – before this "Internet" thing became mainstream. How could companies get exposure for their products? Through the media of course. The mass media had captured audiences, and they were able to monetise this powerful position they had in society by forcing people to consume advertising as they were dealt with servings of information they actually wanted.

It worked in the past, because that’s how the world worked. That is of course, until the Internet and the Web completely transformed our world.

Companies jumped on the web thinking this was simply an extension of the mass media but so much better. And they were right to some extent – it was much better. A bit too good actually, because it now exposed the weaknesses of the concept of advertising.

Take for example one of the undergraduate students that works at my firm. Apparently, this 19 year old never watches television – but he is on top of all the main shows. He does this through peer to peer technology, where he is able to download his favourite shows. I asked him why does he do that and he responded quickly: "because I can avoid the ads". What’s happening with the Internet is that consumers can control the experience they have when consuming information now, unlike the past where they marched in line according to the programming schedule. The audience is no longer captive.

The Internet did another thing: it made advertising more accountable. In the past, savvy agencies would ‘segment’ the population and associate various mass media outlets as better being able to connect with the ‘target market’. To measure, print used circulation and readership – working out how many people bought the publication, and some number out of some Actuary’s head of how many people read that same copy (through statistical techniques of assessing patients in doctors’ surgeries, no doubt). Broadcasters on the other hand, would randomly call households and using statistical methods, would estimate the number of people that tuned in.

Perhaps the fact I took statistics for my undergraduate degree, is why I am so skeptical. Even my stats lecturer admitted it was bullshit – albeit in an ‘educated’ way. In relation to the mass media, the bigger issue was the fact this educated bullshit was not disaggregated. What I mean, was that when a newspaper has a readership of 100,000 people – there is a massive assumption that if you advertise in that publication, you will actually reach them. You might have bought a newspaper to read this one article your friend mentioned – and yet, your act of purchase enables the newspaper to justify all the other pages to advertisers with a simplistic metric.

The Internet completely changed this because we no longer are relying on statistics, but actual data collected. In the past, advertisers would get a plane and fly over an Amazonian forest they picked and pay to drop one million pamphlets hoping that at least 50,000 of their target market would catch the pamphlets and respond. Of course, indirect sales activity could indicate the effectiveness of a campaign, but in reality it was all a guess. Now with the Internet, a lot of the guesswork is not required any more – and quite frankly, advertising on the Net looks bad but the reality is that the truth has now been set free.

This is looking at it from an accountability point of view, but looking at it from a practical view as well, there are issues. The holy grail of advertising, is targeting. The reason being, if you can target an ad better, you are more likely to get a conversion. However there is a natural friction with targeted advertising and it’s called privacy. As I’ve said before, privacy is the speed hump for the attention economy.

Advertising on the net technologically offers a great ability to target, with marketers licking their lips at the opportunity. However this is coming with a complete misunderstanding, that technology may be an enabler but culture and society will be a breaker. People do not want better targeting. The thought that some company profiles you scares the crap out of people. Yes, I’ve even convinced myself that when advertising is relevant, it’s useful – but this is looking at it after the fact. The problem with targeted advertising, is that whilst it may run a world record 100 metre dash, it might not get the chance to actually get off the starting blocks. Just ask Facebook if you don’t believe me.

The structural impact the Internet has had to ruin advertising
The Internet is great for measuring – but there are a few too many measures. The lack of a consistent measurement system creates several problems. More significant is the fact that different types of Internet services compete based on what model works best for them. For example, pay per action is something advertisers love because they are getting a better return on their investment by seeing a follow through. This works with contextual advertising like the kind Google uses – it’s actually in Google’s interest for you to click off their pages.

Contrast that with video sites where a person is engaged with the content for ten minutes. An advertiser can’t compare ten minutes of engagement on a video site easily with click-actions on contextual advertising sites. What this creates is a vacuum, where the ad dollars will bias those that offer a better likelihood of making a sale. After all, why would you care about capturing someone’s attention for ten minutes, when you can simply pay for someone clicking on a link which is directly linked with an e-commerce sale on your site.

This creates a real problem, because it’s not an equal playing field to compete for the advertising. Certain types of services do better under different models. Banner advertising will die, not just because people are realising the usability issues surrounding banner blindness , or the fact that banner advertising is simply a copy and paste model of the mass media days , but because competing advertising models that better link them better to final sales will become more popular. When we hear about the great growth rates in online advertising, don’t forget to dig a little deeper because the real growth comes from search advertising which makes up about half of that.

There’s another structural problem with the Internet: there’s too much competition. In the mass media days, the media had an established relationship as "the" information distribution outlets of society. With the Internet, anyone can create a blog and become their own publisher. Additionally, the Internet is seeing growth not just in New Media ventures, but utility and commerce ventures as well. Same advertising pie theoretically (ignoring the long tail effect for a second, where small advertisers can now participate), but a lot more "distributors". This creates a fragmentation, where advertising dollars are being worn thin. It’s for this reason the larger internet services tend to manage to get by . Just looking at the face of it though, you know there’s a problem in the longer term even for the bigger players when you operate in such an environment.

It’s not just other Internet services to worry about however: it’s the advertisers themselves. In a world of information, democratised by search engines judging quality content – you as a publisher are on the same foot as the company paying for the ads. Why would Nike want to advertise on your website, when it can just improve its own search engine ranking? Companies can now create a more direct relationship with their customers and future customers – and they no longer need an intermediary (like the media) to facilitate that relationship. That’s a Big Deal. It’s not just search though – the VRM Project is doing exactly that, creating a system that will facilitate those relationships.

Concluding thoughts
I could just as much put an argument in favour of online advertising, don’t get me wrong – there will be a lot of growth occuring still. But what I want to highlight, is that taking a step back at the facts, there is something seriously wrong with this model. If advertisers no longer need that intermediary to facilitate a relationship; if advertisers are chasing the industry down the tail of measureable ads that better link to a final sale; if the entire industry is not consistent and competing with each other both in inventory and in methods, in an infinite battle; and if consumers are no longer captive to the content distribution experience – it makes you question doesn’t it?

According to Nielsen over a year ago, about a third of all U.S. online advertising dollars spent in July came from the financial sector–with mortgage and credit reporting firms representing five of the top ten advertisers. Together, those companies spent nearly $200 million on search, display and other Web advertising, meaning that a slowdown would degrade fairly significant annual revenue streams. The writing was on the wall that long ago, what analysts are only now saying are troubled times for online advertising.

Just like we knew a year ago about the credit crunch, before a drastic turn of events turned it into the most dramatic economic shift in our world in our collective memories, so too will the advertising bubble burst. It will be years – perhaps decades – before this happens. However one thing is for sure – the Internet has not only ruined the newspaper, music and traditional software industries, but it’s also ruining the world of advertising. Like how newspapers, music and software are currently evolving into new models which we still are not sure where they will end up, so too will advertising be transformed.

Mr Online Advertising and Ms Media Company relying on it as a revenue model – you are growing on the basis of some very shaky foundations.

Liako is everywhere…but not here

Life’s been busy, and this blog has been neglected. Not a bad thing – a bit of life-living, work-smacking, exposure to new experiences, and active osmosis from the things I am involved in – is what makes me generate the original perspectives I try to create on this blog.

However to my subscribers (Hi Dad!), let this post make it up to you with some content I’ve created elsewhere.

You already know about the first podcast I did with the Perth baroness Bronwen Clune and the only guy I know who can pull off a mullet Mike Cannon-Brookes of Atlassian . Here’s a recap of some other episodes I’ve done:

  • Episode two: ex-PwC boy Matthew Macfarlane talks to current PwC boy myself and Bronwen, in his new role as partner of a newly created investment fund Yuuwa Capital. He joined us and told us about what he’s looking for in startups, as he’s about to spend $40million on innovative startups!
  • Episode three: marketing guru Steve Sammartino , tells us about building a business and his current startup Rentoid.com
  • Episode four: experienced entrepreneur Martin Hosking shares us lessons and insight, whilst talking about his social commerce art service Red Bubble .
  • Episode five: “oh-my-God-that-dude-from-TV!” Mark Pesce joins us in discussing that filthy government filter to censor the Internet
  • Episode six: ex-Fairfax Media strategist Rob Antulov tells us about 3eep – a social networking solution for the amateur and semi-professional sports world.

I’ve also put my data portability hat on beyond mailing list arguments and helped out a new social media service called SNOBS – a Social Network for Opportunistic Business women – with a beginners guide to RSS . You might see me contribute there in future, because I love seeing people pioneer New Media and think Carlee Potter is doing an awesome job – so go support her!

Over and out -regular scheduling to resume after this…

The Rudd Filter

This poor blog of mine has been neglected. So let me do some catchup with some of the things I’ve been doing.

Below is a letter I sent to every senator of the Australian government several weeks ago. Two key groups responded: the Greens (one of the parties to hold the balance of power) who were encouraged by my letter, and the Independent Nick Xenophon (who is one of the two key senators that will have an impact) had his office respond in a very positive way .

It relates to the Government’s attempt to censor the Internet for Australians.

Subject: The Rudd Filter

Attention: Senators of the Australian parliament

With all due respect, I believe my elected representatives as well as my fellow Australians misunderstand the issue of Internet censorship. Below I offer my perspective, which I hope can re-position the debate with a more complete understanding of the issues.

Background

The policy of the Australian Labor Party on its Internet filter was in reaction to the Howard Government’s family-based approach which Labor said was a failure. Then leader of the Opposition, Kim Beazley, announced in March 2006 (Internet archive ) that under Labor “all Internet Service Providers will be required to offer a filtered ‘clean feed’ Internet service to all households, and to schools and other public internet points accessible by kids.” The same press release states “Through an opt-out system, adults who still want to view currently legal content would advise their Internet Service Provider (ISP) that they want to opt out of the “clean feed”, and would then face the same regulations which currently apply.”

The 2007 Federal election, which was led by Kevin Rudd, announced the election pledge that “a Rudd Labor Government will require ISPs to offer a ‚Äòclean feed‚Äô Internet service to all homes, schools and public Internet points accessible by children, such as public libraries. Labor‚Äôs ISP policy will prevent Australian children from accessing any content that has been identified as prohibited by ACMA, including sites such as those containing child pornography and X-rated material.”

Following the election, the Minister for Broadband, Communications and Digital Economy Senator Stephen Conroy in December 2007 clarified that anyone wanting uncensored access to the Internet will have to opt-out of the service .

In October 2008, the policy had another subtle yet dramatic shift. When examined by a Senate Estimates committee, Senator Conroy stated that “we are looking at two tiers – mandatory of illegal material and an option for families to get a clean feed service if they wish.” Further, Conroy mentioned “We would be enforcing the existing laws. If investigated material is found to be prohibited content then ACMA may order it to be taken down if it is hosted in Australia. They are the existing laws at the moment.”

The interpretation of this, which has motivated this paper as well as sparked outrage by Australians nation-wide, is that all Internet connection points in Australia will be subjected to the filter, with only the option to opt-out of the Family tier but not the tier that classifies ‘illegal material’. While the term “mandatory” has been used as part of the policy in the past, it has always been used in the context of making it mandatory for ISP’s to offer such as service. It was never used in the context of it being mandatory for Australians on the Internet, to use it.

Not only is this a departure from the Rudd government’s election pledge, but there is little evidence to suggest that it is truly being representative of the requests from the Australian community. Senator Conroy has shown evidence of the previous NetAlert policy by the previous government falling far below expectations. According to Conroy, 1.4 million families were expected to download the filter, but many less actually did . The estimated end usage according to Conroy is just 30,000 – despite a $22 million advertising campaign. The attempt by this government to pursue this policy therefore, is for its own ideological or political benefit . The Australian people never gave the mandate nor is there evidence to indicate majority support to pursue this agenda. Further, the government trials to date have shown the technology to be ineffective.

On the 27th of October, some 9,000 people had signed a petition to deny support of a government filter. At the time of writing this letter on the 2 November, this has now climbed to 13,655 people. The government’s moves are being closely watched by the community and activities are being planned to respond to the government should this policy continue in its current direction.

I write this to describe the impact such a policy will have if it goes ahead, to educate the government and the public.

Impacts on Australia

Context

The approach of the government to filtering is one dimensional and does not take into account the converged world of the Internet. The Internet has – and will continue to – transform our world. It has become a utility, to form the backbone of our economy and communications. Fast and wide-spread access to the Internet has been recognised globally as a priority policy for political and business leaders of the world.

The Internet typically allows three broad types of activities. The first is that of facilitating the exchange of goods and services. The Internet has become a means of creating a more efficient marketplace, and is well known to have driven demand in offline selling as well , as it creates better informed consumers to reach richer decision making. On the other hand, online market places can exist with considerable less overhead – creating a more efficient marketplace than in the physical world, enabling stronger niche markets through greater connections between buyers and sellers.

The second activity is that of communications. This has enabled a New Media or Hypermedia of many-to-many communications, with people now having a new way to communicate and propagate information. The core value of the World Wide Web can be realised from its founding purpose: created by CERN , it was meant to be a hypertext implementation that would allow better knowledge sharing of its global network of scientists. It was such a transformative thing, that the role of the media has forever changed. For example, newspapers that thrived as businesses in the Industrial Age, now face challenges to their business models, as younger generations are preferring to access their information over Internet services which objectively is a more effective way to do so .
A third activity is that of utility. This is a growing area of the Internet, where it is creating new industries and better ways of doings, now that we have a global community of people connected to share information. The traditional software industry is being changed into a service model where instead of paying a license, companies offer an annual subscription to use the software via the browser as platform (as opposed to a PC’s Window’s installation as the platform). Cloud computing is a trend pioneered by Google, and now an area of innovation by other major Internet companies like Amazon and Microsoft, that will allow people to have their data portable and accessible anywhere in the world. These are disruptive trends, that will further embed the Internet into our world.

The Internet will be unnecessarily restricted

All three of the broad activities described above, will be affected by a filter.
The impact on Markets with analysis-based filters, is that it will likely block access to sites due to a description used in selling items. Suggestions by Senators have been that hardcore and fetish pornography be blocked – content that may be illegal for minors to view, but certainly not illegal for consenting adults. For example, legitimate businesses that used the web as their shopfront (such as adultshop.com.au), will be restricted from the general population in their pursuit of recreational activities. The filter’s restriction on information for Australians is thus a restriction on trade and will impact individuals and their freedoms in their personal lives.
The impact on communications is large. The Internet has created a new form of media called “social media”. Weblogs, wiki’s, micro-blogging services like Twitter, forums like Australian start-up business Tangler and other forms of social media are likely to have their content – and thus service – restricted. The free commentary of individuals on these services, will lead to a censoring and a restriction in the ability to use the services. “User generated content” is considered a central tenet in the proliferation of web2.0, yet the application of industrial area controls on the content businesses now runs into a clash with people’s public speech as the two concepts that were previously distinct in that era, have now merged.
Further more, legitimate information services will be blocked with analysis-based filtering due to language that would trigger filtering. As noted in the ACMA report , “the filters performed significantly better when blocking pornography and other adult content but performed less well when blocking other types of content”. As a case in point, a site containing the word “breast”, would be filtered despite it having legitimate value in providing breast cancer awareness.
Utility services could be adversely affected. The increasing trend of computing ‘in the cloud’ means that our computing infrastructure will require an efficient and open Internet. A filter will do nothing but disrupt this, with little ability to achieve the policy goal of preventing illegal material. As consumers and businesses move to the cloud, critical functions will be relied on, and any threat in the distribution and under-realisation of potential speeds, will be a burden on the economy.
Common to all three classes above, is the degradation of speeds and access. The ACMA report claims that all six filters tested scored an 88% effectiveness rate in terms of blocking the content that the government was hoping would be blocked. It also claims that over-blocking of acceptable content was 8% for all filters tested, with network degradation not nearly as big of a problem during these tests as it was during previous previous trials, when performance degradation ranged from 75-98%. In this latest test, the ACMA said degradation was down, but still varied widely‚Äîfrom a low of just 2% for one product to a high of 87% for another. The fact that there is a degradation of even 0.1% is in my eyes, a major concern.The Government has recognised with the legislation it bases its regulatory authority from, that “whilst it takes seriously its responsibility to provide an effective regime to address the publication of illegal and offensive material online, it wishes to ensure that regulation does not place onerous or unjustifiable burdens on industry and inhibit the development of the online economy.”

The compliance costs alone will hinder the online economy. ISP’s will need to constantly maintain the latest filtering technologies, businesses will need to monitor user generated content to ensure their web services are not automatically filtered and administrative delays to unblock legal sites will hurt profitability and for some start-up businesses may even kill them.

And that’s just for compliance, lets not forget the actual impact on users. As Crikey has reported (Internet filters a success, if success = failure ), even the best filter has a false-positive rate of 3% under ideal lab conditions. Mark Newton (the network engineer who Senator Conroy’s office attacked recently ) reckons that for a medium-sized ISP that‚Äôs 3000 incorrect blocks every second . Another maths-heavy analysis says that every time that filter blocks something there‚Äôs an 80% chance it was wrong.

The Policy goal will not be met & will be costly through this approach

The Labor party’s election policy document states that Labor‚Äôs ISP policy will prevent Australian children from accessing any content that has been identified as prohibited by ACMA, including sites such as those containing child pornography and X-rated material. Other than being a useful propaganda device, to my knowledge children and people generally don’t actively seek child pornography, and a filter does nothing to prevent these offline real-world social networks of paedophiles to restrict their activities.

What the government seems to misunderstand, is that a filter regime will prove inadequate in achieving any of this, due to the reality of how information gets distributed on the Internet.
Composition of Internet traffic by you.

Source: http://www.ipoque.com/userfiles/file/internet_study_2007.pdf
Peer-to-peer networks (P2P), a legal technology that also proves itself impossible to control or filter, accounts for the majority of Internet traffic, with figures of between 48% in the Middle East and 80% in Eastern Europe . As noted earlier, the ACMA trials have confirmed that although they can block P2P, they cannot actually analyse the content as being illegal. This is because P2P technologies like torrents are completely decentralised. Individual torrents cannot be identified, and along with encryption technologies, make this type of content impossible to filter or identify what it is.
However, whether blocked or filtered, this is ignoring the fact that access can be bypassed by individuals who wish to do so. Tor is a network of virtual tunnels, used by people under authoritarian governments in the world – you can install the free software on a USB stick to have it working immediately. It is a sophisticated technology that allows people to bypass restrictions. More significantly, I wish to highlight that some Tor servers have been used for illegal purposes, including child pornography and p2p sharing of copyrighted files using the bit torrent protocol. In September 2006, German authorities seized data center equipment running Tor software during a child pornography crackdown, although the TOR network managed to reassemble itself with no impact to its network . This technology is but one of many available options for people to overcome a ISP-level filter.
For a filtering approach to be appropriate, it will require not just automated analysis based technology, but human effort to maintain the censorship of the content. An expatriate Australian in China claims that a staff of 30,000 are employed by the Golden Shield Project (the official name for the Great Firewall) to select what to block along with whatever algorithm they use to automatically block sites. With legitimate online activities being blocked through automated software, it will require a beefed up ACMA to handle support from the public to investigate and unblock websites that are legitimate. Given the amount of false positives proven in the ACMA trials, this is not to be taken likely, and could cost hundreds of millions of dollars in direct taxpayers money and billions in opportunity cost for the online economy.

Inappropriate government regulation

The governments approach to regulating the Internet has been one dimensional, by regarding content online with the same type that was produced by the mass media in the Industrial Era. The Information Age recognises content not as a one-to-many broadcast, but individuals communicating. Applying these previous-era provisions is actually a restraint beyond traditional publishing.
Regulation of the Internet is provided under the Broadcasting Services Amendment (Online Services) Act 1999 (Commonwealth) . Schedule Five and seven of the amendment claim the goal is to:

  • Provide a means of addressing complaints about certain Internet content
  • Restrict access to certain Internet content that is likely to cause offense to a reasonable adult
  • Protect children from exposure to Internet content that is unsuitable for them

Mandatory restricting access can disrupt freedom of expression under Article 19 of the International Covenant on Civil and Political Rights and disrupt fair trade of services under the Trade Practices Act.

It is wrong for the government to take the view of mandating restricted access, but instead should allow consumers that option to participate in a system that protects them. To allow a government to interpret what a “reasonable adult” would think is too subjective for it to be appropriate that a faceless authority regulates, over the ability for an individual adult to determine for themselves.

The Internet is not just content in the communications sense, but also in the market and utility sense. Restricting access to services, which may be done inappropriately due to proven weaknesses in filtering technology, would result in

  • reduced consumer information about goods and services. Consumers will have less information due to sites incorrectly blocked
  • violation of the WTO’s cardinal principles – the “national treatment” principle , which requires that imported goods and services be treated the same as those produced locally.
  • preventing or hindering competition under the interpretation of section 4G of the Trade Practices Act . This means online businesses will be disadvantaged from physical world shops, even if they create more accountability by allowing consumer discussion on forums that may trigger the filter due to consumers freedom of expression.

Solution: an opt-in ISP filter that is optional for Australians

Senator Conroy’s crusade in the name of child pornography is not the issue. The issue, in addition to the points raised above, is that mandatory restricting access to information, is by nature a political process. If the Australian Family Association writes an article criticising homosexuals , is this grounds to have the content illegal to access and communicate as it incites discrimination ? Perhaps the Catholic Church should have its website banned because of their stance on homosexuality?

If the Liberals win the next election because the Rudd government was voted out due to pushing ahead with this filtering policy, and the Coalition repeat recent history by controlling both houses of government – what will stop them from banning access to the Labor party’s website?

Of course, these examples sound far fetched but they also sounded far fetched in another vibrant democracy called the Weimar Republic . What I wish to highlight is that pushing ahead with this approach to regulating the Internet is a dangerous precedent that cannot be downplayed. Australians should have the ability to access the Internet with government warnings and guidance on content that may cause offence to the reasonable person. The government should also persecute people creating and distributing information like child pornography that universally is agreed by society as a bad thing. But to mandate restricted access to information on the Internet, based on expensive imperfect technology that can be routed around, is a Brave New World that will not be tolerated by the broader electorate once they realise their individual freedoms are being restricted.

This system of ISP filtering should not be mandatory for all Australians to use. Neither should it be an opt-out system by default. Individuals should have the right to opt-into a system like this, if there are children using the Internet connection or a household wishes to censor their Internet experience. To mandatory force all Australians to experience the Internet only if under Government sanction, is a mistake of the highest levels. It technologically cannot be assured, and it poses a genuine threat to our democracy.

If the Ministry under Senator Conroy does not understand my concerns by responding with a template answer six months later , and clearly showing inadequate industry consultation despite my request, perhaps Chairman Rudd can step in. I recognise with the looming financial recession, we need to look for ways to prop up our export markets. However developing in-house expertise at restricting the population that would set precedent to the rest of the Western world, is something that’s funny in a nervous type of laughter kind of way.

Like many others in the industry, I wish to help the government to develop a solution that protects children. But ultimately, I hope our elected representatives can understand the importance of this potential policy. I also hope they are aware anger exists in the governments’ actions to date, and whilst democracy can be slow to act, when it hits, it hits hard.
Kind regards,
Elias Bizannes
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Elias Bizannes works for a professional services firm and is a Chartered Accountant. He is a champion of the Australian Internet industry through the Silicon Beach Australia community and also currently serves as Vice-Chair of the DataPortability Project. The opinions of this letter reflect his own as an individual (and not his employer) with perspective developed in consultation with the Australian industry.
This letter may be redistributed freely. HTML version and PDF version.

You don’t nor need to own your data

One of the biggest questions the DataPortability project has grappled with (and where the entire industry is not at consensus), is a fairly basic question with some profound consequences: who owns your data. Well I think I have an answer to the question now, which I’ve now cross-validated across multiple domains. Given we live in the Information Age, this certainly matters in every respect.

So who owns “your data”? Not you. Or the other guy. Or the government, and the MicroGooHoo corporate monolith. Actually, no one does. And if they do, it doesn’t matter.

People like to conflate the concept of property ownership to that of data ownership. I mean it’s you right? You own your house so surely, you own your e-mail address, your name, your date of birth records, your identity. However when you go into the details, from a conceptual level, it doesn’t make sense.

Ownership of data
First of all, let’s define property ownership: “the ability to deny use of an asset by another entity”. The reason you can claim status to owning your house, is because you can deny someone else access to your property. Most of us have a fence to separate our property from the public space; others like the hillbillies sit in their rocking chair with a shot gun ready to fire. Either way, it’s well understood if someone else owns something, and if you trespass, the dogs will chase after you.

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The characteristics of ownership can be described as follows:
1) You have legal title recognising in your legal jurisdiction that you own it.
2) You have the ability to enforce your right of ownership in your legal jurisdiction
3) You can get benefits from the property.

The third point is key. When people cry out loud “I own my data”, that’s essentially the reason (when you take out the Neanderthal emotionally-driven reasoning out of the equation). Where we get a little lost though, is when we define those benefits. It could be said, that you want to be able to control your data so that you can use it somewhere else, and so you can make sure someone else doesn’t use it in a way that causes you harm.

Whilst that might sound like ownership to you, that’s where the house of cards collapses. The reason being, unless you can prove the ability to deny use by another entity, you do not have ownership. It’s a trap, because data is not like a physical good which cannot be easily copied. It’s like a butterfly locked in a safe: the moment you open that safe up, you can say good bye. If data can only satisfy the ownership definition when you hide it from the world, that means when it’s public to the world, you no longer own it. And that sucks, because data by nature is used for public consumption. But what if you could get the same benefits of ownership – or rather, receive benefits of usage and regulate usage – without actually ‘owning’ it?

Property and data – same same, but different
Both property and data are assets. They create value for those who use them. But that’s where the similarity’s end.

Property gains value through scarcity. The more unique, the more valuable. Data on the other hand, gains value through reuse. The more derivative works off it, means the more information generated (as information is simply data connected with other data). The more information, the more knowledge, the more value created – working its way along the information value chain. If data is isolated, and not reused, it has little value. For example, if a company has a piece of data but is not allowed to ever use it – there is no value to it.

Data gains value through use, and additional value through reuse and derivative creations. If no one reads this blog, it’s a waste of space; if thousands of people read it, its value increases – as these ideas are decimated. To give one perspective on this, when people create their own posts reusing the data I’ve created, I generate value through them linking back to me. No linking, no value realised. Of course, I get a lot more value out of it beyond page rank juice, but hopefully you realise if you “steal” my content (with at least some acknowledgement to me the person), then you are actually doing me a favour.

Ignore the above!
Talking about all this ownership stuff doesn’t actually matter; it’s not ownership that we want. Let’s take a step back, and look at this from a broader, philosophical view.

Property ownership is based on the concept that you get value from holding something for an extended period of time. But in an age of rapid change, do you still get value from that? Let’s say, we lose the Holy War for people being able to ‘own’ their data. Facebook – you win – you now ‘own’ me. This is because it owns the data about me – my identity, it would appear, is under the control of Facebook – it now owns, that “I am in a relationship”. However, the Holy War might have been lost but I don’t care. Because Facebook owns crap – as six months ago, I was in a relationship. Now I’m single and haven’t updated my status. The value for Facebook, is not in owning me in a period of time: it’s in having access to me all the time – because one way they translate that data into value is advertising, and targeting ads is pointless if you have the wrong information to base your targetting on. Probably the only data that can be static in my profile, is birth-date and gender – but with some tampering and cosmetics, even those can be altered now!

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Think about this point raised by Luk Vervenne, in response to my above thoughts on the VRM mailing list, by considering employability. A lot of your personal information, is actually generated by interactions with third parties, such as the education institution you received your degree from. So do I own the fact that I have a Bachelor of Commerce from the University of Sydney? No I don’t, as that brand and the authenticity is that of the university. What I do have however, is access & usage rights to it. Last time I checked, I didn’t own the university, but if someone quizzes me on my academic record, there’s a hotline ready to confirm it – and once validated, I get the recognition that translates into a benefit for me.

Our economy is now transitioning from a goods-producing to a service-performing and experience-generating economy. It’s hard for us to imagine this new world, as our conceptual understanding of the world is built on the concept of selling, buying and otherwise trading goods that ultimately ends in us owning something. But this market era of the exchange of goods is making way for “networks” and the concept of owning property will diminish in importance, as our new world is will now place value on the access.

This is a broader shift. As a young man building his life, I cannot afford to buy a house in Sydney with its overinflated prices. But that’s fine – I am comfortable in renting – all I want is ‘access’ to the property, not the legal title to it which quite frankly would be a bad investment decision even aside from the current economic crisis. I did manage to buy myself a car, but I am cursing the fact that I wasted my money on that debt which could have gone to more productive means – instead, I could have just paid for access to public transport and taxis when I needed transport. In other words, we now have an economy where you do not need to own something to get the value: you just need access.

That’s not to say property ownership is a dead concept – rather, it’s become less important. When we consider history as well, the concept of the masses “owning” property was foreign anyway – there was a class system with the small but influential aristocracy that would own the land, with the serfs working on the land. “Ownership” really, is a new ‘established’ concept to our world – and it’s now ready to get out of vogue again. We’ve now reached a level of sophistication in our society where we no longer need the security of ownership to get the benefits in our life – and these property owners that we get our benefits from, may appear to yield power but they also have a lot of financial risk, government accountability and public scrutiny (unlike history’s aristocracy).

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Take a look at companies and how they outsource a lot of their functions (or even simplify their businesses’ value-activities). Every single client of mine – multi-million dollar businesses at that as well – pay rent. They don’t own the office space they are in, as for them to get the benefits, they instead simply need access which they get through rental. “Owning” the property is not part of the core value of the business. Whilst security is needed, because not having ownership can put you at the mercy of the landlord, this doesn’t mean you can’t contract protection like my clients do as part of the lease agreements.

To bring it back to the topic, access to your data is what matters – but it also needs to be carefully understood. For example, access to your health records might not be a good thing. Rather, you can control who has access to that data. Similarly, whilst no one might own your data, what you do have is the right to demand guidelines and principles like what we are trying to do at the DataPortability Project on how “your” data can be used. Certainly, the various governmental privacy and data protection legislation around the world does exactly that: it governs how companies can use personally identifiable data.

Incomplete thoughts, but I hope I’ve made you think. I know I’m still thinking.