The Fallacy of Reach in the Network

Mark CubanMark Cuban understands broadcasting, more specifically the value proposition of one-to-many. While he has his hands in many things, his fortune came through the sale of broadcast.com to Yahoo in 1999. He sold the company for $5.7 billion and the rest, they say, is history. So it’s really no surprise that Mr. Cuban is miffed that Facebook wants him to pay for the privilege of spamming sending messages to the many fans of his Dallas Mavericks. He told ReadWrite’s Dan Lyons that unless Facebook changes its current form, he’s moving his fandom to another form of social media: Twitter, Tumblr or even MySpace.

We are moving far more aggressively into Twitter and reducing any and all emphasis on Facebook,” Cuban says, via email. “We won’t abandon Facebook, we will still use it, but our priority is to add followers that our brands can reach on non-Facebook platforms first.”

Cuban and other corporate Facebook members are howling because new rules on the social network make it harder for brands to reach people without spending big money on sponsored posts.

That’s because in September Facebook changed the algorithm that controls which messages get through to which members. The result is that some brands a sharp drop off in the reach of their posts — as much as 50% in some cases.(Emphasis added)

His problem is with the word “reach,” a one-to-many marketing term that describes the size of one’s audience. It also conveniently dehumanizes that audience by turning them into numbers for the serving of oneself. This is highly problematic in the 21st Century, because our culture is now a network, not a potential audience.

The value of one-to-many is the origin of marketing, so its roots run deep in the soil of hierarchical economics. If you can make your pitch to enough people at the same time, all sorts of wonderful things can happen for you. P. T. Barnum knew this, and so does Mark Cuban. The trick, of course, is to buy your way — or manipulate your way — in front of enough people so that other economic laws can work on your behalf. As I’ve noted previously, a stage is the earliest version of this, whether that was a big rock; higher ground occupied by the toughest and meanest; or a fancy theater where elegant plays were presented. The contemporary list includes newspapers, radio and the ultimate, television.

A great many people view the Web as the latest version of one-to-many innovation, including Mr. Cuban, and this is the kind of naïveté that is causing many to question his smarts (Hey Mark Cuban: Of course Facebook is charging you — what did you expect?). This belief completely misses the point of the Web, however, and leads its believers into very unstable ground in terms of creating value via the network. I’ve been writing for years that the Web can be seen as a form of one-to-many — especially in times of crisis — but at its essence, the Web is a 3-way communications tool, the first of its kind in the history of humankind. It’s a network, not a playground for one-to-many manipulation.

The idea of “audience” assumes a choice to get up and leave, but the reality is that most don’t. Another assumption is that even those who do leave can be wooed back, because while the audience has choices, they are limited. None of this is true with the Web. Choices aren’t limited. The audience can talk back. And most importantly, they can talk to each other. This is “the Great Horizontal,” as described by Jay Rosen and others.

People who only function from a one-to-many mindset disrespect these attributes when they treat fans or followers as an audience. And it’s inevitable that marketers will do so. Inevitable.

I’m a pizza fan, and one of the earliest Pizza companies to explore the Web for “customer service” was Papa John’s. I love their pizza and was a willing participant in a Monday email that offered a special. Then, it became several days a week, and now it’s daily. The problem is that marketers can’t resist the opportunity to use ANY connection to sell their wares or increase those sales. What this does is destroy the specialness of that Monday coupon and turn Papa John’s correspondence into spam.

Like millions of others, I donated $10 to the Red Cross in the wake of Hurricane Sandy. This involved a text message to a universal code (90999). In addition to my receipt, I received a separate pitch for “Red Cross news,” up to 4 messages per month. Even charities can’t resist the science that for every X amount of requests, X number will say “yes.” This may be smart business, but again, it’s exploitive, manipulative and dehumanizing.

When I agree to “follow” someone via social media, the presumption is that I wish them to engage with me, big brand or otherwise. I’m also hoping to engage with them, although I’m not naïve. What I’m not doing is signing up for spam. The problem is that when this social engagement is granted, the one receiving this permission (e.g. “the brand”) can’t resist the broadcast axiom that power belongs to the one with the reach. “Once you agree to follow me,” this approach reasons, “I can send you whatever and how much ever I wish.” This then moves the brand’s messages into the category of spam.

Is there a form of “reach” at play in the network? Probably yes, but it’s certainly different than old school one-to-many. How should a brand like The Dallas Mavericks use social media for business purposes? I think we’re still writing the book on this one, but you’re safe actually engaging with people rather than throwing things at them.

Look, Mark Cuban is a good guy, and the Mavericks are my favorite pro sports team. He’s used social media to give tickets away, which is great, but it’s really no different than a radio promotion. If you want to use the Web that way, you know what? You should pay for it.

The times they are a-changing have changed

Steve Denning's newest bookHere are a couple of great lines from a Forbes article by Steve Denning, “Resolving The Identity Crisis Of American Capitalism:”

Once making money becomes the goal of a firm, companies and their executives start to do things that not only lose money for the firm but cause problems for the economy…

…Customer capitalism involves a shift (of) the focus of companies to delighting the customer and away from shareholder value, which is the result of delighting the customer.

The shift to customer capitalism doesn’t involve sacrifices for the shareholders, the organizations or the economy. That’s because customer capitalism is not just profitable: it’s hugely profitable.

The shift to customer capitalism does however require fundamental changes in management. The command-and-control management of hierarchical bureaucracy is inherently unable to delight anyone—it was never intended to. To delight customers, a radically different kind of management needs to be in place, with a different role for the managers, a different way of coördinating work, a different set of values and a different way of communicating.

The shift to customer capitalism also involves a major power shift within the organization. Instead of the company being dominated by traders and salesmen who can pump up the numbers and the accountants who can come up with cuts needed to make the quarterly targets, those who add genuine value to the customer have to re-occupy their rightful place.

What I love most about Denning’s approach is the use of the word “customer,” when many others would use the term “consumer.”

Burn this into your mind and into the minds of those around you: We have entered a new era. Period. It’s not on the horizon; we’re already there. Those who take a leadership position and beat their competitors to the punch are GUARANTEED the top spot in this new era’s business infrastructure. It’s all about the customer today. Making money is the end, not the means anymore. It has to be that way. The beancounters and manipulators are lesser players in the new status quo, because, as Steven Covey wrote many years ago, “You can’t talk your way out of something you behaved your way into.”

Umair Haque wrote in 2004 that in a networked world, the emphasis must be on the product, not marketing. Jay Rosen says basically the same thing in his brilliant thoughts about “The Great Horizontal” and “Audience Atomization Overcome.”

Dylan’s classic song noted that “The Times They Are A-Changin’,” but I’m much more inclined today to say that they’ve already changed. When the brightest business minds of the day — and I certainly include Steve Denning in that group (John Hagel, too) — shift their thinking from hard core making money to hard core customer service, it’s time to give up on an agenda that only defends the past.

Dissing Harvey Levin (and entirely missing the point)

TMZ logoOccasionally, the comments posted in response to an online article are more revealing of media that anything in the story itself. Take the case of Paul Farhi’s Washington Post piece, TMZ founder Harvey Levin’s unsolicited advice to mainstream media: Adapt or die.

Mr. Levin addressed the National Press Club with a dire warning for the institution it represents:

Your business model is broken. Your future is in jeopardy. Adapt or die.

It is clinging to this broken business model that’s the problem, Levin said, because media is afraid to mess with it.

Newspapers and magazines should get out of the print business, he added, if they want to survive. And if the upheaval of the Internet over the past decade hasn’t been enough, just wait: The next five years will be even more tumultuous for the hidebound and hoary.

But rather than investigate what Mr. Levin told them, Farhi chose to insert the content of TMZ into his article, which was done with just a hint of snark. Calling him a “gossipmonger” and dismissing him according to his appearance (“pint-sized, tanned and California cool in a blazer, open-necked shirt, jeans and slip-on sneakers”), Farhi shifts the article from what Mr. Levin said to the content of his product, TMZ. The article questions tactics like paying for information and raises the matter that Levin’s TMZ has gotten some things wrong, all designed to invalidate anything offered in the way of advice. After all, cough-cough, we can’t trust, cough-cough, anybody who would do, cough-cough, something like THAT!

This opened the door for comments supportive of Farhi’s distaste. “God help us…sensationalist trype…appeal to the lowest common denominator…Internet version of yellow journalism…character assassination…his “newsroom” of stoner kids…new media for a dumb nation…TMZ is the real life idiocracy…tabloid pornography…you can’t take his news seriously,” and so forth. Some readers noted that the Post should be paying attention, but for the most part, everything that Levin brought in his message was overwhelmed by criticism of the content of his enterprise and how it’s presented. This is the big — and, frankly, pathetic — mistake that most journalists make in analyzing the success of TMZ. This is because, by training, tradition and instincts, journalists believe it is the news content or its subjective “quality” that matters, so the content is what gets the attention. TMZ, however, is so much more than content, and that’s what Levin was trying to say.

TMZ was created of, by and for the Web. It’s TV show grew out of that base and functions in a secondary role. The stories are presented in blog format, with the latest on top. It has never wavered from this, not for a moment. The stories are all unbundled and can be distributed elsewhere. The language is conversational and assumes a live audience. Its franchises and gimmickry all serve a content point (e.g. “What do they look like today?”); it isn’t there simply to be there or to justify hokey marketing. It lives within the continuous stream that is news in the 21st Century. It satisfies a niche that, like it or not, is important in people’s lives. You can’t join the watercooler discussion about the Jackson trial unless you know about it, and that discussion changes throughout the day. Just as ESPN dominates the world of sports (“If it happened today, you’ll see it on ESPN”), so TMZ dominates its niche in the entertaining world of make believe. We can all take a lesson from that.

Levin’s business model is still advertising, but he’s able to emphasize dayparts. He also delivers a very sellable audience for advertisers, while the Big-J types are content with the +55 crowd. What the journalists miss is that its not all about the content of TMZ.com; it’s at least as much about its definition of the story, how that’s presented and distributed, talking with people instead of at them, its ownership of a popular information niche, and the pure passion evident in everything the company does.

Harvey Levin does have an important message for media, and it isn’t simply “gossip sells.” We need to get off our high horses and listen.

 

The big, dumb audience

a fool's errandThe central tenet of mass marketing is that it “works” by dropping messages into large groups of people. Whether it’s the pulpit, the stage, the stadium or mass media, the best advertising can do is a one-to-many paradigm. It doesn’t matter who or what these groups are; what matters is the size of the gathering, because the more eyeballs, the greater the likelihood of “hitting the target.” It was the wonder of this that drove newspapers from their activist, partisan nests in the late 19th Century and birthed the absurd notion of “objectivity.” The crowd had to be large, diverse and passive, not small, strident and active.

Making money became the fundamental reason for media, and industrial age managers began to see their news customers as a mass instead of people. It is this idea that’s being turned on its head today. People can be smart. Masses, to be effective, are best considered dumb. Whether it’s the audience, the readers, the listeners, the viewers or whatever, what we see is a vast sea of faceless “consumers” held captive by the breathtaking marvel of our content and into which we can drop messages that they neither want nor need. And, of course, people will pay us to deliver those messages.

Along comes the Web and shatters that perfect money machine, because it’s not a one-to-many paradigm. The Web is a 3-way phenomenon — down, up and sideways — and it’s much more suited to direct and content marketing than mass marketing. This is causing a huge conflict for those whose money comes the old fashioned way.

For example, Shawn Riegsecker, the founder and president of big online ad network Centro, told eMarketer last week that “brands increasingly pushing to pinpoint their exact target audience” is a “fool’s errand.” The quote caught my attention, because Centro is THE giant in the non-targeting ad game — the old money machine — a pertinent fact that eMarketer left out of its interview (Wait a minute, Shawn. Isn’t your company the main benefactor of a purely reach-based ad model?). Centro commands big money from ad agencies and dictates which sites in the market get paid based on their reach and often old school, run-of-site CPMs. The company is at the very heart of the Madison Avenue illusion that the Web is just another playing field for mass marketing.

We’re driving ourselves insane by trying to get to the right audience when close enough is good enough.

Right. Riegsecker is to ad innovation what the New York Times is to new journalism. Everything’s fine. Now just shut up and send us your check.

For sure, Centro offers targeting, but its bread and butter is dumb masses. Notice also that he references sellers as “brands,” another moniker compliments of the mass marketing industry. It’s all about “brands” selling into big, dumb audiences, not products and services being sold to human beings. Ad networks and agencies are the middlemen of this sophisticated big money machine, and the Web finds all middlemen to be inefficient. This, too, is driving people nuts, especially those whose livelihoods depend on status quo maintenance.

He’s partially correct in that a lot of people are trying very hard to find the “perfect” target, but a lot of that is driven by businesses who view the Web more as a lead generator than a brand lift mechanism. There’s nothing wrong with that, but it doesn’t stop the ad industry from playing defense against the direct marketing magic of the Web’s data. There’s simply too much money at stake. As I’ve said here often, however, that money is living on borrowed time, because advertisers are themselves becoming their own forms of media companies, and nobody has any idea where it’s all going. Meanwhile, those with skin in the old game keep fighting to defend their model, and that’s a problem, because every day you play defense is another day you could be playing offense in this age of disruptive innovation.

Gordon Borrell, who studies these trends in online advertising, agrees that “advertisers need to stop fretting over the absolute perfect audience target or metric and get their message out to the best possible target.” He adds, however, that “getting as close to the audience ‘truth’ as possible is more or less a mandate with digital media, and I don’t want to see an end to that quest.”

Borrell noted that digital data is the real problem for traditional media.

We all know how traditional media believe that it’s all about size. They’ve railed against measurements that make them look puny while embracing other measurements that prove their dominance. With the Internet, I suppose it boils down to advertisers wanting to hit that exact target — which seems to be getting smaller and smaller — rather than buying mass. So therein rests the big conflict: a big dumb audience versus a small group of wallet-ready buyers.

So Riegsecker may be right from his perspective, but it’s exactly that perspective that’s being challenged by the data-centric Web. This is why those companies who’ve invested in data — the best examples being Google, Amazon and Facebook — have such a big future leg up on their old school competitors. As ad money continues to move to the Web, it’s going to want specificity, not just big, dumb audiences.

The real conundrum in all of this is that we’re in a slow transition period, so mass marketing is still extremely valuable. The smart companies who’ve long depended on dumb masses, however, are also getting their feet wet in the other, even though it feels uncomfortable and a lot like competing with ourselves. The stakes are simply too high not to diversify our business models, and the people formerly known as the audience are now in charge anyway.

The real fool’s errand, therefore, is acting as though it’s otherwise.

Twitter handles should be personal brands

your personal brand is everythingWhen the BBC’s chief political correspondent jumped ship to work for a competitor last week, she took her 60,000 Twitter followers with her, and that has raised a few eyebrows in media circles. UK blogger Tom Callow made what I believe is an incorrect assumption when he wrote:

On Thursday 21 July, the BBC lost 60,000 Twitter followers when Laura Kuenssberg renamed her @BBCLauraK account to @ITVLauraK.

Callow wrote that the BBC has an ownership claim on that Twitter account, and suggested that those followers were interested in the views of the BBC’s chief political correspondent,” not ITV’s.

Twitter followers aren’t names in an address book. They are more like subscribers to a blog. We must remember that Twitter is precisely that: a microblogging service. Whilst the microblogs of BBC correspondents are running off Twitter’s servers, the BBC is controlling what tweets go out and must be able to stake a claim on the ownership of each official account — not least because they are now promoted so prominently on screen during news bulletins and even shows like Newsnight and Question Time.

Lost Remote’s Cory Bergman advanced the story, and asked the essential question, “Are people following the person — or the content the person represents?” Cory also smartly suggests that, contrary to what Callow thinks, Twitter does function in important ways like an address book.

This is a very important issue for media companies to get right, because in the world of personal media, personal brands are what matters. People follow people, not institutions, and if we try to practice the opposite, we’re likely to end up without any followers at all. This is why I think Callow is misinformed, because he’s viewing Kuenssberg’s (or any reporter’s) use of Twitter from an entirely old school business perspective.

People jumping ship and taking their followers with them is a necessary part of business in the 21st Century. The way to stop it is to make employment with you so attractive that there’s no incentive to switch, but if and when it does happen, the “loss” of those followers is simply a cost of doing business today. I would argue that we don’t really lose anything when that happens anyway, because to think otherwise underestimates both people and the ease with which technology allows them to change, too.

Moreover, we want to actually encourage the growth of personal brands among our employees. Why? Because without it, there’s no incentive for them to use social media 24/7 in the execution of their jobs. If we “own” those accounts, then we must pay people to use them, and that means on company time. Don’t think so? Press the issue and see how far it goes in the courts. No, we’re MUCH smarter to help individuals grow their brands with the quid pro quo being that they will use their brands to the furtherance of our business while our employees. We gain from their brands, which can include all forms of social media, blogging, personal events and appearances, and anything else they do with “their” brands, as long as they are our employees. When that ends, the cross-promotion ends, and that’s the way it should be.

Don’t think this is viable? Ask Arianna Huffington.

Individual people can go places that institutions can’t, and if we limit that in the name of protecting “our” assets, we effectively limit the potential that goes with it. We can’t have it both ways, folks.

Media companies, especially television stations, seem to hyper-react whenever somebody leaves. Their bios are immediately removed from websites with no explanation, and on-air goodbyes are often completely missing, depending on the reasons for departure. We do this despite that fact that it’s an affront to our audiences, who’ve gotten to know these people during the years of their service. Social media changes that dynamic, because true fans can follow them wherever they go. This is a good thing, I think, and another reason why my advice to any active or budding news person is to use their own name as their Twitter handle and not associate it with any media outlet.

Media companies who insist that call letters, for example, be included in Twitter accounts miss the point of social media by assuming it’s simply a way to extend their brands. Why we do this is a mystery, for the online world is not the airwaves; there are far more than four or five antennas in the ground here.

Making money with new media begins with new thinking

new stuff confuses usI get these funny looks sometimes during meetings and presentations. It’s a sign that I’m somehow making an assumption about audience knowledge that needs explaining instead. I’ve learned to stop and go back, because thought paths I crossed long ago are just becoming apparent to many today. The great curse of downstream thinking is that it’s very hard to explain to those firmly planted on today’s path.

So, in our new series, “Making money in Media 2.0,” we’ll take these steps backwards once in awhile, because things are happening so quickly today that unless our foundational understanding is solid, we’ll make mistakes.

Every day there’s a new article somewhere blaming this thing or that for the demise of legacy media companies, especially newspapers. This is our logical minds trying to figure things out, but our logic is immersed in certain assumptions and beliefs. The Web is a marvel of humankind, on a scale with the Biblical Tower of Babel. It functions in ways completely foreign to those who’ve only understood the life that came before, so it’s quite natural for us to miss what’s actually taking place.

Where we tend to “miss” new media most is in the money-making realm. The best we can see is how the digital world is turning old dollars into new dimes, but that’s because our viewpoint is biased by history, tradition and the limited scope of our knowledge.

Clayton ChristensenIn Clayton Christensen’s brilliant books, The Innovator’s Dilemma and The Innovator’s Solution, he describes two different kinds of business innovations. Sustaining innovations are those that bring better products to an existing market. Some sustaining innovations are simple, incremental, year-to-year improvements. Others are dramatic, breakthrough technologies. “The odds overwhelmingly favor the incumbent leaders of the industry in battles of sustaining innovation,” Christensen told Howard Dresner in 2004, “whether they are simple, incremental innovations or breakthroughs.” A disruptive innovation, however,“brings to market a product not as good as the products in the current market, and so it cannot be sold to the mainstream customers. But it is simple and it is more affordable.” Disruptive innovations take root in a small corner of the market but eventually reach the mainstream. “I call that a disruptive innovation,” Christensen said, “not because it’s a breakthrough from a technological sense, but instead of sustaining the trajectory of improvement that has been established in a market, it disrupts it and redefines it by bringing to the market something that is simpler.”

The real problem for media is that the Web is a disruptive innovation while incumbent businesses view it as a sustaining innovation. This is the core issue with making money in the Media 2.0 world, and the more time and energy we spend in the sustaining innovation square peg, the farther we get from the real money in the round marketplace.

How I wish this light would suddenly flash to life in the minds of media company executives.

The primary example of this is a TV station’s website, station.com (or newspaper website). Here, the Web is used to extend the brand of the TV station, provide new services to its viewers, and make it a better television station. There’s money to be made here, for sure, but it is just those dimes (and always will be).

Social media is another example. Local media companies set up accounts on Twitter, Facebook and now Google+ to, again, improve their central products and services, as if these were sustaining innovations. We use Twitter to notify people of our work. We use Facebook to easily interact with our viewers. We use Google+ to put multiple folks on the air at the same time. It’s all so useful in making us better media companies.

There’s a new movement underway called “Social TV,” that combines the interactivity of innovations like Twitter with shared viewing experiences in order to provide the magical marketing term “engagement.” This is fine, but it is a sustaining innovation.

People ask me about these things, and I say they’re great and that we must respond, but they do nothing to help what is essentially a business problem.

So everything we’ve done with new media so far has been to improve old media. I heard an investor say once that media companies were only interested in bolting innovations onto their existing business model, and I think that’s generally true. In doing so, however, we risk everything, because we’re missing the reality that the Web is a disruptive innovation.

This is why Christensen is so adamant that the only workable response to a disruptive innovation is the creation of a separate business unit that is free to compete with the legacy platform, even destroy it. Most companies have indeed set up separate units, but unfortunately, they are behaving as though the Web is a sustaining innovation. Incremental revenue increases can be gained through networking all the websites owned by a company, which also keeps costs down, but this has the effect of creating a specialized ad network, which can work against the best interests of each property.

Local media is a local industry, and that’s where the separation needs to occur. I’m not suggesting it can’t be managed from afar, but the more the new unit is disconnected completely from the old, the greater its likelihood of success. I don’t believe, for example, that brand-extension websites should be operated by this new unit. Unfortunately, that’s the central focus of most digital or interactive divisions of local media companies, and this is exactly what Christensen is talking about.

In Salt Lake City, Christensen protégé Clark Gilbert is running the separate division for Deseret Media. Much has been written about his successes, but even his is a hybrid that functions as both brand-extender and innovator, because he also has editorial oversight. This may be the only way media can function, but it will always be less than it could be.

In referring to Gilbert, Christensen noted his “masterful” research on the Boston market while a student of his at Harvard.

Those ones that set up a separate organization; after they got the funding and everything, as soon as they separated it, they could think, “Now who wants to learn about Boston? Who’s not in Boston? Who would like to advertise (who’s) not advertising in The Globe, and who would like to use this that doesn’t subscribe to The Globe?” All of a sudden, there are all these opportunities they can see, where when they were in the Boston Globe newsroom, they just couldn’t see those things.

Perhaps it’s best to conclude that Media 2.0 is both sustaining AND disruptive innovations. I don’t doubt there’s truth to that, but the money is following the disruption, so that’s where we need to be.

Clay ShirkyMedia 2.0 immersion also makes real the truth about our industry: we’re not in the “news” business; we’re in the advertising business,” something I’ve been preaching for years. In a new post this week (“Why We Need the New News Environment to be Chaotic”), NYU’s Clay Shirky, one of the great thinkers of our age, echoed the thought.

Outside a relative handful of financial publications, there is no such thing as the news business. There is only the advertising business. The remarkable thing about the newspapers’ piece of that business isn’t that they could reliably generate profits without accomplishing much in the way of innovation—that could just as easily describe the local car dealership. The remarkable thing is that over the last couple of generations, those profits supported the fractional bit of those enterprises that covered the news.

But all of that is changing, because the advertising industry itself is in disruption. Content marketing and promotions are two big growth categories for advertisers who behave much more like they themselves are the media today. Where are local legacy media companies in all of this? Nowhere, because we’re still functioning as though Media 2.0 is only a sustaining innovation.

This is serious stuff, folks, because it impacts our bottom lines. The solution is to arrive at the place where we’re free to disconnect making money from making news content, or at least get into the content business that advertisers are flocking to by the thousands.