Wednesday fun – Chris Anderson abuses ‘free’

In an ironic twist Chris Anderson is guilty of taking content for his latest book from Wikipedia for free and without citation:

Chris Anderson and his US publisher Hyperion have said they intend to "correct" future editions of his title Free after the Virginia Quarterly Review said it had "discovered almost a dozen passages that are reproduced nearly verbatim from uncredited sources", with most "but not all" coming from Wikipedia.

And his excuse, poor:

Responding in an email after VQR posted its findings online, Anderson said he "had the original sources footnoted," but "lost the footnotes at the 11th hour", and admitted that in his "rush" to publication he had forgotten to do a "write-through [which] covered all the text that was not directly sourced".

Please!

Full story on Bookseller.com.

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Freeconomics – maybe people will start paying for things

The folks at Chinwag were kind enough to ask me to chair a panel on the topic of freeconomics last night.  I’ve written extensively about ‘free’ as a business model extensively before, but to recap the argument for free is that more and more goods are being delivered digitally, the marginal cost of delivering a digital good is $0 (or pretty close to it), and that in a competitive market over time the price of goods trends towards the marginal cost of distribution.  Hence digital goods should be free to consume and companies will have to make money from advertising or by selling related goods – e.g. bands give away their music for free and make money from gigs and t-shirts.

The counter argument is that the only reason we have gotten used to getting stuff for free on the web is because VCs and large corporates have subsidised those services in a rush for market share, and that for most companies you can’t make enough money from advertising, or the other areas to make the free business model work – so it is unsustainable and we will all have to get used to paying again.

For the most interesting/surprising thing to come out of the discussion was a much greater degree of willingness to start paying for services than I had expected.  A lot of that was couched in terms of ‘if there was no free alternative I would pay’ which of course begs a very large question, but it will be intertesting to see what happens when people are actually asked to start paying, because I think they will be.  Subsidies from VCs and large corporates are drying up, if they haven’t run out already, and despite the fears of what it might do to their businesses I expect many companies to start experiementing with charging more aggressively.

The other takeaway that I hadn’t considered fully is that for many services in reality the marginal cost of delivery is not zero.  This was made most forcefully by panelist Alan Patrick, but also by panelist Bruce Daisely of YouTube who made the point that the worlds favourite video service now accounts for 10% of total bandwidth consumption – which I’m sure costs Google a lot of money.  This point knocks a sizeable whole in the ‘free’ argument, although ‘free’ fans would argue that these costs are going down all the time.

Free is the only business model for online news

That is a feeling I have had for sometime and is re-enforced by the recent results from FT.com.

This is from PaidContent:

But, despite FT.com unveiling a new access model in November (giving five articles free per month, and a further 30 for those who register), we’re still seeing a plateau in paying  subscribers. Results said subscriber levels were only “maintained” at “around 100,000” – the same figure as last month, when MD Rob Grimshaw told me sub levels were “largely static”.  non-paying registrations, of course, have tripled since the switch, from almost 150,000 to 500,000 at present – so FT.com isn’t converting many of these to paying subs but is trying to monetise them through other means, like direct marketing and on-site advertising.

The message here is clear. People love the content, but aren’t prepared to subscribe. I am in that camp myself. Furthermore, my guess is that if they got rid of the five/thirty articles limit their traffic would rise even faster.

The real way to make money, as shown by the Guardian is to build out a community which converses about the news, and leverage that to offer other paying services like recruitment. For those that want to look further into the future I would add syndicate your content so people can consume it where they want to, and build monetisation into the feed.

BTW – if you fall foul of the five articles per month limit on FT.com you can set your counter back to zero by deleting your browsing history, cookies etc.

Newspaper companies really embracing the web

Newspaper companies are often seen as soon-to-be-extinct relics of a bygone age, but at least two of them have read the tea leaves correctly, and are embracing the new order. I am thinking of the Guardian and the New York Times.

I’m writing this because of two bits of news I just read.

Firstly, the latest circulation figures for American newspapers make grim reading for the old guard. The New York Times was about the worst hit:

The New York Times lost more than 150,000 copies on Sunday. Circulation on that day fell a whopping 9.2% to 1,476,400. The paper’s daily circulation declined 3.8% to 1,077,256. [the declines are over the last twelve months]

And, secondly, the New York Times will soon release an API:

Once the API is complete, the Times‘ internal developers will use it to build platforms to organize all the structured data such as events listings, restaurants reviews, recipes, etc. They will offer a key to programmers, developers and others who are interested in mashing-up various data sets on the site. “The plan is definitely to open [the code] up,” Frons said. “How far we don’t know.”

Granted, it isn’t exactly clear what people will be able to do with the NYT API, but this is at least a step towards making all their content available for anyone anywhere on the web.

This leaves a couple of business models open to them – 1) as Fred Wilson has been saying for some time the future business model for content is to microchunk it, syndicate and embed the monetisation in the feed, or 2) go the Chris Anderson route and embrace free as the future.

Embracing free means using your content to build your brand and leveraging that to make money in other ways – like recruitment or dating. The Guardian is doing very well with both of these. I heard the other day that their growth in the recruitment revenues is now more than offsetting the decline in physical newspaper sales.

The New New Thing

Last week Jeff Nolan wrote a post entitled Incrementalism and “The New New Thing” where he bemoans the lack of true innovation and the state of venture capital generally. He is talking about Silicon Valley, but what he writes applies equally over here in Europe.

He correctly observes that a lot of money is still flowing into startups, and that too many of them only offer incremental improvements on what already exists. He is on the money with the belief that incremental innovation is rarely a sufficient foundation for a big new business. In his own words:

As I survey the landscape of consumer- and business- focused software and  service providers I am struck by how much incrementalism there is at the moment. Something like Twitter is ground breaking in terms of breakout adoption, but what about the other 10,000 startups? There are few bold “aha” ideas, lot’s of social “-this or -that”, and mostly a bunch of companies hoping to draft on the perceived success of a few gorillas. Will we suffer through yet another “Year of the Mobile Web” or “Year of the Semantic Web”?

He then goes on to draw a couple of conclusions I don’t share. First:

What is coming to a close is the notion that all online services need to be free and paid for with advertising; there are too many startups that are dependent on a business model that has yet to prove itself for tech companies.

I agree that there are many web businesses with advertising models that will fail, and probably more of them than we had when semiconductors or enterprise software were the big investment themes, but that is because barriers to entry are really low. It costs next to nothing to get a web business started and it is getting cheaper by the day.

So the higher than normal number of startups doesn’t cause me to fret about the health of the ecosystem. Nor would I say we are reaching the end of the line for ‘ad-supported’ as a business model. Online advertising is still growing at double digit rates, and whilst innovation in that market is required I think it will continue to thrive, and the best web businesses will succeed on the back of it. (Although I also expect that innovation in business models will become more important as the trend towards free accelerates.)

Second:

What’s frightening is the inability to answer the basic question “What’s next?” The Valley thrives on “The New New Thing” (possibly one of the most poignantly titled books ever) and with every turn of a generation, there is an awkward moment where we’re just figuring out where we’ve been but have yet to see
where we are going… Right now is that moment.

Knowing what is coming next is always a difficult business, but I am more sanguine than Jeff on this point. When I read the paragraph above I asked myself what it was that excited me at the moment and the answers all had the common theme of entertainment. Regular readers of this blog will know I am into virtual worlds, social games, music and online TV. All of these areas are about delivering new or enhanced forms of entertainment via the web.

That is the path I think we are headed down at the moment, and we are still nearer the start than the end.

More on ‘free’ as a business model

Last week Chris Anderson of Wired and Long Tail fame posted a preview of his new book on free as a business model and I wrote a post summing up his argument (which I largely agree with) and calling for innovation in business models – we will all still need to find ways to make money after all.

Reading through the comments on the preview and on my post, there is a lot of scepticism about whether things can really go this way.  I think they are already and will go further – maybe not 100% all the way – but enough that understanding this topic is important, and that there will be money made by the entrepreneurs who get there first.

Today Jay Deragon has an interesting post on this topic, largely quoting Kevin Kelly, also of Wired.

He offers some different ways of looking into this difficult topic.

Whilst Anderson explains free by the declining cost of processing, bandwidth and storage Kelly says the same thing a different way – by pointing out that distributing copies of anything is now free, whereas in the previous era copying became cheap, but money was made by selling the copies (books, CDs, etc.).

Therefore, Kelly argues, we need to look for things that can’t be copied if we are going to find innovative business models.  Kelly has one big idea – trust/reputation, and eight others:

  1. Immediacy – getting it before everyone else
  2. Personalisation – requires an ongoing conversation between customer and supplier
  3. Interpretation – make it work for me – Red Hat does this for Linux
  4. Authenticity – guaranteed
  5. Accessibility – whenever, wherever I want it etc. – this is where BT are heading
  6. Embodiment – we still need real things every now and again
  7. Patronage – the idea people want to reward their favourite artists – e.g. Radiohead let their fans decide the price of it’s last album
  8. Findability – helping people find stuff they want/need – Facebook does this for it’s application developers

These are all great ideas.  Scaling bsuinesses based on them will not be as straightforward as scaling a traditional web business, but if it were easy, everyone would be doing it. :)

I look forward to hearing how it will be done.