Tag Archive for 'business model'

A solution for the newspaper industry

Newspaper executives around the world are scrambling at a solution to the new marketplace. NewsCorp’s CEO in Australia remarked a few months ago that they only make 1/10th of the revenue on websites as they do through print – but with declining print circulation due to the popularity of online news – this is really affecting the bottom line of the industry. Unfortunately, they’ve been attacking news aggregators despite the fact that that’s the solution to their problems – it’s now a changed marketplace that they need to embrace.

The market dynamics are different now
Newspapers existed at a time when information was scarce. They performed the role of aggregating news (as well as creating it), and distributing it to the public through expensive channels which could not be easily recreated.

In today’s age, information is in abundance and is drowning out consumers – with a distribution environment that is now cheap. Further, the role of news aggregation can be done more efficiently through online tools. However this has caused a problem – because in the value chain of online news, the aggregators are the ones that are able to monetise the content. Because people don’t have time to read all the news now, they rely on aggregators that pull content from a variety of sources – and then only click on stories that capture their attention. These aggregators can place sponsored posts or advertisements alongside other articles, and so have found a new way to monetise content in the ‘click economy’.

However from the content providers point of view, they’ve invested time and money in creating unique content, only for it to be ignored by consumers because they no longer have a captive audience – and for aggregators who do, to be monetising content they didn’t pay for.

Google News - aggregator

Newspapers need to drop advertising and think about the entire value chain
Content can no longer rely on advertising as a revenue model – as I’ve argued before, it’s a broken bubble economy. But premium content can exist as a paid subscriber service. This seems to be the direction newspapers are heading. But I think it’s a mistake to enact paid subscriptions on all newspaper websites – it will kill demand and will not scale across the entire industry, other than for the few globally recognised newspapers and strong national brands where their location gives them a comparative advantage (ie, LA times for entertainment; Washington Post for US politics; Wall Street Journal for the capital markets).

Rather than charge consumers to subscribe to a newspaper, what the newspaper companies should be doing is creating a new type of organisation that can pool their resources. They should do this in the same way they did with the associated presses around the world several decades ago, where they can source expensive overseas content in a cooperative, which can then be distributed by newspapers in their niche markets.

Newspapers should create niche aggregators modeled in the same way Google News, Techmeme and its political cousin memeorandum (shown below) have done. Consumers will pay a subscription fee to these aggregators to get access to certain sources of information. And newspapers will get proportionally remunerated through the co-operatative making money on the aggregators service, but also control the distribution of their premium content which can be monetised further down the value chain (ie, once a consumer visits their website).

memeorandum

The model scales because a consumer has only one organisation to deal with, and can control their content consumption and payments. The aggregators also allow the consumer to define what sources of information they value. Better still, this controlled environment of information distribution puts more onus on the content creators to generate quality product. If people include them in their aggregator subscription but never click on that particular organisations content, no one can be faulted but the content creator themselves for not creating compelling content.

Better still, market dynamics can come into play. Part of the function of an aggregator is to cluster stories. This allows for a fair way of distributing the content – the news source that pays a premium can get a higher weighting in this clustering. So an aggregator may have 50 sources that all get clustered as one headline; based on a sources ability to pay per headline, will determine how much the dominate in weighting. This then puts the onus on the newspaper to create a better sales force that can monetise content later down the value chain, which can subsidise this discovery phase of the value chain.

Is this the answer?
Who really knows but its a step in the right direction. With consumers paying to subscribe to an aggregator, they’re getting better value through diversity of inputs – and newspaper companies will get remunerated on how much content they provided as a proportion of the total attention by a consumer on the aggregator. The future of content will be driven by the subscription model, and this is a way that achieves that with the best value for a consumer.

Newspapers are reliant on the aggregators as a source of traffic and discovery. Rather than trying to kill them – they should copy them, license the technology and control the discovery phase of news consumption now crucial for today’s information-overloaded consumer.

What’s holding back newspapers from going down this path? They are too used to being the aggregators themselves. Instead, they need to realise that they must specialise now. They should focus on creating great content (a discussion in itself), and let technologists drive the discovery phase.

Semanticising Twitter for a revenue model

Twitter It was interesting to read the 11 business models for Twitter. Here’s one that I rarely see ever get mentioned: semantic conversations.

The assumptions.
Before I jump into it, some context as to why I think this is a solid approach.

advertising sucks in the traditional sense. Showing ad’s blindly, is like throwing pamphlets over the Amazon hoping that your target market catches some of them. Or another example: if you’re looking for some relief, do you walk down the main street of your city with your pants down yelling out "I want sexy time"? Sure, some people will approach you – but it certainly is not the most efficient way.

search advertising is the window into the future of advertising. The reason why Google does so well is because when a user searches they are flagging their intent. No more blind guessing – now it’s just a matter of accurately matching that intent to something. To extend the analogy using sex, this is like going to a single swingers party – you know everyone there is hungry, so to speak.

Word of mouth marketing beats any other form. Imagine you’re at a nightclub with your best friend. A model stops in front of the two of you – looks at your friend – and asks what cologne he’s wearing. He replies, she smiles – and then walks off giving him a wink.
You tell your little brother the next day about the incident who’s just run out of cologne. Next thing you know, he’s at the department store calling you and asking what’s that cologne’s name. Unlikely story? Have a think about the last time you bought something – we tend to rely on people we trust to guide our decisions.

Affiliate marketing is one of the most successful ways of making money on the web. My friends at Tjoos.com, help people find coupons – and they make a stupid amount of money because of affiliate deals. Affiliate marketing is rooted in a traditional concept for selling – there are suppliers like a manufacturer, and there are the retailers who onsell the supply like we see with clothing shops. With affiliate marketing, you act as a store pushing a product – and you get a cut of the final transaction if successful.

On Twitter people talk and share The use cases of Twitter are a different topic in itself, but let’s think of one of the most common: people share links with other people. As a case in point, monitor this search query I just constructed. Within minutes, you will see hundreds of new results returned. That’s a lot of links been shared.

Semantic conversations explained
Let’s say I just suggested that people read the book "Growth Fetish". People that follow me know me well enough to look into it as a legit thing. Perhaps some even trust my judgement to blindly buy the book (like I do with some people I know).

Now imagine, if instead of just saying the name of the book or pointing to the authors website – I had an easy way to embed Amazon affiliates. When people read I liked a book or a product, and they see a link – two things happen: they likely will follow the link to see what the fuss is about, and after reading up they will potentially make a purchase depending on how impressed or how much they trust me. Because the link tracks that I was the person recommending it, it connects the sale of that product by that person to me. And they don’t need to make the purchase right there – it can happen up to 45 days later and I still get recognised for it (as is the case with most affiliate programs).

Twitter affiliated

Implementation
It’s going to take a bit of thinking on how to implement this easily. For example, it needs to be drop dead easy for people to find the correct link and embed it. Twitter should tweak its system so that it recognises true hyperlinks that have words aliased, rather than just raw addresses. A way of guessing what the person is promoting and matching it to a Amazon code would be ideal (ie, “findbook:growth fetish” will have Twitter make a suggestion to link it to).

It would have to be a revenue share program, meaning Twitter and the user get a cut. That’s a good thing, because everyone’s interests are aligned. But it also means it needs to be thought out as it’s an art to get the right progressive scale between motivating and killing.

Good luck Twitter: I’m counting on you and Facebook to work out a monetisation model, as you will drive the next wave of growth which builds the industry (like Google did post the dotcom years).

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.

Analysing the user experience from two social networking sites

Yet again, MySpace has e-mailed me a useless e-mail that frustrates me more than it gives me value . But what I noticed recently, was another social networking site, taking a different approach.

geni

Whereas MySpace is simply alerting me, which is forcing me to painfully log into their service, Geni is actually alerting me the information without me having to take another action.

A few points of reflection on this:
1) Using my business analysis on the consumer Internet , MySpace is offering a content model (hypermedia is how I referred to this in my post) whereas Geni is offering a Utility computing product. Both these businesses consider themselves "social networking" sites and yet both offer a different product model.
2) This also highlights two different business models: MySpace is a platform whilst Geni is working on a network model. Meaning, MySpace’s business model is premised on you visiting them for you to get value; Geni’s isn’t. To be perfectly honest, both MySpace and Geni are irrelevant for me. However platforms can come and go, but network models always stick around. As irrelevant Geni is to me, I still value it – a network business strategy (meaning you follow the user, rather than expecting them to come) builds a long term relationship.
3) Social networking sites when it’s the core product, work best as utility services and not a content business. Look at what a different user experience it is for me, because I can get benefit from my Geni account despite not having to log in. Although I am not giving them pageviews, I am giving them my attention which is translating into greater brand equity for them. When you treat social networking as a content business, this distorts the service offered to users, as misaligned business views on generating revenue drive strategy in a way that is harmful to the consumer ie, I feel like saying "f**k off" whenever I see those e-mails for MySpace . But "thank-you" to Geni.

The main point I want to get at though, is that the user experience is just as important when the user is not on the site as it is when they are on the site. People shy away from the recently-recognised network model of business, because they don’t get the same traffic. I say embrace it, because the market will eventually correct itself to recognise this is a superior type of strategy.

How business is done on the Internet

Day in and day out, the Internet continues to show innovations from people all around the world. Yet for all these innovations, it all comes down to the very core of trying to do business in a new way.

I’ve been doing some research recently for an internal publication my firm produces on the future of the entertainment and media industries, and I wondered what exactly does it mean to do business on the Internet. Whilst there are some brilliant thoughts on what business models on the Net are, I think we lack a proper analysis of what it means to do business.

Below is a summary of my understanding from a consumer perspective of doing business (enterprise is a different beast), but which I think will help people better understand how it all works.

First of all, we need to split the three key factors about business:

  1. Business models: What the structure of a business is.
  2. Revenue models: How the business generates cash from customers to fund its operations.
  3. Product models: What the product is that you provide to your customers to generate the cash

Too often, these three components are mixed as one or the same. Another thing that happens, is we struggle to classify the Internet because it contains so many different types of business. Breaking it down gives us more complete view.

Business models

The first thing to understand, is how a business is structured of which there are three varieties:

  1. Destination: driving consumers to a point ie, a website that you try to drive usage by consumers. This was very much what the early Internet was in the manifestation of the world wide web; websites attempting to get ‘eyeballs’. Your business model is based on the premise of getting people to visit your destination.
  2. Platform: a service that you try to build usage by creating an ecosystem for. Arguably, the web is the platform but in reality we are seeing a different type of platform akin to the Microsoft Windows approach of creating a core service that others can build on. You could classify the web2.0 view that websites are communities in this, whereas there are companies trying to create operating systems on the web for widgets that are a similar thing. Your business model, is built on the premise that people interact on your service or use your platform.
  3. Network: a service that people use regardless of where they are on the Internet. This type of business is about attaching to a user as they use the Internet. It’s almost like the flipside of the above two models: instead of having everyone come to you, this is about following everyone wherever they are. Your business model is built on the premise that people use your service in a decentralised manner.

Revenue models
Revenue models are a key factor to understand as they are what sustain long term changes to an industry that is currently been pushed by venture money and acquisitions from the dominant players. There are four types of monetisation models that I can observe:

  1. Fees: Payment of a fixed amount for access or usage of goods and services over the internet
  2. Subscription: Payment of a fixed amount on a periodic basis for access or usage of goods and services
  3. Commission: Payment of a percentage fee of a transaction
  4. Attention: Consumer gives their time, such as viewing an advertisement, in exchange of goods and services

Product models
There are three types of product models:

  1. Markets is the term I am using to explain when businesses use the Internet as a way to allow others to transact goods and services. The product offered by these companies is effectively a mechanism to do commerce. For example, eBay offers a product model that gives the ability for people to auction goods. Their product is to offer the facility for vendors and consumers to transact. They are like a shopping centre, giving space for vendors to sell and centralising the space so that consumers know where they can buy from these vendors. Markets offer the ability to perform trade of some sort with other parties
  2. Hypermedia is the term I am using to describe any type of content offering to people. Philosophically, it falls under the “new media” category that I have previously linked to and I use the term coined by Ted Nelson which is the broader term coined at the same time as “hypertext”. Effectively, you are offering content to a consumer in an Internet environment. Formally defined, it is access or supply of content via visual, audio and/or text over the Internet
  3. Utility computing is what you can call search engines, web applications, and the software as a service variety, which essentially is about providing computing services for information. Maybe a better way to define the concept is that they are computing services that allow for productivity through information retrieval, creation or management.

It is important to note that a business doesn’t have to restrict itself to just one of the above sub-categories. A business must have at least one business model, one revenue model, and one product model (or rather, they should – web2.0 startups seem to forget the revenue model bit). But within those groupings, it doesn’t have to be just one.

Take for example Facebook, which was initially a destination business – people logged in, viewed peoples profiles and their news feed, and the company generated value for the user by them ‘visiting’. With the launch of the applications platform, Facebook became a platform, because it allowed other entities to build on top of its core service. In this regard, Facebook generated value by creating an ecosystem of applications within its confines. As for a network model, Facebook is yet to to this, but imagine if they created an ad network like Google’s – whereby information about you in Facebook is used to determine what advertising to see across the entire internet. Here the value is that Facebook helps add to your experience across the entire Internet (despite being off the actual site)

So as a concept, below is my matrix of doing business on the Internet (I’m graphically inept, but I want to illustrate the three dimensions conceptually). What do you think?

business on the net

If you can draw better than me (not hard), I’ll credit you on this post!

Update May 27 2010: Rethinking this two years on, I think this still stands as a rough analytical framework. But I now believe that business model makes sense for the overall discussion above (ie, the combination of all the components), and what I term as ‘business model’ in the post is actually more like the ‘operating model’ of a web business.

DataPortability is about user value, fool!

In a recent interview, VentureBeat asks Facebook creator and CEO Mark Zuckerberg the following:

VB: Facebook has recently joined DataPortability.org, a working group among web companies, that intends to develop common standards so users can access their data across sites. Is Facebook going to let users — and other companies — take Facebook data completely off Facebook?

MZ: I think that trend is worth watching.

It disappoints me to see that, because it seems like a quick journalists hit at a contentious issue. On the other hand, we have seen amazing news today which are examples of exactly the type of thing we should be expecting in a data portability enabled world: the Google contacts API which has been a thing we have highlighted for months now as an issue for data security and Google analytics allowing benchmarking which is a clear example of a company that understands by linking different types of data you generate more information and therefore value for the user. The DataPortability project is about trying to advocate new ways of thinking, and indeed, we don’t have to formally produce a product in as much maintain the agenda in the industry.

However the reason I write this is that it worries me a bit that we are throwing around the term “data portability” despite the fact the DataPortability Project has yet to formally define what that means. I can say this because as a member of the policy action group and the steering action group which are responsible for making this distinction, we have yet to formally decide.

Today, I offer an analysis of what the industry needs to be talking about, because the term is being thrown around like buggery. Whilst it may be weeks or months before we finalise this, it’s starting to bother me that people seem to think the concept means solving the rest of the world’s problems or to disrupt the status quo. It’s time for some focus!

Value creation
First of all, we need to determine why the hell we want data portability. DataPortability (note the distinction of the term with that of ‘data portability’ Рthe latter represents the philosophy whilst the former is the implementation of that philosophy by DataPortability.org) is not a new utopian ideal; it’s a new way of thinking about things that will generate value in the entire Information sector. So to genuinely want to create value for consumers and businesses alike, we need to apply thinking that we use in the rest of the business world.

A company should be centered on generating value for its customers. Whilst they may have obligations to generate returns for their shareholders, and may attempt different things to meet those obligations; they also have an obligation to generate shareholder value. To generate shareholder value, means to fund the growth of their business ultimately through increased customer utility which is the only long term way of doing so (taking out acquisitions and operational efficiency which are other ways companies generate more value but which are short term measures however). Therefore an analysis of what value DataPortability creates should be done with the customer in mind.

The economic value of a user having some sort of control over their data is that they can generate more value through their transactions within the Information economy. This means better insights (ie, greater interoperability allowing the connection of data to create more information), less redundancy (being able to use the same data), and more security (which includes better privacy which can compromise a consumers existence if not managed).

Secondly, what does it mean for a consumer to have data portability? Since we have realised that the purpose of such an exercise is to generate value, questions about data like “control”, “access” and “ownership” need to be reevaluated because on face value, the way they are applied may have either beneficial or detrimental effects for new business models. The international accounting standards state that you can legally “own” an asset but not necessarily receive the economics benefits associated with that asset. The concept of ownership to achieve benefit is something we really need to clarify, because quite frankly, ownership does not translate into economic benefit which is what we are at stake to achieve.

Privacy is a concept that has legal implications, and regardless of what we discuss with DataPortability, it still needs to be considered because business operates within the frameworks of law. Specifically, the human rights of an individual (who are consumers) need to be given greater priority than any other factor. So although we should be focused on how we can generate value, we also need to be mindful that certain types of data, like personally identifiable data, needs to be considered in adifferent light as there are social implications in addition to the economic aspects.

The use cases
The technical action group within the DataPortability project has been attempting to create a list of scenarios that constitute use cases for DataPortability enablement. This is crucial because to develop the blueprint, we also need to know what exactly the blueprint applies to.

I think it’s time however we recognise, that this isn’t merely a technical issue, but an industry issue. So now that we have begun the research phase of the DataPortability Project, I ask you and everyone else to join me as we discuss what exactly is the economic benefit that DataPortability creates. Rather than asking if Facebook is going to give up its users data to other applications, we need to be thinking on what is the end value that we strive to achieve by having DataPortability.

Portability in context, not location
When the media discuss DataPortability, please understand that a user simply being able to export their data is quite irrelevant to the discussion, as I have outlined in my previous posting. What truly matters is “access”. The ability for a user to command the economic benefits of their data, is the ability to determine who else can access their data. Companies need to be thinking that value creation comes from generating information – which is simply relationships between different data ‘objects’. If a user is to get the economic benefits of using their data from other repositories, companies simply need to allow the ability for a user to delegate permission for others to access that data. Such a thing does not compromise a company’s competitive advantage as they won’t necessarily have to delete data they have of a user; rather it requires them to try to to realise that holding in custody a users data or parts of it gives them a better advantage as hosting a users data gives them complete access, to try to come up with innovative new information products for the user.

So what’s my point? When discussing DataPortability, let’s focus on the value to the user. And the next time the top tech blogs confront the companies that are supporting the movement with a simplistic “when are you going to let users take their data completely off ” I am going to burn my bra in protest.

Disclosure: I’m a hetrosexual male that doesn’t cross-dress

Update: I didn’t mean to scapegoat Eric from VentureBeat who is a brilliant writer. However I used him to give an example of the language being used in the entire community which now needs to change. With the DP research phase now officially underway for the next few months, the questions we should be asking should be more open-ended as we at the DataPortability project have realised these issues are complex, and we need to get the entire community to come to a consensus. DataPortability is no longer just about exporting your social graph – it’s an entirely new approach to how we will be doing business on the net, and as such, requires us to fundamentally reexamine a lot more than we originally thought.

Half the problem has been solved with time spent

On Thursday, I attended the internal launch of the Australian Entertainment & Media Outlook for 2007-2011. It was an hour packed with interesting analysis, trends, and statistics across a dozen industry segments. You can leave a comment on my blog if you are interested in purchasing the report and I’ll see if I can arrange it for you.

One valuable thing briefly mentioned, was the irony of online advertising.
Continue reading ‘Half the problem has been solved with time spent’

The Wizards of Oz

The Internet has enabled a new world-order, causing people from the CEO down in almost every industry, an amazing amount of grief. The music industry, the newspaper industry, the telecommunications industry – heck, even tangible non-digital products like books – have been challenged at the core. However what these CEO’s have begun to realise, is that the Digital Age is no longer a threat, but a vehicle for growth.

Innovation is a key source of competitive advantage. And if you are an established company, innovation is hard. What takes six months of trying to convince the right people, jumping through hoops to keep internal stakeholders happy, and then finally releasing a half-baked product that is dramatically cut down from your vision – could be done by a bunch of college students in a garage over a weekend. Economies of scale is no longer an advantage in the Information Age – small, agile teams are.

In America – Google, Yahoo, Microsoft, News Corp, IAC and the rest – rely on acquisitions to fuel their innovation. An amazing amount of innovation is occurring on the web at the moment – not just new products but new business models. And the above mentioned companies have realised that acquiring a start-up early on, is a cheap way to innovate – as well as a great way to recruit.
But what about Australia?

Like America, we have a strong Internet industry with some clever entrepreneurs. But unlike America – no one is acquiring them. Could it be executives of this country’s leading companies just don’t know how much talent is available onshore? Well working in a professional services company that advises these companies, I am sure of it. Even a tech-savvy person like me is still discovering the amazing amount of talent and potential in my city, let alone country.

So here is to educating – both you and me – as I begin to start profiling innovation in Australia To make a suggestion for me to review on my blog, post it here

New measurement systems need a purpose

Chris recently proposed a new measurement system for attention, after yet another call to arms for a new way of measuring metrics. This is a hard issue to gnaw at, because it’s attempting to graple at the emerging business models of a new economy, which we are still at the cross roads at. Chris asked us on the APML workgroup on what we thought of his proposal, which is interesting, but I thought it might be better to take a step back on this one and look at the bigger picture. Issues this big need to be conceptually clear, before you can break into the details.

Television, radio, and newspapers are the corner stone of what we regard as the mainstream media. For decades, they have ruled the media business – with their 30 second advertising spots, and “pageviews” (circulation). Before the information age, they were what the ‘attention economy’ was. None of those flamin’ blogs stealing our attention: content and advertising flowed through to us from one place.

The internet is enabling literally an entire new Age of humanity. A lot of the age-old business models have been replicated, because we don’t know any better, but people are abandoning them because they are realising they can now do so much more. So the key here is not to get too excited on what you can do – rather, we need to think why what we need to do.

Let me explain – advertisers sold their product on a TV/radio commercial, and a newspaper page, because it guaranteed them that a certain amount of people would see it. Advertisers advertise because they want to do one thing: to make money. It’s just how capitalism works – profit is god – so do what you can to make higher profit.

But back then, the traditional mainstream media was the only way they could reach audiences on an effective scale. However advertising on the Sunday night movie is the equivalant to dropping a million pamphlets out of a plane, hoping that the five customers you know that would buy your product, end up catching it. Back then, no one complained – it was the best we could do. It sucked, but we didn’t know any better.

The internet changed that.

Advertisers can now target their advertising to a specific individual. They don’t care anymore about advertising on a mass scale; what they would rather is advertising on a micro scale. Spending $20,000 on 10,000 people you know that want to buy your product, has a much better Return on Investment than $2,000,000 on 1,000,000 people – of which 10% don’t speak the language of your ad, 20% aren’t the target group for your ad; and 30% are probably offended by your ad and will ruin it for the 40% they you were targeting in the first place.

Sound crazy? Well Google making $10 billion dollars doing just that is crazy.

So now that we have cleared that up – let’s get back to the issue. We now know one of the reasons why we need measurement: advertisers want to target their advertising better. Are there any other reasons? Sure- sometimes people want to measure what their audience reads for non-monetary reasons – they could just trying to find out what their readers are interested in, so they can focus on that content. Statistics like that is not narcissism – it’s just being responsive to an audience. Or then again, it could be pure ego.

So when it comes to measuring content, there are two reasons why anyone cares: to make money, or to see how people react to your content. However it’s the first type that is causing us problems in this issue. And that’s because how long someone spends on your content, or how many people view your content, is no longer relevant as it was in the mass media days. What is relevant is WHO is reading your content.

I don’t think you can have a discussion about new ways of measuring the way content is consumed, without separating those two different motives for measurement. I like Chris’s proposal – knowing how long someone spends reading my blog posting is something I would find interesting as a blogger. But that’s pure ego – I just want to know if I have a readership of deep thinkers or random Google visitors that were looking for a picture about shorts skirts. (As an aside – one of my pictures is the number one Google image result for “women in short skirts” – thank God it goes to my Flickr account now, the bandwidth that used to eat up was crazy!)

So before we come up with new measurement systems, lets spend more time determining why we are measuring. Simply saying we are better measuring what consumers are giving their attention to, is only part of the problem. We need to first determine what value we obtain from measuring that attention in the first place.