Universality and Advertising

Here in Canada we frequently have debates about “universality”. For example, should the government give money to all elderly people (i.e. be a “universal” program), or just those who need it? Obviously the latter is cheaper. But it has this downside:  if a government program isn’t used by people who are fairly well off, then it will have little involvement from those members of society with the greatest impact and influence, who could keep the program healthy. The program will likely deteriorate because of the lack of powerful support from vested interests.

Now consider advertising on television. Here in North America, more and more people are watching programs other than through advertising-supported broadcast. The Sopranos initially airs on ad-free subscription channels (i.e. that the viewer must pay to see), then becomes available on ad-free DVD (that the viewer must pay to rent or buy), and then finally airs on advertising-supported broadcast (that the viewer pays nothing for). In the past, everyone watching a popular program like Friends would see the ads. Over time it will just be those who can’t or won’t pay to see the program ad-free. This audience will have less disposable income, and therefore be less valuable to advertisers, so that the advertisers won’t be willing to pay as much to have their ads shown. Ultimately this could threaten the very existence of ad-supported television.

(Diverting the most desirable customers from a market is known as cream-skimming.)

So how to solve this problem?

One way is to have ads be fairly innocuous. I don’t mind all the ads in the newspaper because I don’t have to read them unless I want to. Many ads on web pages also qualify as not particularly annoying. On free television today, by contrast, ads are inescapable unless you record the program on a VCR or DVR and watch it later. Video blog Rocketboom has lately incorporated advertising occasionally, but puts it at the end of the show so that viewers watch it only if they want to.

I think ad-supported television is going to have to try some new ways of making ads less annoying. A good start would be to cease the practice of having the audio louder than that of the surrounding program. But it would have to go a lot further than that.

Web 2.0 and the corporate market

Traditionally, new technology has been expensive. When it first becomes available to the public, it’s purchased only by those who stand to get so much benefit from it that spending the high price is justified. For instance, cellphones were originally used by people like real-estate agents who were highly mobile but still needed to be reachable by phone in order to make that $500,000 sale. As time goes on, the state of the art improves, making it possible to lower the price. So once the early adopters have all bought, the price is dropped in order to sell to the next tier of customers. Because each tier is bigger than the last, volumes go up and economies of scale also reduce the cost per unit. Eventually children start carrying cellphones. If a technology is applicable to both business and consumer use, initial sales are to business, and consumers buy later after the price has come down and the products have become largely idiotproof.

All familiar stuff, right?

Well, that’s not how it is in the world of Web 2.0.

The tools are cheap to begin with, and often free, and tend to be aimed at consumers — not surprisingly, because Web 2.0 is about individual empowerment, not about supporting command-and-control style corporate processes. I’ve heard people talk about selling Web 2.0 stuff to the corporate world and charging a lot of money that they’re not charging to consumers, but I don’t think they understand the corporate market today. Companies do not want to pay any more than consumers. And they like free just as much as everyone else does. There are some limited exceptions, e.g. a company may pay extra for a robust version of a tool, say something that’s hosted at a high-availability facility and has 24-hour support. Or they might pay for a copy to install on their own servers, behind their firewall. But they’ll only pay a reasonable premium for these things. If the premium is too high, they’ll just use the consumer version. Even if the consumer version has a usage limit, a corporate user may not be that much more likely to exceed it than anyone else, because the user is still just one person.

I guess this post continues a semi-theme in this blog: it’s not that easy to make a living from Web 2.0.

Hat tip to Toronto Wiki Tuesdays, a monthly event hosted by Sunir Shah and Martin Cleaver, for giving me a forum last night to articulate the above point.

Patron of the... blogs?

Let’s say I wanted to make a living as a blogger, or a musician, or some other media creator in a Web 2.0 world. How to do that, given that selling media products at a profit is getting to be difficult?

Well, if I had fans, I could be supported by a group of them who paid me a small amount every month (perhaps by automatic credit-card deduction). I could call them patrons of the arts, just as in days of old when a composer such as Mozart would have a patron such as Baroness von Waldstätten, except that I'd have multiple patrons. I’d publicize them on my website.

If I wanted to earn $100,000 a year, and my patrons were to pay me $10 a month (i.e. $120 a year), I'd need 833 patrons.

That seems like a lot of patrons to find. I can get away with fewer if some of them give more than $120 a year. So let me encourage the richer ones to give more, by giving them special recognition on my website and maybe other perqs.

Notice how this is getting to be just like, say, The Canadian Opera Company. The “Friends of the COC” has the following membership levels: Friend $100-199, Supporting $200-$499, Contributing $500-$799, Associate $800-1249, and Sustaining $1250-$1749. Beyond that there are the President’s Council (up to $9999) and the Golden Circle (gold level is $50,000 or more). Each step up gets you more goodies like invitations to working rehearsals, special events, use of the President’s Council Lounge at performances, etc.

Also, the COC’s new opera house is named the Four Seasons Centre for the Performing Arts, because the Four Seasons hotel chain gave $20 million for the naming rights. Perhaps my website could have the Larry Ellison Tribute Corner at the top (he co-founded Oracle Corporation and is a billionaire, plus he has a large ego).

In these new days of individuals’ doing the same things as organizations used to, why not?

The trick of course is to get people to part with their money.