Aug 282014
 

There’s a great piece in The Atlantic this month on advertising, the internet’s “original sin”, by MIT’s Ethan Zuckerman. Advertising, he argues, has stripped us of our privacy, to the point of normalizing constant online surveillance. Add to that the fact that it’s not yet clear how well even these sophisticated data-heavy ad products are at actually making money — at least for companies without the scale of a Facebook — and it’s hard to disagree with the sentiment that the internet deserves something better.

But what?

Here I want to push back a bit. The example that Zuckerman cites is Pinboard, an online bookmarking service that charges its users. (Full disclosure: I am pretty sure I’m the last active Delicious user on the planet.) Pinboard has an appealing premise:

Why Pay For Bookmarking?

It boils down to this: running a web service costs money. If you’re not paying for your bookmarking, then someone else is, and their interests may not be aligned with yours.

This is what Zuckerman has in mind when he writes:

One simple way forward is to charge for services and protect users’ privacy, as Cegłowski is doing with Pinboard. What would it cost to subscribe to an ad-free Facebook and receive a verifiable promise that your content and metadata wasn’t being resold, and would be deleted within a fixed window? Google now does this with its enterprise and educational email tools, promising paying users that their email is now exempt from the creepy content-based ad targeting that characterizes its free product. Would Google allow users to may a modest subscription fee and opt out of this obvious, heavy-handed surveillance?

I should say, I love this option, and think it would be an improvement from the status quo. But I’m not sure this is actually the most plausible alternative to ad-supported sites and services.

Let’s take the hypothetical further: what if tomorrow advertising were no longer an option for web services and content providers? We’d see some users paying up for things like Pinboard, certainly. Perhaps even for a Facebook subscription.

But I’d argue for another possibility: that we’d continue to get lots of these services for free, minus a modest hosting fee paid to a separate party.

The site you’re reading right now runs on WordPress, an open-source content management system for which I pay nothing. My only cost is a few dollars a year to a hosting provider to keep the site online. This hosting provider has no connection to the company behind WordPress* or the community of WordPress developers who help maintain it.

That’s subtly different from the Pinboard model (which again, is a great model) in that the software comes free. All I’m paying for is storage, and storage is cheap.

If suddenly advertising weren’t an option, whether because it turned out to be a terrible business model or because we decided we cared about privacy, my hope is that something closer to the WordPress + hosting model might spring up to replace it.

You’d pay a few dollars a month for some storage somewhere, which in turn would offer, at a click of the button, installation of the various open source software packages to support things like social networking. These services would no longer be centralized, and so would work a bit more like email or RSS, but fundamentally most users probably wouldn’t even recognize the difference.

This distinction matters, in part because I suspect it’s bound to disappoint some people. For those interested in privacy, both alternatives are good. For those interested in as many people using the internet for as many things as possible, the cheaper, open alternative is better. But for those whose real interest is in getting paid, the open alternative is a disaster.

That’s not what Zuckerman or Pinboard creator Maciej Cegłowski are about. But my sense is there’s a serious faction of web-ad haters for whom this is the primary gripe. This is particularly true on the content side, where — as opposed to for software — an increasing number of workers find their skills no longer in demand.

To this group, the idea of customers just forking it over already feels righteous. And so it’s worth noting that, if advertising went away, that’s not mostly what would happen.

In fact, the shift to “open” content would work even more seamlessly than for web services. Making consumers pay to access any professional content might increase purchases on the margin, but more than that it would shift attention away from the pros and toward the amateurs. Independent blogging would come back in vogue, and we’d discover that, while the average amateur can’t create as engaging a list of images as the average pro, thousands of amateurs giving it a try will in a lot of cases produce something about as good. Luckily, the internet is great at filtering up that one good one, and bringing it to everyone’s attention. This model doesn’t work for everything, particularly certain expensive and time consuming kinds of journalism. But for, say, political commentary, it works better than lots of paid commentators care to admit.

All of which makes me agree even more wholeheartedly that ad-backed business models aren’t an ideal way of supporting the internet. But if they suddenly went away, don’t expect me and everyone else to start paying up.

*It’s true that WordPress wouldn’t be where it is without Automattic, the company its founder created around it. But that’s not the only model for open source development. It’s certainly possible to offer mature, first-class open source software without a single company at the center, driving the initiative. My hope is that this is what we would see increasingly on an internet that relied less heavily on ads.

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Aug 222014
 

Mobile apps are dominating media consumption, but getting users to use your app is really, really hard:

U.S. users are now spending the majority of their time consuming digital media within mobile applications, according to a new study released by comScore this morning. That means mobile apps, including the number 1 most popular app Facebook, eat up more of our time than desktop usage or mobile web surfing, accounting for 52% of the time spent using digital media. Combined with mobile web, mobile usage as a whole accounts for 60% of time spent, while desktop-based digital media consumption makes up the remaining 40%.

Apps today are driving the majority of media consumption activity, the report claims, now accounting for 7 our of every 8 minutes of media consumption on mobile devices. On smartphones, app activity is even higher, at 88% usage versus 82% on tablets.

So apps are where media gets consumed. But that doesn’t mean media companies should throw all their efforts at mobile apps. Because getting users to download and use those apps is incredibly difficult:

Only about one-third of smartphone owners download any apps in an average month, with the bulk of those downloading one to three apps. …a “staggering 42% of all app time spent on smartphones occurs on the individual’s single most used app,” comScore reports.

For most media companies, taking advantage of mobile apps means optimizing content for the mobile apps of Facebook and Twitter, and for email. That might not sound ideal — no one wants to be dependent on a monolithic third party like Facebook to deliver their product — but that’s how it is, for now at least.

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Aug 052014
 

To hear pundits talk about it, it’s easy to conclude that we have no idea what policies will help with economic growth. After all, we’re debating whether we’re stuck in stagnation or about to witness a new era of technology-led expansion. But there are a set of policies the majority of economists believe will be growth enhancing, and — spoiler alert — cutting taxes isn’t on the list.

This is from a Foreign Affairs essay on automation and the economy by Erik Brynjolfsson, Andrew McAfee, and Michael Spence:

As for spurring economic growth in general, there is a near consensus among serious economists about many of the policies that are necessary. The basic strategy is intellectually simple, if politically difficult: boost public-sector investment over the short and medium term while making such investment more efficient and putting in place a fiscal consolidation plan over the longer term. Public investments are known to yield high returns in basic research in health, science, and technology; in education; and in infrastructure spending on roads, airports, public water and sanitation systems, and energy and communications grids. Increased government spending in these areas would boost economic growth now even as it created real wealth for subsequent generations later.

That’s not to say growth is primarily a factor of policy. No doubt it’s exogenous to a significant degree. But that sort of agenda would almost certainly help.

The essay overall is a concise summary of the global pressures on labor (and even capital) created by digital technologies, and for the longer version Brynjolfsson and McAfee’s recent book The Second Machine Age is also quite good.

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Jul 042014
 

Screen Shot 2014-07-03 at 11.32.33 AMThe New York Times has a fun interactive that lets you compete against an algorithm designed to predict which tweets will get the most retweets. The Times also has a story about the algorithm and its implications. Its takeaway:

That an algorithm can make these kinds of predictions shows the power of “big data.” It also illustrates a fundamental limitation of big data: Specifically, guessing which tweet gets retweeted is significantly easier than creating one that gets retweeted.

Sure. But predicting which of two phrasings will get the most retweets is still plenty difficult, and as part of my job is social media, it’s totally a “skill” I supposedly have.

So I was pleased to beat the algorithm 18 to 13. But even in victory, it’s clear that this is a losing gambit for me, over time. First off, there’s a chance I just got lucky, especially since the story says the algorithm usually guesses right 67% of the time. (I’m not sure how the interactive works, and whether they picked a single set of harder examples, if mine were different from others, or what.)

But any case, even if I wasn’t lucky, there’s a single question that to me is the bottom line in terms of humans’ race with machines: which of us do you think will get better faster?

If you do this same kind of test in two years, how much better will I be? Sure, maybe I’ll have improved a bit (although maybe not). But with more data at its disposal, faster processing power, new statistical techniques, etc. the room for an algorithm to improve is far greater.

The same holds for many other kinds of forecasting. That humans still beat algorithms at predicting, say, geopolitical events (I’m making this up) is interesting. But even as we get better, our progress is incremental, linear. It’s the algorithm that’s poised to win most improved.

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Jun 132014
 

Having just finished the Steve Jobs bio, and so freshly reminded of how Apple borrowed the idea of the graphical user interface from Xerox to great effect (only to later turn around and call Microsoft a thief for doing the same), I enjoyed this back and forth on Xerox. It’s a piece of an extremely long Q&A between Felix Salmon and Jonah Peretti about… everything.

JP: The thing is, if you care about having an impact on the world, the too-early mode is the highest leverage point because you can have an idea, build a mock or a prototype of it, and then have those ideas find themselves in products that other people build that then scale up to massive.

FS: You’d rather be Xerox than Apple?

JP: People always talk about Xerox as a sad story.

FS: Maybe.

JP: I mean some people do. If all you value is money, then it’s a sad story. But if you think that the graphical user interface is a cool thing and you worked on the graphical user interface at Xerox, you can feel like, “This has a big impact on the world.”

FS: It’s a way of looking at the world through a lens of capital rather than labor. I’m sure the people who invented the graphical user interface at Xerox are doing very well for themselves right now.

JP: Right. And some of them have a sense of personal satisfaction that they had a big impact, even if they didn’t profit from it at the scale that they could have.

The history of the tech industry is full of case studies where we ask why some once great company couldn’t capitalize on a breakthrough it had created. It’s a fascinating question, but it’s worth remembering that it’s a question for firms more than it is for people. It’s easy to see why a firm would want to capture some of the financial value of a breakthrough, but for many people that’s not necessarily the goal. Sure, some great technologists truly are motivated by getting their innovations into as many hands as possible. But not all of them.

Sometimes, as Peretti says, the true impact gets made by the innovators who are too early, while the riches go to those who follow later. For lots of people, it’s the impact that matters.

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Apr 262014
 

tuxWith the FCC reportedly considering allowing paid “fast lanes” for internet traffic, the principle of net neutrality looks more at risk than ever. One of the big concerns of net neutrality advocates is that its absence might empower incumbent firms over newer, smaller, more innovative ones. That is a very valid and important concern.

But small firms represent only one sort of innovator, and arguably not the one most at risk from pay-to-play operations.

Here are a couple examples of the protect-the-startups meme in recent coverage. From NYT:

Consumer groups immediately attacked the proposal, saying that not only would costs rise, but also that big, rich companies with the money to pay large fees to Internet service providers would be favored over small start-ups with innovative business models — stifling the birth of the next Facebook or Twitter.

And here’s an editorial from The Financial Times, arguing that net neutrality may no longer be the right goal:

The fine detail of the FCC’s decision will matter. The regulator will have to ensure its reforms do not create barriers to entry for small and innovative companies – the internet giants of the future.

At The New Yorker, net neutrality advocate and media scholar Tim Wu goes a bit broader:

We take it for granted that bloggers, start-ups, or nonprofits on an open Internet reach their audiences roughly the same way as everyone else. Now they won’t.

To the extent that we can protect innovative new firms from being crushed by incumbents before they get off the ground, that’s great. But the next Facebook or Twitter, while at risk, also has the ability to raise capital and spend it on faster content delivery. (The details of the FCC regulations aren’t yet clear but it sounds like there will be a requirement that similar pay-to-play offers be available to all comers.)

An even bigger risk then is for non-professional content producers and for peer-to-peer, commons-based production. The bloggers Wu mentions could fall into this category, though if they’re using a proprietary platform like Tumblr or Medium they might not. A peer-to-peer project like Wikipedia has its nonprofit arm, but little ability to raise the capital necessary to ensure delivery. Less organized peer production efforts would be at even greater risk. A distributed network of independent bloggers might produce great content, but that content will be delivered slower than content produced by professionals, or by amateurs who’ve bought into a commercial platform. Suddenly, peer production is at a huge disadvantage relative to commercial production unless it has the weight of a commercial enterprise behind it.

The promise of large-scale production outside of firms or governments, from open source software to Wikipedia to independent blogging, was once one of the greatest promises of the internet. And it is even more at risk from the legalization of pay-to-play than are startups. Sure, incumbents might lean on startups who can’t afford to pay for faster delivery. But just as worrying is the thought that startups might raise venture capital to pay for faster delivery in order to crowd out commons-based peer production.

The net neutrality debate isn’t just about small vs. big. It’s also about commercial vs. the commons.

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Apr 052014
 

NYT now

There are few if any media outlets that can really go up against the big social networks and have a prayer of stealing away attention. The New York Times might be an exception.

When I first heard about NYT Now I didn’t think twice. It seemed like yet another addition to an already complicated, expensive offering. And its name suggested the reason I didn’t need it: speed is not the primary thing I’m looking for in consuming the Times’ content.

But a piece at Nieman Lab has me rethinking my skepticism:

NYT Now can be seen in part as an Empire Strikes Back play: It aims to take readership back from Twitter and Facebook.

In most cases, for most publications, this will be a losing battle. Still, I can’t help but feel that the moment is ripe for some modest progress here, and The New York Times might be the ones to do it.

I’m not the only one backing away from the social platforms, turned off by the chattering torrent therein. It seems harder every day to maintain a decent signal to noise ratio, which in theory is something the platforms themselves could change. They are developing better filters, and will continue to do so. But with their entire business strategies hinging on more eyeballs on more content for longer, they have a hard time actually making progress on this problem. Essentially, I want tools that make it easier for me to spend less time on Twitter and still find all that I want. That’s in conflict with Twitter’s business plan.

Of course, The Times wants eyeballs on its content for as long as possible, too. But the fact that its business model now includes a subscription component helps here. Once I’m paying for the content, the economics of providing a product I’m not obsessively checking constantly work better. So I’m hopeful that The Times might successfully offer a news feed app that works without being a hopelessly addictive time suck.

A big piece here is that NYT Now plans to include some stories from elsewhere, overcoming one of the biggest barrier to news apps in general, which is that no single publication can ever have all the content you want to read.

There’s also the price. My hesitation in paying for The Times is well documented, and can be summarized as:

1) As much as I like the Times, I don’t need it. And I’d rather be asked to support good journalism than forced to pay for it.

2) If I am going to pay money to support good journalism, I want to know that my money is going directly to that cause.

I wish The Times were structured more like The Guardian, with an endowment funding its efforts. But that’s not the case, and I’m more amenable to paying for it than I was a couple years ago, for various reasons. But at nearly $9/week, the price for the full digital subscription is still high for me.

My basic benchmark in terms of what feels reasonable is Netflix and Spotify: the $7-10/month range. Sure enough, NYT Now falls squarely in that range, at $2/week. That’s getting cheap enough that I might pay merely to support the paper’s mission.

The final reason I’m excited is that I’ve found Circa’s Android app more satisfying than I would have thought, in large part because it is sparing with its notifications. (It seems to only push out truly major news, as opposed to The Times, which pushes alerts about the Final Four.) The presentation in Circa is so clean and condensed that it for the first time has me inclined to see real value in the news app, above and beyond the content, where previously it has always seemed that an RSS reader or Twitter handles the app layer just fine.

For all these reasons, I could see NYT Now working for me (once it comes out for Android). It’s a relatively inexpensive way to support good journalism, and a less noisy way to stay on top of the news as opposed to social media. And they’ve finally learned the lesson that aggregation doesn’t dilute the brand. I may finally have found a news app I want to pay for.

(Note: here’s another Nieman review.)

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Apr 042014
 

One of the most interesting bits of the debate over high frequency trading sparked by Michael Lewis’s new book is the question of why we should care that some Wall Street firms are ripping off other ones. One reason might be if Main Street’s money is disproportionately tied up in the funds that are getting ripped off. That raises the question of just who has how much money in the stock market. Not surprisingly, the vast majority of stock is owned by the wealthy.

Start with this overview of the stock market via Business Insider:

chart-of-the-day-who-owns-the-stock-market-november-2012The first thing to note here is how small the pension fund slice is, and how it has shrunk over time. So pensions make up a relatively small slice of stock ownership, but the average American still might be holding stock via a mutual fund or as individuals, right? Well, here’s a look at the percentage of Americans at each income level that own any stock or bonds, including via a mutual fund:

Screen Shot 2014-04-04 at 1.34.15 PM

 

And here’s a look at how much Americans have put away for retirement, by income level:

Screen Shot 2014-04-04 at 1.36.23 PM

 

 

 

 

 

 

 

 

 

 

As for the households piece, fewer and fewer Americans are investing in the stock market:

Screen Shot 2014-04-04 at 1.39.27 PM

So can we put this all together to get a sense of how much of the stock market is owned by whom? Here’s one attempt that goes beyond just stock by the Institute for Policy Studies via ThinkProgress:

Screen Shot 2014-04-04 at 1.40.48 PM

 

And here’s confirmation that that distribution holds for stock by The New York Times:

The richest 10 percent of households own about 90 percent of the stock, expanding both their net worth and their incomes when they cash out or receive dividends.

The point is clear: the vast majority of stock is owned by the rich, even once you take into account retirement funds. Of course, that doesn’t mean we don’t have to care about the stock market. Among other reasons, the small amount of money the non-rich have invested there represents a decent chunk of their wealth.

But it’s nonetheless worth keeping this distribution in mind when talking about who is ripping off whom in the stock market. For most Americans, the great economic injustice is stagnant wages, not high frequency trading.

UPDATE: Ben Walsh vs. Michael Lewis on stock ownership as it relates to HFT.

 

 

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Mar 192014
 

Interviewed by Goldman Sachs, he comes to much the same conclusion as I did in my previous post on the attendant fees:

Eric Posner: I think there could be some advantages of usingBitcoin over existing payment systems, but these advantages are not as obvious as they might seem. For example, probably themost compelling advantage is that Bitcoin transactions seem to becheaper. Existing payment systems are often quite expensiveeither because somebody effectively has a monopoly, there are alot of government regulations that are costly to comply with, or thecompanies that offer these services provide certain protectionsthat people want and are willing to pay for.In the case of Bitcoin as it stands now, these costs are largely avoided, at least to the extent that you can technically send bitcoins from one wallet to another wallet without incurring fees;no middlemen are required to do this. The problem is that mostpeople will end up relying on intermediaries when they use bitcoin,not in least part due to security concerns around storing bitcoin onhard drives that can crash, be hacked, or, as in one famous case,thrown away. Most people will buy bitcoins from exchanges and use bitcoin service providers like Coinbase or Bitpay to store their bitcoins and transfer money to somebody in another part of the country or the world. Then that person will maintain their bitcoinswith a service provider and/or will convert the bitcoins back into themoney they use. And perhaps the same or other intermediaries willprovide insurance or protection from exchange rate volatility. Whenyou throw in all of these things, the effective price of using bitcoinis going to be greater than zero. Is it going to be as much as itcosts right now to use your credit card or a bank wire? Maybe not, but it is too soon to tell.

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