Saturday, October 20, 2007

Attention Does Not Guarantee Income

Radiohead criticized in BoingBoing for misusing mp3 giveaway to generate CD sales.

Silicon Valley criticized in the New York Times for conflating users with revenue.

The issue in both these stories is that Internet people believe getting users' attention is enough, and nobody else agrees.

There's an ancient Latin saying that translators are traitors. It has its roots in a similarity between the two words in Latin, but it's survived the ages, because even though the pun has disappeared, the meaning hasn't. Anyone who can see both sides of an issue will turn out to have divided interests. I frequently translate between geek language and business-speak in this blog, and I side with the business people on this one.



Business people can find the Web a weird, even occasionally demented place:

The past few weeks we've felt a lot like the owners of a restaurant that gets a five star review only to have the reviewer rant on about how the restaurant is planning to charge for its delicacies. Shouldn't the restaurant owner just line his walls with advertisements and be happy?

Of course, this sounds silly for an offline business but it is just as ridiculous online. The only difference is that there aren't billions of dollars lined up waiting to fund a bunch of new restaurants. No, restaurant owners are forced to deal with reality right from the start as every business should be - no matter how much capital is available in the short term.

But this "reality distortion field" was probably inevitable. History does, after all, have a silly habit of repeating itself. And so only a few short years after the bubble burst all kinds of private equity is flowing freely, elaborate parties are being held, the froth is building, and once again web companies (and web bloggers) are forgetting that to stay in business there needs to be revenue beyond investor capital and Google ads.

That's AuditoriumA, responding to reviews which praise their application but criticize it for not being free.



Here's the BoingBoing criticism of Radiohead. The part in bold is my emphasis:

Radiohead's "groundbreaking" decision to let fans choose what price to pay for 160k MP3s of "In Rainbows" was just a promotional tactic to boost CD sales, according to the band’s management.

'If we didn’t believe that when people hear the music they will want to buy the CD, then we wouldn’t do what we are doing,’ Bryce Edge of Courtyard Management told Music Week, the UK’s industry magazine.

Whoah, way to ream the trust and goodwill of your entire (online) audience.

BoingBoing might have reconsidered that last part, because for me the bold sentence is only showing up in my RSS feed - I don't see it on the Web site - but there's something kind of insular about this. I think you'd have a very hard time explaining that sentence to somebody who wasn't involved in geek culture in any way. As best as I can translate, they're saying that giving music away free on the Internet with the intention of selling it later in physical reality constitutes some kind of betrayal.

As far as I can tell, that only makes sense if you assume that giving music away for free was an ideological gesture.



I'm not even sure that's what they're saying. It's just the only way I can make these numbers add up. Putting a CD in a store after you let listeners hear your music on the radio for free doesn't mean you've "reamed" anyone's trust or goodwill. If you're just Joe Music Fan Who Loves Radiohead, and you can download their album before it becomes available in stores, that sounds pretty awesome.



If, however, you're Joe Ideologue Who Doesn't Really Care About Radiohead But Is Thrilled To Have A Big Name In Music Jumping On The Free Music Downloading Bandwagon, finding out it was just a promotional ploy could indeed involve a sense of betrayal.

It adds up, I think. One thing I know for sure, it's unusual to use the metaphor of anal violation to describe a band selling their music in a store. That's the kind of genuinely insane bullshit that could only come from somebody really smart thinking some thoughts that make perfect sense but just ain't so. Whenever anyone is angry about something cool which made a lot of people happy, ideology is one of the first things to look for.

Ideologies are basically systems for converting difficult decisions into effortless knee-jerk reactions. They're very, very efficient, and they give you the power to reduce endless complex mental activity to a few simple steps, which is why they're so popular with programmers. But just because you subscribe to an ideology that says "downloading music for free makes the world better for everyone" doesn't mean you actually speak for everyone. I think it's pretty likely that Joe Music Fan Who Loves Radiohead isn't complaining about getting "reamed."



The madness in Silicon Valley isn't ideology, however. It's irrational exuberance. Irrational exuberance is easy to explain. You're fresh out of college, you got your first job without any effort or concern, and you know somebody really smart who became a millionaire for reasons that don't make perfect sense. You gloss over the reasons not making sense, because you know those same illogical forces could make you a millionaire too. What you don't know is that those same illogical forces can also hang you and everyone you know out to dry. (And by the time you've learned, there'll be a fresh batch of kids right out of college.)

Just remember, if it seems too good to be true, it probably is.



What's interesting is how these two strange ideas on the Web align themselves with each other. Musicians should value trust and goodwill over CD sales. Internet businesses should concern themselves with getting users' attention, not making money. These ideas are both huge in tech culture, but they're both variations on the same bullshit theme, that attention matters more than income. Let me tell you plain and simple: it isn't true.

BoingBoing's vulnerable to this fallacy because you can't be icons of a culture without picking up that culture's conventional wisdom, and if the conventional wisdom is flawed, yours will be too. The RIAA were such despicable assholes about peer-to-peer filesharing that the tech culture adopted a staunch pro-filesharing ideology in response. Silicon Valley's vulnerability, however, is essentially an economic version of NIH (Not Invented Here) syndrome.

Silicon Valley has failed to adapt to the economic innovations of open source. It is now several orders of magnitude cheaper to launch a successful technology company than it has ever been before. But venture capitalists are basically giving the same amount of money to the same amount of people, even though more people, by orders of magnitude, need less money, by orders of magnitude. This concentrated overspending is why companies in Silicon Valley buy so many toys. They have to spend it somehow.



The problem really is NIH, in an absolutely literal sense - the origins of open source are more in Massachusetts and Helsinki than Palo Alto. Although the culture of Silicon Valley encourages a free-wheeling, cryptoanarchist libertarianism, the region got its start as a tech hub through government subsidies and military research. Venture capital is actually very much oriented to big money, and presumes long, expensive manufacturing and release cycles that to a large extent are irrelevant today (or will be until the robotics boom). People in the tech culture often make fun of the entertainment industry and its total failure to adapt its big-money assumptions to economic realities which are infinitely more agile. What we very infrequently notice is that venture capitalists are making a nearly identical pig's ear of a nearly identical transformation in their own industry. They're doing exactly the same thing.

I think the real reason that Internet companies chase users rather than revenue is that Silicon Valley - or more accurately, Sand Hill Road - is still expecting long journeys to profitability, and simply can't cope with the reality that you can build something in your spare time and get it profitable all in the space of a few months. A few brave startup founders go their own way and skip the VC money, at least until they have revenue and they can call the shots; most take the easy way out. VCs are almost desperate to give out money these days - they even advertize on Google - and turning down large sums of money is hard. You get VC money with users, not revenue; and so it goes.

There are many, many times where going along with bullshit gets you into less trouble than pointing it out, but I do want to point out that this idea, that getting users' attention is better than getting their money, this idea is totally unique to the tech culture, and it's the number one reason everybody else thinks our business people are insane. With my adventures in music, art, acting and screenwriting, I spend a lot more time interacting with people outside the tech culture than the average geek, so, in classic translator/traitor fashion, I'm here to tell you their secrets. The big incredibly useful secret that people outside the tech industry know is that getting money is more useful than getting attention. Now you know, and knowing is half the battle.

2 comments:

  1. Interesting post.

    There is a flipside too, a lot of users don't want to part with their money. Somehow the industry has created an atmosphere where users don't want to pay for what we produce. Can you imagine what would happen to Digg's or del.icio.us's user base if they started charging? It would be interesting to see how much they would have to charge the few users that would stick around in order to match their current revenue from advertising.

    I don't buy the argument that if you make your product good enough and reasonably priced users will pay for it. Some of them might but others are more likely to move on to freer pastures, even if the grass is not as green. This in turn affects your ability to make the product reasonably priced.

    Although, Television has survived pretty well using the "attention = income through advertising" model for the past 50 years. So maybe there is a worthwhile business model in there somewhere.

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  2. There's absolutely a business model, but it affects the type of services people build. Digg or del.icio.us are too "I could have done that" for anyone to pay money for it. Ads make perfect sense there. People pay for Basecamp and Blinksale. These are systems targeted at businesses, and businesses pay for them because they're worth the money.

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