Category Archives: Economics

12.07.07
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CNET, Gamespot and Jeff Gerstmann: Controversy or conspiracy theory?

On Wednesday, I spotted a post from Michael O’Connor Clarke about Jeff Gerstmann, a games reviewer and Editorial Director at CNET‘s Gamespot, who appeared to have been fired for giving a bad review to Kane & Lynch. The game’s publishers, Eidos Interactive, had just bought hundreds of thousands of dollars’ worth of advertising on the site and the rumour was that they used the weight of that contract to force CNET to fire Gerstmann. It seems the news was broken in this Penny Arcade strip.

Here’s Gerstmann’s review:

The implications of this rumour are clear: If CNET is bowing to pressure from advertisers to ensure that their own games are favourable reviewed, then CNET’s games coverage becomes not worth the electricity that lights its pixels. Indeed, the suspicion that CNET can be bought immediately devalues all its reviews, across all sectors. If the PR, advertising and editorial departments submit to bullying from one vendor, then there’s no reason why they aren’t doing the same for other vendors. This is potentially very damaging for CNET as it destroys readers’ confidence that what they are getting is honest, unbiased opinion.

As Kotaku says:

As our tipster points out, if the rumor is true, it could point to a distressing precedent at Gamespot and parent company CNet. “As writers of what is supposed to be objective content, this is our worst nightmare coming to life,” wrote the tipster.

Our efforts to confirm the story with Gamespot haven’t proved successful. Our current requests with PR, Gerstmann and other CNet contacts have either gone unanswered or yielded a “no comment.”

But rather than address the rumours head-on, CNET shilly-shallied about:

CNET allowed hours to pass by as people continued to spread word of the firings, creating incensed users everywhere. They issued no formal statement and made no attempt to defuse the situation. Eventually, they came out with what I refer to as a “non-denial denial,” in which they made no reference to the controversial situation, resorting to generalized statements about how CNET is a bastion of “unbiased reviews.”

And the first formal response on Gamespot is a masterpiece of not really saying anything:

Due to legal constraints and the company policy of GameSpot parent CNET Networks, details of Gerstmann’s departure cannot be disclosed publicly. However, contrary to widespread and unproven reports, his exit was not a result of pressure from an advertiser.

“Neither CNET Networks nor GameSpot has ever allowed its advertising business to affect its editorial content,” said Greg Brannan, CNET Networks Entertainment’s vice president of programming. “The accusations in the media that it has done so are unsubstantiated and untrue. Jeff’s departure stemmed from internal reasons unrelated to any buyer of advertising on GameSpot.”

“Though he will be missed by his colleagues, Jeff’s leaving does not affect GameSpot’s core mission of delivering the most timely news, video content, in-depth previews, and unbiased reviews in games journalism,” said Ryan MacDonald, executive producer of GameSpot Live. “GameSpot is an institution, and its code of ethics and duty to its users remains unchanged.”

Whilst neither CNET nor Gerstmann were willing to discuss exactly what happened, Gerstmann was keen to play down the implications of his firing by telling MTV’s Multiplayer blog that there’s no reason for gamers to doubt Gamespot’s reviews.

Despite that, public opinion in the gaming world swung against CNET, despite the hints that Gerstmann’s firing may be nothing to do with Kane & Lynch, and more to do disagreements with (new) senior manager Josh Larson. If I may quote liberally from Kotaku:

Speaking with a Gamespot employee yesterday who asked not to be named for this story, we’ve learned that, despite the neutral nature of the Gamespot news item on the matter, the editorial staff is said to be “devastated, gutted and demoralized” over the removal of former editorial director Jeff Gerstmann. While the termination of Gerstmann, a respected fixture at Gamespot, was pitched to his remaining colleagues by management as a “mutual decision”, it was anything but, we’re told.

The confusion over the reasons for Gerstmann’s termination, compounded with a lack of transparency from management has created a feeling of “irreconcilable despair” that may eventually lead to an exodus of Gamespot editorial staffers. “Our credibility,” said the source, “is in ruins.” Over the course of the previous days, a “large number of Gamespot editors” have expressed their intentions to leave. Tales of emotionally deflated peers, with no will to remain at the site, were numerous.

Unless cooler heads prevail or concerns are addressed, Gamespot could see “mass resignations”, our source revealed.

Rank and file employees of the Gamespot organization are unaware of the real reasons behind Gerstmann’s termination. Our source admitted that Eidos was less than pleased with the review scores for Kane & Lynch: Dead Men, but the team has “dealt with plenty of unhappy publishers before.” Our contact stressed that “Money has never played a role in reviews before” and that “[Gamespot] has never altered a score.” No pressure from management or sales has been exercised to remove or alter content, the source reiterated.

However, the source did speculate that disagreements between Gertsmann and VP of games Josh Larson may have been the root cause of the former being terminated. Larson, successor to former editor in chief Greg Kasavin, was described as out of touch with the employees who report to him. The VP is the one allegedly responsible for telling Gamespot editorial staff that it was Gerstmann’s “tone” that was at the heart of his dismissal.

Then, on a Valleywag post disputing the theory that Gerstmann was fired for a bad review, someone who appears to be a Gamespot insider left a number of rather damning comments (again, summed up well by Kotaku):

No one wants to be named because no one wants to get fucking fired! This management team has shown what they’re willing to do. Jeff had ten years in and was fucking locked out of his office and told to leave the building.

What you might not be aware of is that GS is well known for appealing mostly to hardcore gamers. The mucky-mucks have been doing a lot of “brand research” over the last year or so and indicating that they want to reach out to more casual gamers. Our last executive editor, Greg Kasavin, left to go to EA, and he was replaced by a suit, Josh Larson, who had no editorial experience and was only involved on the business side of things. Over the last year there has been an increasing amount of pressure to allow the advertising teams to have more of a say in the editorial process; we’ve started having to give our sales team heads-ups when a game is getting a low score, for instance, so that they can let the advertisers know that before a review goes up. Other publishers have started giving us notes involving when our reviews can go up; if a game’s getting a 9 or above, it can go up early; if not, it’ll have to wait until after the game is on the shelves.

I was in the meeting where Josh Larson was trying to explain this firing and the guy had absolutely no response to any of the criticisms we were sending his way. He kept dodging the question, saying that there were “multiple instances of tone” in the reviews that he hadn’t been happy about, but that wasn’t Jeff’s problem since we all vet every review. He also implied that “AAA” titles deserved more attention when they were being reviewed, which sounded to all of us that he was implying that they should get higher scores, especially since those titles are usually more highly advertised on our site.

Gamespot insiders were clearly unhappy with what has happened.

Eventually, Gamespot management did address the issue, although they maintain they are legally unable to discuss why Gerstmann was fired, the categorically deny that it was because of pressure from Eidos.

Q: Was Jeff fired?
A: Jeff was terminated on November 28, 2007, following an internal review process by the managerial team to which he reported.

Q: Why was Jeff fired?
A: Legally, the exact reasons behind his dismissal cannot be revealed. However, they stemmed from issues unrelated to any publisher or advertiser; his departure was due purely for internal reasons.

[…]

Q: Was Eidos Interactive upset by the game’s review?
A: It has been confirmed that Eidos representatives expressed their displeasure to their appropriate contacts at GameSpot, but not to editorial directly. It was not the first time a publisher has voiced disappointment with a game review, and it won’t be the last. However, it is strict GameSpot policy never to let any such feelings result in a review score to be altered or a video review to be pulled.

Q: Did Eidos’ disappointment cause Jeff to be terminated?
A: Absolutely not.

Q: Did Eidos’ disappointment cause the alteration of the review text?
A: Absolutely not.

Q: Did Eidos’ disappointment lead to the video review being pulled down?
A: Absolutely not.

[…]

Q: Why didn’t GameSpot write about Jeff’s departure sooner?
A: Due to HR procedures and legal considerations, unauthorized CNET Networks and GameSpot employees are forbidden from commenting on the employment status of current and former employees. This practice has been in effect for years, and the CNET public-relations department stuck to that in the days following Jeff’s termination. However, the company is now making an exception due to the widespread misinformation that has spread since Jeff’s departure.

[…]

Q: GameSpot’s credibility has been called into question as a result of this incident. What is being done to repair and rebuild it?
A: This article is one of the first steps toward restoring users’ faith in GameSpot, and an internal review of the incident and controversy is under way. However, at no point in its history has GameSpot ever deviated from its review guidelines, which are publicly listed on the site. Great pains are taken to keep sales and editorial separated to prevent any impression of impropriety.

For years, GameSpot has been known for maintaining the highest ethical standards and having the most reliable and informative game reviews, previews, and news on the Web. The colleagues and friends that Jeff leaves behind here at GameSpot intend to keep it that way.

The problem is, the damage has been done. Whatever the reason for Gerstmann’s dismissal, the appalling way that CNET handled the crisis means that a lot of people now believe that the Chinese wall that separates advertising and editorial has been permanently damaged. That in and of itself means that both Gamespot’s and CNET’s credibility has been severely dented and if there’s one thing that a publisher cannot afford to do, it’s to appear even for a moment to be in the pockets of its advertisers. Readers want impartiality, honesty, transparency, and if they sniff a rat they’ll leave in droves.

CNET should never have fired Gerstmann without thoroughly thinking through the implications of such a precipitate dismissal. Doing so without a strategy in place for addressing the inevitable rumour that would follow was stupid and short-sighted. In any company, that sort of “marching off the premises” style of dismissal is bound to cause a rumpus, especially when the person being fired, as Gerstmann appears to have been, is much loved by their colleagues and readers, and has been there for so long. It shouldn’t have taken a genius to realise that there’d be a pretty strong reaction against it, and that some sort of thought should be given to how to address the rumours early on.

Whether Gerstmann was fired because of Larson, or Eidos, or something else, is almost irrelevant now. The conclusions one can draw are that either CNET’s in bed with its advertisers, or it’s being managed incompetently by someone prone to throwing hissy fits and firing people on the spot. If one were being generous, one might just put this down to an HR/PR fuck-up, but there is a valuable lesson to be learnt by every publisher and every company with externally-facing bloggers: Look before you fire.

12.03.07
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Creative Business: Substitutes and complements

As part of the Creative Business in the Digital Era project, I’m doing some thinking and learning about business models and microeconomics. This post is originally from the CBDE blog.

After my post the other day about business model archetypes, I had a very interesting conversation with friend and ORG Advisory Council member, Kevin Marks, who pointed me in the direction of an article by Joel Spolsky – Strategy Letter V. In this post, Joel talks about the microeconomics he studied at university, stuff like “if you have a competitor who lowers their prices, the demand for your product will go down unless you match them.” The main body of his post discusses substitutes and complements, and for someone like me who has learnt about business the hard way (by doing it), it’s like a little light bulb illuminating.

Like most creative people, I’ve never studied business, and for years I fell in to the same trap that I later saw many of the musicians I used to work with fall into: I didn’t want to learn about business because I didn’t think I needed to. All I wanted to do was write, maybe make a bit of music, but in any case, just do my own thing. Then my career took an unexpected turn, I started my own business, and I was on the lower slopes of the steepest learning curve of my life. Perhaps if I’d known about blogs like Joel’s in 2000, I would have had a better time of it! Anyway, I digress.

A substitute is an item that can replace another item, so I can buy a PC from IBM or Dell, it doesn’t really matter – PCs are substitutable. A complement is an item that, you guessed it, complements another item, so if I buy an iPod, then there are a range of accessories that act as complements, such as iPod socks or remote controls or armband iPod holders for the keen jogger. Joel talks a lot about complements and focuses mainly on the computer industry.

A complement is a product that you usually buy together with another product. Gas and cars are complements. Computer hardware is a classic complement of computer operating systems. And babysitters are a complement of dinner at fine restaurants. In a small town, when the local five star restaurant has a two-for-one Valentine’s day special, the local babysitters double their rates. (Actually, the nine-year-olds get roped into early service.)

How does this apply to, say, the music industry? Well, let’s say that you are in a band. Your main product is music, which you sell in the form of a CD. The complements to your CD are things like gig tickets, tour programs, T-shirts, DVDs. People buy these other products together with your CD, and are very unlikely to buy them if they aren’t also interested in buying your CD.

Joel then goes on to say:

All else being equal, demand for a product increases when the prices of its complements decrease.

Let me repeat that because you might have dozed off, and it’s important. Demand for a product increases when the prices of its complements decrease. For example, if flights to Miami become cheaper, demand for hotel rooms in Miami goes up — because more people are flying to Miami and need a room. When computers become cheaper, more people buy them, and they all need operating systems, so demand for operating systems goes up, which means the price of operating systems can go up.

OK, let’s just swap things about a bit. Your products are CDs, gig tickets, tour programs, T-shirt and DVDs. The complement to that is the music itself. (Note that we’re used to thinking the other way round, labelling the music as the product and the merchandise as the complement, because the music comes first and the merch has to come second. But when you view the saleable items as the products and the music as the complement, this all makes much more sense.) Demand for your products increases when the price of its complement – the music – decreases. If the price of your music is zero, i.e. you are giving it away for free online, economic theory has it that the demand for your products increases.

Joel generally talks about companies that are producing complements to someone else’s products, and discusses how important lowering the price of those complements is:

Once again: demand for a product increases when the price of its complements decreases. In general, a company’s strategic interest is going to be to get the price of their complements as low as possible. The lowest theoretically sustainable price would be the “commodity price” — the price that arises when you have a bunch of competitors offering indistinguishable goods. So:

Smart companies try to commoditize their products’ complements.

If you can do this, demand for your product will increase and you will be able to charge more and make more.

In the music industry the separation between product and complement is more perceived than real – whilst the record company controls the complement – music – the rights required to create products is often licensed out to third parties, such as merchandising specialists, who have to conform to the record company’s terms. From what Joel’s saying, it would be in the interests of the third parties, e.g. the merchandising companies, to lower the price of the music to increase demand for their product – the more people can access the music of MyWonderfulBand, the more fans there are, the more demand for T-shirts. In practice, though, that’s impossible as the merchandising companies have no leverage to achieve such a goal.

But if the same people – the band – are in control of both products and complements, they can create an end-to-end business model that sees them giving away the product and earning off its complements. I’d argue that people like Ani DiFranco have been doing this for years, encouraging people to make copies of her music and then selling merchandise and touring frequently. For a musician, this is a self-reinforcing feedback loop. The more you tour, the more merchandise you sell, the more you bring your music to the attention of people who may want to buy tickets for your next gig or buy a T-shirt or CD. By taking the risk of commoditising your music, you can potentially drive up the demand for the complements substantially, if you can get over the icky feeling of commoditising the very thing you feel most passionate about.

This ties in nicely with Tim O’Reilly’s view that:

Obscurity is a far greater threat to authors and creative artists than piracy.

So how about the other creative industries? Well, in the publishing industry, the product is the book contents, the complement the book itself, so giving away ebooks should drive demand for paper books. Authors don’t seem to do much in the way of merchandising – perhaps that should change, especially with services like Spreadshirt or Cafepress. Films are rather the same – the moving image is the product, the DVD the complement. Photography – the image is the product, the print or the book the complement…

Now, I did warn you that I am thinking out loud here, and I see a problem with all this, and it has to do with substitutes. Remember, a complement is “a product that you usually buy together with another product”. But for many of the products that come out of the creative industries, the physical incarnation is not a complement to the digital version of the creative work, but a substitute. Joel defines a substitute like this:

A substitute is another product you might buy if the first product is too expensive. Chicken is a substitute for beef. If you’re a chicken farmer and the price of beef goes up, the people will want more chicken, and you will sell more.

If the digital creative work is a substitute for the physical instantiation of the work, the whole complement theory falls over. Computers and operating systems are complements of each other because one without the other is sort of pointless – you want the one if you have the other. But with no CD, my MP3 is still listenable; with no DVD, my MPEG is still watchable; with no print, my JPG is still viewable. This is why the RIAA and its ilk have being getting so much in a tizz about the downloading of unauthorised files – they see the digital as directly substitutable for the physical. And if something is substitutable, it can’t be complementary. Can it?

This is, I think, where the lines get a little fuzzy. Technically, an MP3 is a perfect substitute for a CD – you can do pretty much everything with an MP3 that you can do with a CD. (Indeed, the chance are you’ll turn your CD into MP3s as soon as you get it). But I’m not sure that its substitutability is so perfect and I wonder if, as more people experience total music data loss when their MP3 player or computer hard drive craps out, its perceived substitutability will actually decline. It took the loss of 40gb of digital music carefully collected over years and years for me to learn that backing up my music is really important. As the MP3 player market matures, we will see more people loose data when their devices perish or when they try to swap between silo’d devices that do not play nicely together, e.g. trying to play proprietary format music on a non-compatible device. At that point, substitutability will decline slightly and complementariness will increase slightly, although it will be individual context that will define whether a given MP3/CD is a complement or a substitute.

It is an irony that the industry that has been so worried about substitutability also has some of the best complements to it’s main creative output. Bands aren’t reliant on just CDs for income: gigs and merchandise play a significant part in the successful band’s income, and it’s possible to imagine that percentage could increase as income from CDs decreases. Other creative industries, though, are going to need to find some complements, and quickly. The digitisation of creative works is neither slowing down nor going away; and the commoditisation of those works is both inevitable and uncontrollable, driven as it is by the consumer rather than the rights owners. The only way to deal with the commoditisation of your past cash cow is to sell complements to it.

10.14.07
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Duty to buy a newspaper?

Roy Peter Clark at Poynter certainly has kicked off an interesting discussion with a column on the journalism centre’s website in a call to journalists to dig into their pockets and buy the newspaper. His full argument is worth a read, but the essence is:

I owe it to hard-working journalists everywhere — and to the future of journalism — to read them. It’s no longer a choice. It’s a duty.

And here’s why: There is one overriding question about the future of journalism that no one can yet answer: How will we pay for it? Who will pay for good reporters and editors? Who will pay to station them in statehouses, or send them to cover wars and disasters? Who will finance important investigations in support of the public’s health and safety?

Poynter has done a great service in collecting some of the blog posts that comment on the column. I’m not going to take aim at the original column. There are plenty of people who have done that.

My information diet

I’ll be honest. I can’t remember the last time I actually bought a physical newspaper. I get them from time to time on flights and at hotels, but the last time I put down money and bought a newspaper. I’d have to think hard about that. I think I bought a Guardian right before I joined the newspaper.

But I’m drowning in information. If this diet were food, I’d be the size of a small block of flats. Super-size me. I actually have to do a lot just to filter and sift the massive amount of information available. I’m constantly looking for signal in the noise. No one news source does it for me, and I compare a lot of news sources because they all have a point of view.

Before I leave the door, I have Sky News and BBC Breakfast on the laptop TV, more for background noise than information to be honest, although it’s good to know what the domestic (read British) media and press are exercised about today. I can’t filter TV news so I don’t ‘use’ it much. It’s too time consuming for what I get out of it. To be brutally honest, sometimes I get so pissed off at TV news for wasting my time I flip the channel to Everybody Loves Raymond. The BBC TV news podcast isn’t updated until I’m at work or else I’d just watch that and skip the fluff. If there is a good piece of video, I’ll see it. If a politician or presenter says something of note, I’ll see it repeated a million times during the day or in the papers.

Now, on my half hour commute in the morning before I hit the Tube, I listen to the NYTimes Front Page podcast and the hourly NPR news update downloaded to my iPod via iTunes. I just can’t find a good top of the hour headlines podcast in the UK. I haven’t checked the BBC lately. I wish they would produce a World Service headlines podcast. If I have time, I also listen to podcasts from On the Media, the Economist, the BBC’s Pods and Blogs (which I used to contribute to) and This American Life (although Suw and I usually listen to that together over breakfast on the weekend).

On the Tube, I usually skim stories from four newspapers: The New York Times, the Washington Post, the International Herald-Tribune and the Guardian. If I see something I need to read, I’ll mentally bookmark it for when I get to work. I also check on the headlines the BBC News website and do a quick check on CNET and Wired. I’ve been doing this for years on my Palm handheld using a service called Avantgo. The screen is great, and I don’t really have this fetish about paper. It’s just information, and it’s easier to organise this way. And it’s much easier to deal with on the Tube. I also have an RSS reader on my Palm, QuickNews, which I wish was better. That gives me headlines from Marketwatch and a half dozen blogs.

Most everyone else on the Tube reads the Metro free-sheet. I don’t. It’s just a rehash of what I’ve already seen on Sky and the BBC, and unlike most everyone else, I’m not interested in celebrity news. Besides, I never have to go looking for celebrity gossip. It’s everywhere. I also have an environmental issue with all of those free-sheets. What a waste.

When I get to work, I fire up my RSS reader, NetNewsWire, and look through the blogs and traditional news sources. I check Popurls.com to get a quick filter of social news sites, video sites and aggregators. I usually have NPR on in the background and give a quick check to NBC’s evening news via iTunes. I get e-mail newsletters from the Washington Post – my old hometown paper – and the NYTimes. I also get an e-mail from NewsTrust and SimplyHeadlines.com, aggregators of different sorts. I also get a morning e-mail from Global Voices giving a great roundup of global blog buzz. Friends are always sending me links via Del.icio.us, mostly to do with new media journalism, and I get things passed along directly via IM.

A former colleague at the BBC said that someday everyone will consume their news like me. I’m not so sure. Very few people actively seek out as much information as I do. I don’t extrapolate my own behaviour too much. I am a very wired news junkie. It’s my job to know what’s going on. But there are a lot of people doing one or more of the above.

But as some people in the Poynter discussion have pointed out, lack of information is not my problem. Lack of time and a limit to the amount of attention I have is more of a problem. I still don’t think this is an issue that most journalists have grokked. There’s who, what, where, when and why, but too many journalists don’t seem to think they need to explain to readers, viewers, listeners: Why should I care?

Relevance

Again, this is one of the posts where the comments are worth reading. Steve Yelvington in his post, A troll in scholar’s clothing, echoes one of the sentiments in the post which is that news has to be relevant to consumers, the audience in order for them to buy it. Steve says:

Quit blaming the Internet. There’s nothing wrong with paper. It’s your journalism that isn’t relevant. … We’re not going to get meaningful content and services from journalists who spend their time reading each other and sniffing around each other’s scents like a pack of dogs.

Don’t compare your journalism with that of another newspaper. Compare it with the needs of the community.

Amen brother. As Steve has often pointed out, newspaper audiences (in the US), have been declining since the 1970s, when the Internet was still in the lab.

I love the depth of the style of journalism that newspapers have traditionally done. That’s not to say that television is not capable of it. TV documentary units in Britain and long ago (and long since dead) in the US have produced some excellent journalism. But now, what is the business model for this content? What pays for this relatively expensive work? That’s the crux of the original post.

For a number of reasons, most people aren’t like me. They don’t see the reason in their busy lives to seek out news and information like I do. I grew up with newspapers and watching the evening news every night with my parents. I knew that to make economic, political and any of a number of other everyday decisions, I needed quality information. But I am in the minority, and as long as I am in the minority, newspapers and the kind of journalism that they represent will be in decline in the developed world.

I think the issue of relevance is at the heart of newspapers decline. Why should most people care about news? Journalists take it for granted, but I fear that it’s only occasionally obvious for our audiences.

When I was back in Washington this March, I struck up a conversation about world affairs with an IMF employee on the Metro. She got off a couple of stops before me, and an African-American man had overheard us and came up to me after she got off. It was after the wobble in Chinese markets had sent stocks swooning the world over. He wondered how something in China could affect the US economy because suddenly it had affected him. I had to get off at the next stop and didn’t have time to say that the Chinese and Japanese held a majority of the United States’ foreign debt. Anything that impacted the appetite for the debt would hit the US, possibly hard. And that’s just one link between the two countries. China and the US need each other economically for a myriad of reasons. China has its own finely tuned balancing act in terms of growth, inflation, internal stability, resources and the environment.

The man on the Metro represents, to me, a failure of journalism. It was a failure by journalists to explain to everyone in our communities why the story was important. Until our journalism really is essential to people’s lives and we make that case, newspapers will get crowded out by a dizzying array of information and, yes, entertainment choices.

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10.03.07
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FOWA07b: Robert Kalin

Founded Etsy, website for selling craft and hand made stuff. See it as a soap box for people who make things.

Moved to New York, faked ID in order to get classes at university. Wanted to remain unemployed and start a company. Started six, including carpentry. Did one year of art school in Boston, but had never used computers much.

Built Get Crafty for wife of a professor in NY, and then did client work, but didn’t like that. Got the idea to create a market place for people who made things on Get Crafty. Launched 2 years ago, 100k sellers, mainly US and UK. Haven’t had a hockey-stick, low growth. Only in US dollars but working to support multiple currencies. Mainly English-speaking countries. Visualisation clock, 24 hours, and show usage round the clock, quite overnight. 10k items a day are listed, 7k items selling per day.

Always a bump before Christmas, then it drops off afterwards. Usage jumps almost bi-monthly. People think Etsy is small, but it’s small now and part of something larger. Two paths the world can go down, one to go with shopping locally and buying hand-made goods, the other is petrol- and war-based.

Wants Etsy to be an organising principle, rather than a corporation. Wants to think about how can build businesses that are rewarding. Etsy has grown from 4 to 44 people, have learnt a lot on the way growing there, and the growth of the company has to stay in tandem with the growth of the market.

It’s not just a marketplace, it’s a community. Marketplaces have always been communities, people would go to the market not just to buy things but to gossip. Contrast that to what we have today, online or offline. Social aspect of knowing who made what you’re buying has been eradicated. Important part of Etsy is human contact between buyer and seller. Also a lot of alteration services, and items tend to come with stories. If you had to save 10 things from your burning house, you wouldn’t grab your flat-screen TV, you’d grab those things that would have meaning to you. Most stuff we have is actually easy to get rid of.

Make it playful – can shop by colour, so Etsy will show you all the things that are a particular shade of green, say. Seasoned Etsy shoppers don’t use that feature as much as new people. There’s also a ‘time machine’, that shows you stuff in the order it was posted.

The social side, stuff coming, where you can shop with your friends. (Demo was broken.)

Etsy – sees that as the first wave of hand-made people, most Etsy users are women, and most aren’t that into tech.

Sees Etsy itself as hand-made. Before industrial revolution, everything was handmade. If you needed a table, you’d go to your local artisan to get it made, or make it yourself. Now, if you talk about a group of people sitting around sewing, the image that comes to mind is of a sweatshop. Fallen into a Bladerunner future, where it’s all mass-produced. Mass production has it’s benefits, but there’s a human cost. Something that is baffling is how much more important that it is to put money over human life, and if that is the goal of your business then it’s a personality time that I think is very unhealthy and not sustainable in the long run.

When the Nazis were bombing London, their planes required a patented fuel, patent was owned by Rockefeller, and he sold that fuel to the Nazis. But people say “that’s business”. But what values does business have?

Need to look at long term growth. Google’s letter at IPO said “Our stocks should drop in the short term, because some of our investments will be puzzling”, and that’s an interesting way to go forward with a company but not sure if the US economy will go with that.

Created freeform virtual space, like a congress, with lots of additional options, and anytime they are teach a workshop, they beam it out, so you can see people talking to each other. Use it for their own remote developers, but also publicly for skill-shares.

In mass-production, there’s a lot of copying. That’s seen as a bad thing in the hand-made world, but it’s inevitable that people have similar ideas. Copying someone’s brand, though, is different.

Going to be able to request custom items. Most maps talking about social networks etc. never talk about commerce. Huge swath of people out there not thinking about it.

(Talks now about history of commerce, which I am not going to blog.)

07.04.07
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Steve Yelvington describes NewspaperNext innovation process

I’m with Steve Yelvington at the IFRA Asia workshop on citizen media. He’s one of the great minds trying to take journalism into the future, thinking about the business, thinking about the journalism and thinking about both print and the internet. He talked about the NewspaperNext project.

The American Press Institute wanted to try to figure out what was happening to the US newspaper industry and what they could do to meet some of the business challenges that the industry was facing. API has focused traditionally on newsroom training, but now it wanted to focus on the business of newspapers. They applied for a grant from the Knight Foundation and worked with Clayton Christensen of Innosight Consulting.

Steve Yelvington served on the 24-member advisory board for the year-long project. News companies including Morris Communications that Steve works for and Gannet are taking the results very seriously. He described the findings of the research and how newspapers could apply them.

The basic findings:

  • Great incumbent companies consistently collapse in the face of disruptive technology.
  • “Cramming” old products into new forms is the wrong approach so new companies with new approaches win.
  • Products succeed by helping customers get done the jobs they already have been trying to do. (Newspapers are so all-purpose and flexible that they often fail in understanding what jobs they are meant to do. Classifieds? Sports pages to follow statistics of baseball? Money spent for static stock market listings when people get live data at their brokers’ site?)
  • We can learn to spot opportunities for growth, not just wring our hands over losses. (Steve demo-ed Dodgeball, a social networking site focused on basic human needs. If you’re 22 years old, you’re not sitting at home. You’re out with your friends. To find where your friends are, you can track them via your mobile phone and the web. Newspaper shouldn’t put out a youth-oriented tabloid, they should look to filling the needs of youth.)
  • Most market research misses the real opportunities.

Innosight Consulting was hired by a fast-food chain that wanted to sell more of its milk shakes. They used traditional market research and asked people what they wanted in the milk-shake. The research came up with lots of contradictory observations. Innosight, instead, hung out at a fast-food restaurant observing customers. Why do you buy a milkshake? What they discovered surprised them. There were two groups of customers buying milkshakes. In the morning, young, single people bought milkshakes between 7:30-8 am. They bought milkshakes and only a milkshake and left. In the late afternoon or morning, a family came in and bought a milkshake for their kids.

They began asking the customers why they bought milkshakes. The morning people were commuters with 30-40 minute trips to work. They wanted the milkshake to last. They couldn’t drink it fast and liked the thickness. The afternoon purchaser, the families, were parents trying to calm down and quiet unruly kids.

For the morning crowd, they created a milkshake with bits of fruit that was satisfying and would last. For the afternoon crowd, they created a smaller and thinner shake. By understanding the jobs that people are trying to do, they could better tailor the products.

  • Too much capital can doom a project. When trying to develop something else, pull it off. Give it a separate profit and loss statement. Make sure managers understand the imperative.

Steve next compared sustaining versus disruptive innovation.

Sustaining: Better, premium price, new & improved, leap forward and complicated.

Disruptive: Different, lower price, good enough, leap down and simple.

Is blog software simple? Yes. Blog software has disrupted the business model of traditional content management software. The transistor radio is a disruptive innovation. When it came out, the radio was tiny, small and tinny. It wasn’t as good as the cabinet radios. But it was good enough. And you could take to the beach. It didn’t compete but created an entirely new market for radio.

Disruptors:

  • Low end or new market that’s ‘beneath’ existing players.
  • Starts with least profitable customers.
  • Moves upmarket. (Steve said it comes up from underneath you and cuts off your legs.)
  • Changes the rules of the market.
  • Topples existing players.

Examples:

  • Steel mini-mills
  • Semiconductors, microprocessors
  • Minicomputer, personal computers
  • Desktop publishing
  • Digital photography
  • The Internet
  • Linux
  • MySQL

The bad news is that new entrants succeed at the expense of incumbents, and the very thing that make an incumbent successful lead to its failure including on focusing on your best customers, paying too much to your bottom line and focusing on continuous improvement.

We need to think of making things that are good enough and not overshooting. We’re taking too long to create ‘perfect ‘ systems that don’t meet needs. We over-invest, over-plan and then we stick with the bad business plan until it all collapses. Come up with a good idea and field test. Fail forward and fail cheaply. Failure is not a bad thing if we learn from our mistakes and correct. Be patient to scale. Impatient for profits.

Steve said that you can download an 85-page report from the Newspapernext site.

05.01.07
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Internet World: Lulu’s model for self-publishing

I started my day off at the Internet World 2007 conference because I wanted to chat with the folks at LinkedIn for a story I’m working on about online business social networks. The first keynote was by Bob Young, one of the founders of the self-publishing site Lulu.com. In 1993, he co-founded ACC Corporation that went on to merge with RedHat, which has grown into a Fortune 500 company.

“I thought I’d talk about three things: 1) Web 2.0 and what it means in Europe. 2) What it means in the UK. 3) What it means to you.”

How I got to Lulu from this RedHat thing. Those of you familiar with software, know that it was built on a proprietary model. (Well, I might quibble with him on that one seeing as Bill Gates actually stirred up the young software world when he suggested that it should be proprietary and that people should charge for it. That’s ancient history in the software world, in the days of the Altair. But I know where he’s going with this.)

They gave you the binaries, not the source code. If you don’t know the difference, you should. In a very digital economy, in a digital society, if you only get the proprietary model, it’s like buying a car with the bonnet locked shut, and the dealer has the only key. Why would you want to open the hood the car? If you can open the bonnet, you have control of your car. You can take it to the dealer or any other garage. That is what took RedHat from startup in my wife’s sewing closett to a Fortune 500 company with half a billion dollars in revenue.

The control that gives you is that you don’t have to become a programmer but you can you hire someone to add the features you want.

Fast forward, and we’re now in the age of Web 2.0. For those of you who have difficulty understanding how Web 2.0 is different from web that you have used for the last 10 years. The companies no longer provide any value to you. We simply build an infrastructure and you the users add value. If you go to MySpace, you aren’t going there to use things that MySpace developed, you are going there for what users add.

The possibility has been there since the beginning of the internet. eBay is my favourite web 2.0 company. Everything of value has been added by users. I go back to Adam Smith. Businessmen in their own self interest create value for society. Yeah, you can trust the government to develop what you need, or Pierre Omidyar (founder of eBay) can create what you need.

What Lulu is trying to do – based on Adam Smith – is that companies working in their own self interest make the world a better place. This is not to make Lulu successful but make our users successful. YouTube created a lot of traffic but that was based on you guys. How do we encourage people to make video when you didn’t get paid for the last one? Web 3.0 will be based on what eBay, Lulu and Revver are doing. It allows you to get paid for what you are doing.

With the internet, geography ends. It doesn’t matter if you are based in Europe. There is no competitive advantage being based in US. The UK has one competitive advantage: English. English is the lingua franca of the modern world. It is the French of the modern world. You guys can build sites with as global of a reach as any company.

Question from audience: Isn’t this about enabling users? Such as one click purchasing for iTunes or Amazon?

Answer: The great technologies of the internet in ten years are not going to be the great companies of today. Internet is in its infancy. We still have not created the great applications. It’s a lot like the PC industry in 1985. In 1985, they were Ashton-Tate, WordPerfect. Dell not even founded or possibly founded in 1985. (I checked. Dell was founded in 1984, but shipped the first computer of its own design in 1985.)

Question: How do you monetise Lulu?

Answer: It’s all about our authors. Lulu allows you to publish in one of three ways. Either electronically, a book or soon as a CD or DVD. Think of Harry Potter, you can either read, listen to as an audio book or watch as a DVD. We charge for printing. We do the reverse of the publishing model. You keep 80% of the revenue you make.

Question: How does Lulu assess whether these are unknown authors whether they are of some quality?

Answer: Ahh, the quality question. We sell 160,000 books a month. We’re adding 5000 authors a week. What is interesting to us is that concern (about quality). We probably have the world’s largest collection of bad poetry. Early on, the Washington Post newspaper ran a story. The literary editor thought he had come across the worst novel in the English language and was asking how can self publishing create good novels? We encouraged (the author) to come to Lulu, and we sent out a press release saying the worst writer in the English language had come to Lulu.

There shouldn’t be a group of editors who decides what is good enough or relevant. It should be the marketplace.

We are working on social networking and recommendation tools, to allow readers to decide quality.

From the musical Gypsy Rose, there is a song that says you have to have a gimmick. You have to do something different. If you do a different detective story, you have to do something different, like base it in your home town.

We don’t think we compete with Random House or Penguin. They think they have succeeded if they get their authors down to 10 and sell a million books each. Our model is the reverse. On a single copy, on Lulu, you make money and Lulu makes money.

03.22.07
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Guardian Changing Media: Business model for free content?

Session Chair: Nick Higham, correspondent, BBC News

Christian Ahlert, director, OpenBusiness.cc

Suw Charman, independent social software consultant

Adam Freeman, deputy commercial director, Guardian News and Media

Question to Christian, what did Google do right?

Christian: At first, they were kind of a bit crazy. They didn’t have a clue. Google created a really good technology, but they didn’t have a business model. Everyone could use good and they can still use Google. The only way that they could create a business model was on top of the attention they created. Giving something away on top of the attention they created. This is key way that the internet and business on the internet works.

When it comes to Web 2.0, social activity has become a product unto itself. I created OpenBusiness two years ago because of Bill Gates. I’m involved with Creative Commons. That is an alternative rights mechanism. Some rights reserved instead of all rights reserved. Bill Gates said two years ago, “What those Creative Commons guys are doing sounds like Communism to me.”

One business model is Last.fm. They give stuff away for free. It allows people to share their tastes.

Last year, he consulted with a major media company. They wanted to become a Web 2.0 company, but the first thing the company said is that they had sent a cease-and-desist letter to someone who had put something on YouTube. He thought the meeting was pointless. Six weeks later, they had another meeting, but a smart executive put the same message up on YouTube. But he got a cease and desist letter because they said he was using YouTube for commercial purposes.

There are hundreds of ways in how you can create revenue. Many of his business ideas are taken from the world of open source software development. People build very successful business models around open-source software. Or you can upsell, by adding premium or paid for services, or even free-ium content.

Suw Charman: There is an idea if you give something away for free that you can’t make money for it. We see this in the publishing world with Cory Doctorow, Lawrence Lessig and Tom Reynolds. Certainly, Cory Doctorow has been very open with his figures. His first novel has been downloaded 700,000 times, but Down and Out in the Magic Kingdom is also on its fifth or sixth printing.

The people who are most aggressive downloaders are also the largest buyers of music. We’re still seeing a shake out in business models. If you have a product that is desirable, then people will buy it. Downloads aren’t exactly equivalent to the physical product.

Nick: DVDs, the physical product comes with extras.

Suw: When you look at the music industry, you see a nice blip when people were replacing their tapes and vinyl with CDs. This created an artificial hump in sales. The music industry is shifting fewer units so are selling less. To blame this entirely on downloaders is spurious. You have a small number of bands shifting a large number of units.

Suw called it a power law issue. Mark Cuban calls it the ‘rat’s ass of the long tail’. And it takes a lot of money to climb further up the tail, although I’ll leave that image there.

Adam Freeman: We are a multi-platform player. Today it is printed words on paper. In the future, it will probably be video. We are not on the web but part of the web, and fortunately, that has coincided with a boom in advertising. It has to be compelling, and it has to be unique. You can’t do that in news, but you can do that in crosswords or news compilations for expats. They also have a dating service.

CA: Lots of business give away things for free but use that to generate business. We didn’t mention quality and convenience. To bash the music industry again, who developed iTunes? A computer company. (Nick Higham: How many have iPods? Almost 100%.)

The guys who started Skype have launched Joost. The quality is great. I mean, YouTube, Google Video? The quality is crap.

Question from audience: The music industry didn’t invent iTunes because it wasn’t their core competencies. He went on to insinuate that Suw and people like her thought music was ‘shit’ because her tastes were changing as she was aging.

Winning argument boss, or not. Suw’s a square because she’s getting older?!? Blame the user. Blame the listener. This seems to be the music industry strategy. Don’t innovate. Don’t invest in new business models. Defend your old business models with a stable of lawyers.

CA: Decoupling using a product and not paying for it is nothing new. Radio has been doing that for years. The internet has changed transaction costs forever.

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12.14.06
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Feed the Geeks

Last week, my good friend Chris Vallance was asked in a radio interview: “What is a geek?” After the interview, he asked me how I would have answered. I thought about it for a while.

A geek is someone who talks about technology as much as most men talk about football.

I am the first to admit that I’m a geek, and I’m proud of it. I’m a geek about all my passions whether it’s food, wine, backpacking through the mountains or journalism. I revel in the minutiae of anything I’m interested in (but hopefully don’t bore to tears anyone who happens to talk to me about them). But almost everyone has their personal passions, some are just more socially acceptable.

Most mainstream media organisations are following mass media strategies when it comes to blogs. They are producing general interest news blogs in spades because journalists think that everyone is interested in news, and a very narrow definition of news at that. They are pushing large numbers to blog on mega-blog sites without understanding that blogging is personal publishing where blog readers develop strong ties to the blogger. In the age of social media, it’s good to remember that people develop relationships with people, not brands, organisations or ‘content’.

Not unsurprisingly, mass media organisations are still focusing on the mass. They are still focusing on the ‘rat’s ass of the long tail‘, as Mark Cuban calls it. Andy Kessler quotes Mark as saying in an e-mail exchange:

…in a long tail universe, the cost to crawl up the tailto the rat’s ass is more expensive than the production.

Andy Kessler, as part of a series of posts on Media 2.0, goes on to advise: “Go horizontal.” I couldn’t agree more. Feed the geeks, and by that I don’t mean just the people who are passionate about technology. Feed the foodies, the wine officianados, the travel buffs, the video gamers, the greenest thumb gardeners, the DIYers, you name it. A blog is an inexpensive, lightweight content management system that lowers the barriers to entry and speeds development. Blogging will allow media organisations to target niches that would be impossibly expensive in print. And a good blogger can connect directly with their audience in ways that print can’t and build a loyal community.

At a recent new media event I was lectured by the managing director of a major UK media company about blogging and told that my job was to bring eyeballs to advertisers. Memo to self: Avoid old media execs who have had too much to drink.

But it’s a mistake to think that blogs are about the old-fashioned concept of ‘sticky eyeballs’. There is a business model to blogging – if used strategically and not just as a technological solution to allow comments on traditionalcontent.

As Paul Gillin says in an article about the troubles facing the American newspaper industry, “This new medium (blogging) is far more cost-efficient than the ones it will replace.” Google’s AdSense tied search to ads so that people who were searching for something would find related ads. Niche blogs do the same thing. Someone coming to a wine blog is already interested in wine and wine-related products. Just as tech advertisers do better on BoingBoing than on general interest sites, wine advertisers will find a more interested interest on a wine blog than they would a general news and information site. It’s a sound advertising model, and there is a sound business model behind blogging.

Want proof? Under heading of: “It’s not just a hobby – some small sites are making big money. Here’s how to turn your passion into an online empire”, Paul Sloan and Paul Kaihla wrote in Business 2.0:

Denton won’t discuss financial details, but industry experts estimatethat Gawker Media will bring in as much as $3 million in revenue thisyear. Gawker Media’s average CPM is between $8 and $10; CPM rates onGoogle AdSense and competing automated systems are estimated atanywhere from 50 cents to a few bucks.

But media organisations won’t succeed in the age of blogging with a mass media strategy focused on bland, broad-based blogs where there is no ‘there’ there. Instead, news organisations can grow the business by targetting passionate niches in their audience. If you don’t, there are lots of passionate bloggers out there who will.

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12.06.06
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Journalism.co.uk: Readers’ Revolution panel on MyMissourian

UPDATED: On Monday evening, I had to rely on the wisdom of the crowds to help me find Skempton Hall at Imperial College and managed to be only slightly more than fashionably late – good for a party but maybe not so good for a panellist for a discussion. The topic was the Readers’ Revolution, various ways in which media consumers have also become media producers.

Clyde Bentley of the University of Missouri – who I had the pleasure of meeting at Poynter’s Web+10 last year, talked about the hybrid web-to-print MyMissourian project. And Robin Hamman, a friend and former colleague at the BBC, was speaking about his Manchester blog project (I’ll post about Robin’s presentation tomorrow). I talked about what I call newsgathering in the age of social networks and also ways in which the Guardian is moving community and participation from the edge to the centre of our digital strategy.

Clyde was already speaking when I arrived. After giving an overview of the University of Missouri School of Journalism and the Missouri Method, he talked about the media landscape that media organisation find themselves in. According to Netcraft, there are now 101,435,253 sites.

We’re fighting for attention.

Now, I hear media leaders say that this is why brand and quality are even more important in the age of the Attention Economy. I disagree. I think relevance trumps industry-defined measures of quality, but Clyde will touch on that.

Clyde may be a professor, but he understands the economics of media, which I think more journalism students need to get to grip with as they enter the job market (and it’s a tough market out there for new grads or even old hands). The most valuable voices in journalism today are passionate about journalism and realistic about the numbers.

Last month, I heard executives from the Washington Post and the New York Times talk about how they are focussed on growing their online businesses as quickly as possible to make up as revenue tails off from the print business. But the numbers, as they stand, are sobering. Online journalism is not enough to meet the shortfalls as newspaper
revenue falls. Clyde said:

The money isn’t there. Revenue is 5.41% , only about $1.9m for newspaper revenues online versus the print revenues. … Plot line of online revenue versus print
revenue doesn’t meet soon. We are not making enough money to turn off
the presses in my lifetime. We need an interim strategy.

UPDATE: I asked Clyde the source of those figures. Too many slides going by my sleep-addled brain at that point. The figures are from the Newspaper Association of America. It represents expenditures for online advertising in newspapers only. Clyde said: “Our initial research shows most of the overall online advertising is for messages that do not support editorial content — corporate sites, click-throughs from other commercial sites, free-standing ads, etc.” And there is not a major shift from print to online, yet. Clyde said that the shift was a bit more than 4% last year.

The citizen connection is about easy blogging and social networking. Clyde added: “Money is going online; it just isn’t going to support journalism.”

Initially, they drew a fiscal blank. How about a hybrid of citizen journalism and their own? “Web and print. Users with journalists. News and fun.”

MyMissourian.com was born. It is a site that anybody can participate in. It’s not hard news.

Inspiration came from OhMyNews, started by a radical leftist journalist. It has changed the face of Korea. Dean Mills, the dean of the prestigious school of journalism at the University of Missouri, recognised the potential and asked us to move quickly. MyMissourian.com was proposed in May 2004, and launched in October 2005.

It didn’t go over too well initially, Clyde said. Critics complained: “People are ripping you off. They are going to flood it with commercial messages.”

But they had done their research before launch. They wanted to give the voice to the voiceless, and allow non-journalists to set the agenda. And, they knew that they were going to make money.

They proposed to allow citizens to gather stuff online – photos and stories – and use that material in a print product to pay the bills.

All US newspapers have a TMC product, a total-market coverage product. With circulation dropping, they send TMC products free to non-subscribers. The vast majority, 88% of US newspapers, have a free product. Pre-print advertising, not classifieds, account for 25% of our revenue. But then there is driveway rot. Free-sheets sitting unread, rotting on the driveway. (Or tube-stop rot here in the UK with the blizzard of free newspapers.)

The print edition of MyMissourian launched in October 2005. It allowed them to use of the efficient advertising pattern of print. The print MyMissourian has Increased their readership by 28,000 households. They have 900 or writers who contribute to the site and, therefore, to the print edition. People are more interested in MyMissourian because they help create the site and the newspaper.

Is there a future for journalists? Yes, both professional and citizen journalists, but the job of professional journalists is changing, Clyde said. It is now more about guiding people to content and covering stories from a different way. Journalists should invite the public to the table.

Many editors are concerned about errors, credibility and libel. The arguments: How do you deal with issues of decency, commercialism, literacy and banality?

They looked for simple, logical solutions. As for banality, Clyde said, “Banality? Journalists are poor judgements of what or who is stupid.”

For the MyMissourian community, they laid down four simple rules:

  • No nudity
  • No profanity
  • No personal attacks
  • No attacks on the basis of race, religion, national origin or gender

The site meant the end of ‘no’ when it came to what they could cover. “We don’t say: ‘No won’t cover your event’, or ‘No, we can’t run your youth baseball story’,” he said.

The citizen journalists write about personal memories, faith of all kinds (“Journalists hate covering religion because it’s not matter of logic. It’s a matter of faith,” he said). We enlist senior photogs, older members of the community, and give them disposable cameras.

This is gut level journalism. Some people just want to share their recipe. They’re planning on releasing a cookbook just based on the recipes that people have shared.

You know what’s not popular? Politics. It’s less popular than Clyde and his colleagues had predicted. Religion
is far more popular than we predicted. And pictures of dogs, cats, even
rats trump most copy.

And the bottom line is that that it cost less than $1000 in new costs in a year and a half.

The cultural issues

Suw and I often say that the cultural issues are more challenging than the technical ones. And Clyde said that this has been hard on journalism students. “They want to write, not guide.”

Many of his students were at a loss at how to cover non-news topic like Little League. And I was fascinated when he said that few students are well prepared to work with the public. Journalists are basically shy people.

The lessons from their hybrid experiment:

  • Use citizen journalism to supplement not replace.
  • UGC isn’t free.
  • Online attracts the eager, but print serves the masses.
  • Give people what they want, when they want it and how they want it.
  • Get rid of preconceptions of what journalism is.
  • Every day people are better ‘journalists’ than you think.

Next, they want to integrate blogs with print.

It’s a very interesting model, and it’s the kind of creative, ‘hybrid’ thinking that is needed to reconnect journalism with readers, viewers and listeners. It reminds me of a talk I recently heard. We live in an ‘and’ world, not an ‘or’ world. Although I’m a strong advocate of online journalism, I recognise that strength lies in new combinations of the strengths of online and traditional media. Creative and organisational tensions will exist, but I’ve convinced it’s where the opportunities lie. The challenge is helping inspire the change.

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10.22.06
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Monaco Media Forum: Irrational Exuberance 2.0? Not really.

In January 2005, I went to the Web+10 conference at Poynter in Florida (for the full monty, go here for the audio). Poynter’s Howard Finberg asked what our fears were now 10 years into this real-time experiment of online journalism. I said: Irrational Exuberance 2.0.

Former Fed chairman Alan Greenspan used the term back in the 1990s. He first used the term in 1996, but I remember it being thrown around in the dot.com boom. As the Wikipedia entry says:

It had become a catch phrase of the boom to such an extent that, during the economic recession that followed the stock market collapse of 2000, bumper stickers reading “I want to be irrationally exuberant again” were sighted in Silicon Valley and elsewhere.

As I asked on the Media Guardian’s blog, Organ Grinder: Is GooTube the sign of another internet bubble? I have a personal interest in this. I covered the dot.com boom for the BBC, and I remember in the late 1990s, everyone wondered why I didn’t head off across the Potomac to the Dulles tech corridor and AOL to make my millions or better yet to Silicon Valley. I didn’t because I could see the handwriting on the wall in 1999. It was more than the damn Pets.com sock puppet. I remember when dot.com companies launched a round of funding simply to pay for multi-million Super Bowl ads. I knew that there were speculators tacking on dot.com to their name simply to float on the market. I knew there was something of the tulip craze to it, and I knew that by 1999, most of the companies that were launching were derivative or trying to be the first entrant in a market without understanding the market they were entering.

I knew that stability at the BBC was worth more in the long run than ephemeral paper millions that would be gone tomorrow in the chorus of ‘Sell, sell, sell’ on the trading floors of Wall Street. However, along with the cyber-snake-oil-salesmen in the late 1990s, the crash wiped out a lot of good companies and a lot of good people and slowed, or in some cases, stopped online news development. I often say that after the crash, of the people who I knew in online journalism, only a fraction – possibly less than 10% – still were working online.

And it boiled my blood that I heard the odd news exec say after the crash: See we told you the internet was just a fad. And even if they didn’t say it, they decimated their online news operations. I remember in 2002, after an interview that I produced for the BBC with Peter Jennings about 9/11 how he led us on a tour of their online operations. He was honest and heartfelt in his respect for these online journalists at ABC and said ‘The Mouse’, ABC’s new owners Disney, were downsizing the department. I don’t really want to see that again.

It heartened me today to hear venture capitalist Pip Coburn put the current wave of digital activity in perspective. Google paid $1.65 million in an all stock deal for YouTube. But back in the boom, network equipment maker JDS Uniphase paid $41 billion for an optical networking company. They later had to write-off $38 billion of the deal. He says that he’s much more excited about what’s going on now. “Real value is being created,” he said.

And I’d have to agree with him. Internet innnovation is far broader and more distributed than it was. That doesn’t mean that we’re in a ‘New Economy’ where the old rules don’t apply. We’ll have other downturns, other waves where speculation outpaces innovation and other crashes, but no one will ever write the internet off as a fad again.

Related Links: Pip Coburn’s excellent post from 2004, The Internet After The Crisis. Fascinating look back and forward.

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