The Tend to Zero Risk

One of the reasons so many media companies are in trouble is the simultaneous crisis in all revenue streams.  It seems to many, that whatever strategy is deployed, the size of the potential revenue pot keeps falling. 

Back in the sixities, almost all business to business titles were paid for.  News about your industry was valuable and that value could be measured with money.  Today nobody charges for news.  In print, yields have been under pressure for some years.  Online display advertising with it’s transparent measurability has given advertisers a legitimate stick with which to beat media owners.   Where there has been success in selling online display the achieved CPM has been falling.  Too much traffic, too little of it useful or enaged, consequent poor click through rates mean that much inventory remains unsold – a growing proportion for many – and what does get sold is at rates that are falling.  Where once the choice advertisers had was limited by the number of titles in a market, today they are confused by so much choice.

We lost our way with recruitment.  Where we used to charge thousands of pounds for a page of advertising, the job board model now offers an ad £100.  In the recession prices here too are falling.

However we solve the current strategic conundrum, it seems pretty clear that unless we can push back the tide of prices tending to zero we don’t have a business.    The truth is, whilst there are things we can do to make a difference the price of a transaction in the new world is unlikely to reach the heady heights of the old world.  There are  four steps that all media companies must take:

1) Set the fixed cost base at a  level which is supportable by the new model.  This means attacking some sacred cows and stripping away layers of management costs.

2) Improve the value of your advertising proposition.  Seth Godin says,

“As long as your site is about something else and the ads are a distraction, you’ll see CPM rates drop. As soon as you (or the advertisers) figure out that creating online communities aligned with the advertising, where attendance is a choice by the consumer, then you’re creating genuine value.” 

In B2B that means making ads relevant and targeted.  Don’t give up on vertical search solutions.  Keep experimenting – there are riches ahead for the media company that gets it right.

3) Audit every activity that leaves the building and assess it for value.  Use that value audit to establish the prices that could be achieved.

4) Give up on the idea that you are going to survive by doing the stuff you used to do.  News products supported by advertising are going to be very small businesses.  Plan and implement a series of new product developments that will help you scale your business.  Buy some expertise to help you do it.

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Strategy Destroys Value

In another ineresting talk at the Acitivate 09 Summit, Umair Haque of the Havas Medai Lab points out that we are now all hyper connected.  This hyper connectivity is driving a new kind of networked economics.  This network effect can be seen all around us.  Look at how Obama used the network to raise funds; look at the velocity of growth of Twitter as it leveraged viral networks.  But there are unintended consequences too.  There are viral diseconomies that can lead to panic effects.  Look at how the passing of toxic assets between banks spread rapid panic and led to an implosion of the financial markets.  

These negative viral effects are what Haque calls, “the zombie economy”.  An economy which is stuck and unable to innovate its way out of diffiiculty.  When there are negative viral effects value is destoyed and strategy ceases to create value.  He concludes thet, “Twentieth Century capitalism is not fit for twenty first Centry purpose.  We need a new constructive capitalism.”  This must be based on renewal, democracy, peace and equity rather than exploitation, tyranny, war and domination.

How very Guardian!

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Your Computer Is Killing the Planet

Gavin Starks, the CEO of Amee, shocks us all in a presentation at Activate 09 by claiming that a 2.5kg laptop computer produces 460kg of CO2.  The average annual emmission of C)2 for a human being is 2 tonnes.  So people like us are generating a quarter of that just by using a computer.

Amee is abusiness that aims to produce a carbon footprint of everything on earth, to build what they call environmental intelligence into evrything.  The scary prediction is that we are heading towards “peak consumption” on all our ebergy resources.  MIT has noted that surface warming is accelerating to a level which makes mass extinction a real possibility.  The warming willeventually blow the atmosphere away and Earth will turn into a planet like Venus.

On the basis of the old adage that if you can’t measure it you can’t manage it, Amee aims to make carbon data transparent.  Their metering tools will helps government and business to measure their energy identity.  The energy identity of an individual or a business or a nation is more important than digital identity.

In the UK an average person produces 10 tonnes of CO2.  In the US it’s 20 tonnes.  For the planet to survive the sustainable level is 2 tonnes.

 

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From The GUARDIAN Activate Summit

Activate summit

 

A panel on Society Humanity Technology and the web.  The panel includes the CTO of Amazon, Werner Vogels,  who speaks first.  Your worst nightmare is that you throw a party and no one comes. On the web you throw a party and everyone comes.  How do you prepare for this uncertainty.  He mentions a web site called playfish which built 8m users for a new game in four weeks.  Also mentions the web coverage of the indie 500 series.  3-4 m users show up but only for three or four days a year.

There is a growing abundance of products

Intensifying competition

Growing power of customers

Reduced pricing of products

Limited acces to capital

 

How can you manage all this uncertainty and risk. There are four principles to look at. 

Acquire resources on demand.

Release resources when no longer neeeded

Pay for what you use (change fixed costs to variable)

These infrastructure services as he calls them are becoming more like utilities and we should think of them as such.  This is about focussing on the core competencies of the organisation where value can be added.  I t means you can move from a a capital cost model to a variable cost model.

Cloud computing is one of the keys to deploying this approach where you only pay for what you use.  If possible operate without any infrastructure of your own at all by using cloud computing services.  If a web service becomes rapidly popular either you have to buy many s3ervers (capital) or use cloud services and pay for what you need if and when you need it.

http:Aws.amazon.com is the site where amazon will give you access to these infrastructure services.  Anyone can do it he says.

The second speaker is Clare Lockhart, the CEO of the Institute for State Effectiveness.  Their role was to help set up state goverenace in Afghanistan.  A fascinating insigth in to how infrastructure was built in Afghanisatnan using local networks and heirarchies to create a a single common currency, telecoms etc.

Is this a metaphor for the Internet?  Mmm.

If the citizen is at the centre of state design, then the user is the centre of tech design she argues.  In time distance learning, tele medecine, and market pricing will be vital Internet applications as the emerging nations become ICT enabled.  These nations have no back story on using tech so how can we make sure that we learn from our mistakes in building these plans.

Now comes Arianna Huffington.  No introduction needed. The past is well organised to block reforms.  The future is much less well organsied.  Look at how Obama is struggling to get his agenda moving in health. Wall street etc.  Change is often slowed by lobbying even though it may not be in the interests of those lobbying.  Look at the money spent by the banks to lobby governments. It was successful  from the banks point of view in limiting regulation, except that all the banks went bust.  Sometimes change is blocked even when it is in the best interest s of those who commit themselves to blocking the change.

Huffington is evangelical  about the damage lobbyists do and using the viral nature of the net to spread news about the money made and the damage done by lobbyists.  The drip drip nature of the Internet is often more effective in making a story impactful than a big splash in a newspaper which then rarely gets followed up.

Of course the Net can produce errors and untruths but it is remarkably effective at self correcction. Look at how the nonesense about Obama being part of a muslim/black conspiracy was dissembled.

“you consume old media sitting on your couch.  You consume new media galloping your horse”  Users want to get involved (look at Iran)

In business, the next big thing is going to be about helping people to connnect and how to disconnect and reconnect again.

She worries that papers are believing again that content can protected behind walled gardens again.  This won’t work.

 

Now we move on to philosphy from Nick Bostrum from the Future of Humanity Institute.  In our ancient past there is no record that leaders expected anything to change save for who was in control and had power. It is only in the last 200 years since the enllightment that we have begun to coonsideer a=how change might affect the masses not just who rules them.

He shows a table of daetahs from causes such as the plague and HIV and WW2 and argues that they are all pretty small in the grand chem of things> A  four by four matrix with at the top right some event that ends human extinction is shown.  An existential catastrophe.  He jokes therehas never been one, but 99.9% of all species that ever lived here are extinct.  The Toba eruption killed all but 500 females it is thought.  Some human like species are extinct (neat=nderthal man) so the possibility of future extinction exists.  Two kinds of existnetial risk are the natural and the anthropogenic.  The second of these is the most dangerous.  We have survived many natural risks over thelast two hundred thousand years but the man made ones are new and therfore more dangerous. In the posdt human world tech development stops.  He shows a graph of world product as a proxy for this which shows that over 200000 years the growth in product is a very recent and extreme spike.  But looked at over 100 years it deosn’t look as though we are close to the end yet.  It is possible that tech oinnovation wont collapse but could go through cycles of osciallationas within boundaries of magnitude that don’t reach the point of human extinction.

 

f earth had formed one year ago, homo sapiens would be 12 minutes old.  Computers just 4/10ths of  second ago, the Interent just 1/10^th of a second ago – so this is all very recent.

 

Cresation o f an untraintelligent machine would end human invention as an ultra intelligent machine could design ever better machines, so an ultra intyelligent machine is the last machine man would ever make.

What would be possible in a post human world a world where everything is very different, perhaps the popualtion would live for 500 years, be not confined to a particluar space. There may be many kinds of being.  He concludes that this summit might not be very important in the scheme of things.  In addtion to being very small in the schem of things we are also in our human devlopment very young.

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