Stories, moments, people and ideas of interest from within the worlds of innovation and design, spotted and written about by Helen Walters, design writer, editor, and ideas editor at TED. Attitude, errors and opinions obviously all the writer's own.
Ask me anything
May 23, 2012
"The crash will come. And Facebook—that putative transformer of worlds, which is, in reality, only an ad-driven site—will fall with everybody else."
— Much post-Facebook IPO post-rationalization going on. Marketplace’s Heidi Moore pointed out some stark figures: “Facebook’s market value at its highest: $112 bn. Today: $93bn. So Facebook lost $19 billion of value in one trading day.” And media commentator Michael Wolff chimed in with The Facebook Fallacy to pick apart the problems with the business model of the Silicon Valley social media darling.
"65 percent of all revenue generated in the App Store — roughly $2 billion — has come from free games that charge for extra goods."
— Playing At No Cost, Right Into The Hands Of Mobile Customers takes a look at the “freemium” model and includes some interesting stats on who’s doing it well. According to a business director at PopCap, free game Bejeweled Blitz brings in five times more revenue than the $1 version of the game. Serious business.
In The Future Of The Book Is The Stream, Megan Garber outlines about a new initiative from audiobooks.com to sell a monthly subscription service rather than sell books by the title. She writes:
“The service has the potential to reframe book-buying as a transactional thing, making it less about purchasing an object, and more about purchasing an experience.”
It’s an interesting proposition, and if taken to its logical conclusion, as Garber tracks here, could potentially revolutionize the book-selling business. But one thing she doesn’t get into: what this means for the content providers themselves. What does a monthly subscription service mean for the authors and writers trying to make a living through their craft? If we move to a world where we no longer pay for things because we actually want to read/watch/hear them and more because we have the ability to read/watch/hear them, what does this mean for the content that will become available to us?
In a world of shared value and collaborative consumption, it’s likely that our attitudes towards “owning” books will evolve rapidly. Yet while I now read digital books almost exclusively, there’s still something to be said for having permanent access to those digital files, lost if a subscription lapses. And, while the shift that subscription brings to content ownership might encourage people to read more widely and freely, I also wonder about the other implications on our resulting relationships with that content. Interesting to ponder.
"One of the things that attracted me in the first place about Amazon is that I could easily describe how we were going to make money, to anybody. We are going to sell books. People will send us money, and we will put it in the bank. And then we will ship them a book. And we will do that a lot…"
"The founders have already shown their brilliance by extracting half a billion dollars from an unprofitable start-up with an unproven business model. That’s not funny."
—
Lots of comment on Groupon and its ebullient young founder, Andrew Mason, as the company gears up for its IPO. Groupon is at a Loss to Justify Itself, by the FT’s John Gapper, takes a sober look at the firm, and his conclusion isn’t particularly heartwarming. “Something smells bad,” he writes. No accusations of outright fraud, but some thoughtful concern at the 2.5 year old company, whose filing
is filled with unsettling details about its business model, how much money it is spending to sustain its explosive growth and its accounting methods. Its early investors are seeking another infusion of cash, having allocated most of an earlier $1.1bn in fundraising to themselves.
Then Gapper points out the real problem with Groupon. Its marketing innovations, its commitment to the power of copywriting, even its smart extension of its own service are somewhat beside the point. As he writes, the company’s real Achilles heel is rather more fundamental:
it lacks unique technology and its sales force of 3,500 could be matched by others such as LivingSocial or FourSquare.
It’s a timely and useful reminder that true innovation and lasting value and growth involves tedious matters of figuring out a sustainable business model as well as whipping up a frenzy of attention.
"Business-model innovation is a hot topic. As the field has matured beyond a focus on new products and ideas, there is an increasing emphasis on identifying new ways for businesses to earn money. The challenge is that business-model innovation is far from straightforward. It is not a matter of simply changing how you get paid. It more often requires a fundamental redesign of how you create and deliver value, involving all aspects of the business — and, importantly, the jobs people do."
— Doblin’s own Erik Kiaer writes a nice piece for Fast Company, An iPad App That Helps You Overhaul Your Business Model. It’s a review of the iPad version of Business Model Generation, the book by Alexander Osterwalder and Yves Pigneur that was first published some years ago. In general, Erik gives the app two thumbs up, though he choked a little at its hefty price ($29.99.) It’s clear that publishers haven’t figured out the economics of new media publishing yet: converting print to digital (especially in a way that uses the medium appropriately) is by no means cheap. And yet in the main, publishers have carefully taught consumers to expect digital things for free, or for very little money. No one has figured this out yet; expect to continue to see prices all over the map.
"As communicators we [designers] are poorly communicating our own value and if it continues, we will continue to be undervalued, underpaid and subjected to pitch work and crowdsourcing."
—
In Crowdsourcing: Sabotaging our value, Thomas Wilder lays out the designer’s take on crowdsourcing. Understandably, he’s miffed at companies such as 99designs, DesignCrowd and Crowdspring coming along and taking the bread from professionals’ mouths. He lays out a pretty good argument that, thankfully, is not just a wringing of hands and shaking of fist at sky. Wilder acknowledges that designers have a responsibility to better educate clients in why they should pay for professional service. This, to me, seems like the crux of the matter. Until clients truly understand the value of good design, they’ll be seduced by the promise of cheap logo goodness. You can’t blame them for this. You can educate them.
But then Wilder falls back into the safe, aggrieved world of ‘should’. Banks and law firms are prepared to pay good money for professionals, he writes. “This model should also apply to the design industry.” Sure it should. But as Jeff Jarvis and others have repeatedly pointed out, there’s no business model in “should”. And that means designers have to stop whining, take off their gloves, step up and start educating. Else they’ll complain their way right into obscurity. (Story via Jason Santamaria.)
Lots of thoughts, always, about the future of the business of news. Commentator (and former journalist) Jeff Jarvis is a pretty fervent proponent of the new opportunities afforded by our digital reality, as well as a vehement critic of some of the decisions made by the current ruling elite in charge of fashioning the future of the media. In this post on BuzzMachine, he describes his astonishment at the “economic naiveté I hear in discussions of the business of news” and outlines the basis of a new talk and a lesson for his journalism classes. It’s a work in progress, but some of his rules for business models are insightful, and below. They’re well worth taking the time to consider deeply—and notably apply more broadly than to the newspaper industry alone:
* Should is not a business model. You can say that people “should” pay for your product but they will only if they find value in it.
* Business models are not made of entitlements and emotions. They are made of hard economics. Money has no heart.
* Begging is not a business model. It’s lazy to think that foundations and contributions can solve news’ problems. There isn’t enough money there. (Foundation friend to provide figures here.)
* No one cares what you spent. Arguing that news costs a lot is irrelevant to the market.
* Disruption is the law of the jungle and the internet. If someone can do what you do cheaper, better, faster, they will.
* The bottom line matters more than the top line. Plan for profitability over revenue, sustainability over size.
"Nobody was going to take them up on their offer to contribute to the “non-paid blogger system.” We were rather insulted, actually, at least to the extent that it is possible to insult someone whose job requires him to write about Shia LaBeouf."
— Eric D Snider writes a hilarious, bittersweet post about the goings on at movie blog, Cinematical, which recently became a part of the Arianna Huffington/AOL empire, and whose longtime freelancers were invited to start writing and contributing for free. The topic of how to make the media industry a going concern once more is by no means played out, and there are surely no easy solutions. Nonetheless, it’s startling to see what a poor job companies are doing at managing these moments. Or, as Snider puts it, “AOL lived up to its reputation within the communications field by doing a terrific job of making it seem like they were communicating with us without actually conveying any information.” Snap.
![In The Future Of The Book Is The Stream, Megan Garber outlines about a new initiative from audiobooks.com to sell a monthly subscription service rather than sell books by the title. She writes:
“The service has the potential to reframe book-buying as a transactional thing, making it less about purchasing an object, and more about purchasing an experience.”
It’s an interesting proposition, and if taken to its logical conclusion, as Garber tracks here, could potentially revolutionize the book-selling business. But one thing she doesn’t get into: what this means for the content providers themselves. What does a monthly subscription service mean for the authors and writers trying to make a living through their craft? If we move to a world where we no longer pay for things because we actually want to read/watch/hear them and more because we have the ability to read/watch/hear them, what does this mean for the content that will become available to us?
In a world of shared value and collaborative consumption, it’s likely that our attitudes towards “owning” books will evolve rapidly. Yet while I now read digital books almost exclusively, there’s still something to be said for having permanent access to those digital files, lost if a subscription lapses. And, while the shift that subscription brings to content ownership might encourage people to read more widely and freely, I also wonder about the other implications on our resulting relationships with that content. Interesting to ponder.
[“Books About Books” image by jm3 on Flickr.]](http://25.media.tumblr.com/tumblr_lzym8a4FsA1qikpxao1_1280.jpg)
