Monday, May 12, 2008

Wisdom of Crowds Reliability

Something that's been bugging me lately is why we distrust the so called Wisdom of Crowds effect. To recap the wisdom of crowds effect (coined by James Surowiecki the author of the book with the same name), is that the crowd in aggregate is smarter than any one individual. He tells anecdotes of guessing the number of jellybeans in a jar and the fact that the average will be closer to the actual number than any one guess. Another example is from the popular game show Who Wants to Be a Millionaire? Ask the audience is the wisdom of the crowd, while Phone a friend (which fails more time than not) is the individual. We can also point to the success of Wikipedia which is self policed. Are people spammers? Not when it takes them a while to build their reputation. eBay members, Amazon members, and other such members value their reputations more than anything. Is it a few bad apples that ruin it for everyone else?
Can the Wikipedia model work for everything?

The self correcting nature of the wiki allows for people to police and to ban certain IPs and usernames. Further, the general consensus of the crowd is to create something that is useful for everyone. It is the few bad apples that do ruin it for all. The spammers, the Nigerian princes, the Viagra hawkers. Will the crowd out the spammers, I think so, comments anyone?

Tuesday, May 6, 2008

Infinite Information - Narrow Minds?

We live in today's age of infinite information. Never before have we had the world at our fingertips. Google provides us with a portal into the World Wide Web. It's truly an amazing time. With all of this information, don't you think that we'd be more open to ideas?

Here's a reverse point of view on things though, that I'd like to throw out and see what you guys think. Do you think that with so much information and so many tools to wade through this information that we are actually providing ourselves with a more narrow mindset? After all, in college, weren't we encouraged to do everything? With our new Internet tools are we limiting ourselves? An example: Let's say that you were interested in news on the Yahoo - Microsoft merger. You input this into your Google Reader and now Google comes up with other news articles that fit the meta data with Yahoo and Microsoft. So other news items that come up deal with Google, Cisco, Oracle, and other such tech companies. Another example: Netflix and Amazon. You like tech books/movies and AMZN/NFLX provides you with these recommendations. Are you missing out on Shakespeare/Art house films that you might never come across because you've weeded them out with your preferences?

We can even look at a tool like Digg where the Digg community determines what is news. This news is then "dugg" to the top. What if this was the way that we determine what is important? (Note: some Europeans already think that American media is like this). So for example, the latest features on the newest iPhone is more important than the latest updates on the war in Iraq. The results of yesterday's Yankee game is more important than ..... To some yes, this is important.

This fragmentation of information is creating imperfect information. Are we missing out on some things? Do we still need portals to ensure that we have a shared experience? That we all know who won the Super Bowl, that we all know who won World War II, that we all know who the 32nd president of the US is.... (which by the way leads to another post about how we don't need to "store" information in our heads anymore).

Yes the long tail is a phenomenon that will not go away and the Internet will magnify this effect. But is the head of the tail dead? Will there truly be no more blockbusters? Ironically, the day the Long Tail was published Pirates of the Caribbean set all types of box office records. Are we living in a world where we all live in our own worlds? Is there value anymore in the front page of the New York Times, when we can all create our own?

Monday, May 5, 2008

Who Wins from the Long Tail?

We've talked a lot about Chris Anderson's concept of the Long Tail and the democratization of content. Journalism, film, music and other such "artistic" endeavors are things that anyone can do. The crowd determines who has "talent" and then rewards them with mainstream publicity. And with mainstream publicity comes the ability to reap riches beyond your imaginable belief.

Fast forward to two years from now when the Long Tail is more prevalent than ever. Box office will remain flat, but less people will go see movies (it'll be $20 a ticket after all). CD sales will go the way of the cassette and iTunes will rule but only at 99 cents a track. Amazon will claim that 75% of their sales come from Long Tail books and blockbusters will gravitate more toward the body of the tail. TV...What's that? Everyone will watch "TV" on their laptops when and where they want.

So who wins? There's a glut of video content coming online with the latest being "GodTube" receiving $30 million. Let's assume that there is an effective monetization strategy whether that is pay per view (like JumpTV), pre roll, plinking, or some other strategy to turn this content into cash. Even then, are we giving up control to the power broker (i.e. Google)? That would be as if everytime TV Guide sent NBC a viewer they would get a cut. Hmmm. Are content owners slowly losing control?

With the long tail of content is there an effective monetization strategy that can allow the niche creator to make a living? We've seen with YouTube's monetization that the BreakALeg.TV received an 80 cent CPM. So who wins? Unfortunately (please don't deindex me, Google), it seems to be the broker which is shaping up to be more and more Google/YouTube.

Friday, May 2, 2008

Can Video Ever be Pay Per Click?

Can video ever be pay per click? Video is a strange beast online. Its not exactly free as YouTube quickly learned after they received their first Limelight bill. Google AdSense works because the cost to deliver these ads to the blogs that host them are so negligible as compared to bandwidth. However, when we begin to talk about video, the economics completely change. Let's take as an example. It costs about 11-12 cents for an episode of Lost. ABC charges their advertiser about 25 cents to sponsor the entire episode (this equates to an astronomically high CPM of $250; although they do get to sponsor the whole 42 minute show). This nets ABC 12-13 cents per show. Guaranteed. At this high cost, ABC HAS to guarantee this revenue. Or do they?

Let's look at some other statistics. The average commission from an affiliate is let's say $10. This takes into account big purchases (laptops and ipods) and small purchases (books, CDs) and everything in between as well as the average split of anywhere from 5% to 10%. For a 42 minute episodic, ONE person out of 80 has to buy something in order to break even. 80*$0.12=$10. Add in some type of pay per click revenue at an average of let's say 50 cents per click (everything from a mortgage to a newsletter sign up) and there's a possibility to even pay for video production.

The economics look promising if the model works. Are people ready to purchase items within video? We don't know. But we do know this. YouTube is making $0 on all of those dog on a skateboard videos that we watch. And with HD coming out, the only one that will be laughing to the bank is Akamai and Limelight.