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Ad revenues down, competition blooming, subscription models not working, donations falling flat -- What's to become of the web?
Down and Out on the Web
by Del Miller
July 30, 2003
I stepped out of my hotel and onto the bustling streets of Manhattan. I was a young, fresh-faced greenhorn straight off the high plains, agog at the tall buildings and amazed at the cultural goulash of New York City. One's first exposure to The City is a trifle disorienting - the expectation is that it would be just like any other city only bigger, but that's not how it is: Denver doesn't scale linearly into New York. At some mystical intersection of population density and social energy, Olde New Amsterdam morphed into this bizarre new planet in an orbit of its own.
I cast myself into a rushing river of pedestrians and made my way to the nearest streetcorner, where at once I was approached by a raggedy man who asked me if I could spare some change. His face was pitiable and his pitch was brief, something about how a quarter would enable him to feed his wife and kids, take care of his mortgage and pay his way through law school. But hey, I had a pocketful of money and wouldn't miss a little of it. So I gave him a quarter, wished him a good day and went along my way.
Now mind you, in those days a quarter meant more than it does today, so I felt a tiny bit pleased with my philanthropy - giving is good for for the giver too, and gosh, the guy seemed so darned grateful.
I crossed the street and ran straight into another fellow with an almost identical story of loss and poverty, and I gave him a quarter and wished him a day not quite as nice as I had wished the first guy. But still, that was two good deeds on the same day and I hadn't been on the street for more than a minute. My karma bucket sloshed to overflowing.
At the next corner, guess what? Yep, another man asking for money. This time I stopped and gave the matter some thought. I looked around and saw that on every corner in sight was yet another man, in the same threadbare uniform, asking for money. I did a few, quick, financial calculations and came to a startling conclusion - if I gave a quarter to each of these men, stationed on every corner in New York City, then a small number of people would be exactly one quarter richer and I would be standing on the very next corner asking passersby if they could spare me some change.
So I didn't give out anymore quarters.
I Shall Yield No Quarter
What brings this story to mind is the current state of the World Wide Web in general and of the Macintosh Web in particular. Everywhere you look, the free content we've been so accustomed to on many of our favorite websites, is now affixed with a price tag, in the form of subscription prices, pay per view features or outright pleading for donations.
Now don't get me wrong, I'm not for a second comparing these websites with panhandlers - on the contrary, these sites are the products of good, hardworking people who literally drip with devotion to the cause of giving their audience a product of value. When they ask us for our spare change it is anything but begging - it is a request to be compensated for the time, cost and effort of putting out a quality product. They deserve our support.
The comparison that I am making, however, is between the consuming habits of the prospective, paying readership and my decision a couple of decades ago to not hand out anymore quarters.
The Meter Is Running
The problem with pay-as-you-go websites is very simply that there are roughly 3,083,324,652 of them, according to Google, and if you only paid a penny to each one for full access, your total bill would be enough to buy a seat on The Energy Task Force. Just taking a single minute to sign up for each one would mean that you would have had to start filling out the registration forms around the time of Oetzi the Iceman in order to be current with your reading today. The mind reels.
Admittedly, nobody is going to browse three billion websites, much less subscribe to them; but how many times does a reader have to see a website turn up with a request for payment before he multiplies a few dollars a whack by the number of websites asking for money before the portion of his brain responsible for checking accounts just goes numb?
Sure, most people would be willing to part with a few bucks for the content on a favorite website, but when everybody seems to be asking for payment, the average web resident is simply going to say, "I can't pay all of them."
What follows is a psychological shift, in which the friendly little notices asking for payment disappear from the visible universe in a cloud of quantum improbability. The reader's eyes are subconsciously averted, the mouse finger reflexively clicks past and the next bookmark on the list is brought to the screen. It's the same sort of anti-eye-contact that occurs on the streetcorners of midtown Manhattan.
This whole discussion might be less difficult if there were an efficient, secure, universal and non-intrusive method for micropayments on the web. But there isn't one now nor does one appear to be on the horizon, so we have to look at the financial health of the commercial web in light of what have now - which isn't much, unfortunately.
But if our websites can't make ends meet, what's to become of our web? How do we finance the content that we value so much if the audience isn't willing, for whatever reason, to pay for it? It's hard to remember, but there was once a time when everything on the web was commerce free, so to see the future perhaps we first need to look at the past.
Children of History
Back in the dark reaches of primordial, internet time, say eight years ago or so, there was already a million websites scattered throughout the digital terrain, but they were mostly simple affairs. Most of the web pages encountered in those days were either hobby sites or academic postings with no commercial aspirations. There was little in the way of elaborate graphic design or magazine style original content - or any of the other dead tree publication features that generally require lots of manhours and money to build and maintain.
They were simple projects that a single person could construct and maintain in his spare time and since the fastest modems around topped out at 14Kbaud bandwidth issues were non-existent. The very idea of making a business out of the endeavor was not only far fetched but actively denounced by the purists who preached a gospel of a non-commercial internet. Left in a vacuum, the web would no doubt have grown from this model into simply a much bigger version of the same thing; simple, special purpose sites dedicated to the dissemination of free information.
But the forces of capitalism blasted a hull breach into this self-contained world, as the business and political establishment leaped onto the internet with self-serving war cries of 'Information Highway' and 'e-commerce.' Venture capitalists, not wanting to miss the boat to the new economy, poured billions of dollars into countless new business models, promising to transform the internet into a worldwide market of buyers and sellers.
Unfortunately, the 'commerce' part of 'e-commerce' didn't take off as fast as the 'e' part. Millions of people were attracted to the churning venue of the web, but the number using it to buy and sell were significantly less than the predictions of the investment community. In a more rational sector of the solar system, those in charge of other people's money might have spent a little less freely until such time that the buying habits of the marketplace caught up with the heady concepts of the new economy, but this didn't happen.
The Cathedral and the Bizarre
What did happen is clear, although I confess that I don't fully understand why it happened. Somehow the venerable, conservative, green eyeshades of the stock market took one look at the World Wide Web and, as a man, lost their minds. Three-hundred and seventy-nine gazillion dollars were funneled into totally unproven business models based on the diaphanous commodity called "eyeballs." With a faith that would have impressed Simon Stylites, fund managers tossed a significant portion of the world's monetary value onto the dot.com crap table in the breathless, get rich confidence of horse track addicts.
It eventually became apparent, in the unignorable manner of poop on the dinner table, that nobody was making any money. The solution appeared to be that more eyeballs were needed and, it was felt, advertising was the answer. Soon enormous amounts of IPO money were diverted away from programming fees, databases, potted palms, fancy chairs and inhouse cappuccino bars, and into advertising channels. This did not go unnoticed by the thousands of enthusiast websites who stepped up to to take some of this freely flowing money and they converted their humble, electronic abodes into commercial, money making websites, financed to a significant degree by IPO funded advertising.
Now, these advertising supported sites accepted a Faustian bargain, in that they too had to compete for eyeballs in order to make the advertisements pay, and thus their basic nature changed from that of an expression of the owner's individuality into that of media animals competing for viewers. They quickly adopted the attention getting and extravagantly expensive techniques of all mass market publications. Websites that had been small, one man, text-oriented enthusiast pages quickly grew into Java-driven, Flash-adorned, payroll burdened businesses, cast in the mold of their patron dot.coms and fueled by recycled IPO money.
This worked acceptably swell. There was lots of IPO-minted advertising money around and a good website could reasonably expect to extract some of it. Part time webmaster's quit their day jobs and donned the robes of entrepreneur. They hired staff and invested heavily in glitzy graphics to attract those magic eyeballs and underwent a facelift and tummy-tuck that changed the nature of the web forever
A Day of Reckoning
One day it all ended. For reasons no clearer to me than why it all was allowed to get so far out of hand in the first place, the financial community suddenly looked up, after four years of manic optimism, and muttered something about profitability. In the blink of a mythical eyeball the pseudoword "dot.com" became a dirty pseudoword and all the money left town. Why this was such a surprise I don't rightly know, but the impact on the web was dramatic.
One minute the web was hurtling along as an irresistible force of world culture, it's breadth and influence already so great that it could be called a success by any reasonable standard. The next minute it was the greatest commercial failure since the Hunt brothers tried to corner the silver market.
The immediate and most obvious effect was to turn a crowd of twenty-something, millionaire geniuses into an equal number of busboys and lawn care specialists. This was not universally considered to be a terrible shame, at least not by those who had sat out the boom watching everyone else get rich. But the trickle down effect on the rest of the web was tragic. Thousands of hard working, creative and brave webmasters who had built up their businesses on the say-so of our illustrious financial masters, were now trying to figure out how to pay the rent.
They looked at their bank balance on one hand and at the quite valuable content of their websites on the other and many of them decided the content was strong enough to sell in its own right. So they asked their readers to pay for it.
This would not have been a bad idea, had it not been that every third webmaster on the planet decided to do the same. Readers were suddenly inundated by websites that wanted money and they pretty much decided they couldn't contribute to all of them - so they decided not to contribute to any of them. It's the old "panhandler on every corner" problem.
And so, we may conclude that unless someone hits upon a reasonable method for micropayments, donation based and pay for content sites will not be viable, at least not in most cases and not in the long run. But something had better work or the web may change in ways you don't like.
The Click of Doom
Now, I'm not a webmaster and so I speak less from experience than from the distant bunker of Terribly Concerned Onlookers. But, in the absurdly remote chance that The Benevolent and Protective Order of Independent Webmasters asks me to speak at their annual convention, with the hopes that I might talk smart about the current crisis, I would say this:
One problem is convincing advertisers not to fall for the all the same mistakes that got us where we are now. For instance, they need to be persuaded against the "tyranny of the click-through" that made perfectly good advertising programs appear to be complete failures because readers chose not to interrupt their browsing to immediately click themselves off to the advertiser's site. The click-through metric was bogus from the beginning - billboard advertisers don't expect motorists to throw their cars into an instant tailspin just because of a catchy billboard in the right-of-way, yet that is the thinking behind nearly all web advertising. Advertising is about share of mind - not physically hijacking the customer.
When I see a car ad in a dead-tree publication I might become quite interested in owning that car, but I'm very unlikely to throw down the magazine and dash down to the dealer to consummate the deal. No car company would consider my failure to do so as a failure of their advertising program. The purpose of the ad was to leave an image of that car in my mind so that when I did decide to buy a car I knew where to look. Aside from impulse purchases, people buy on their own schedule, not at the behest of the advertiser.
This is well known by the marketing profession and an entire science has grown up to analyze the effectiveness of ads based on this branding phenomenon. Otherwise magazines, newspapers, TV and radio advertising simply would not work. I mean, what's the click-through rate on a newspaper ad? But the interactive nature of the web has fooled advertisers into thinking that human shopping psychology takes a hard left turn at the internet. As a result advertisers have come to demand an immediacy of result from web advertisement that they would never expect from conventional media.
But the value of web advertising is, by custom, measured by the willingness of surfers to drop what they're doing and leap into a sales pitch at another site - a behavior that wouldn't be expected from reasonable people in any other media. Yet this unrealistic expectation is the standard basis for declaring that web advertising doesn't work and is one of the root causes of the website revenue crisis. It isn't that web advertising doesn't work, it's measuring its value by click-through that's screwy.
The Winter of Our Dis-Content
Advertisers need to realize that the web is all about content and that effective web advertising, no less than than feature articles, is all about content as well. Ads that might seem to work on broadcast media like radio or television, don't work the same when the viewer commands the navigation tool.
Marketer's make a big mistake about the web audience. They assume that web surfers are viewers and they are not - they are readers. Web sites are read not viewed. Consequently, advertisers tend to consider website content as nothing more than a vehicle to transport the reader to their ad and this is bound to cause a problem. Web ads today are almost always designed to compete with the content, in a constant battle to tear the reader away from the content that he's there for in the first place. Guess who wins.
Advertisers must be educated to work with the content, not against it. If I'm reading an article on comparative CPU architecture, a banner for the latest screen saver is going to fade to invisibility. On the other hand a review of notebook computers would be a great vehicle for laptop carrying cases.
Trade journals have always worked this way. A savvy marketer will plan ahead to make sure his add is prominently displayed in the special issue that closely relates to his product. On the web, this practice is almost non-existent.
Web surfing is not like window shopping at the mall, strolling around looking for a good deal. It's more like a trip to the library. Advertisements are simply other books on the shelf and the reader will check them out using the same criteria as he does for other books. Libraries arrange their stacks according to content for a reason.
Marketers will have to be educated that ads must sell themselves and that it is they who are responsible for the effectiveness of their advertisement. Touting a product alongside content of no particular relevance is bound to fail and blaming the medium for poor results is just silly.
Show Me the Money
To be fair, website operators know all of this and would love nothing more than to sit down with their advertisers and work out an ad program that will benefit everyone. But the immediate problem is that money is so tight that nobody, advertisers nor webmasters, have money to experiment with content based advertising or invest in the long term branding programs that really work.
To compound the problem websites in the year 2003 have an overhead appropriate for 1999 but are surrounded by an advertising environment more like 1995. The public now demands graphics, flash, fresh content, high bandwidth and all the other expensive niceties of professional publications, but the revenue streams are like the old days when web surfers were of the gritty sort that took their internet neat.
The Good News. Such As It Is.
The web offers one of the best vehicles in the world for a seller to get his message in front of the teeming millions. This is a fact that marketers cannot ignore forever. As the science of web advertising finally matures and when the economy finally improves the prospects for web advertising will improve.
In the meantime, websites have to stay solvent, or else your favorite sites may not last for the turnaround. You (Yes, that means you.) will have to help support these sites in some way or another.
A Shameless Plug
Applelinks has always been about quality content and satisfied readers, and we've built one of the longest running and most successful websites on the Mac web. We face the same revenue problems as all the other sites, but we haven't asked for subscriptions or donations and don't plan to start now.
What we have done is open the Think Different Store, a wonderful online buying experience for Apple fans. The TDS is a full service store run by some truly great people (Trust me, if you knew them personally you'd want to be their friends.) who care passionately about the Apple community and are committed to providing you the same satisfaction as a customer that you get as a reader of the Applelinks site.
When you're looking for Macintosh related products click on the Store
button at the top of the Applelinks page. You'll not only find low prices
and great service but you'll automatically support the first class content
that you find at Applelinks and MacOPINION. It's a win-win for everyone.
Copyright 2003, Del Miller. All rights reserved.
Thoughts on the viability of content on the web? Drop me a line here.
Del also writes the "Difference Engine" column at www.macopinion.com
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