Archive for the ‘the square triangle’ Category

The Web Needs a For-Profit Consortium

February 5, 2009

Facebook, Twitter, FriendFeed… they are all going to fail and go away if the Web isn’t made economically sustainable.  Each thinks they can independently find their own path to riches.  It’s highly unlikely that this will happen.  And it’s unlikely your Web startup will make money either.  Why?  Because the underlying Web culture and potential economics models are misaligned.

Yesterday, I proposed creating a for-profit consortium to realign the way the Web works so that

1.      online non-search advertising finally works so that it can generate the wealth needed to sustain Web 2.0

2.      individuals can earn money online expressing their talents and passions

These two things will create numerous gains, including improving the economy, the environment, world understanding, our individual wallets….  I will be outlining the many benefits my last “Part 3” post soon.

I expected at least some positive response to my article yesterday even though it was long (sorry, but the problems are complex…I’ve tried to make the solution as simply expressed as possible).  All I got back was a couple of “What the hell is a for-profit consortium?” pokes.

Okay, that’s fair.  They’re very rare, after all.  Here’s an official definition of Consortium:

A group made up of two or more individuals, companies or governments that work together toward achieving a chosen objective. Each entity within the consortium is only responsible to the group in respect to the obligations that are set out in the consortium’s contract. Therefore, every entity that is under the consortium remains independent in his or her normal business operations and has no say over another member’s operations that are not related to the consortium.

Consortiums are often used within the non-profit sector, specifically with educational institutions. They often pool resources such as libraries and professors and share them among the members of the group. Several groups of North American colleges and universities operate under consortiums.

For-profit consortiums also exist, but they are less prevalent. One of the most famous for-profit consortiums is the airline manufacturer Airbus.

For the purposes that I’ve outlined, our “Square Triangle Consortium” would be made up of existing companies or startups in the tech space, and preferably some input from established media, too.  We would negotiate how much each participant’s relative contribution is worth, create stock and then divide the stock accordingly.

The purpose of the consortium is to turn the economic quagmire of Web 2.0 in a hotbed for economic growth that will explode out to many sectors, benefiting everybody who is dependent on adverting – be is companies with something to sell or media.

Okay, so if you think of Web 2.0 as largely a bunch of different companies floundering around in search of sustainable business models, then what our consortium will do is align all stake holders’ interests – social network users, advertisers, developers, investors, media – so that ultimately each company can do its own thing. 

Our goal is to make technology, advertising, media and entertainment work together again.  The Internet broke a lot of the synergies between these sectors and we must get them back.

Okay, so I know my posts are a lot to absorb.  But I’m right about this.  I hope people will start taking a bit of time to understand what I’m saying and react to it, even if it’s negatively.  I’m sure there are flaws in my plans that I haven’t recognized.  That’s why we need a lot of divergent brains to come together and act for the Web’s common economic good.

There is much at stake here, Folks!  Finding economic success for Web 2.0 is not just about making VCs happy.  It’s about making sure social media survive and grow into Web 3.0 and 4.0 and on and on.

The Square Triangle’s History

February 2, 2009

 

I believe if we look to our past and remember how our modern economy was created in the first place, we can find our way out of the economic disaster.

Most people will point to the industrial revolution as the catalyst that propelled us into our modern economy, and certainly that’s the primary impetus.  But the industrial revolution had been churning away across Europe and the U.S. since the mid-1700s.  After 150 years of slow progression, it was something else that lit the fire that would thrust us forward dramatically.

4-together1That “something” is what I call the Square Triangle.  It was created by the serendipitous combination of four things:  technology, advertising, media and entertainment.

  

print2You can think of the triangle as a technology, in this case, the printing press, connecting 3 points: publishers, readers, and advertisers.  Newspapers existed like this for centuries, each focusing on its own small community. 

 

The change came in the United States when the first national brand, laundry soup, was created in 1906.  Suddenly, brand advertisers across the country wanted to reach ALL potential buyers, including the so-called “illiterate masses.”  So comic strips were born.  This created two more points that squared off the triangle, adding cartoonists (artistic types) and newspaper syndicates (business people).

bloggerComic strips drove eyeballs in mass to newspapers, which drove eyeballs to pictures of national brands, which created demand and the one mass market.  A fury of innovation,  production and consumption followed; the economy exploded in growth and our modern middle class was formed.

Cartoonists were considered heroes.  They became the rock stars of the day and were treated as such.  Newspapers were eager to pay for comics because it meant they could secure more and better ads.  More ads, more products, more jobs, more money to invest, more tax revenue.  Living standards increased substantially for over two decades, until the Great Depression, which I could argue was an inevitable reckoning.  Nobody knew how to handle the increasing complexity of such a huge market.  Sound familiar?  History has repeated itself all these decades later as the one global market has grown beyond the establishment’s capacity to handle it and we’re now having to regroup.

But getting back to the history…

So then it’s the 1940s and WWII is finally over.  People have money and want to celebrate.  At the same time, a new technology has emerged, the television.  From the late 40s on, more entertainment is matched to more advertising and when household television ownership reaches a tipping point, another explosion of growth occurs.

 

tvAgain, the Square Triangle is the model.  Various creatives like actors, writers and directors pool together to collaborate, and business people like lawyers and producers manage it all.  Networks eagerly pay for programming because it, in turn, generates more money from advertisers.  Quality and quantity of shows grow rapidly and great cultural progress is achieved as we learn more about strange places and diverse lifestyles.  The giant leaps in understanding and tolerance from the 1950s to today are happy consequences of the Square Triangle.

Which brings us to the Internet.  Internet connections started hitting the mainstream in 1995, almost 14 full years ago!  So why hasn’t the success of the Square Triangle been repeated?  Because it has never been adopted.  The “Dot com” bubble and crash were mainly about selling retail products online.  Originally, the only online advertising was by electronic versions of newspapers.  So that was the best approximation of the Square Triangle.  Trouble was, they didn’t have an effective entertainment component.  Newspapers relied on the same print comic strips that editors have kept trapped in 1950s sensibilities to this day — most of which didn’t appeal to young Internet audiences.  Plus, the syndicates put the same comics online for free on their own websites, so why go to a newspaper to read them?  Since there wasn’t compelling entertainment to match to the ads and make them effective, advertisers soon lost interest and fled the Internet.  Massive retail sales never materialized.  Dotcom crashed.

internet2From the ashes came blogs and that recreated the triangle.  But the squaring has still never happened.  Why?  Because of Free. 

 

To make the Square Triangle work, publishers need to have confidence that if they purchase entertainment, they can get bigger, more loyal audiences and more and better advertising, and thereby make a lot more money than they’re spending on content.  As the Internet exists today, there is no way to do that.  The vast majority of consumer-generated entertainment isn’t consistent enough in quality to ensure audience loyalty.  And when something worthy does appear, it’s passed around for free. 

It’s not that talent doesn’t exist to make high quality Internet entertainment.  Far from it.  The problem is that the countless talented people out there who could be producing and collaborating don’t have the time and focus to do so on the consistent, ongoing basis that is demanded for the Square Triangle to work.  They must attend to paying jobs in order to make a living.  And because all media are on a downhill slide, it’s increasing likely that those jobs are not “creative” at all, and that their talents – which could be used to make Internet advertising effective and catapult our economy forward just as cartoonists did a century ago – are going to waste.

There’s no Square Triangle to generate high quality, innovative entertainment made specifically for the Internet, except in relatively small pockets like the gaming sector. 

There are movie actors and TV actors, after 14 years, why are there no Internet actors?  There are screen writers and television writers, why are there no cell phone writers?  Why aren’t photographers and cartoonists and illustrators making a living by directly selling their products online – instead of having to give them away for free in the hopes of generating paid work that has all but disappeared offline, too?

If the past 100 years has taught us anything about wealth creation, it’s that audience-building entertainment and demand-building advertising must go hand in hand. 

4-apart2But here we are, with poor melding of sectors and stagnation.  No demand creation, no job creation, no economic and cultural boom.

 

I strongly believe that if we take the Square Triangle – a model that has proven itself for one hundred years to be extremely effective at creating economic and cultural growth –and apply it to the World Wide Web, then global peace and prosperity will make giant strides.