There’s a great line by comedian Louis CK when he was on Conan last year: “Everything is amazing and nobody’s happy.” It’s a brilliant and hilarious rant about how technology has changed our lives and people don’t realize or appreciate it, check it:
Another great line: “How quickly the world owes him something he knew existed only 10 seconds ago” about the guy who complains about the Internet breaking on the plane.
It gets me thinking about how technology has changed my life, and how my offline and online worlds are increasingly colliding. As we integrate new technologies into our lives, it’s amazing how quickly we forget that we once had a life without it.
Remember life before the Internt? I guess I do, but not really. And people younger than me definitely don’t. My dad introduced me to Usenet in about 1990 (I was 9), and then shortly thereafter we got onto CompuServe. From there I discovered chatrooms (which taught me how to type), and from there I discovered IRC. I learned how to build computers because I found out you could play multiplayer Doom if you had 2 PCs — so I took apart and upgraded an older machine we had. Then I learned how empowering the Internet could be because when I had questions about PC building and networking I could find answers on newsgroups or by asking people in IRC chatrooms. In 1995 my dad came home from a business trip and brought me my very first issue of Wired:
For Christmas I naturally asked for my own subscription! Looking at the headlines on the cover are making me laugh right now: Interactive media: who needs it?, Neal Stephenson, and questioning traditional encyclopedias. These are conversations we’re still having.
Fast forward to today and I don’t see the distinction I once had between my offline and online lives. When I was a kid I didn’t really tell people that I was spending copious amounts of time in chatrooms. Now? My Twitter handle is on my business card. (And yes, Twitter is just one big chatroom, 100 million people strong.) In other words, Twitter isn’t a deviant thing I do by myself when nobody else is around like the chatrooms of yore. In fact, I’ve started meeting my “Twitter friends” in real-life, converting them to “real friends.” But in truth I don’t make the distinction between “Twitter” and “real” friends. They’re just friends, or contacts or people I know. Online or off? Who cares. It’s just the world, it’s just people–there is no online-offline gap as it relates to relationships.
And I love how the next wave of social media, location-aware services, are further bridging that online-offline gap. Google Maps has long given physical locations an online footprint, but something so silly as “checking-in” with your phone at a restaurant actually takes that footprint and gives it a leg or two. It connects an actual person to a real location, and produces a kind of digital shadow of what transpired. And this will only continue. Maybe not as Foursquare or Gowalla in their current forms, but this real-time linkage between people, places, and their corresponding online profiles, will only continue. If you can innovate in that stack, you may well have a legitimate business idea.
I admit that it’s polarizing. If you tell 10 people about Foursquare, most of them will shriek in horror. Why would you want to do that? I recently watched Marc Andreessen’s lengthy Q&A session at Stanford (worthwhile if you have the time) and he made the point that he loves to invest in polarizing technologies, stuff that 80% of people shriek in horror at, but that 20% of people become completely obsessed with. That reminded me of Facebook when it first arrived on the scene–many of my friends absolutely refused to join, saying it was creepy and weird. They said the same thing about Twitter a year ago. And now that’s the consensus around location-aware apps.
The more technology changes our lives, and the more we don’t realize it, the more we bridge the online-offline gap. I have ongoing conversations with people via Twitter, that move fluidly to in-person, to phone, to SMS, to email, to chat, to Facebook. Most of this was impossible a very short time ago, yet I take it for granted, it feels like it’s always been here. And that’s because I don’t consider the communication platform when I’m communicating. Online or offline? It’s just communication.
So the cable/satellite game works like this: every channel gets paid an affiliate fee by the cable/satellite company for every subscriber it has. So if the Disney Channel has a million subscribers on DirecTV, and they’ve negotiated a $1 affiliate fee, DirecTV pays Disney a million bucks.
A channel like AMC has to produce only one hit show to make it a “must-have”. If the whole world is buzzing about the awesomeness of Mad Men, and you’re DirecTV and you don’t offer AMC, you have a problem. So what do you do? You get AMC on your roster pronto, and sit back and smile as your subscriber base adds it to their monthly plans overnight.
Gurley makes the point that a channel like AMC only needs one hit show, and they can broadcast pretty much any old crap the rest of the time. Why? Because AMC’s affiliate fees aren’t based on how much people are watching their shows, it’s based on how many people subscribe to their channel. Mad Men produces huge subscriber counts, and there are diminishing returns for additional investment in content.
Hulu recently started charging for the service because cable networks like Comcast complained. Why should Comcast pay affiliate fees when Hulu doesn’t? Fox/NBC/ABC, who own Hulu, acquiesced, and now Hulu pays affiliate fees. That obviously completely changed the economic reality of running the service, hence the pay wall that now exists.
So it seems that the dream of on-demand, free (but ad-supported), streaming television on the Internet is dead. And not because there isn’t a demand. Who doesn’t love on-demand, free television? Yes, there are PVRs, and yes, network sites are increasingly making content available. But it’s not the same.
The problem is that the content creators are addicted to those affiliate fees (and who can blame them?), and as a result they’re in bed with the distributors.
I’d love to see a new spin on the Hulu idea, where content creators bring new properties straight online and skip the TV distribution model altogether. Mad Men was originally created by a production company called Road Rebel. Road Rebel sold the rights to Mad Men to AMC. What if Road Rebel had sold the rights to “Hulu 2.0″ and instead of receiving lump sum payments, agreed to a revenue share based on the advertising revenues the show generated, in perpetuity? And what if “Hulu 2.0″ wasn’t country-specific, but a geo-unrestricted distribution platform? Mad Men had a million viewers for their Season 1 premiere. That’s just in the United States, and just on an obscure cable channel. If a show was truly “hot” and everyone was talking about it, isn’t it reasonable to think that a show with distribution into any Internet-connected home worldwide would generate not just a million, but tens of millions of viewers?
The green boxes are the stages in the consumer decision making process, and the corresponding yellow boxes are the internal psychological processes the consumer experiences along the way. This was a recent topic in my Integrated Marketing Communications class last week.*
As the professor was talking my mind wandered and I started to think web startuppy thoughts. Who gets paid for contributing to these stages and who doesn’t? Online advertising is broken. It over-rewards late stage contributors, and barely rewards the early stage influencers.
Think about that Purchase Decision box. Let’s say I decide I want to buy a digital camera, and I’ve already gone through all the preceding boxes and I’ve done my homework and decided the Nikon D5000 is for me. Easy! I’m going to Google. Here are the ads I see at the top:
And here are the ads on the side:
If you know anything about the camera category and Google AdWords, you know these ads earn Google very high CPCs because there are a lot of retailers bidding on these placements, driving the prices up.
I have no issue with Google making money helping users find retailers to buy stuff. But I think there’s a real opportunity for whomever figures out how to innovate the advertising model for those earlier boxes. Websites that contribute to Need Recognition/Motivation and Alternative Evaluation/Attitude Formation barely get compensated at all! Yet motivating users to want a brand, a model, a product category, is arguably the most difficult thing of all.
And if you as a content creator are successful at this? You get bupkis.
Someone’s going to figure out a model where:
Advertisers are confident that their ad dollars are contributing to real purchases, even if those dollars are spent earlier in the conversion funnel
Content sites are rewarded for capturing the attention of valuable audiences
Users are happy because there will be more high quality content around for them to consume
And whoever figures this model out gets to be the next Google. Get busy!
*I made those boxes but they were inspired (i.e., stolen) from my prof’s slides. My boxes are prettier
