Many a mogul has marveled at the wonder of the open-source economy. The story is often told: Distributed armies of programmers created the most important software underlying the internet, from the Linux operating system that powers most internet servers to the free Apache web server software that delivers most web pages to the 500 million open-source Firefox browsers that show those pages. Why do these programmers do this work for free? Because they’re generous. They want to be part of something. They care. They may want to stick it to the man (namely, Mr. Gates). And they know that banding
60
together in an open network lets them create a better product than they could if they were to work inside most corporations. How is open-source not chaos? New York University journalism professor Jay Rosen studied the Firefox project when he wanted to bring similar collaboration to journalism at his NewAt project. He learned that contrary to common misperception, open-source projects are not anarchies. They have leadership and structure. They have people to wrangle the people who want to help. It is elegant organization at work. Open-source Wikipedia is an incredible resource, a collection of human knowledge vaster and more responsive to change than any encyclopedia. No one who creates it is paid. They contribute out of generosity and ego and because they believe they own it. Note that to make the gift economy work, a project doesn’t need its entire community to contribute. Only about 1 percent of those who use Wikipedia create Wikipedia—that is Wikipedia’s 1 percent rule. Indeed, if that were doubled, it probably would create chaos. In Here Comes Everybody, NYU professor Clay Shirky, who studies social software, calculated the output of the authors of one article: “[O]f the 129 contributors on the subject of asphalt, a hundred of them contributed only one edit each, while the half-dozen most active editors contributed nearly ?fty edits among them, almost a quarter of the total.” The most active contributor was 10 times more active than the least active. Wikipedia is not-for-pro?t. It has spawned a for-pro?t search service called Wikia, where users are creating even the algorithms that power it. It has commercial competitors, such as Mahalo, a human-powered search and guide created by serial entrepreneur Jason Calacanis, who pays his writers. At the 2008 Burda DLD conference in Munich, Calacanis tweaked Jimmy Wales, founder of Wikipedia and Wikia, for not paying for content. Wales responded that nobody works for free. “What people do for free is have fun. . . . We don’t look at basketball games and people playing on the weekends and say these people are really suckers doing this for free.” People will contribute their intelligence and time if they know they can build something, have in?uence, gain control, help a fellow customer (more than a company), and claim ownership. Customers are also generous with ideas. In 2008 Starbucks launched MyStarbucksIm, where its customers were invited to tell the company what to do (following Dell’s lead with IdeaStorm; both use Salesforce
Jeff Jarvis
61
.com’s Ideas platform). The response from customers was immediate and impressive: thousands of ideas, votes, and comments. One customer wanted Starbucks to make ice cubes out of coffee so, when they melt, they would not dilute cold drinks; 7,600 fellow customers immediately agreed. Another customer proposed putting a shelf in bathrooms—for where else can you put your drink when you’ve drunk too much? A few customers found the thought somehow distasteful, but Starbucks called the suggestion a “sleeper idea” that deserved attention. Some threads emerged from the suggestions and discussion. Many customers wanted express lines for brewed-coffee orders so they could avoid waiting behind alleged coffee a?cionados with their half-this, half-that, skinny, three-pump, no-foam, Frappuwhatevers. Some customers asked to be allowed to send in their orders via iPhone. And some customers suggested—and thousands more agreed—that the chain should enable them to program their regular order into their Starbucks card so they could swipe it as they enter, placing the order and paying for it at the same time, letting them skip the cash-register line. One more proposed a pour-it-yourself corner and another asked for a delivery service. The theme—that is, the problem for Starbucks—was clear: long, slow, inefficient, irritating lines. But not one of these customers started with that complaint. Instead, they offered solutions to ?x the problem. All Starbucks had to do was ask. Chris Bruzzo, the Starbucks chief information officer (and a former Amazon executive who learned much about new ways to relate to customers there), built MyStarbucksIdea. The forum was an extension of what Starbucks employees had experienced for years: When they say where they work, “people open up this to-do list in their heads. They have very speci?c, detailed ideas,” Bruzzo told me. Now Starbucks has given them a public platform to share ideas. Because it is open and customers can react to all suggestions, some ideas gain traction and some die on the vine. Customers help the company by eliminating many of the turkeys (such as offering diet powder in drinks or mixing in whole cookies or renaming the accursed Starbucks sizes in honor of the Olympics, from venti to gold). Other ideas take off (such as giving free birthday brews, which Starbucks then considered). Bruzzo said it is vital for the company to “close that loop in an authentic way and show the commitment on the part of Starbucks to respond to what we’ve heard, which is about putting those ideas in action or building
62
those ideas together with customers.” In short: “We’re truly going to adopt it into our business process, into product development, experience development, and store design.” To do that, he assigned 48 “idea partners” from all over the company to enter the discussion with customers, using the forum as a laboratory. They were to become champions for ideas back in their departments “so that literally customers would have a seat at the table when product decisions are made.” Starbucks, like Dell, has a parallel version of the platform running behind its wall for employees to share and discuss their own suggestions. Marc Benioff, the outspoken CEO of Sm, used the Ideas platform ?rst for his own customers and employees and then opened it up to other companies. “It’s like a live focus group that never closes,” he said in an email. “I believe that these days, the rapid communication that is enabled by wikis, blogs, Twitter, YouTube, and you name it ensures that no matter what kind of company you are, your customers are having a conversation about your products and practices. The question that every company has to ask is, ‘Do I want to be part of this conversation? Do I want to learn from it? Am I willing to innovate on the basis of it?’ If you harness the power of this community, you will bene?t. If you turn your back on it, you get farther and farther out of touch while competitors ?ourish. The dead-end suggestion box and auto reply are symbols of corporate indifference and are no longer tolerated.” (If Benioff sounds like Michael Dell on the topic, there’s a reason: He was the one who suggested that Dell needed IdeaStorm.) Any company or institution could use a platform like this. Governments should use it to gather citizens’ suggestions. Editors should use it to solicit and discuss story ideas from readers. Retailers should use it to help decide what goes on shelves. The question is how much companies and institutions are willing to open up to the gift economy and let their constituents take part in their decisions. The gift economy is about more than just listening to customers out of courtesy or respect (now that companies can no longer get away with hiding phone numbers and email addresses and sentencing customers to phone-mail jail). It is about understanding that customers and constituents want to have a voice and gain control. It is a better way to do business. Can customers help design products? Can citizens help write legislation? Can they assign journalists? We will ask those questions in the next section of the book.
Jeff Jarvis
63
Are you willing to have your customers sit at the next desk to work with you? They’re willing. Try them.
The mass market is dead—long live the mass of niches
“Masses are other people,” sociologist Raymond Williams said in his 1938 book Culture and Society. “There are in fact no masses; there are only ways of seeing people as masses.” Advertisers, manufacturers, retailers, media companies, and politicians ?nd it convenient to see us as masses. It’s the essence of their business, their efficiency, their reach, their economy of scale. We are their critical mass. So for them, our newfound power to stand out and act as individuals, to coalesce into networks of our own, and to rise above them in Google searches—whether we are competing with them or complaining about them—is a supreme irritant, even a threat. Mass-based industries and institutions worry now about “fragmentation”—a term used by those who control the mass market. But out here in the market, we call it “choice.” Give us more choice and we’ll take it. We’ll gravitate to our own interests, tastes, and communities. The natural state of life, commerce, and media is choice. The impending shift away from the mass-market economy was chronicled famously in Chris Anderson’s era-de?ning 2006 book, The Long Tail. Anderson said that as the internet creates the means to make, ?nd, and pay attention to an unlimited variety of content about anything, culture and commerce will be less dependent on mass hits. Very few people might watch a single video about how to catch butter?ies, but when we can create and watch an unlimited supply of such highly targeted content, the total audience for all these niches together will accumulate to take a sizable share of the audience’s attention. In 2008, Anita Elberse challenged Anderson in the Harvard Business Review, arguing that his theory wasn’t proving out in practice because a small number of titles still capture a large share of attention and sales. Anderson handily and graciously dealt with her objections on his blog, LongTm, reinterpreting some of Elberse’s data and de?nitions to show that the tail, as he measures it, is indeed a factor: Though consumers still buy many copies of a limited
64
number of hit CDs from Wal-Mart, their attention devoted to music not sold in Wal-Mart is substantial and growing. A seminal work in this debate is, believe it or not, a PowerPoint presentation: Umair Haque’s New Economics of Media (search Google for “Haque new economics of media” to ?nd it; I also suggest you browse his blog, Bm, which has in?uenced Anderson and me). Don’t be deterred by his 107 slides and their dizzying economics charts. Haque’s lesson is clear: The age of the blockbuster is past. Making money through controlling production, distribution, and marketing is a diminishing game. Haque says media 2.0’s three sources of value creation are revelation (?nding the good stuff ), aggregation (distribution 2.0), and plasticity (enabling content to be extended through, for example, mashups). Th is economy, he says, requires openness, decentralization, and connectedness through niches—not blockbusters. The new opportunities lie in the long tail. I know the arguments to the contrary: the Oscars, the Olympics, Harry Potter, The DaVinci Code, American Idol, Wal-Mart. Yes, stipulated, there will still be blockbusters. But let’s also agree to these factors: The tools that enable anyone to create and distribute goods and media will yield almost unlimited choice. The public will increasingly seize upon that choice. The attention given to and thus the value of this new wave of choice will grow. There are new opportunities in enabling, organizing, and monetizing this abundance. The blockbuster strategy always was a gamble; as it continues, it is a bigger gamble than ever. The mass market’s hold over the economy diminishes. The mass market was a short-lived phenomenon. It began with the large-scale adoption of television in the mid-1950s—and the consequent death of second and third newspapers in most American cities, yielding one-size-?ts-all mass products in both broadcast and print. It was in the mid-1980s, in the age of the remote control, that I became the TV critic at People magazine, the last great mass magazine launched in America. In its ?rst decade, the magazine was pretty much a piece of cake to run: Put a star in a big show on the cover and watch it sell. But I remember the day that ended, when my editor and mentor at People, Pat Ryan, yelled at me from the other end of the hall: “TV’s dead, Jarvis! It’s dead!” She had just received the latest in a string of bad sales reports on covers featuring stars in top shows. They didn’t produce guaranteed hits anymore because Americans were not all watching the same shows. No longer did we
Jeff Jarvis
65
wake up as one nation asking, “Who shot J.R.?” Instead, while I was watching MTV, you were watching the History Channel, she was watching the Golf Channel, and the kids were using that new-fangled VCR with its ?ashing “12:00” or playing video games (never mind that the internet and the iPod had yet to come). Some lament the death of the allegedly grand shared experience of mass media, portraying it as the electronic ?reside around which we sat in a common cultural encounter. I don’t. I value choice. The fragmentation of media threw business strategies into a dither. Advertisers still wanted to buy us en masse, so media had to work harder to ?nd a mass to satisfy them. It was then that People shifted from covering the event in the star’s career to the event in the star’s life, and other publications followed the lead. Bodily ?uids journalism, I called it: stories about celebs’ deaths, diseases, affairs, scandals, weddings, babies, divorces. The balance of power at mainstream publications—at least on their covers—shifted from news to celebrity, journalism to gossip, editor to PR person, hack to ?ack. Stars realized the dollar value that their names and faces brought to magazines, and that’s when their publicity people took over. Editors used to act as gatekeepers to the most valuable commodity—the audience. But then PR people became gatekeepers to a more valuable asset—celebrity. They would negotiate access, guarantees of covers, photo approval, selection of reporters, and even the ability to pick and change their quotes. PR people held such power because they now held the key to magazines’ ability to attract large audiences. Magazines all wrote about the same celebrities and scandals—they went more mass—but that was because there were fewer topics that would attract lots of buyers. Too many of us were busy watching Discovery instead of Dynasty. And that, in turn, changed the economics of TV content. Networks seeing their shrinking masses could less afford to gamble on expensive dramatic shows, let alone miniseries (remember them?). They were replaced by so-called reality TV, which was not only cheaper but also more sensational. What replaces the mass? The aggregation of the long tail—the mass of niches—does. We each gravitate to our own interests and, thanks to the new and inexpensive tools of content creation online, there’s sure to be something for everyone—and if there isn’t, we can make it ourselves. The 500-channel world never materialized. Instead, the billion-choice universe emerged. Internet tracking service comScore said in 2008 that we watched
66
10 billion videos a month online. Of course, none of them individually had the ratings of the Super Bowl. But together, those 10 billion videos captured a huge amount of our attention. eMarketer says 94 million Americans read 22.6 million blogs in 2007—more than there are newspapers and magazines: blogs about knitting, blogs about heart disease, niche blogs about writing niche blogs. As I write this book, Wikipedia has 2.3 million articles and even it has new competitors, including the Star Wars version, Wookiepedia. Everyone, and every interest, has a place online. Advertisers, addicted to one-stop shopping, still spend huge budgets on TV that are way out of proportion to the time the audience spends there versus the time we now spend on the internet. That can’t last forever. Soon, agencies will have to work for a living. Instead of re?exively buying slots on primetime TV, they will need to put together networks of smaller media with smaller audiences that add up to a critical mass. This approach is harder but more targeted and more efficient. Why advertise diapers on a show I watch—next to my teenage kids—when instead Pampers can now advertise on mommy blogs? As advertisers and agencies catch up with the death of the mass market, money will ?ow online that will, in turn, support the creation of new content, which will draw a greater audience, which will earn more money. On and on this virtuous circle will go until broadcast TV is a shell of its former self. There will still be hit shows—the Deal or No Deals that pass for our grand shared experience today—but there will be fewer of them. Google ?gured out how to navigate the universe of niches and pro?t from it. It created a new way for advertisers to reach highly targeted audiences just as they search for and read relevant content. Even more disrupting to old media ways, Google didn’t charge for eyeballs—that is, the size of the audience—but for clicks—that is, action. Advertisers could measure the return on their investment instead of talking to faceless masses that may or may not have been listening. More disruption: Google didn’t set ad rates as old media did; it let the marketplace set the price of keywords in auctions. Because Google bene?ts as more ads are clicked on, it is in Google’s interest to continue to improve its targeting and effectiveness. That improves both advertisers’ efficiency and Google’s bottom line. This virtuous circle of virtuous circles is how Google built its empire around the fall of the mass and the rise of the niche. You, too, must learn how to make the transition from mass to niche
Jeff Jarvis
67
and how to exploit it. If you’re still selling products to the masses, you’re going to ?nd it harder. If you’re making one-size-?ts-all products, realize they don’t ?t everyone. Customers will tell you what they want instead. In the next section of the book, we will examine scenarios for adapting and capitalizing on the move from mass: how automakers should let us help them make cars, how retailers can help us ?nd unique goods, how universities should help us craft our educations. The shift from mass is really a shift of power from top to bottom, center to edge, them to us. The mass market is dead. It committed suicide. Google just handed it the gun.
Google commodi?es everything
In the earliest days of the web, I watched focus groups where users thought there was this amazing new company that had acquired all the content you could imagine about every subject possible, as if from the merger of a library, a newspaper, a magazine, and a weather service. That company was Netscape. It merely made the ?rst commercial browser that took readers to those other companies’ sites. But Netscape got the credit. Today, that amazing brand is Google. People go online looking for something, ?nd the answer, and often don’t know where they found it. Google found it. They’re savvier today and know that Google doesn’t own all the content it links to. But that doesn’t matter, so long as they ?nd what they want—and Google is damned good at that. That’s great for users but bad for brands. Here you work your buns off creating a brand online; you build technology and staff to maintain your site; you spend a fortune on marketing and search-engine optimization to get people to ?nd it; you tell advertisers how many users come to your page and like your brand. But in the end, huge numbers of users don’t recall coming to your site and don’t credit your brand. When I worked on newspaper sites, we knew we had more users than the research said. The problem was, when users were asked where they had seen a piece of information that could have come only from us, they often couldn’t remember. Google found it for them. Google diluted our brands. Google has turned commodi?cation into a business strategy. Content is commodi?ed: Google makes it just about as easy for you to ?nd what I’ve written on a topic as what Newsweek has written. Once was, brands
68
organized information but now Google does. Media are commodi?ed: Google places marketers’ ads on sites without telling them where the ads will appear. It places those ads not as an ad agency would—on the basis of the audience size, demographics, trust, or value of a media brand—but on the coincidence of words on a page. The value of the ad depends only on how many people click on it. Thus the media brand behind the content where the ad appears becomes less critical and less valuable. Even the audience is commodi?ed: There’s little that distinguishes one of us from another—not age, income, gender, education, interest, all the things advertisers historically paid for. Everybody’s like everybody else. We’re just users. We might as well be pork bellies. And advertisers are commodi?ed: Their text ads look alike, without their expensive logos and brand messages. You’d think they’d object, but they don’t mind because they pay only for clicks. Google has cleverly reduced the risk in advertising, so advertisers let Google drive. It isn’t all bad. The leveling of the playing ?eld the internet and Google engineered also made it possible for a tiny store selling a niche product to ?nd its ideal customer or for a mere blogger to swim alongside big, old media. But in that process, it’s ironic that our unique identities, personalities, brands, quali?cations, interests, relationships, and reputations as publishers—the values the internet enables—can be lost even as we can be found via Google. What do we do about the threat of commodi?cation? One smart response is to play by Google’s rules and take Google’s money as Am has done. Or you can join networks with other specialized niches to reach critical mass, as Gm has done. Or get people to link to you and talk about you because you’re just so damned good, as Apple does. Or place your ads on highly targeted sites where you know your customers are, sponsoring that mommy blog with free baby food for loyal readers. Develop a deep relationship with your constituents so they come back to you directly, not just through Google search but by using social services such as Facebook. Serve the niche well rather than the mass badly.
Welcome to the Google economy
In April 2008, just as America was diving into recession, Google announced another amazing and pro?table quarter. The New York Times
Jeff Jarvis
69
story was headlined, “Google de?es economy.” It should have read, “Google de?nes economy.” Old de?nitions of our economy measured the performance of big companies and their impact on each other (see: the Dow Jones Industrial Average). Media and advertising served only large companies because only they could afford to advertise in large outlets. Manufacturers could get retail space only if they operated under the economies of scale. That was the mass economy. Then Google’s marketplace for advertisers of all sizes introduced the small-is-the-new-big ecosystem, the mass-of-niches economy. That Google’s advertising is run in an auction marketplace means that its economy is more ?uid; it ?lls in voids. When an economic downturn affects, say, travel, a magazine such as Condé Nast Traveler will suffer— airlines and resorts will advertise less and there aren’t more big advertisers to ?ll the gap at Traveler’s price. But on Google, if American Airlines and the Ritz aren’t buying the keyword “Paris” this month, other advertisers may buy it. The price of that keyword may decline with demand, but in Google’s very broad economy, the prices of other keywords (e.g., “foreclosure” and “credit”) may rise. This practically unlimited supply of advertisers in a ?uid marketplace appears to be a new economic model that may insulate Google from some of the dynamics of an economy built on mass and scarcity. Google has its own economy. Google also re?ects our new and emerging economic reality. In the ?nancial meltdown that reached full ?ame in the fall of 2008, we saw not just the failure of mortgages, derivatives, banks, and regulation. We saw the dawn of a new economy that could best be viewed and understood through the lens of Google, the one company that—by design or by luck—was built for the emerging world order. As banks, companies, and even nations faltered, Google still announced pro?ts rising 26 percent. In Google’s economy, companies will no longer grow to critical mass by borrowing massive capital to make massive acquisitions—at least not for the foreseeable future. Instead, they need to learn from Google and grow by building platforms to help others prosper. Indeed, growth will come less from owning assets inside one company and amassing risk there than from enabling others in a network to build their own value, reducing their cost, and spreading their risk. That is Google’s way.
New Business Reality
Atoms are a drag Middlemen are doomed Free is a business model Decide what business you’re in
Atoms are a drag
Stuff is just so last-century. Nobody wants to handle stuff anymore. It’s inconvenient and expensive. If you have stuff, to paraphrase the late, great George Carlin, you have to ?nd a place for it. You must buy the raw stuff you’ll use to make your stuff. Then you have to store your stuff, pack it inside more stuff, and ship it along with other stuff. Not to mention that you have to pay to hold an inventory of stuff and you risk your stuff going out of style, in which case you’ll be stuck with a lot of useless, old stuff. Anybody can reverse-engineer your stuff and make the same stuff. Now you may argue that their stuff isn’t as good as your stuff—as Carlin said, “Have you noticed that their stuff is shit and your shit is stuff?”—but once there’s competitive stuff, you’ll probably have to charge less for your stuff to sell more of it. Stuff is a pain. Digits aren’t. Since the dawn of industry, controlling things and the means to make, market, and distribute them has de?ned businesses. Carmakers sold cars, newspapers papers, book publishers books. They identi?ed—and limited themselves—by their products. We are what we make. Magazine companies sell what? Magazines? Not so fast. In 2008, Colin Crawford, an executive at the tech publisher IDG Communications, bragged that his was no longer a print company. IDG had crossed the Rubicon from print to digital two years earlier when its growth in online revenue exceeded the decline in its print revenue. As a result, Crawford
Jeff Jarvis
71
blogged, his team could focus on “the changing needs of their customers” and on new online and mobile products and event businesses. The staff was, he said, “unburdened by print.” Print had become a burden to a print company. It’s expensive to produce content for print, expensive to manufacture, and expensive to deliver. Print limits your space and your ability to give readers all they want. It restricts your timing and ability to keep readers up-to-the-minute. Print is already stale when it’s fresh. It is one-size-?ts-all and can’t be adapted to the needs of each customer. It comes with no ability to click for more. It can’t be searched or forwarded. It has no archive. It kills trees. It uses energy. And you really should recycle it, though that’s a pain. Print sucks. Stuff sucks. So who wants stuff ? Not Amazon. Yes, Jeff Bezos built a great company around selling things: books, gadgets, hardware, almost anything that can be delivered to our door. Just as Craig Newmark of craigslist is blamed (unfairly) for driving a stake through the heart of papers, Bezos is blamed for crippling bookstores, with independent outlets dying and even chains suffering. But who can blame shoppers for going to Amazon with its discounts, convenience, and selection? Bezos is as clever about stuff as he can be. He holds as little inventory as possible, getting more merchandise as needed when we order it. He owns no stores, pays no retail rent, hires no sales clerks. He doesn’t own the shipping infrastructure he uses but gets the best possible deal he can with outside services because he wields such huge volume. Because of that volume, he negotiates the best prices from suppliers. He passes a portion of those savings—the internet dividend—to his customers, which only builds his volume even higher. It’s a business of efficiencies, volume, turnover, and tight margins. I bought Amazon stock and I’m holding onto it, not because Bezos built the better bookstore but because he is creating digital equity. He sells his retail services to other merchants, sending them customers online and taking a cut, in some cases warehousing and shipping their inventory and charging for the services. He also took the computer infrastructure he had to build and offered it to any company as a low-cost, pay-as-you-go service: computing power, storage, databases, and a mechanism for paying programmers. Countless companies now use Amazon Web Services as their backend, foregoing or at least forestalling investments in computers
72
and software. Amazon has also created the infrastructure for an ondemand workforce called Mechanical Turk (named after a phony chessplaying automaton from 1769 that had a human chess master hidden inside). Companies post a repetitive task to be done and anyone can earn money— as little as one cent per task—by verifying the address in a picture, for example, or categorizing content. It’s a ?exible marketplace for labor. With all these services, Amazon is supporting a wave of entrepreneurial effort. Why would a bookstore do that? Amazon turned its cost center into a pro?t center—and beat Google to the opportunity (Google later followed suit). Bezos is not building a stuff company. I believe he is building a knowledge company. No one knows more about what identi?able individuals buy than Amazon—not even Wal-Mart (to them, we are mostly a mass) or the credit card company (they can’t necessarily see what products we buy at the grocery store). Amazon knows what we bought, when we bought it, and what else we bought with it. It can try out sales pitches to see which work best. It knows enough to predict what we might want so it can entice us to buy it. It has captured millions of reviews and ratings of every imaginable product from people who have bought and used them: a more valuable repository of consumer reports, I’d say, than Consumer Reports itself. No one knows more about the stuff we buy than Bezos. Handling stuff becomes a small price to pay to become so smart. Amazon is positioned perfectly for the transition to digital content delivery. It is selling and delivering books to PCs and its Kindle e-book reader. It is selling movies direct to our TV sets. It is selling music downloads. Amazon has built a strong position in content thanks to innovations ranging from reviews to searching inside books to automated recommendations. By re?ex, many of us go to Amazon to check out products before we buy them. That is Amazon’s brand and value, as much as the stuff it sells. Bezos built a digital knowledge and service empire. Just as fast-food joints make more money selling Coke than cheeseburgers and some retail chains have built more value in real estate than merchandise sales, Bezos doesn’t really make his money pushing atoms. Like Google, he creates value by getting smart and building bits. Are you limited by your stuff? If a magazine publisher no longer thinks of itself as a magazine company and if a bookstore can build a knowledge company, then ask what you can be. Where is your true value? I’ll bet it’s
Jeff Jarvis
73
not in the atoms you move around. It’s in what you know or how you serve or how you can anticipate needs, isn’t it?
Middlemen are doomed
Nobody likes a middleman. Well, except for my very nice literary agent. When she read in the proposal for this book that middlemen were doomed, she protested: “But that’s me, Jeff.” Sorry to say, yes. When she sold the book to the publisher, you could say that she sold her own professional obit. Then again, she did make the sale. Without her—and her relationship with publishers—my proposal wouldn’t have gotten into three houses, which led to an auction that raised the price (boy, was that fun). Even though my agent charges a higher commission than a real-estate agent (much higher), she increased my advance by more than the amount of the commission she was paid. Her agency also provides editorial, legal, and marketing advice. My agent made the marketplace more efficient and added value for me. She also makes the business more efficient for publishers, sifting through an abundance of book ideas and writers. When I went to work as an online executive at a media conglomerate in the 1990s, I was delighted that I would get to work with a book publisher as it went online. But my boss warned me that I shouldn’t get too excited. He explained that a publisher doesn’t have direct relationships with readers (bookstores do) or even with talent (agents do). Publishing, he said, is a distribution business. Publishers, too, are middlemen. Today, technology and the internet have fostered new self-publishing companies—Lm, Bm—that enable authors to have their books designed, printed, sold, and distributed and to keep a much higher proportion of the sale price—up to 80 percent, versus the roughly 15 percent of the hardcover price authors receive from mainstream publishers (minus the agent’s 15 percent). Authors can sell their books directly to readers via Amazon as well. But, of course, mainstream publishers will argue that because they have relationships with bookstores for sales and with media outlets for promotion, they are able to sell many times more books for a higher pro?t than an author can when selling directly. They’d be right—for now. This is why even I, cyberguy, chose to have this book published the old-fashioned way: Because the book and my ideas will be distributed and promoted broadly and I will likely make more money. My
74
publisher is adding value. In the next section of the book, we examine how book publishers need to update their business and their books for the Google age. For all middlemen, the clock is ticking and the question of value is looming. Every time Google makes a direct connection, a middleman’s value is diminished. Are you a middleman? If the web is hurting rather than helping your business, the answer is probably yes. If you make the marketplace more efficient, if you solve problems of abundance and confusion and add value, good. But even if you do, anyone can use the internet to undercut you—to craigslist you. If you make your living telling people what they can’t do because you control resources or relationships, if you work in a closed marketplace where information and choice are controlled and value is obscured, then your days are numbered. I’m talking to you, car salesmen, advertising agencies, government bureaucrats, insurance-office bene?t-deniers, head hunters, travel agents (oh, sorry, they’re already nearly extinct), and real-estate agents. The internet abhors inefficiency, eliminating it whenever Google, Amazon, eBay, craigslist, et al connect buyer to seller, demand to ful?llment, question to answer, SWF to SWM. Economist Umair Haque, blogging for the Harvard Business Review, sees a shift from an economy built on inefficient marketplaces, where ownership and control are centralized, to an economy built on efficiency, where information is open and the power resides nearer the edges. “Competitive advantage is fundamentally about making markets work less efficiently,” he said. “One catastrophically effective way to do that is to hide and obscure information—to gain bargaining power relative to the guy on the other side of the table.” The new way to succeed is to do the opposite: “Release information bottlenecks and make things more liquid.” In other words, stop trying to make money by interfering in transactions. Consider my least favorite inefficient marketplace: real estate. I hate paying agents 6 percent commission for doing so little. They, in turn, hate it when I talk about them on my blog. What we think of real-estate agents around the world is an open secret. A 2008 survey by the British Journalism Review found that real-estate agents are the least-trusted professionals, worse even than tabloid reporters. Only 10 percent of Britons trust them. But real-estate agents have nothing to fear from me—or, they think, the internet—because they control one of the last dark pools of restricted
Jeff Jarvis
75
information left in business: the multiple-listing service (MLS) database of properties for sale. If your house isn’t listed there, buyers won’t see it and other agents won’t show and sell it. But only real-estate agents can list homes in the MLS. I call that monopolistic restraint of trade. Real-estate agents call it service. The U.S. Justice Department called it antitrust, and in 2008 it reached a settlement with the National Association of Realtors to open up the multiple-listing service somewhat to discount brokers. It was a small victory against the middleman. Agents say they bring you pricing expertise. But in the U.S., Zillow. com will give you an automated estimate of your home’s worth based on comparable sales in your area. Zillow tracks its own accuracy, comparing actual sale prices with its estimates. So much for that bit of expertise from Ms. Agent. Agents say they market your home. Pshaw. They used to advertise a selection of homes in the Sunday paper, but those ads promoted their agencies as much as marketing speci?c properties. Real-estate ads are like grocery ads that entice you to come in because ?ank steak is on sale or because one house caught your eye. Now, thanks to the internet, there’s less need for agencies to advertise in papers. Real-estate agents can save money by putting listings on their own web sites or even on craigslist and Zillow. They rarely pass those savings on to homeowners. Agents say they bring their expertise to buyers, not just sellers. When I bought homes, I went to agents so I could see the multiple-listing service and pick out my prospects. The only real service the agent provided was hauling me around and letting me into homes. “A real-estate agent may see you not so much as an ally but as a mark,” Steven D. Levitt and Stephen J. Dubner wrote in their 2005 paean to seeing things differently, Freakonomics. They cited a study that found that real-estate agents keep their own homes on the market an average of 10 days longer than homes they represent—and agents sell their own homes at prices 3 percent higher. Levitt and Dubner explained that it’s more ef?cient for agents if they can get you to sell quickly, even if for a few dollars less. “Here,” they wrote, “is the agent’s main weapon: the conversion of information into fear.” In the long run, Zillow and similar services will become smarter than the smartest agent. On the internet, more information equals more power and value. (In the next section of the book, I’ll outline how I propose to replace real-estate agents.)
76
In the early 1990s, when I worked with newspapers, I predicted that real-estate agents would desert papers for online. I advised newspapers to get into the real-estate business themselves, becoming agents just so they could get access to the multiple-listing data. Newspapers are not in the publishing business but are in the information business, and the MLS is the key to the information that mattered. God no, the publishers said, we don’t want to rock the boat with agents and lose that ad revenue. But papers were bound to lose it anyway. Newspapers didn’t know what business they were in and didn’t know who their true customers were. They thought they were in the business of selling real-estate ads, not serving homeowners (aka readers). Newspapers even tried to discourage homeowners from posting their own for-sale-byowner ads because agents saw those homeowners as competition. Staying loyal to real-estate agents over readers did newspapers no good. The agents didn’t return the loyalty. Newspaper classi?ed revenue in real estate, jobs, and cars fell from $19.6 billion in 2000 to $14.2 billion in 2007 (adjusted for in?ation, that’s a drop of about 40 percent). If newspapers had seen just how dire their future was, they might have gone around the agents they had protected and freed up information for readers. But soon it was too late. Though real-estate ads increased as home prices rose, the home bubble eventually burst in 2008, and papers’ last gravy train derailed. Real-estate agents and papers are not alone as middlemen, the proprietors of inefficient marketplaces. The monopolies, duopolies, oligopolies, cartels, and controlled marketplaces enjoyed by cable companies, phone companies, broadcasters, advertising agencies, health-care companies, and government are challenged by the internet’s open marketplace of information. Google isn’t their competitor. Google is the weapon their competitors wield.
Free is a business model
Free is impossible to compete against. The most efficient marketplace is a free marketplace. Money gets in the way. It costs money to market and to acquire customers so you can sell things to them. It costs money to take payments. Charging customers stops some unknown number of them from getting your product or using your service, which stops you from having a relationship with them. Money costs money.
Jeff Jarvis
77
Obviously, that’s absurd. The goal of any business is to collect money and make a pro?t. The most sensible way to do that is to charge the people who consume what you produce, right? Not always. Return to the chapter on networks, where new-age phone companies (Skype), retail marketplaces (Amazon, eBay), and classi?ed-ad marketplaces (craigslist) grow larger by charging less, even nothing. As much as I abuse media for operating under the rules of the old economy, let it be said that more than a century ago they created a new model built on not charging customers full freight. Rather than making readers or viewers cover costs, media charge the people who want to reach the people they reach—they charge advertisers. That is what makes broadcast free and newspapers and magazines inexpensive. A high-end magazine might cost $4–$5 per copy to produce and distribute; it might cost another $20–$30 to market to acquire that subscriber. Yet many successful monthly magazines charge their readers only $1 per copy to subscribe; it’s nearly free. A publisher in this scenario is in the hole $50 or more per subscriber in the ?rst year (that improves every time readers renew). Clearly, though, magazines make money from ads—enough to dig themselves out of that hole and earn an impressive pro?t through the side door. Google and the internet have created more models for making money through that side door. The appeal of this path is that often you need not own the assets that make you money. Google doesn’t want to own the content it searches; it wants knowledge to be free online so it can organize more of it. In the late 1990s, Google executives came to me when I worked for a magazine publisher, trying to convince us that we should take all our content archives—for which we charged readers—and put them on the internet for free. Google search, in turn, would send lots of traffic to the old articles. Google also offered to put its ads on these pages, making new money on old content—more money, they assured us, than we were making from archive fees. They were probably right, but I knew it would have been impossible to convince magazine publishers—who were too accustomed to owning and exploiting their valuable assets—to see value elsewhere. At the time, publishers didn’t understand that restricting access online was turning away people to whom they could show ads and sell magazines and build relationships. The pay wall was less a revenue opportunity than an opportunity cost.
78
The New York Times learned this lesson through experience. So accustomed were Times executives to selling papers and charging readers for access to content that they couldn’t bear the idea of giving it all away on the free web. They decided to charge readers online and had to ?nd something to put behind a pay wall. It had to be something that would not hurt their advertising business (they wouldn’t have wanted to put ad-rich travel content behind a wall, losing audience and ad revenue, for example) but something that readers thought was still worth paying for. In 2005, NYTm fenced off columnists and archives along with other goodies and charged $49.95 per year for access. TimesSelect got 227,000 paying customers (plus print subscribers and students, who received it for free). It brought in a reported $10 million annual revenue. I never saw an accounting of the cost of marketing to acquire those subscribers or of customer service; the pro?t margin was not reported. In a speech then, Guardian editor Alan Rusbridger showed a picture of The Times’ lavish new headquarters and said that revenue wouldn’t pay the gas bill in the building. The Times killed the service in 2007 and freed its content again for a few simple reasons: First, it increased the audience to the paper’s site; within months after tearing down the wall, audience increased, by one account, 40 percent. Second, The Times could make more money on the advertising shown to its additional audience. Third, opening up improved the paper’s Googlejuice by bringing in more clicks and links, which in turn yielded more traffic. Finally, the dropping of the toll booth brought The Times’ columnists back into the conversation. Rusbridger had said The Times walling off its columnists was “brilliant” for the Guardian because it opened the door for it to reach The Times’ former readers (the Guardian gets a third of its audience in the U.S.). In the end, The Times rediscovered the value of free. Google understands the value of free better than anyone. When it bought Blogger, it stopped charging for the service and added advertising. When it launched Gmail with tons of storage, it made the service free and served targeted advertising. More recently Google has set out to pull a craigslist on the $7 billion mobile directory-service business. Google made directory assistance free at 1-800-GOOG–411. My accursed mobile service provider still charges me $1.79 to ?nd a number—and mind you, the only reason I’m looking for a number is so I can make a call using the company’s
Jeff Jarvis
79
network, which I pay to do. This is like a store charging us for directions to come spend money there. Google surely will make money on its mobile directory service with advertising. It will learn more about our behavior and needs. I can imagine it using us to create a vast repository of our reviews and recommendations about establishments (“leave your review after the tone” or “rate the restaurant using your keypad”). Google may ?nd yet another side door to make money. Tech publisher Tim O’Reilly speculated on his blog that Google wants to gather billions of voice samples as we ask for listings. That will make its speech recognition smarter, helping it get ready for the day when phones and computers respond to voice commands. Chris Anderson, editor of Wired magazine, projected that by 2012, Google could make $144 million in fees from users if it charged for directory assistance, but by foregoing that revenue it could instead make $2.5 billion in the voice-powered mobile search market. As with newspaper classi?eds, the entire industry may shrink but the winner will grab the biggest share of what is left. That winner is likely to be a new player, not one trying to protect old revenue streams and assets. By making its service free, Google will establish itself as the leader in providing local information and position the company for the coming mobile explosion. On Jim Cramer’s CNBC show, Google chief Eric Schmidt said the company anticipates making more money on mobile than desktops because mobile provides a better way to targets ads, and targeting is Google’s real strength. Anderson, author of The Long Tail, argues in his next book that free is a business model. In a preview of FREE! in Wired, he provided a case study: Ryanair, a discount ?ier out of Dublin, has been selling tickets around Europe for as little as $20 and hopes to offer seats for free. The airline saves money—and who can complain at these prices?—by using less popular airports. Once it has you, it charges extra fees for priority boarding, luggage, food, and credit card handling (American airlines have started similar charges but at higher ticket prices and with spotty service). Ryanair also shows ads onboard—an ideal exploitation of a captive audience. It hopes to start onboard gambling, which could be a huge moneymaker. A favorite buzz phrase of consultants in the last few decades is “zerobased budgeting”—rethinking and rebuilding your business from scratch, without legacy structures and assumptions. Now you really can start at
80
zero: What if your goods cost you nothing? What if you charged nothing? Where does your value exist? What is the essence of your business? What can you learn from it? How do you make money—is there a side door? Your business will likely operate at a different scale: It could be smaller but with lower costs and higher margins. Or it could be larger with lower margins, which helps it grow bigger faster with less investment and risk. But it will surely be different. Rich Barton, founder of online real-estate service Zillow, told The New York Times: “The internet is a great big race to free. Anyone who has built a business model with a price above free for something that can be free is in a tough strategic position.” So how do you get to free ?rst?
Decide what business you’re in
What business is Google really in? Of course, it’s in the search business; that’s why we go there. But it doesn’t pro?t from licensing its search. It is also in the service business, providing us with everything from email to document management to mapping to publishing tools to social networks to telephone directory assistance to video distribution. But it charges us for none of that. It is not in the stuff business, moving things or selling them (though it has not fully escaped the tyranny of matter; it buys a lot of atoms in the form of computers, and it has to spend a lot on charged atoms to power them). It is also not in the content business; apart from its collaborative, Wikipedia-like Knol, it doesn’t create or control original content but instead prefers to organize others’ (owning content would put Google in competition with the businesses whose content it exploits). Ultimately, Google is in the organization and knowledge businesses. Google knows more about what we know and want to know and what we do with that than any other institution. But its pro?t doesn’t come from that either. Google’s pro?t comes from advertising, which it dominates because it is so good at search and has so many of us using its services and knows so much that it can target ads efficiently. Google knows what it is. AOL thought it was in the content business, which is why Time Warner, a content company, made the disastrous mistake of combining with AOL. In reality, AOL was in the community business (its chats and forums were pioneering and popular, long before Facebook or MySpace) and the service business (“you’ve got mail” on AOL way before you’ve gotten it
Jeff Jarvis
81
from Gmail). AOL didn’t ask the right question: What business are we really in? Poor Yahoo thought it, too, was in the content business; that is why it hired a Hollywood studio exec, Terry Semel, to be its CEO. He tried to turn it into a digital movie studio. But Yahoo could have owned search as the pioneer in web directories; it handed that to Google. It could have owned search advertising as a pioneer there, too, but it ceded leadership in automated advertising as well to Google. What business is Yahoo really in? I think it never decided. What business are you really in? Many companies worry that they can’t make the transition to bits: analog to digital, physical to virtual, 1.0 to 2.0. Some are nearer than they think. Kodak is a classic case of a company said to be making the transition from atoms to bits—physical ?lm to digital images, sales to service. If it had realized soon enough that it was in the image and memories business—if it hadn’t de?ned itself by the atoms it pushed and processed—it should have beaten Yahoo to the punch and bought the photo and community service Flickr. When I think of pictures today, the ?rst brand that comes to my mind is Flickr. Others think of Google’s Picassa. I also think of my Nokia camera phone. Who now thinks of Kodak (or Polaroid, which stopped making instant ?lm cameras in 2008)? No one. Airlines are the ultimate atomic enterprises, moving our own molecules from place to place and burning lots more molecules in the process. But even airlines could be relationship and knowledge companies. Are cable companies pipe managers, or should they be hosts for our digital creations? Are doctors’ offices sickness companies or health companies? Are insurance companies arbitrageurs of risk or guarantors of safety? Are grocery stores stuff companies or knowledge factories? Are restaurants kitchens or communities? We’ll examine such upside-down views of these industries and more in the next section of this book. You should be asking: Am I a knowledge company? A data company? A community company? A platform? A network? Where is your value and where is your revenue? Remember that they might not be in the same place; the money may come in through a side door. It’s time for your identity crisis.
New Attitude
There is an inverse relationship between control and trust Trust the people Listen
There is an inverse relationship between control and trust
Trust is more of a two-way exchange than most people—especially those in power—realize. Leaders in government, news media, corporations, and universities think they and their institutions can own trust when, of course, trust is given to them. Trust is earned with difficulty and lost with ease. When those institutions treat constituents like masses of fools, children, miscreants, or prisoners—when they simply don’t listen—it’s unlikely they will engender warm feelings of mutual respect. Trust is an act of opening up; it’s a mutual relationship of transparency and sharing. The more ways you ?nd to reveal yourself and listen to others, the more you will build trust, which is your brand. Give the people control and we will use it, my ?rst law decrees. Don’t and you will lose us. In a meeting of web 2.0 gurus at National Public Radio sometime ago, I heard David Weinberger—coauthor of The Cluetrain Manifesto, author of Everything’s Miscellaneous, and a Harvard fellow—extend that law. He may have thought of this law as his own, but I prefer to co-opt it as Weinberger’s Corollary to Jarvis’ First Law: “There is an inverse relationship between control and trust.” There’s another one of those counterintuitive lessons of the Google age: The more you control, the less you will be trusted; the more you hand over control, the more trust you will earn. That’s the antithesis of how companies and institutions
Jeff Jarvis
83
operated in pre-internet history. They believed their control engendered our trust. In the early days of the internet, some journalists dismissed new sources of information—weblogs, Wikipedia, and online discussions—arguing that because they were not produced by fellow professionals, they could not be trusted. But the tragic truth is that the public does not trust journalists. A 2008 Harris survey found that 54 percent of Americans do not trust news media, and a Sacred Heart University poll said that only 19.6 percent believe all or most news media. In the U.K., a 2008 YouGov poll found what looks like a high number who trust BBC journalists a great deal or a fair amount—61 percent—but that was down 20 points since 2003. Trust is—no surprise—an issue with political leaders. In 2007 the World Economic Forum released a Gallup Voice of the People survey reporting that globally, 43 percent of citizens said political leaders are dishonest; 37 percent said they have too much power; 27 percent said they are not competent. Fifty-two percent of U.S. citizens said their politicians are dishonest. Business came off only marginally better: 34 percent believed business leaders are dishonest; 34 percent said they have too much power. To co-opt Sally Field: We don’t like you. We really don’t like you. When asked how to restore trust, a plurality of world citizens polled by Gallup—32 percent—argued for transparency and 13 percent pushed for dialogue with consumers. There is Weinberger’s Corollary in action: Open up, hand over control, and you will begin to regain the trust you have lost.
Trust the people
Before the public can learn to trust the powerful, the powerful must learn to trust the public. I learned my lesson about trusting the people when I was a TV critic at People magazine in the mid-1980s. That was the critical moment in the history of popular culture when the remote control passed 50 percent penetration on American couches. The remote, the cable box, and the VCR reached critical mass, and together they put us in control of our consumption of media. No longer were we imprisoned on Gilligan’s Island by the bad taste of network programmers in Burbank.
84
At the end of a season back then, I was about to go on a CBS morning show to talk about the season’s ratings when the segment producer, Bonnie Arnold, came to me on the set and summarized what she thought I would say: “You’re defending the taste of the American people, right?” I recoiled in horror. I’d never do that, I said. How could I say that the masses have taste? I’m a critic, a media snob. This is television we’re talking about. Vast wasteland, remember? Arnold argued with me: “You’re saying that good shows rose to the top of the ratings and bad shows fell. So you’re arguing that the audience has good taste.” Ding. She was right. I was defending the taste of the American people. That moment evolved my worldview (as the internet would again 20 years later). I realized just then that once the people were given choice and control, they would tend to pick the good stuff. The more choice they had, the better the stuff they picked. The better stuff they picked, the more Hollywood was forced to make good shows for them. Here was a virtuous cultural circle and another law: Abundance breeds quality. Of course, there have been exceptions—blooper shows, game shows, tabloid shows, trailer-trash talk shows. We have feared that each of these trends would take over television and society. But in each case, we as a nation overdosed on our guilty pleasures and they faded away. Quality wins. I’ve long argued that the golden age of television was not the 1950s, with our misplaced nostalgia for its cheesy video Vaudeville. Uncle Miltie, I say, was a hack. The Sopranos is higher art than Playhouse 90. Seinfeld, Cheers, and The Office are funnier than The Honeymooners. Sacrilege, perhaps, but true. The golden age of TV is now—or probably tomorrow, as TV is reinvented and opened up on the internet. On that day in the 1980s, I learned to trust the people. Bonnie Arnold’s challenge turned me into a populist. I realized that if you didn’t trust the people, then you couldn’t believe in democracy (why let us pick our leaders . . . even if we sometimes do bollix it up?), free markets (shouldn’t somebody be in charge?), journalism and education (why inform the people if they’re a bunch of idiots?), even reform religion (surely the masses shouldn’t talk directly with God). My new, populist worldview was only strengthened by my experience with the internet, which gives us control over not just our consumption of media but now its creation. The internet enables unlimited creation and, because abundance breeds quality, we now have more good stuff. I know,
Jeff Jarvis
85
you’re going to rub my nose in a YouTube video—one featuring a ?aming fart or a twirling cat—and you’ll argue that the internet opens the door to the creation of crap. That, it does. But it also offers new opportunities for talent and new stages for voices that could not emerge in the old systems of control. There have always been bad books on bookstore shelves next to the gems. See: Danielle Steel. There will always be ?aming cat videos next to art online. But there is the opportunity to make more art now. The challenge is ?nding and supporting it. That is where Google comes in. Google can’t and shouldn’t do it all; we still need curators, editors, teachers—and ad salespeople—to ?nd and nurture the best. But Google provides the infrastructure for a culture of choice. Google’s algorithms and its business model work because Google trusts us. That was the ding moment that led Sergey Brin and Larry Page to found their company: the realization that by tracking what we click on and link to, we would lead them to the good stuff and they, in turn, could lead others to it. “Good,” of course, is too relative and loaded a term. “Relevant” is a better description for what Google’s PageRank delivers. As the company explains on its site:
PageRank relies on the uniquely democratic nature of the web by using its vast link structure as an indicator of an individual page’s value. In essence, Google interprets a link from page A to page B as a vote, by page A, for page B. But, Google looks at considerably more than the sheer volume of votes, or links a page receives; for example, it also analyzes the page that casts the vote. Votes cast by pages that are themselves “important” weigh more heavily and help to make other pages “important.” Using these and other factors, Google provides its views on pages’ relative importance.
Google doesn’t view all links from all people equally. The more links you get to your site, the more your links to other sites are worth. Thus Google pays heed to those to whom we pay heed. Google realizes that trust is something we share with each other. Or put another way, any friend of ours is a friend of Google’s. Google found value in trust. Others are creating systems of trust as the core of their businesses. Facebook helps us build lists of those we know and trust. eBay turned internet commerce’s disadvantage—fear of being
86
robbed by merchants we do not know—into a unique opportunity by becoming the platform for trusted transactions of physical goods among strangers. Studies have shown that consumers are likely to pay higher prices to merchants they trust. Amazon, too, has created a system of trust in its reviews (though they can be in?ltrated by both authors and their enemies) and in the money-where-your-mouth-is value of telling us that people who bought this also bought that. Pm (which I’ll discuss in the chapter, “The First Bank of Google”) created a system of trust for person-to-person loans. PayPal did the same for person-to-person payments. We are witnessing the growth of the trust industry. Social news service Digg has built a content community around trust. Users ?nd and submit stories to the site, and then the community votes on what should go to the front page. That’s editing by the mob and it works (especially if your interests gravitate toward the geeky). Instead of a staff, Digg has thousands of volunteer editors out there ?nding the interesting and noteworthy news on the web, and competing with each other to get it on Digg ?rst. That makes the service lightning fast, a great source of alerts and updates. Diggers develop a reputation—anointed by fellow Diggers—by ?nding the most interesting stories fastest. Journalists I know are suspicious of Digg and of the mob usurping their prerogatives and jobs. One day I sat at a lunch with a news executive and my son, Jake. The executive’s a nice guy but not terribly interesting to a teen. So Jake had his nose buried in his iPhone as the executive belittled Digg, which he decreed to be over already. “Why would anyone trust this thing?” he asked. I turned to Jake and asked him what he was doing. “Oh, Digg,” he said. As we quizzed him, Jake told the executive that he never goes directly to a brand like this man’s newspaper or even to blogs he likes. He rarely types in one of those addresses and wonders what they have to tell him today. Mind you, he reads a lot of news—far more than I did at his age. But he goes to that news only via the links from Digg, friends’ blogs, and Twitter. He travels all around an internet that is edited by his peers because he trusts them and knows they share his interests. The web of trust is built at eye-level, peer-to-peer. Before I go on, let me acknowledge that, of course, things can go wrong. In 2005, the Los Angeles Times decided to be cyber-hip by inventing the “wikitorial,” an editorial from the paper that the public was invited to rewrite. In no time, the quality of discourse around the ?rst
Jeff Jarvis
87
wikitorial descended to the level of that on a prison yard during a riot because the Times had made a fundamental error: A wiki is a tool used for collaboration, but there was no collaborating to be done on the topic of the Times’ wikitorial—the Iraq war. I saw things going to hell and blogged that the Times would have been wiser to have created two wikis—one pro and one con—structured like an Oxford debate. The challenge to the opposing crowds would have been: Give us your best shots and let readers judge. It so happened that Jimmy Wales, founder of Wikipedia, saw my post and agreed. He headed to the Times to propose “forking” the wikitorial into two, but by then it was too late. The Times put a stake through the heart of the wikitorial. Since then, when newspaper people talk about interactivity, somebody will point to the danger of the wikitorial. Never mind that the form was misused; wikis now have cooties. Interactivity has its limitations. Some people are simply wrong. Others are asses. Some need their meds. But don’t let them ruin the party. Too often, I hear traditionalists in every industry suggest we throw out the internet baby with the bathwater: When they see one nasty comment, one hoax, one rumor, one lie, they try to use that to discredit the entirety of a service or of the internet as a whole. That’s just as silly as wanting to ban phones, cars, or kitchen knives because something bad could be done with them. Of course, people misuse the internet. They misuse everything else, why should the internet be different? Where there is a challenge, though, ?nd the opportunity. LiveWorld, for example, has made a business out of monitoring and maintaining communities. Too many companies have been built not on trusting people but on making rules and prohibitions, telling customers what they cannot do, and penalizing them for doing wrong. Google has built its empire on trusting us. Trust Google on this.
Listen
At Google, we are God and our data is the Bible. It’s through the data generated by our activity that Google listens to what we want, prefer, and need. Google vice president Marissa Mayer has said that Google is constantly trying to anticipate and interpret our desires so it can predict what we are going to do—our intent. It does that by watching our every move. When her team wonders whether a page should be this color or that, they
88
don’t make the decision themselves, nor do they hold a focus group. They put both colors on the web in an A/B test that measures which yields better usage. “We’ll be able to scienti?cally and mathematically prove which one users seem to be responding to better,” Mayer told students at Stanford, demonstrating an engineer’s faith in numbers. If a Google employee is meeting with Larry and Sergey to talk about users’ needs, Mayer advised, she’d better come with more than her own conclusions. She’d better come with the data. “Their immediate question is, ‘How many people did you test?’ ” This reliance on data as the proxy for the will of the people is so ingrained in Google’s culture that it even supersedes organizational politics. “We rely so much on the data and we do so much measurement that you don’t have to worry that your idea will get picked because you’re the favorite,” Mayer said. “Data is apolitical.” Google has faith in data because it has faith in us. When you take to heart the moral of James Surowiecki’s 2004 book, The Wisdom of Crowds, you must realize that your crowd—your users, customers, voters, students, audience, neighbors—is wise. The next questions should be: How do you capture and act on that wisdom? How do you listen? How do you enable them to share their wisdom with each other and with you? How do you help them make you smarter (and why should they bother)? Do you have the systems in place to hear? Do you have the culture in place to act on what you hear? The ?rst answer is to listen before you speak. Many times, companies have told me they’re going to blog to start conversations. Hold on, I tell them. Read before you write. Use search tools to ?nd the conversations already going on about you and then join them. Look at every bit of data you have about how your constituents behave to learn more about their desires—and ?gure out what new data you can collect. Find ways to ask your public directly or through testing. If you’re lucky, like Google, you will have the means to test the actions of thousands or millions of users in a day. Am has 700 sites with useful information on very nichey topics and millions of users searching for answers in millions of articles. When I worked with them, I sat in metrics meetings while executives stared at no end of usage statistics projected on the screen, tracking the behavior of any and every link on all pages. They rigorously tested different versions of pages whenever they wanted to make a change. Not every business and institution has the blessing of Google’s and
Jeff Jarvis
89
Am’s data. Sometimes, of course, it’s better to listen to people one-on-one, as Starbucks and Dell are doing with their give-us-your-ideas platforms and as countless companies do when they read blogs and forums. These methods beat focus groups and surveys, which pick people at random who may have nothing to say. It’s better to listen to the people who have a reason to talk with you. Procter & Gamble chairman and CEO A.G. La?ey said in Strategy + Business magazine that he wanted customers to be “valued not just for their money, but as a rich source of information and direction.” Sometimes, listening itself becomes your product. Flickr listens well. The photo service founded by Caterina Fake and Stewart Butter?eld and now owned by Yahoo created an incredible infrastructure to take in more than a million photos a day and enable users to organize them around captions and tags—one-word descriptions—which also enable fellow users to ?nd them (and each other). This is all made possible, as we discussed earlier, because of Flickr’s decision to make photos public by default. Flickr brings out not just the wisdom of the crowd but also the aesthetic of the crowd and displays that for all of us to see. Go to ?m/ explore/interesting/7days/ and press the reload button a few times or click the link there that enables you to view these images as a slideshow. I predict you won’t be able to stop. It’s mesmerizing. These are the photos Flickr has determined are interesting. How did they do that? By ranking popularity? No, that would likely lead to lots of pictures of thin young people who look good wearing very little on beaches—or, worse, to pictures of cute cats. Does Flickr do this with an army of editors? That would be the re?ex of old media. But that would not scale, as they say in Silicon Valley; it would take a nation of editors to sift through the 3,000 pictures that come into Flickr every minute. How does Flickr ?nd interesting photos? Well, of course, they don’t. We do. As Butter?eld and Fake explained it to me, Flickr determines “interestingness” in a few ways. The ?rst and most obvious component: Flickr measures the interactions—commenting, emailing, tagging, linking—that occur around a photo. Second, they map all these actions to see which users turn out to be hubs of activity. These people are presumed to be in?uencers and their actions are given extra weight because the Flickr community must trust them—a logic not unlike that used by Google’s PageRank. Third, Flickr performs a reverse social analysis: If
90
Bob and Sally are emailing and commenting on each others’ photos all the time, the system presumes they are relatives or friends; they have a social relationship built on familiarity. But if out of nowhere, Bob interacts with Jim’s picture, the system then presumes that their relationship is based on the photo, not on life. The interestingness algorithm devalues Bob and Sally’s social relationship and gives greater value to Bob and Jim’s interaction around a photo. It’s counterintuitive but sensible when you think about it. Flickr ends up with a never-ending stream of interesting photos. Granted, being interesting is not as hard a test to pass as, say, relevance on Amazon or accuracy on Google. Still, look at Flickr’s gallery. I’ll bet you’ll agree that almost all the choices are, indeed, interesting. Flickr is algorithmically aggregating the aesthetic of the crowd. Out of that comes a better service for every user, more opportunities to build traffic and revenue, a rich relationship of trust among those users and Flickr, and even new products. All from just listening.
New Ethic
Make mistakes well Life is a beta Be honest Be transparent Collaborate Don’t be evil
Make mistakes well
We are ashamed to make mistakes—as well we should be, yes? It’s our job to get things right, right? So when we make mistakes, our instinct is to shrink into a ball and wish them away. Correcting errors, though necessary, is embarrassing. But the truth about truth is itself counterintuitive: Corrections do not diminish credibility. Corrections enhance credibility. Standing up and admitting your errors makes you more believable; it gives your audience faith that you will right your future wrongs. When companies apologize for bad performance—as JetBlue did after keeping passengers on tarmacs for hours—that tells us that they know their performance wasn’t up to their standard, and we have a better idea of the standard we should expect. Being willing to be wrong is a key to innovation. Procter & Gamble’s A.G. La?ey said in Strategy + Business that he improved the company’s commercial success rate for new product launches from 15–20 percent to 50–60 percent, but he didn’t want to push the rate higher because “we’ll be tempted to err on the side of caution, playing it safe by focusing on innovations with little game-changing potential.” Mistakes can be valuable; perfection is costly. The worst mistake is to act as if you don’t make
92
mistakes. That puts you on a pedestal, and when you fall off you better watch out: That ?rst step’s a doozie. Consider Dan Rather. Minutes after he reported questions about George W. Bush’s military service on CBS’ 60 Minutes in 2004, bloggers suspected that documents he had used as the basis of his story were faked. At the blog LittleGreenFootballs, Charles Johnson proved it. He took a memo supplied to Rather that reputedly had been typed using a 1970s-era IBM Selectric and then precisely re-created it using Microsoft Word on a next-century computer. He even made a neat animation that placed his document over the alleged original to show just how exact the match was. After his conclusions appeared on his blog, word ?ashed around the web. For 11 days, Rather ignored the ensuing storm, saying nothing. When he did respond, he dismissed his critics as political operatives. The smarter reply—the journalistically and intellectually honest approach—would have been to say, “Thanks guys. Let’s share what we know and get to the truth together.” Rather came from an era of control when journalists were taught, ironically, to hide things from the public—sources, research, decision-making, and opinions. “Judge us by our product, not our process,” a former network news president told me in a discussion about journalistic transparency at the Aspen Institute. But today, on the internet, the process has become the product. By revealing their work as it progresses, journalists can be transparent about how they operate and can open up the story for input from the public. Bloggers purposely post incomplete knowledge so they can get help to make it complete. Gawker Media publisher Nick Denton explains that such “half-baked posts” tell readers: “This is what we know. This is what we don’t know. What do you know?” Corrections welcomed here. I hear people fret that there are falsehoods and lies on the internet. There certainly are. And there are people who believe or want to believe those lies and errors. But there are also people such as Rather’s bête-noire bloggers who are willing and able to ferret out facts. “We can fact-check your ass,” blogger Ken Layne said in 2001. A lot of attention is given to the mistakes or sabotage we see on Wikipedia, but what’s more impressive is watching the process of correcting and improving entries there, undertaken by people who get nothing out of it but the satisfaction of making things right. Sm exists just to debunk urban legends. Wg
Jeff Jarvis
93
exists to give whistleblowers a place to share documentation of evildoings—and when a federal judge tried to shut it down in 2007, its community responded by replicating the site all over the web. Truth will out. Contrast the Rather affair with the case of Reuters after one of its photographers was accused of doctoring a photo of Beirut during Israeli bombardment of the city in 2006. Some of the same bloggers, including Johnson, demonstrated that the photographer had used Photoshop to extend and darken a cloud of black smoke by copying and replicating parts of the picture. The wire service immediately pulled the photos and investigated the photographer’s other work. Reuters ?red him and changed its procedures to catch future tampering. Most important, Reuters thanked the bloggers, acknowledging that they, too, cared about the facts. That is how to make a mistake.
Life is a beta
Almost every new service Google issues is a beta—a test, an experiment, a work in progress, a half-baked product. It is a Silicon Valley punch line that Google products stay in beta forever—Google News was supposedly un?nished and in testing for more than three years—whereas Microsoft releases products and releases them again and releases them a third time before ?nally getting them (almost) right. “Beta” is Google’s way of never having to say they’re sorry. It is also Google’s way of saying, “There are sure to be mistakes here and so please help us ?nd and ?x them and improve the product. Tell us what you want it to be. Thanks.” Most established companies would consider releasing un?nished products to market criminal: You can’t produce a product that’s not perfect—and not even done—or it will hurt the brand, right? Not if you make mistakes well. “Innovation, not instant perfect perfection,” was Google vice president Marissa Mayer’s advice to Stanford students. “The key is iteration. When you launch something, can you learn enough about the mistakes that you make and learn enough from your users that you ultimately iterate really quickly?” The internet makes iteration and development-on-the-?y possible. Mayer put Google’s worldview into cultural context: “I call this my Macs and Madonna theory. When you look at Apple and Madonna, they
94
were cool in 1983, they’re still cool today in 2006, 23 years later.” How do they manage that? “They don’t do it by being perfect every time. There’s lots of missteps along the way. Apple had the Newton, Madonna has the sex book.” When you make a mistake, Mayer advises, “you just iterate your way out of it or you reinvent yourself.” Mayer recounted a debate among engineers before the launch of Google News. Days before the start of the beta, they had enough time to implement one more feature—sort by date or by location—but couldn’t decide. So they did neither. The day the service was released, they got 305 emails and 300 of them asked for sort by date. The users answered the engineers’ question for them. “Just get the product out there and then have the users tell us where it is more important to spend our time.” Google is not perfect. “We make mistakes every time, every day,” Mayer confessed. “But if you launch things and iterate really quickly, people forget about those mistakes and have a lot of respect for how quickly you build the product up and make it better.” Google is unafraid of making mistakes that can cost money—courage one rarely sees in business. Advertising executive Sheryl Sandberg (who later was hired away from Google to be COO of Facebook) made an error she won’t describe in detail that cost the company millions of dollars. “Bad decision, moved too quickly, no controls in place, wasted some money,” she confessed to Fortune magazine. She apologized to boss Larry Page, who responded: “I’m so glad you made this mistake, because I want to run a company where we are moving too quickly and doing too much, not being too cautious and doing too little. If we don’t have any of these mistakes, we’re just not taking enough risk.” Google CEO Eric Schmidt told The Economist that he urges employees: “Please fail very quickly—so that you can try again.” Facebook tends to blunder into new products, making mistakes as it goes. When Facebook introduced the news feed that compiles tidbits from friends’ pages and activities, some users were freaked by what they perceived as a loss of privacy (even though anything going into news feeds was already public). Protest groups were formed inside the service, using Facebook to organize a ?ght against Facebook. Founder Mark Zuckerberg apologized for not warning users and explaining the feature well enough—communication was his real problem—and Facebook added new
Jeff Jarvis
95
privacy controls. There was no exodus. Today, I don’t think any user would disagree that the news feed is a brilliant insight; it is the heart of the service. Though he makes mistakes, Zuckerberg makes them well by listening to customers and responding quickly. After a kerfu?e about a new Facebook advertising feature subsided, blogging venture capitalist Rick Segal begged us all to give Zuckerberg some slack. “He is going to make lots of mistakes, and he will continue to learn and grow. . . . We need to use care in beating up Zuckerberg and Facebook in general because we want these folks to push the limits of ?nding new ideas and trying to make sense out of all the data ?owing everywhere. Try it and get some reactions, adjust, ?nd the happy center, rinse and repeat. . . . If they do really bad things, people vote with the mouse clicks.” It’s not the mistake that matters but what you do about it.
Be honest
Fake news anchor Jon Stewart is one of the most trusted newsmen in America because he calls bullshit. Howard Stern is the king of all media in the U.S. because he’s honest. The tagline of Stern’s personal news service on satellite radio: “No more bullshit.” Shouldn’t that be every news organization’s tagline? Every company’s? I’ve been a fan of Stern’s since I reviewed his show for TV Guide in 1996 and discovered, counterintuitively, that he is best taken not in small doses but in large doses. If all you heard of him were the odd belch, you’d be forgiven for dismissing him. But Stern is greater than the sum of his farts. Listen for a few days and you will hear the rare man—rare especially on broadcast—who is not afraid to say what he thinks and what we think but don’t dare say. In the plasticized, packaged world of roboreporters on TV and shtickmeisters on radio, it’s a relief to hear somebody who’s candid, honest, and blunt. He is open and transparent about his life. He is unafraid to ask the tough question; I only wish that the PR-laden morning shows were as direct as Stern or as skeptical as Stewart. Stewart, anchor of Comedy Central’s The Daily Show, came in fourth among the most admired newsmen in America, tied in that slot with network anchormen Brian Williams, Tom Brokaw, Dan Rather, and Anderson
96
Cooper in a 2007 survey conducted by the Pew Research Center for the People & the Press. Stewart’s spin-off, Stephen Colbert’s Colbert Report, mocks spin, shooting buckshot into the pomposity of news shows, talk shows, pundits, and PR. Stern, Stewart, Colbert, and bloggers everywhere say what they think. In them, we hear the language of the internet age: honest, direct, blunt, to the point, no bullshit, few apologies. Their tone may shock old, controlled sensibilities. But complaining about it, tsk-tsking it, trying to clean it up, or trying to ignore it won’t work. The post-media generation raised on honesty and directness expects truth and bluntness from others. With Google, it is harder to hide behind spin, to control information, or to hope that people will forget what you said yesterday or the mistakes you make today. The truth is a click away. Institutions are learning to acknowledge their mistakes and apologize. When he took office following predecessor Eliot Spitzer’s sex scandal, New York Governor David Paterson preemptively admitted having an affair, among other peccadilloes. Apple had a near-disaster in the launch of its M service and Steve Jobs admitted it publicly. This is honest talk, which comes in a human voice. Even in the machine age—the Google age—that voice will emerge and succeed over a ?ltered, packaged, institutional tone. The Cluetrain Manifesto (which you can read for free at Cg) teaches this lesson in its 95 theses, which begin: 1. Markets are conversations. 2. Markets consist of human beings, not demographic sectors. 3. Conversations among human beings sound human. They are conducted in a human voice. 4. Whether delivering information, opinions, perspectives, dissenting arguments, or humorous asides, the human voice is typically open, natural, uncontrived. 5. People recognize each other as such from the sound of this voice. 6. The internet is enabling conversations among human beings that were simply not possible in the era of mass media.
Jeff Jarvis
97
In every interaction you have with your constituents, speak with a human voice as if you were speaking face-to-face. Be boldly, bluntly honest when admitting your mistakes—and when disagreeing with the public. Lock your PR people away. And remember, everything you say is searchable. Think of Google as the angel on your shoulder keeping you honest.
Be transparent
My life is an open blog. On the “about” page on my site, I try to practice what I preach about transparency. I reveal my business relationships: the companies for which I work, write, speak, and consult. I reveal personal relationships: companies where I used to work, where I have friends, and even where I have been turned down for jobs. I list stocks I own. I sometimes write about religion, so I reveal mine. As I often write about politics, I reveal my views and—to the horror of traditional journalists—my votes. This page is my defense against an accusation that I might try to hide af?liations, opinions, or con?icts of interest. At the end of this book, I will also make relevant disclosures. I’ll throw out this challenge to you in your organization: Why keep secrets? Or why keep more secrets than you have to? I’ve heard the argument: Your competitors will steal good ideas. But transparency will build a relationship of trust with your constituents and open up new opportunities. The ethic of transparency sums up much of what has come before in this book: the need to involve your constituents in your process, the need to hand over control through openness and information, the bene?ts of open-source networks, the bene?ts of the gift economy, the ability to listen. But I must acknowledge the irony of advocating transparency in a book about Google, which in many ways is as opaque and secretive as Dick Cheney. You can’t get into a Google office without signing a nondisclosure agreement. Google won’t reveal details of its revenue split with sites that run its ads. It refuses to list its Google News sources. It won’t tell us how many servers it has. It chooses not to use open-source software for some functions, like managing its cloud of computers, so it can retain a proprietary advantage. Still, as we’ve just discussed, Google does develop most of its products in public by releasing un?nished versions and getting help from users. In that sense, it is unusually transparent, willing to work in the open and
98
involve its users in development. I suggest you follow Google’s example in its product development and ignore its silence and opaqueness elsewhere.
Collaborate
If you don’t open up, you can’t collaborate. Collaboration with customers is the highest and most rewarding form of interactivity, for that is when the public tells you what they want in a product before you’ve made it. If you’re lucky, they’ll take ownership in the product you create together. They won’t just buy it, they’ll also brag about it. I have tried to make this book collaborative. I didn’t put chapters online as I turned them out to have readers correct and edit them, as other authors have done; that is too after-the-fact. Nor did I try to make the book a product of democracy (“vote on what I should say”); deciding what to say is, in the end, my job. Instead, I discussed ideas in the book on my blog as I researched them and thought them through and asked readers for guidance, which they generously gave. The chapter “Google Mutual Insurance” that follows is a product purely of that discussion. Collaboration is good business. Michael Dell spoke to me about “cocreation of products and services,” a radical notion from a big company whose policy had once been to look at and not touch its blogging customers. Now it tries to make, change, and support products collaboratively. “I’m sure there’s a lot of things that I can’t even imagine but our customers can imagine,” Dell said. “A company this size is not going to be about a couple of people coming up with ideas. It’s going to be about millions of people and harnessing the power of those ideas.” Once you can hear them. Start by letting your customers into the genesis of your products: your design process. Impossible, you protest: It’s a secret. Well, why is that? By closing off design, you’re also closing yourself off from the best ideas of the people who need, buy, and care about your product. Think how much more valuable your products and company would be if you were to give your customers exactly what they want. Take one project or product and try being radically transparent about it (as we will explore in the chapter, “Manufacturing”). Blog about your plans and decisions. Join in conversations—human conversations—with customers. Ask people what you should do. Admit mistakes. Open up.
Jeff Jarvis
99
Your competitive advantage is not that your designs are secret but that you have a strong relationship with your community of customers. I’m not suggesting that you hand over design to a committee of the whole. That would be like turning over the boardroom to a giant focus group. Design cannot come out of town-hall meetings. It’s still your job to come up with good ideas, to invent, inspire, surprise—and to execute well. Companies are not democracies. But neither should they be dictatorships. They should be—but too rarely are—meritocracies. Your challenge is to get good ideas to surface and survive from within and without and to enable customers and employees to improve your ideas and products.
Don’t be evil
We can’t leave a chapter about ethics and Google without addressing its famous self-admonition: “Don’t be evil.” Larry Page and Sergey Brin interpreted the pledge this way in a letter they wrote before their 2004 initial public offering: “We believe strongly that in the long term, we will be better served—as shareholders and in all other ways—by a company that does good things for the world even if we forego some short-term gains. This is an important aspect of our culture and is broadly shared within the company.” They de?ned good behavior as delivering unbiased search results and not accepting payment for advantage in listings. They vowed to clearly label advertising, comparing their policy with newspapers’ rules. They set themselves apart from marketers, saying: “We believe it is important for everyone to have access to the best information and research, not only to the information people pay for you to see.” One could see their covenant on evil either as the height of hubris— Google declaring itself the headquarters of corporate virtue—or as a case of saying what should be assumed. It necessarily raises questions about whether Google is living up to its credo. Google has censored search results in China, arguing that it is better to bring a hampered internet there than no internet at all. I don’t agree and believe that Google has more power than it knows to pressure countries around the world to respect openness and free speech. Google, like Yahoo, has handed over information to governments—Google in India, Yahoo in China—that led to users being arrested simply for what they said. As an American and a First
100
Amendment absolutist, I’d call that evil. I think that Google’s lack of transparency about advertising splits is not evil but is also not virtuous business. Some would argue that Google is the bad guy for making money off news headlines while news organizations are struggling; I disagree and say that Google is doing news sites the favor of sharing audience. Some would say that Google can do evil with the private information it has about our searches, clicks, and even health history; I don’t think we’ve seen evidence of misuse yet. Is Google a monopoly? In 2008, as the U.S. Justice Department began an antitrust inquiry into Google’s deal to sell ads for Yahoo, New York Times columnist Joe Nocera reported that Sm had ?led a complaint against Google for raising the company’s ad rates prohibitively high. Google’s algorithms and employees found that Sourcetool did not meet its standards; it resembled a spam site, whether or not it was one. The rate increase was Google’s way of shooing off the site. Sourcetool disagreed and said Google was ruining its legitimate business. The implication was that Google could wield the power of the monopoly. But in the Google age, nothing is as it seems. The issue is not that Google is a monopoly but that it has become the marketplace—the best place for us to ?nd information and for advertisers to ?nd us—as newspapers were in their time and as craigslist is today. Marketplaces have the power to unilaterally charge what the market will bear. craigslist sets most of its ad rates to zero. Google says it doesn’t set rates but enables the market to do the job in auctions. Except in the case of Sourcetool, Google did unilaterally set the rate. The question is whether we trust Google with the power to do that. Is Google a monopoly? Not yet. The next question is whether Google can live by its golden rule as it grows huge and gangly—as middle managers start second-guessing their bosses, as bonuses and greed or simple self-interest overtake the gospel according to Google. Time will tell. Is Google evil then? On balance, I don’t think so. But its day is still young. At least Google is trying to be good. That’s more than one can say for some companies I’m sure we both could name. Wouldn’t other companies do well to make the same pledge on evil? It should be chiseled over doors on Wall Street. If only, in the poisoned process that led to the ? nancial crisis of 2008, enough people had asked whether seeking and issuing toxic mortgages and making and selling toxic assets were evil—instead
Jeff Jarvis
101
of someone else’s problem—I wonder whether we’d have reached that nadir. Imagine if in cable company meetings on pricing and bundling or restricting internet access someone were to ask: Is this the best we can do for our customers? Are we exploiting them? Is this evil? Imagine if someone were to ask at the meeting where airlines chose to ?ght a New York State law requiring that passengers be given clean air and water: Is this any way to treat our passengers? Aren’t we being evil? I wouldn’t much like to be that person—Mr. Goody-Goody, director of whistle-blowing, vice president of virtue. But I do believe that if companies were to ask themselves— and employees were empowered to ask—whether they were being good or evil to their customers and communities, they would often make different decisions. It’s not a bad rule. Wal-Mart made news early in 2008 when it sued a former employee who had been hit by a truck and left severely brain-damaged. The store wanted to recoup what it had paid for her care after she won a $1 million judgment against the trucking company. After legal fees, the victim received $417,000; Wal-Mart sued to recover $470,000, which would have left the employee’s family with nothing to pay for nursing-home care. Wal-Mart was apparently within its legal and contractual rights to recover money; that’s what the ?ne print said. But if just one person had asked the right question in the memos or meetings about this case—Is this evil?—the company would have saved itself horrible publicity on network news, in papers, and in blogs from people who used the story as exhibit A, proof that Wal-Mart is evil. Eventually, the company backed down and did the right thing: It dropped its suit against the brain-damaged woman. But the PR damage cost more than the money at stake. “Don’t be evil” is good business. That was the point made by Umair Haque as he excoriated Facebook later in 2008 for preventing Google from using Facebook members’ data (with their consent). On his Harvard Business Review blog, Haque called Facebook evil. That’s a bit strong, I’d say, but he was making a business point: “What’s really going on here? There’s a massive tectonic shift rocking the economic landscape. All these players are discovering that the boardroom’s ?rst and most important task is simply to try always and everywhere [to] do less evil. In the dismal language of economics: as interaction explodes, the costs of evil are starting to outweigh the bene?ts.”
102
Let’s repeat that and dub it Haque’s Law: As interaction explodes, the costs of evil are starting to outweigh the bene?ts. That, I think, is what Google is talking about when it promises not to be evil. It is not a campaign pledge or a geeky Bible lesson about good and bad. It is a calculated business rule: When people can openly talk with, about, and around you, screwing them is no longer a valid business strategy.
New Speed
Answers are instantaneous Life is live Mobs form in a ?ash
Answers are instantaneous
Google has spoiled us rotten. Think back to the time before Google—it was only a decade ago—and remember the mines you had to dig to ?nd any bit of information. Good God, we actually went to libraries. We waited for answers and went without them. Now I ask Google a question, any question, and it brags that it has given me the answer in fractions of a second. I wanted to tell you just how fast that is compared to, say, the blink of an eye. So what did I do? Of course, I asked Google how fast an eye blinks and in .3 seconds it told me that a blink takes .3 seconds. One of Google’s own principles—the “10 things Google has found to be true”—is: “Fast is better than slow.” A pillar of its design principles—from Google’s list of what makes a design Googley—is: “Every millisecond counts. . . . Speed is a boon to users. It is also a competitive advantage that Google doesn’t sacri?ce without good reason.” Speed is a tenet of the Google religion. Google has made us an impatient people, more than we know. If we can get any of the world’s knowledge in a blink, why should we wait on hold or in line or until your office opens? Why should anyone give us incomplete information when completeness is a search away? We want what we want, and there’s no reason we shouldn’t have it—now. Every industry is affected by this new speed. Fashion—as practiced in international chains such as Zara and H&M—reacts to new styles overnight. A trend comes off the runway and it’s imitated—?attered, that
104
is—in a ?ash. Information on what is and isn’t selling is fed back constantly so stores can adjust their stock and even the companies’ manufacturing and design. Speed becomes not only a competitive advantage but also a strategic necessity. The more quickly businesses can adjust to customers’ actions and desires—the more quickly they can learn from them and try to stay ahead of them—the better business will be. A lack of speed is a strategic disadvantage. Many industries are saddled with slowness because they are trapped by atoms and complexity. Automobiles are fashion products but because their machinery and supply chains are so complex, they cannot exploit new trends (and gas prices) until the trends are already out of date. (Is there an alternative? I’ll brainstorm about that in the chapter, “The Googlemobile.”) The book publishing industry is shamefully slow. I negotiated the contract for this book about a year before you got it in your hands (and by the way, I’ve been meaning to thank you for picking it up). Th at’s damned speedy for a book. As other forms of knowledge, entertainment, and content creation speed up, so must books. (I’ll explore that, too, in the chapter, “GoogleCollins.”) Education prides itself on not being speedy. As an academic, I appreciate the virtues of deliberation, of ideas being reviewed and challenged, of knowledge fermenting over time. But those of us who teach students in rapidly changing arenas (I teach digital journalism) must get better at keeping up with—no, at getting ahead of—our students, industry, and society. Perhaps only religion can claim exemption from the imperative for speed. If any institution relies more on permanence than hastiness, God’s does. Google, like God, values permanence. In its search results, Google gives more credence to sites that have been online long enough to build a reputation over time via clicks and links—this is the essence of PageRank. As a result, Google’s search has been better at delivering completeness and relevance than currency. Google is not great at surfacing the latest links on a topic. Google has fresh links in its database because it constantly and quickly scrapes the web to ?nd the latest content, but until those new entrants gather more links and clicks, it’s hard for Google’s algorithms to know what to make of them. Could this be a chink in Google’s armor?
Jeff Jarvis
105
Life is live
Just as Google and the rest of us start to get our hands around currency— ?nding the latest—the web speeds up even more. The internet is going live. I have broadcast live video to the world on the internet from my Nokia phone—no satellite truck, no microwave hookups, no broadcast tower or cable company, just me and my phone, live. The next time a big news event happens—a 9/11 in New York, a 7/7 in London, or an earthquake in China—witnesses will have the ability not only to capture but also to share with the world what they see as they see it. Live video from witnesses will have a profound impact on news networks. They have begged witnesses to send in their tips, photos, and videos—after the fact. When a student at Virginia Tech University went on a shooting spree in 2007, a fellow student recorded the sound of the shots with his camera-phone. He sent the video to CNN, which took more than an hour to vet it and get it on-air and online. If that student had been broadcasting using a phone on live video services such as Qik .com and Fm, he wouldn’t have sent anything to CNN but would have been sharing the video on his own. CNN’s choice would be whether to link to the student’s broadcast or embed it on its web page or in its broadcast. It could not delay the decision, for then the live video would not have been live anymore. When China’s Sichuan Province suffered its horrendous earthquake in May 2008, people who felt it ?rsthand shared their experience via Twitter, a microblogging platform that enables users to send and receive 140-character-long updates to friends who follow them on the web or via short-message services on their mobile phones. Twitter was cofounded by Evan Williams, one of the creators of the company that built Blogger, which revolutionized publishing. Now he has taken publishing mobile and live. I was shocked that this service, just two years old, had spread to China—but then, I, too, sometimes forget the internet’s ability to spread in an instant, distance be damned. What isn’t shocking is that people in the quake zone would use Twitter to update friends. That’s what it is made for. If I were going through a quake, I’d want to tell family and friends that I was safe, wouldn’t you? Twitter is becoming the canary in the news coal mine. Developers at
106
the BBC and Reuters picked up on Twitter’s potential and created applications to monitor it for news catchwords such as “earthquake” and “evacuate.” Journalists search Twitter to ?nd witnesses to interview and quote. During the Sichuan quakes, Twitter user casperodj wrote, “CREEPY! while i’m typing, there’s an aftershock hitting!” News organizations also search Flickr, YouTube, Facebook, and blogs to ?nd photos and videos that witnesses record, long before professional photographers arrive. Imagine the problem the live web presents to Google: How can it search for and ?nd things as they are happening? Oddly, Wikipedia can be quicker at updating current information than otherwise-speedy Google. It carried the news of Tim Russert’s and Paul Newman’s deaths before major news sites. During momentous events such as the 2004 tsunami, Wikipedians maintained entries with up-to-the-minute news. In the John Henry duel of man and machine, it’s nice to see man winning one. Perhaps we need more human-powered means of recognizing what’s new and what’s hot—that is what the search service Mahalo contends and that is a core value of human-powered aggregator Digg. There is a business opportunity in ?nding currency—complementing Google’s completeness—for news organizations, industry trade groups, aggregators, and bloggers. Live brings an important bene?t to the web: It makes the internet interactive, person-to-person, nose-to-nose. When something is happening live online, we can have conversations around it, we can share the same experience and discuss it, we can in?uence events. But it also makes the web perilous for businesses being talked about—unless they have the facility to listen to and join the conversation as it happens.
Mobs form in a ?ash
In this live connection machine, people of similar interests and goals—call them communities or call them mobs—can ?nd each other, coalesce, organize, and act in an instant. Howard Rheingold dubbed them Smart Mobs in the title of his 2002 book. Rheingold chronicled the fall of Philippine president Joseph Estrada at the hands of a smart mob of tens of thousands who were gathered together in only an hour by SMS messages on phones that told them to “Go 2 EDSA,” an address in Manila, and to “Wear blck.” On a much less grand and profound scale, I watched Twitter form
Jeff Jarvis
107
mobs at the South by Southwest conference in Austin in 2008 after attendees excitedly swarmed to the most anticipated party—Google’s, of course—only to ?nd a line three geeks thick running three blocks long. One of those would-be partiers, Gary Vaynerchuk, a tech-savvy wine merchant and video blogger you’ll hear from later, in the chapter on retail, decided to chuck the Google party and make his own. He used his phone to send a message to Twitter asking who wanted to join him. Vaynerchuk already had a few thousand friends following him and scores of them were in Austin. It helped that Vaynerchuk had shipped a few cases of good wine to Texas. A party formed. On Twitter, I watched as one and then another and then another of his friends told their friends they were heading to the party. It came together in minutes. Not long after this episode, I saw tech blogger Michael Arrington, who runs the powerful TechCm, complaining loudly on Twitter—as best he could in 140-character bursts—that his Comcast internet connection had been down for 36 hours. He gave us a serial narrative about his time on hold and how he was told this was a California-wide issue (though fellow Californians replied on Twitter that they had no problems). Arrington went to a friend’s house to get on the internet and Twittered that he would use his blog to make Comcast miserable. I linked to this on my blog and speculated that with Arrington’s reach, he’d gather a Twitter mob in an instant. Something surprising happened instead: Comcast called Arrington and sent technicians out to ?x the problem. They had monitored Twitter and read about his difficulty. Other bloggers and Twitterers were dubious and said so, but a Comcast rep responded to them on Twitter, proving he was there and listening. Comcast knows that it has to be on top of the conversation as it happens. Every second counts. The internet has caused you to lose control of so much—brand, message, price, competition, secrecy—but more than anything, you’ve lost control of timing. You can no longer decide when to put your story out or when to answer critics. You can’t subject your customers to waiting on hold—no matter how often you tell them that their call matters to you—without them complaining, revolting, and leaving quickly and publicly. The idea of holding back products and popping them out as surprises insults your customers (well, unless you’re Apple). The earlier they’re involved in your process, the better. The internet has changed the speed, the rhythm, and the process of business and next will do the same to government.
108
When customers come looking for you on Google, you’d better have answers to their questions on your web site before they are asked. When customers talk about you in public, you’d better have the means to hear and respond. It’s simple for a competitor with a better answer to steal your customers in a ?ash.
New Imperatives
Beware the cash cow in the coal mine Encourage, enable, and protect innovation Simplify, simplify Get out of the way
Beware the cash cow in the coal mine
Sometimes, success can blind you to the oncoming possibility of failure. And fear of failure can keep you from success. When I was TV critic for TV Guide in the mid-1990s, it still sold more copies in a year than any magazine in America. But it was slowly fading, stuck in the ?rst stage of death: denial. Its circulation had fallen from more than 17 million a week to 15 million, then 13 million while I was there (entirely the fault of my bad taste, of course). TV Guide couldn’t keep pace with the explosion of television: Dozens, then hundreds of channels wouldn’t ?t on the magazine’s little pages. The editors tried more than once to produce a larger version with big, colorful grids, but the old readership of the magazine was stuck in its ways, addicted to listings. There was the other problem: The readers were old and getting older. As I remember, when one readership survey came back with less than the usual level of response, a follow-up study was performed to ?nd out why people hadn’t completed their questionnaires. The answer: Most of the folks who hadn’t responded had died. Meanwhile, competition only grew. Listings were appearing on TV and computer screens, forcing TV Guide to enter those businesses. Newspapers’ TV listings had long been perceived as free by readers. There was discussion of syndicating TV Guide’s listings to papers—which, using Googlethink, could have spread the brand—but the magazine feared that
110
would cannibalize the core product. Beware any strategy built on protection from cannibalization, for it probably means the cannibals are at the door and ready to eat you for lunch. Fast-forward a dozen years, long after I’d left. In 2005, TV Guide transformed into a regular-sized magazine with big, colorful grids. At the same time, it eliminated almost all of its 140 local editions. It raised its price. And it lowered the circulation it guaranteed advertisers to 3.2 million, a dizzying drop from its high of 17 million. About then, I had lunch with my old boss from TV Guide, who had also moved on. I said the company had ?nally done everything we should have done a dozen years before: putting out the right product, reducing costs, and getting realistic about its legitimate circulation. Why didn’t we do that? I asked rhetorically. She responded: “You know why. Because it was a cash cow.” Cash ?ow can blind you to the strategic necessity of change, tough decisions, and innovation. Take the fate of TV Guide as a warning: Beware the cash cow in the coal mine. How many companies and industries fail to heed the warnings they know are there but refuse to see? The music industry is, of course, the best example of digital dead meat. Detroit waited far too long to make smaller cars and pursue electricity as a fuel. Many retail chains opened stores online but stopped there, not seeing opportunities to forge new relationships with customers as Amazon had. Telecom companies were blindsided by the emergence of open networks that undercut their businesses—even though those networks operated on the telecom companies’ own wires. Ad agencies kept trying to forestall the reinvention of their industry, still buying mass media even as more targeted and efficient opportunities grew on the internet. News executives thought they could avoid change and even believed they should be immune from it because they were holders of a holy ?ame: Journalism with a capital J. They ?nally woke up when they watched the giant Knight Ridder chain get gobbled up by the McClatchy chain, which like every public company in the sector lost billions in market value. Now newsmen are willing to change, but it may be too late for them—as it was for the one-time giant TV Guide. They lost the next generations of customers. They lost their destinies because they wanted to save their pasts. Protection is not a strategy for the future.
Jeff Jarvis
111
Encourage, enable, and protect innovation
Google is well-known for giving its technical employees the chance to use 20 percent of their time to work on new ideas, new products, and new businesses. “A license to pursue your dreams,” is what Google’s Marissa Mayer called the policy in Fast Company magazine. A 2008 article in the Harvard Business Review by Bala Iyer and Thomas H. Davenport quoted a Google employee explaining on his blog: “This isn’t a matter of doing something in your spare time, but more of actively making time for it. Heck, I don’t have a good 20 percent project yet and I need one. If I don’t come up with something I’m sure it could negatively impact my review.” Google requires employees to innovate. It’s part of the job. It’s how workers are valued. It’s how Google grows. In 2006, Mayer said that half the new products and features launched by Google in the last six months of 2005 came from work done under the 20 percent rule. I’m not saying that every company is like Google and could or should implement its 20 percent rule. Even Google doesn’t extend the offer and expectation to all its employees (Iyer and Davenport say that’s a mistake). I understand how this policy could be impractical. Maybe you’ve already cut so close to the bone that you fear this reallocation of time and productivity could throw you over the edge. Maybe your employees aren’t built to invent—after all, not every company is populated with Ph.D.s in rocket science like Google is. But anyone anywhere in a company could have a brilliant idea. How do you hear it? How do your employees propose new products, methods, or systems—through the dead-end suggestion box? How will they be rewarded for innovating? Who will try to stop them? Do you have a culture of innovation or is this just something you say at management meetings? You need to encourage employees to suggest new ideas—even suggestions that will cannibalize, destroy, and rethink your business. It’s better for you to disrupt and cannibalize yourself than for a competitor to do it to you. Just as Dell, Starbucks, and Sm maintain versions of their ideas platforms for employees and as Best Buy has BlueShirt Nation, its online community where employees solve problems, so does Google maintain a place for ideas. “It’s like a voting pool where you can say how good or bad you think an idea is,” Mayer told Fast Company. “Those comments lead to new ideas.” Add the lessons of openness and transparency to
112
the need for innovation and you will end up building spaces where employees can share ideas and improve them. Procter & Gamble’s A.G. La?ey said in Strategy + Business that “a practice of open innovation” (his emphasis) with “a broad network of social interactions” is critical. “The idea for a new product may spring from the mind of an individual, but only a collective effort can carry that idea through prototyping and launch.” There are different schools of thought about ownership of ideas. La?ey emphasized collective effort. Mayer said that in Google’s “incredibly open culture” the company tries to avoid territoriality and to “give ideas credit, not credit for ideas.” Nike understands the need to own and protect an idea. In 2008, I attended a brainstorming session at Nike aimed at ?nding better systems to encourage employees to contribute to their communities. We heard from four employees who were already doing this on their own. One of them, footwear designer D’Wayne Edwards, created a contest for young and aspiring designers. Edwards had many agendas: He wanted the company to nurture designers like him. He had grown up dreaming of creating sports footwear. Mentors gave him guidance and breaks, which led to his dream job at Nike. He wanted to give back. He also believed that Nike owed a debt to the urban young people who had elevated the company’s brands and made them hot. And he believed his contest would help the company ?nd and develop talent with new ideas. Edwards said the contest’s winners, though just teenagers, had enough talent and innovative spirit to start working at Nike the next day. The group discussed Edwards’ process in hopes of replicating—or at least not ruining—his innovation and enthusiasm. We heard his fears. Edwards didn’t want to be stopped, so he didn’t start by asking permission. At Nike, they said, employees are told it’s better to seek forgiveness than permission. Just do it, you know. Edwards also didn’t want someone taking over his project, taking credit for it or corrupting it; he demanded ownership. Edwards needed Nike because its brand would attract young people and inspire them. Nike was his platform. To use the brand, he had to get his project vetted by lawyers, but he picked ones he knew would help. It was a rogue operation—innovation is, by de?nition, rogue. So here was Nike convening a meeting of insiders and outsiders to ?gure out how to nurture more rogues. Bureaucracies, task forces, org charts, and formal processes do not
Jeff Jarvis
113

返回书籍页