The Cost of Interaction

May 23, 2008

COST OF INTERACTION: A form of web currency — the price users are required to pay to view, use, consume or interact with web content.

In the business world, the biggest number on the expense side of the ledger is generally the people that the business employs, so it's understandable that businesses — in their quest to improve the bottom line — will always be seeking ways to reduce that expense. The one who writes the checks gets to set the rules, unless there's an artificial barrier such as a labor union in place.

When profit is the motive, everything else is its servant, including the people who help generate that profit. It's capitalism at its finest, a world where "the market" determines everything and where the faithful believe "corrections" come from the markets themselves.

But forthcoming corrections will also originate beyond markets, because we're in the throes of a massive cultural shift — from the "I think therefore I understand" world of cultural modernism to the "I experience therefore I understand" world of postmodernism. One doesn't displace the other; it simply augments and, in some ways, re-routes the former.

Hierarchical systems are all on the table in a postmodern world, because the ability of people to access knowledge isn't blocked by barriers based on education or position in the culture anymore. The doctor is still the doctor, but the nature of his or her authority has changed, because the knowledge that gives the doctor a special place in the culture is increasingly available to non-doctors. Likewise, the strategies and tactics of capitalism are also available for all to see, and we're on the cusp of an all-out revolt against many of them.

The market, if you will, is correcting itself, and much of it will be built around what's called the "cost of interaction." This is the value placed on what is required for a customer to interact with the product or service of a business. It's not a part of the price of the product or service; it's simply a charge that customers are required to pay that is off-the-books. Heretofore, businesses have not counted this, because the assumptions of modernism suggest it's unnecessary, but it is the centerpiece of the revolt that many are already experiencing, including media companies.

This cost of interaction is one of real currency, but not necessarily that which is counted by banks. This is why it slips past the business world.

Real people used to answer phonesThere is no greater illustration of the cost of interaction than the complex telephone answering systems that are a part of every business from coast-to-coast (and beyond). The business assumes that interaction with callers can and should be on its terms, so it creates an elaborate sorting system that it believes will guide the caller to the right party or turn many queries over to automated systems. The investment has been worth it, because it has enabled companies to cut costs in its telephone interactions with the public.

Of course, nobody ever consulted the callers about this, so these systems are often nothing more than a source of extreme irritation for the people the business (hopefully) seeks to serve. What companies don't consider is that by forcing people to jump through these digital loops, they have raised the cost of interaction that everyday people have to pay. They have, in fact, shifted the expense to the caller, and while people may not be able to verbalize it as such, they are well aware of the frustrating price they're being required to pay.

The worst of all, of course, is our government. Have you ever tried to navigate through the Immigration and Naturalization Service (INS?). If you ever find yourself with a free hour to waste, give them a holler.

There are some smart companies who have figured out ways that telephone communications technology can actually work to truly serve callers. One is American Airlines, whose new recognition program is nothing short of a godsend. As a frequent American Airlines traveler, the system recognizes my cell number when I call, greets me by name, and asks if I'm inquiring about the flight I have booked for that day. Instead of walking through a navigation system to find the gate for an outbound flight, all I have to do now is make that simple call.

The cost of interaction is paid everywhere, and it's usually a part of the company's expense control or the company's convenience. Not enough personnel in the check-out line at the grocery store? The cost of interacting with that store has gone up. Arrive on time for an appointment only to wait an hour to see the doctor? The cost of interacting with that office has gone up.

A few years ago, Bob Jeffery, CEO of J. Walter Thompson, noted that "time is the new currency." That, folks, is absolutely true, and time can actually have a dollar value attached with a simple mathematical formula. Inflation may not be dogging our pocketbooks at this particular moment, but this waste of time has a direct impact in a world where time is the new currency.

It is into this cultural tension that media companies are attempting to do business online with the people formerly known as the audience, people who demand better service than they got as passive participators in old world media. TiVo made it possible for people to skip commercials, something they deem a waste of their precious time. Television's response has been to increase commercial pod lengths and shorten programs, thereby digging themselves a little deeper into an anti-consumer hole. The networks have even gotten together to create a video-on-demand service where users can't skip the commercials. Nice try.

But the biggest place where the cost of interaction impacts media consumption is on the Web.

Media companies don't seem to understand that people are in charge of their web experience, and the greatest evidence of this unwillingness to understand is in the design of media websites. By shifting the finished product version of their output to the Web, news organizations have created elaborate portals that require clicks in order to access anything of interest. Assuming that the finished product is what people want, media companies all take part in a dangerously archaic model of content management.

Jakob NielsenThe same newspaper industry that will deliver its finished product to your doorstep is now enamored with ways to make it difficult to access the same stuff online. The roadblocks come in the form of tactics to drive page views and increase revenue by forcing users through navigation systems and relentless links. Online, the cost of interaction for most media sites is much higher than we think, and it will ultimately impact our ability to reach the people we need in order to make money through advertising. The problem, according to web usability expert Dr. Jakob Nielsen, is that the home page is increasingly irrelevant. About 40% of people in 2004 visited a homepage and then drilled down to content they sought, and 60% used some form of deep link that took them directly to a page or destination inside. In 2008, according to Dr Nielsen, "only 25% of people travel via a homepage. The rest search and get straight there."

This is not just a matter of convenience for web users; it's a direct reaction to the cost of interaction charged by sites in the drilling down process.

The scrollbar offers a much lower cost of interaction than links, and yet we value only that which is "above" some artificial "fold" in a web document. This is nuts and an insult to people who increasingly don't have time to interact with us like that.

The broadcast industry is no different. Take away the anchor pictures from the home page of any TV station site, along with the graphics, the marketing, the colors and the ads, and what you're left with is basically nothing. It's just a bunch of links, and if time is the new currency, why are we wasting people's time by forcing them to find what they're looking for in this manner? This is the Achilles' Heel of media company web initiatives, for we only understand marketing through our own platform, and the bigger the platform, the more money we can make. This is known as the "walled garden" approach to web content, for everything we offer is within the "walls" created by our portal. In a nutshell, this is why Google will always beat Yahoo!, for Google's platform is the Web itself, whereas Yahoo! only controls that which is within its walls.

Google so respects the online cost of interaction that it willingly withholds ads from its home page, absorbing the cost of interaction into its own operating budget.

But there's more.

Don Day, Digital Media Producer for the KTVB News Group in Boise, Idaho, and a blogger at Lost Remote, recently published an insightful list of how the typical broadcast website stacks up against Google's basic rules for website design. This would be funny, if it wasn't so sad.

Google has published a list of ten things that make a design “Googley” — and they really are universal. The problem today is that most TV sites have their own set of principles:

Google: 1. Focus on people--their lives, their work, their dreams.
TV: 1. Focus on promotion--our newscasts, our advertisers, our sweeps piece.

Google: 2. Every millisecond counts.
TV: 2. Can we make it flash or use a bright color?

Google: 3. Simplicity is powerful.
TV: 3. Are there enough ad units above the fold?

Google: 4. Engage beginners and attract experts.
TV: 4. People will figure it out on their own.

Google: 5. Dare to innovate.
TV: 5. Are we keeping up with the competition?

Google: 6. Design for the world.
TV: 6. Design for the boss.

Google: 7. Plan for today’s and tomorrow’s business.
TV: 7. Focus on yesterday’s legacy.

Google: 8. Delight the eye without distracting the mind.
TV: 8. Distract the eye while cluttering the mind.

Google: 9. Be worthy of people’s trust.
TV: 9. People trust the anchors. Use big pictures of them.

Google: 10. Add a human touch.
TV: 10. Add a touch more clutter.

The problem is essentially this: the design model that nearly all media companies use on the Web was created by newspaper people as a reflection of a newspaper. From the non-existent "fold" to ad impressions by placement and beyond, nearly every online media term is a newspaper term. We make "pages." We sell "display" advertising. It is entirely a print paradigm.

And of course, the Web isn't print, and therein lies the rub. The pursuit of this model has caused nearly irreparable harm to media companies, and the longer we pursue it, the worse things will be tomorrow.

Television news and other forms of information media all adopted the same paradigm, because that's what was in place when they, too, got into this business of the Web. And so the landscape of media websites resembles the homogenized marketplace of any suburb, with its comfortable franchises and such.

We've studied the model to find ways to make it better, and today, most media company strategies are built on the assumption that this is the way it should be. Few within the industry actually question whether this is true.

The advertising industry adapted to the paradigm, because, well, that's just the way it was, but at no time did anyone ever truly step back and say, "This isn't going to work." Well, it isn't working, because newspaper websites are now experiencing a serious revenue growth problem - one created, you guessed it, by the inherent flaws of the design. These flaws have been masked by incredible growth - "new" money - but now they've come to the surface in the form of a missing key ingredient in mass marketing - frequency.

Steve Yelvington is one of the smartest new media thinkers around, and a newspaper guy through and through. In a blog entry on the subject, Yelvington wrote that frequency is the hard wall that media companies inevitably hit online.

We can fix our sales incentives, train our people, tune our pricing and our packaging, and replace leadership as necessary. But at the end of the day we're going to hit a very hard wall. That wall is "available advertising inventory" that meets the advertisers' needs.

That inventory comes from audience, from reach (unique users) multiplied by frequency (pageviews per user).

And while the reach numbers may look good, the frequency numbers suck.

It's even worse than the raw pageview-driven ad inventory would suggest. An effective advertising campaign requires repetition of the message until you really, really understand that Geico is so easy even a caveman can do it. There's an old ad-biz rule of thumb that a message has to be repeated seven times to be understood. If your average user visits your site twice a month, how can you possibly deliver effective ad campaigns?

Yelvington believes that social networking applications can help, along with RSS feeds, frequent updates, games, newsletters and embed applications. There's no doubt publishers can increase stickiness with these tactics, but they all miss the point that maybe, just maybe, we've gone about this wrong from the get-go.

Moreover, there's evidence now that the reach of a newspaper site doesn't extend much beyond its basic circulation, which prompts local online revenue guru Gordon Borrell to suggest there are other factors at work:

The reason their revenues are flattening and in some cases actually declining is that they’ve upsold all their print advertisers. They’ve hit saturation, and without "online only" salespeople they have a difficult time reaching beyond the core product. In fact, according to the latest data I’ve seen, the average additional "reach" of a newspaper Web site beyond its core print audience is about 7 points. That’s piddly, and that tells me we’re looking at an industry that’s pretty much defined the web as a way to serve its readers, not a way to reach out to new customers.

One of the reasons for that is that finished product news is all media companies know, and that requires a box that doesn't really play nice with the Web or with the people flocking online to access news and information without all the crap that goes with it. If we had set out to design a system for communicating with people online that began with a low cost of interaction, we would hardly have chosen our portal sites as a model.

A big part of the problem is that media people didn't create the Web. That was done by the tech community, as were all of the tools of personal media. They were designed with a couple of simple thoughts all built around the idea of using the technology to communicate: One, blog software (the term the tech community created to define their view of communicating online) needed to be easy to use. With a limited knowledge of HTML and style sheets, a person could easily create and maintain their own website. Two, that software needed to make a perfect handshake with the Web to insure a simple communication path and to allow for the easy finding and sharing of that communication. RSS is another non-media creation, one that was used to help the tech community accomplish their dream of simple communications.

Media websites were designed by traditional media types concerned about maintaining their brand in a multi-platform world.

Personal media software was designed by web people concerned about the Web, communicating, and the creation of new brands.

YouTube is another great illustration of the tech community's view of online television. No media company would have ever come close to innovating such a concept. Not a chance.

So here we are as media companies with two significant problems on our hands, both of our own making. One, we want the Web to mirror our own business model — that being mass marketing through content scarcity. We've forced the issue on this and we're shocked that it's not working. Two, every attempt we make to grow revenue in this paradigm raises the cost of interaction for the people we're trying to woo. Ultimately, this will be fatal.

If we believe that the consumer is god-like online, then we'll respect that by designing applications with a low cost of interaction. In turn, the elusive "audience" we seek will come our way as surely as the old proverb of the better mouse trap. It may seem courageous to step outside the box of our portals to do this, but in the end, it's just smart business.

The Web is not newspapers. The Web is not television. The Web is the Web.