From eyeballs to clicks to ? Monetizing the Web

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I used what is now called the Internet several decades ago, back when it was the Arpanet and MIT was one of the few nodes in the country. I was even subscribed to a newsgroup whose title I forget, but whose topic was “Will the Internet ever be commercialized?”

I’m a big fan of the history of technology and I follow Christopher Mims, who writes about tech for The Wall Street Journal. His article Tumblr and the End of the Eyeballs-Are-Everything Era, sub-titled With an adult-content problem and only the vaguest idea how to make money, Tumblr was easy prey for trends bigger than itself is a short primer on how founders attempted to monetize their net ventures. The initial attempt was the advertising banner, and counting eyeballs was the compulsive activity of every founder. As Mr. Mims writes, every founder had the same idea on how to make money:

On the business side, it operated under the assumption that it could make money off its users the same way people had since the invention of the banner ad: Build a big enough audience, and “monetization” will take care of itself.

This is a variation of the [false] idea of “Build it and they will come.” Evidently Tumblr’s design was  “inherently ill-suited to advertising”, according to Katrin Tiidenberg, a social-media researcher at Tallinn University in Estonia who has studied Tumblr for years. And there was a worse problem:

Its impenetrability was a challenge to advertisers. On top of that, many of its users interspersed their posts on various fandoms, obsessions and memes with sexual content. “A lot of advertising clients, particularly in the U.S., get disproportionately nervous about being seen next to someone’s boobs,”

Advertisers instead turned increasingly to the ostensibly safer realms of Google and Facebook. Together, the two giants now suck up 57% of all digital ad spend, according to eMarketer.

Of course, we are long past banner ads and eyeballs, today it’s all about data, data that enables targeted advertising, which is far more effective than banner ads could ever hope to be. There’s an old saw about advertising: “Half of all advertising spending is wasted, we just don’t know which half.” That was true in the days of broadcast media, like newspapers, magazines and TV, where it was a one-size fits all advertising model, meaning that one-size fit very few very well. Today targeted advertising brings in billions upon billions of dollars for Google and Facebook.  And users are basically selling their identities for the privilege of using the ostensibly free services. Now the federal government wants to get involved in what users see on the web, what companies do with users’ data, and more. Meanwhile print media is dying as they “Replace analog dimes with digital dollars” and vainly seek for new business models.

But to me its survival of the fittest on the Web and what we have been seeing is an evolution of monetization models. Just like homo sapiens triumphed over other species due to our larger brains and better ability to adapt to changes in the environment, Google and Facebook have focused on constantly buying up the best and brightest brains extant. If any company threatens them, like Instagram and WhatsApp threatened Facebook, they simply buy them. And if they can’t find enough job applicants organically they just do a few “aqui-hires” where they acquire a company for its talents and they kill off their product.

No wonder the anti-trust forces in the federal government are awakening from their long slumber – basically since Microsoft was under the anti-trust microscope.

Where will this all lead? One of the technologies I’ve been watching – and waiting for – is the concept of micropayments to enable paying for microcontent. For example, I’m embarrassed to tell you, but I have a subscription to Vanity Fair. Why? Because virtually every issue there is one interesting and well-written article buried in hundreds of pages of ads for fashion and perfume. My dream is, and has been, to be able to buy that one article a la carte. None of the advertising or People style celebrity articles. Let’s do the math. I can get a subscription to Vanity Fair for somewhere between $12 and $24, depending on what deal I find. If I paid Vanity Fair $2 a month for that one great article they would have the same revenue, but only about 10% of the cost: no paper, printing, or binding! No shipping cost! Maybe I’d even like to view some of their cool covers or artwork for 25 cents each. But the killer problem that micro-transactions hasn’t been able to solve is that it’s totally uneconomical to use a charge card to pay for for buying anything that costs less than about $10.00. In fact many restaurants won’t take a charge card for a bill of less than $10.00.

But just as I waited over 25 years to see AI commercialized, it’s about 25 years since Ted Nelson came up with the idea of micropayments and even began to implement it for his Project Xanadu. Unfortunately Ted was – you guessed it, 25 years ahead of his time.

Just as iTunes enabled music fans to buy just the songs they wanted, not the entire album that was probably loaded with filler, NewCo will enable readers like me to buy just the articles I want to read, without all the other stuff.

Monetization models on the web won’t stop with personalized advertising. Perhaps the rise of crypto currencies will enable micro transactions for content. I already have a long list of magazines where I’d like to pay for micro-content starting with The New Yorker and all it’s cartoons every week.

So what Mr. Mims and other pundits seem to miss in articles like this one, is that the Web is a living, evolving thing, that it adapts to its environment like other living things. Print media will have to evolve or die; the same existential choice faced by the music industry. Blogs sites like Tumblr will have to do the same. And what saved the music industry? A new delivery and monetization model pioneered by Spotify – music streaming. All you can eat for $9.99 a month. My bet is that there will emerge a Spotify for print media that will crack the code just like Spotify did. Only it may take a few more years. I can wait but I’m getting impatient.

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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