Archive for September, 2007

Understand your content

Published
by
Elias Bizannes
on September 24, 2007
in Attention economy
. 0 Comments

I picked up a book my parents used on their recent trip to Greece, which was a guidebook of the Peloponnese. Flicking through this paper book reminded me of my thoughts of how the content business is so rife with piracy. Especially with an online world now, people can copy content - images, text, audio - and mash it up into their own creation. It seems crazy but why do people enter a business like that?

The Information Sector is not only a big money maker, but very unique as well. Yes, it can be copied and ripped off - unlike a barbie doll where its form can’t really be manipulated into a new product. However different from selling barbies, is that information products do things that are very unique in this world and extremely powerful. In my view there are four types of information product, which can be explained under the categories of data or culture.

Data

New data
A friend and aspiring politician, once said to me that “information is the currency of politics”. Reuters, the famed news organisation that supplies breaking news to media outfits across the world - derives 90% of its revenue from selling up-to-the-minute financial information to stockbrokers and the like who profit on getting information before others. New information, like what the weather will be tomorrow, loses value with time (no many care what the weather was eight days ago). But people are willing to pay a price, and a big one, to get access to this breaking news because it can help make decisions.

Old data
On the flip side, old information can be very valuable because of the ability to conduct research and analysis. Search engines effectively fit into this segment of the information economy, because they can query past news and knowledge to produce answers. Extending the weather example, being about to find out that data eight days ago along with the weather exactly one, five and ten years ago - can help you identify trends that, for example, validates the global warming theory.

Culture

Analysis
The third category of information products, I call them simply analysis because what they are is unique insight into things. We all have access to the same news for example, but it takes a smart thinker to create a prediction, by pulling the pieces together and creating new value from them. Analytical content usually gets plagiarised by students writing essays, but its also the stuff that shapes peoples perceptions in world-changing ways.

Entertainment
One of the most powerful uses of content is the way it can impact people - entertainment type content is the stuff that generates emotion in people. Emotions are a key human trait that you should keep in mind in any decision - no matter how logical someone is, the emotional self can overtake. A documentary that portrays an issue negatively, and that can generate an angry response in a person, is the stuff that can topple governments and corporations.

Not all information is equal
If you are a content creator, you need to accept that other people can copy your creation. The key is to understand what type of content you are creating, and develop a content strategy that exploits its unique characteristics.

Information products need different strategies in order to effectively monetise them. Below is a brief discussion which extends on the above to help you understand.
New data
With this type of content, the value is in the time; the quicker that information can be accessed, the more useful it is. News items (like current affairs) fit into this category. As a news consumer, I don’t care how I get my news, but I care about how quickly I can get it. It’s for this reason I no longer read newspapers, yet through various technologies like RSS and my mobile phone, that I probably consume more news than ever before.

You should sell this data based on access - the more you pay, the quicker the access. Likewise, the ability to enable multiple outputs is key - you need to be able to deliver your content to as many different places as possible: SMS, email, RSS etc. You should not discriminate on the output; the value is on the time.

If you create news breaks, why are you wasting your time on who can access that information, because of the threat that someone can copy it? If the value is in the time, who cares who copies it because by the time they republish it, its already lost value. A flash driven site like the Australian Financial Review is an example of a management that doesn’t realise this.

Old data
A recent example of action in this space is the New York Times who have recently removed their paid subscription wall, which was previously only available via subscription but now can be accessed by anyone for free. This is a smart business move, because if you are selling archived content, you will make more money by having more people know what exists. A paid wall limits people using it which decreases the opportunity for consumption: you a relying on a brand only to create demand. If you are website with a lot of historical content - restricting access is stupid because you are effectively asking people to pay for access to something that they have no idea what value it holds for them. It’s a bit like traveling - if you’ve never been overseas, you don’t know what you are missing out on. Give people a taste of the travel bug, and they will never be able to sit still.

Unlike new data where the value is based on time, old data finds value on accessibility. People will place value on things like search, and the ability to find relevant content through the mountains of content available. Here the multitude of outputs doesn’t matter, because researchers have all the time in the world. What matters is a good interface, and powerful tools to mine the data: the value is on being to find information. You shouldn’t charge people on access to the content; where you will make money is on the tools to mine the data.

Analysis
This type of content is difficult to create, but easily ripped off by other people - just think of how rife plagiarism is with schools and universities, where the latter treats plagiarism as a crime just short of murder. You can distinguish this type of content as it demonstrates the ability to offer content that is was produced from a common set on inputs that anyone could access, and creating a viewpoint that only a certain type of person could create. The value is on the unique insight.

Despite the higher intlellect to product, it unfortunately is content that is harder to capitalise on. A lot of technology blogs feel the pressure of moving into a more news style than analytical service because news is what gets eyeballs. If you are a blogger looking to make money - the new data approach above should be your strategy. But if you are a blogger trying to build your brand - do analysis. The consequence with analysis is that its harder to do, so you shouldn’t feel pressured to produce more content. I’ve noticed a trend for example, that if I post more blog postings, I will get more traffic. But on the same token, more postings puts more pressure on me, which means less quality content. Understand that the value of analysis isn’t dependent on time. Or better said, the value of analysis is not how quickly it gets pumped out and realised, but how thoroughly it gets incubated as an idea and later communicated.

The value for analysis is clarity and ability to offer new thoughts. To look at the relationship with advertising models, new data like news (discussed above) typically gets higher viewers - which works for the pageview model (the more people refreshing, the more CPMs). Analysis, on the other hand, works with the time spent model. Take advantage of the engagement you have with those types of readers, because you are cultivating a community of smart people - there can be a lot more loyalty with that type of readership.

Entertainment
My sister downloads the Chaser’s War on Everything as a podcast. She first came across them on the radio, but she now downloads the podcasts religiously. Even though I knew about the Chaser’s efforts for years in their various products, I didn’t realise they were still around. If the last few weeks, I have been noticing my friends bring up the shows they are doing. The value in this content was the ability to make people laugh, due to their unique stunts. Their brand is built because of word of mouth recommendations.

Like analysis, entertainment can be a very hard thing to generate because it relies on unique thinking. With a strong brand, people will pay for access to that content. Although it may seem that the viral spreading of funny content for free is a nightmare for a content producer trying to collect royalties, it’s actually a good thing because it entrenches the brand: more people will find out about it. The nature of entertainment, like analysis, is that it is difficult to do repeatedly. Sure people can copy your individual tricks - but they can only do so after the fact. They can’t pre-anticipate the next thing you will do; because unlike breaking news which is on how quickly you can pump out content, entertainment content requires a unique creative process to produce it.

The key with entertainment content, is to build a relationship with an audience and to sustain it. Create a predictable flow of content. Encourage people copying it, because all it does it get more people wanting to see what you come up with next. If it wasn’t for Stephen Colbert’s clips on Youtube, I would never have realised his brilliance. Not knowing he existed, means a DVD set of his shows means nothing to me (but which holds a lot of value now). The value of entertainment is to generate emotions in people repeatedly. Emotions are a powerful influence on human behaviour - master that and you can be dangerous!

Concluding thoughts
This posting only touches on the issues, but what I suggest is that creators of content need to look at what type of content they are producing, for them to exploit its unique aspects. Content represents human ideas, and content isn’t distiguished by a physical form. The theft of your content should be a given and can actually help you. Depending on what that content is, there may be natural safeguards that make it irrelevant (ie, the time value of news).

Climate change: forget the science, it’s real for the market

Published
by
Elias Bizannes
on September 22, 2007
in climate-change
. 2 Comments

I recently sat through a two hour presentation on climate change at work. My employer this year (a big four firm) has been mobilising to respond to the market with a climate change solution for our clients - and the things happening are amazing. They want to be first-movers in what is a huge business opportunity. Even through I have had dealings with people on the climate change team, it wasn’t until I sat through this presentation that a few things clicked for me: climate change is real. And I am not talking about the science - it’s real for the market economy.

I wouldn’t be doing any justice if I attempted to explain what I learned, however I will explain something that was a big realisation for me. This guy that spoke is a world expert, and he reckons more has happened in the last eight months of his career regarding climate change than it has in 25 years of his career. To understand why, is to understand the realisation of the markets.

Increasing shareholder value

If it’s one phrase that sums up corporations working within the framework of capitalism, it’s about “increasing shareholder value”. It’s a term that is mocked because we are sick of hearing it, but it essentially explains the market: investors make money by putting their money where they can generate more value for their buck. Value creation is the centre of everything - a start-up company generates value through innovative new products that people buy; a tax agent generates value by reducing your tax expense; a real estate agent generates value because they can sell your property at a higher valuation. In the context of corporations, people make money in companies through returns: a higher share price means a higher value of that share or piece of property. Companies are judged on their profits because more profits reflect a higher return an investor gets from that entity; just like a home being sold, it reflects the additional value they can generate from that piece of property they own.

Profits reflect shareholder returns, which come in two forms.

1) dividends, which are cash payouts from profit distributions to shareholders. An investor wants higher profits, because it means more cash for them on their existing shareholding - it reflects a better return on their investment.

2) retained earnings, which is when a company doesn’t pay the dividend but holds it so they can fund future growth. More profits, means extra cash to invest to generate more growth in the entity, which ultimately means more value. If you buy a share for $1, and the company grows and your share is now $2 - you are a happy chappy because you’ve effectively doubled your money.

How climate change now has a price

Lets say we generate x amount of carbon tons a year. The objective of climate change, is that we can reduce the amount of x with time, and then get to the stage where we can grow sustainably, which means for every x we generate, we can offset that bit of carbon so as to to generate a net of zero on the environment. That’s called sustainable economic growth.

Lets say y is the amount it costs to remove a ton of carbon dioxide. Meaning y represents the expense of generating carbon. So if you times x with y - that equals the amount it will costs to remove the carbon dioxide we generate so that we have a net impact of zero on the environment (or at least, the cost to reduce emissions). If the government forces you to reduce your emissions, like they force you to pay taxes, that expense has now become very real.

How much a ton of Carbon Dioxide will cost is a big issue yet to be settled, but as you can tell y is an important number because it determines how much it costs for you to reduce your carbon footprint. A very conservative estimate is that it costs 25 US dollars to remove 1,000 tonnes of carbon. The reason I say conservative is because more recent evidence suggests it is actually a lot more than that (I think he quoted 40 euros). Using the $25 figure, he said that it will cost us $15 trillion to remove carbon dioxide. There is so much pressure on governments from voters, lobby groups and the like, that governments (like here in Australia) are going to mandate that you offset your carbon emissions each year. The Kyoto agreement is saying a 60% reduction from 1990 levels by 2050 for example.

Now as an investor, I am thinking my investments have a share of the pie of a $15 trillion expense that they have to pay each year. That’s expensive. Expensive stuff reduces my profit. Reducing my profit means lower returns for my investments (ie, lower dividends, lower retained earnings to fund growth). Holy crap - this climate change thing is eroding shareholder value. Crap crap crap - I want to start knowing what my investments are doing to tackle this future expense. I want more accountability, alongside the financial reports that companies are mandated to provide (and which tells us about profit).

And that is exactly what the investors that control $41 trillion dollars - one third of the worlds money -are currently saying.

So much more to say, but I just want to share that point: climate is real economically and the environmental cost is being built into the market mechanism. There are a lot of issues that are yet to be resolved, but you’d be stupid to start ignoring the massive developments occuring, because its getting nearer to an agreement where it will affect every transaction we make in our economies.

5 observations of how social networking (online) has changed social networking (offline)

Published
by
Elias Bizannes
on September 16, 2007
in social computing
. 0 Comments

Just then, I had an image get shattered. A well respected blogger, whose online persona had me think they were a very cool person offline, is infact, a fat geek with an annoying voice. I can pretty much cross off the list that he can relate to experiences of how Facebook is mentioned in trendy nightclubs on the dancefloor.

Another thing I have noticed: all the major commentators & players of the Internet economy, are usually married, in their 30s or 40s, and almost all come from an IT background.

Don’t get me wrong - the industry has a lot of people that are a goldmine with what they say. They challenge my thinking, and they are genuinely intelligent. But although they are users of web services like Facebook or MySpace - just like the rest of society - they are people experiencing these technologies in the bubble of the technology community. Their view of the world, is not aligned with what’s actually happening in the mainstream. No surprises there - they are the early adopters, the innovators and the pioneers. It’s funny however, that comparable to other services (like Twitter) the adoption amongst the tech community for Facebook has been slow: it was only when the developer network launched that it started getting the attention.

What I want to highlight is that most commentators have no way in the world of understanding the social impact of these technologies in the demograghic where the growth occurs. We all know for example, Facebook is exploding with users - but do we know why it’s exploding? A married man in his 40s with a degree in computer science, isn’t going to be able to answer that, because most of the growth comes from single 20 year olds with an history major.

So what I am about to recount is my personal experience. I am not dressing it up as a thought-piece; I am just purely sharing how I have seen the world take to social networking sites and how it has transformed the lives of my own and the people around me. I’m 23 years old, the people in my life generally fall into the computer clueless category, and I have about 500 Facebook friends that I know through school, university, work, or just life (about ten are in the tech industry).

1) Social networking sites as a pre-screening tool
Observation: I randomly was approached by a chick one night and during the course of our conversation she insisted I knew a certain person. Ten minutes, and 20 more “I swear…you know xxx” - I finally realised she was right and that I did know that person. For her to be so persistent in her claim, she had to be sure of herself. But how can someone be sure of themselves with that piece of information, when I had only met her 30 seconds earlier?

I then realised this chick had already seen me before - via facebook. I know this is the case, because I myself have wandered on a persons profile and realised we have a lot of mutual friends. In those times I would note it is bound to happen that I would meet them.

Implication: People are meeting people and know who they are before they even talk. They say most couples meet through friends. Well now you can explore your friends’s friends - and then start hanging around that friend when you know they know someone you like!

2) Social networking sites getting you more dates
Observation: I met a chick and had a lengthy chat with her, and although she was nice, I left that party thinking I would probably never see her again as I didn’t give out any contact details. That next day, she added me as a friend on Facebook. In another scenario, there was a girl I met from a long time ago and I hadn’t seen her since. We randomly found each other on Facebook, and I’ve actually got to know the girl - picking up from where we left off.

Implication: Social networking sites help you further pursue someone, even though you didn’t get their number. In fact, it’s a lot less akward. Facebook has become a aprt of the courtship process - flirtation is a big aspect of the sites activity.

3) Social networking sites helping me decide
Observation: There was a big party, but I wasn’t sure if I would go because I didn’t know who would go with me. I looked at the event RSVP, and I to my surprise found out a whole stack of people I knew were going.

Implication: Facebook added valuable information that helped me decide. Not knowing what people were going, I probably wouldn’t have gone. Think about this on another level: imagine you were were interested in buying a camera, and you had access to the camera makes of your friends (because the digital photos they upload contain the camera model - as seen with Flickr). Knowing what your friends buy is a great piece of advice on what you want to buy.

4) Social networking sites increasing my understanding of people I know
Observation: I found out when a friend added me on myspace, that she was bisexual - something I never would have realised. Being bi is no big deal - but it’s information that people don’t usually give up about themselves. Likewise, I have since found out about people I went to school with are now gay. Again - no big deal - but discreet information like that increases your depth of understanding about someone (ie, not making gay jokes around them). I know what courses my contacts have studied since I last saw them, and what they are doing with their lives. I also know of someone that will be at one of my travel destinations when I go on holiday.

Implication: You are in the loop about the lives of everyone you’ve met. It’s nothing bad, because these people control what you can see, but it’s great because there are things you know, things you know you don’t know, but now you can find out things you didn’t know that you didn’t know.

5) Social networking sites as a shared calendar
Observation: My little sister is currently going through 21st season - back to back parties of her friends. One of the gripes of 21sts when organising them, is overlap with other peoples. Not only that - but also the physical process of contacting people and getting them to actually RSVP - it’s a pain. However unlike my 21st season experience from a few years ago, my sister has none of these issues. This is because Facebook is like one big shared calender. Another example is how I send my congratulations to birthday friends a lot more than I have in the past because I actually know its their birthday- due to fact our calendars are effectively pooled as a shared calendar.

Implication: Facebook has become an indispensable tool to peoples social lives.

6) Bonus observation - explaining the viral adoption of Facebook
I have a few friends that don’t have Facebook. You can almost count them on the one hand. And when you bring it up, they explode with a “I’m sick of Facebook!” and usually get defensive because so many people hassle them. In most cases, they make an admission that one day, they will join. The lesson here is that Facebook is growing because of peer pressure. The more people in someone’s network, the more valuable facebook becomes to them. When they say 40 million users, it’s actually 40 million sales people.

God bless the network effect.

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