Sunday, May 24, 2009

But would anyone pay?

I've been promoting this idea of actually paying for content, like a really good news article, after you read it, as only then do you know that it's worth paying for, and I think a natural issue with the idea is, would the average person pay?

And I think the simple answer is, no. But this idea is not for average people.

I call it Pay Back Value, and it's simply acting on the web like one would at a high end restaurant--you consume first, then you pay.

However, there are two types of people in the world: those who would pay without threat of punishment, and those who would run out of restaurants without paying all the time if there were no such threat.

The ease of distribution on the Internet means that you can market to the first set, and not worry as much about the second as unlike with a restaurant where the food has a higher reproduction cost, on the Internet, there is little cost in reproduction (production costs remain high!!!) so limited loss from the theft!

Electronic distribution and reproduction is cheap--buying, preparing and cooking food is not.

Still you can get a herd problem where even people who want to pay, feel stupid about paying if there is a perception that no one else is paying or that most are not, so the idea actually gives you the ability to identify people who deliberately steal value, and credit cards can help explain how it works.

You get a credit card, right? But what if you have no intention of ever paying?

When will the credit card company know?

Ans. When they send that first bill and you don't pay it.

What if you pay part of it, or pay for a while just to build up credit and then quit paying?

Isn't that reason for credit card companies to never issue credit cards?

What are they thinking!!!

Similarly to credit cards, you let people sign up for something that gives them content without them incurring upfront cost, on the expectation that they will pay for what they value, and if they don't pay, you find out after some time, like a couple of months.

Then you can stop giving them the content.

I like using the New York Times as an example, as last time I checked they have people sign up now to see articles on the Web, but you can see them for free with no ability to pay later.

Say they institute this concept. People can PBV--pay back value. Like there's a PBV button on the bottom of the page after the news article or column, you can hit that button and pay a dime or something, or if it didn't seem worth it to you, move on.

No payment, no penalty.

Hypothetically as I have no idea what the numbers would be (but psychologists should be interested!!!) they find that 20% of their users pay back more value than if they bought the physical paper and do this month after month, 40% pay back regularly--I know I said above the average would not pay but these are Times readers!!! I'm assuming a higher class of people--and 10% pay intermittently, while 30% do not pay at all.

At their discretion they can block members of the 30% who do not pay from their site, for instance, if someone is reading article after article, day after day, and giving nothing in return, they might simply cut that user off.

Also they can look at the content people across the board are clicking on and buying or not buying, and using regularly paying users as a benchmark for the real value of the paper--kind of a mark to market with content--get an accounting of their losses from theft of content without paying.

For the first time, they can get a real monetary number compiling losses, and have the ability to weed out people who will not pay, and they can reward that top 20% who regularly pay, so most importantly, they regain the ability to reward their best customers.

Quite simply, only then does the Times become a business again.

Free is not a business model.

I have no doubt that paying later will eventually dominate the Web as it's how we do most of our buying in the real world. We rarely if ever pay upfront without being able to thoroughly check for quality.

So the remarkable thing is that the Internet is backwards!!! It's not that the Internet was so advanced that money doesn't work any more.

It's that it's a laggard to how people actually do most of their buying in the real world.

James Harris

Saturday, May 23, 2009

About the Zamboni Brand Ice-Resurfacing Machine

Link above goes to: The New York Times

Quote from the Source:
As Economy Stumbles, the Zamboni Glides On
Published: May 23, 2009
The form, function and sales output of the Zamboni ice-resurfacing machine have barely changed in decades.

Good article. I learned a lot that I didn't know and it was rather heartening. A nice positive read to try and balance out so much doom and gloom lately.

Friday, May 22, 2009

Questioning with money

Link above goes to: The New York Times

Quote from the Source:
Time for a New Strategy?
Published: May 21, 2009
The definition of diversification is evolving as hard-hit investors rethink traditional approaches to take advantage of shorter-term opportunities.

Speed and liquidity. I'm no expert and I'm not rich, as I feel I'm at least for the moment solidly middle-class, but it just seems to me that when information shoots around the planet so fast it's harder to get away with bad bets.

Markets are punishing dumb moves when before you could get away with them as long as you were a big player or got a herd following you but today's market casually punishes entire countries.

It's a whole new world.

Thursday, May 14, 2009

A promise to pay

If you start to wonder what is money, one of the first things that comes up is that it is a medium of exchange, and that it is a better system than barter which is what people had before money.

But that is only part of the story, as there is another way to exchange value besides money and barter, and understanding that very familiar way can bring back an understanding of what money is, in an intuitive way.

And I think that's important as like the U.S. abandoned the gold standard years ago so that the U.S. dollar appeared to be backed by nothing (it's not), money itself has become disconnected in many people's minds from its symbolic nature.

Money has little if any intrinsic value, so most of its value is extrinsic--given to it by others--and it has to do with a promise to pay.

Understanding the symbol of what money covers is a lot like understanding how in algebra x is just a variable, so you can have equations like x+y=z, but you can change the symbol, and have a+b=c.

To get a grasp of the underlying thing that money is a symbol for, consider the other means of value exchange besides money or barter, which is giving and receiving favors.

Seem too simple? How about an example then, as if you have a significant other, consider asking that person to do you a favor and make you a cup of coffee.

Now someone without someone to ask a favor of a cup of coffee, can, if there is a coffee shop nearby, go and buy a cup of coffee--exchange money for the value.

So asking for favors is a way of exchanging value which is actually closer to money than barter, as often when you ask a favor there is an expectation that you will return it, at some point. Whereas with barter, there is an immediate exchange of value for value: like a shoemaker exchanging his shoes for, say an egg laying chicken.

He gives the shoes--he gets the chicken.

You ask a favor, you rely on the memory of the person who gives the favor. And they rely on yours. It is a promise to pay back the favor, later.

You hand them money, they get to use the money for something they want, later.

But people can forget favors, or ask for them, even repeatedly, with no intentions of ever paying back!!! The system is flawed by the need for good memories, and trust.

In contrast, rather than ask a neighbor say, for the favor of a cup of coffee, you can pay for the value of a cup from, say Starbucks, or Peets, or some other coffee shop, and get it, without further owing anything at all.

The abstract value of the favor that is remembered in one case is captured by the money in another. The money is like the encapsulation of a favor: a symbol of that value exchange, which now brings me to our modern Web.

To the extent that there is an exchange of value on the web, it can be said to be by all the means above: barter, favors, and money.

People can exchange attention for information, like barter. Or can pay for goods on the Internet directly by money. Or they can do favors.

The problem for modern companies operating on the Internet is not acknowledging the possibility of a promise to pay, so that often there is simply no way to pay.

For instance, let's say I write something that you think has value. You might say I did you a favor, unless I just wanted you to read it, so I just wanted attention, so you paid already, do I know? Well you could comment, but should you have to comment? And is that really giving back value?

But what if I had ads (I don't) then if the ads paid from your attention then I'd be paid by the people who run the ads through someone else, like Google, and that would do it, right?

Well people who pay for ads pay for them if you buy something from them! As they are paying for the ads either from purchases you and people like you make or the promise to pay that is part of the system of ads, for instance, we watch television ads and enough people go buy the stuff to pay for the television programs.

So if enough people don't go buy the things in the ads, then there is no way for a payment to come from the people who would like to sell things.

So I did you a favor.

Let's go back if that seems wrong: if I write something and you see value in it, then maybe you can comment or if I had ads you could click on ads, but if those things aren't available then I did you a favor: transfered value with none in return.

But is there a promise to pay? And I'd say, no. So then, is it really a favor?

Was there an exchange of value? Yes. You read something that to you had value.

Was there a return of value in exchange? No.

So you get a value gap, which I also call a promise to pay, which in our big wide world is something that helped push money as a symbol of value, as you can ask favors of your friends or spouse--like a cup of coffee--but asking favors of strangers is often called begging.

Friends return favors and hopefully you would to your spouse as well, in more ways than simply say, making a return cup of coffee!

But strangers can't be expected to return favors, as, well, how do you even know what to give in return?

Imagine you go to a strange house to some people you don't know, knock on the door, and ask for a favor of a cup of coffee? Even if they wanted to (and weren't scared of you begging at their door) and gave you a cup of coffee, how could you return that favor really?

Bring them back a cup of coffee later? Offer to mow their lawn later? Something else...?

There really is no way. It's unlikely that you have anything of value to them--extrinsic value--to pay for the disruption of a strange person knocking at their door and asking for a cup of coffee! There is no way to pay them back. Best thing is not to bug them in the first place!

We don't ask favors from strangers normally, but somehow there is this massive and very enticing system called the Web, or the Internet, or the World Wide Web, or whatever where we end up forced to have favors from strangers just about every time we use it.

The biggest mistake that Web companies like Google, or Yahoo! or any number of other companies make, and the mistake people like me make in putting out content as freely as we do is that we are doing others a favor without giving them a way to do anything in return, and in reality, there really isn't any favor they can give in return that would work!!!

Money isn't a necessary evil. It is a symbol. It is a way to exchange value.

Without an ability to pay, on the web people can often not give value back, no matter how much they'd wish. There simply is no way.

You routinely use alternatives to exchange value when you do someone a favor, or receive one in return, where there, the "money" you might say, is your memory and theirs. The value is held in memory, held in trust.

But favors entail a promise to pay, but web companies often don't give you the ability to pay, so a value gap hangs...

Sunday, May 10, 2009

Innovation potential of PBV concept

A little while back I introduced an idea I call Pay Back Value, or PBV for short, which gives the Web one more pay model--pay after.

May seem strange but you do that all the time, like at restaurants or the barber.

What would you do if your barber asked you to pay upfront? Why do people think that's the only way to pay on the web?

It's kind of bizarre in a way that people do!!!

Do you know of any other way to pay on the web but upfront? It's even worse with subscriptions as you're paying upfront well in advance!!!

For a newspaper with a subscription you pay for papers not even created yet.

But there is this other way to pay that we use all the time.

Now I'm going to expand the concept with an innovation to it, which is to have a PBV corporation, and have PBV votes.

So there could be this mega corporation called, and you sign up to it, and it gives website owners the option of putting a PBV button on their site, with a link beneath it explaining that PBV is just a way to pay after you consume, like at a restaurant.

So, maybe you'd have 25 cents, below which is a PBV button, below which is a link that might say: "What is PBV?"

The PBV value is set by the website owner, though the PBV corporation may suggest prices, or give continual guidance on proper price given demand.

But what if PBV really takes off and some website that doesn't have it, wants it?

Well assuming a PBV base of members are setup--people who have signed up for PBV, which requires they give a way to pay like a credit card--why not give them the option to vote on whether or not the website should be included?

So a potential website might get a "PBV Test" button, where PBV users could vote as to whether or not they see value in the site itself and might actually pay at it, and if the site, say, didn't get 2/3 saying they might, then it'd be rejected for membership in the PBV network.

Hmmm...that also gives the option of letting PBV members vote on sites currently in the PBV network, but wait! That's dumb. They're already voting if they are paying, so each pay is a vote. But if revenue suddenly dropped at a site, it could end up with a "PBV Test" button (in the terms of agreement in the contract with the PBV corporation), and PBV users could then vote it out of the network, or let it stay.

Wow. Lots of options for users here! The PBV corporation would, of course, give users access to a report showing their expenditures, on what sites, etc. which could even break things down in various ways to give them insight into their own web valuing behavior.

Web site owners might really be surprised by something like PBV as well, as what if you have TONS of visitors by traditional measures, but find out from PBV that most don't think your site has content worth paying for? Another site with far fewer visitors might make much more money from PBV, while advertising would only give pennies.

It could be a quality differentiator on the web.

I increasingly believe that hypothetical company will be here some day.

After all, there is a pay model that many people use every day that is not on the web for some bizarre reason which is to pay after.

Here's a weird tidbit to leave you with: you buy a newspaper upfront, right?

Can you imagine having to pay, say, $1000 US to walk into a grocery store, and be able to fill one grocery cart with whatever you wanted, paying upfront there as well?

Oh, $1000 too much? What if they said, $100, but you have to walk past all these signs with ads on them?

Ever consider that the pay upfront with ads model is actually kind of strange?

Would you pay $100 upfront to walk into a grocery store and fill one cart?

What I call PBV is simply more like what you actually do: go into the store, take possession of what you want, and pay after, not before.

James Harris

Saturday, May 9, 2009

Paying for value not a new idea

Paying for value is not the new idea.

The new idea was paying upfront, by which I mean, you purchase something before you check it out, or even see it, like if you have a newspaper subscription--you're paying for newspapers that haven't even been printed yet!

People do not do that normally. They get a haircut and then pay. Usually order their food, eat it, and then pay, unless it's fast food. Even at the grocery store, you get possession of your food first, in your grocery cart, and later you pay.

ONLY with novel items or very well-known products, like fast food, do we pay upfront. Can you imagine giving the grocery store people a list of foods that you plan on buying, paying first and then going into the store to collect your items?

But you buy a newspaper in that way. Or you may have a subscription to cable television in that way, paying before you can check out for quality first.

It may be hard to see a newspaper as a novel item, but behavior says it is, as news was not a commodity, until maybe with the Internet.

Somehow the Internet has turned news into less of a novel item so most people refuse to pay upfront, and they don't see it as a known commodity--where you don't worry as much about quality like with fast food--so they can't be convinced to pay upfront.

And We, the people, are right! Buying upfront on television for so many years gave us a lot of crappy TV!!! People decried the quality problems but entertainment executives had a lot of power in being able to choose what could be watched, because people would buy with their attention anyway. And we got a lot of crap, but kept watching that novel thing called a television for years. But now, increasingly we won't. So television revenues can be predicted to crash.

My guess is that what is happening to the newspaper industry is the canary in a mine, and that a very rapid collapse in revenue can occur for the television industry, and it could be the next industry asking for a bail-out.

Buying behavior is not that complicated: novel items can become wanted before being checked out so people pay upfront. Newspapers, television and some other things were novel enough that executives in those industries got spoiled by the power to choose for people who would still buy. Today somehow the Internet has reverted people back to normal buying behavior, so they wish to carefully pick and choose--and pay later.

However, industry executives who had a lot of power don't want to give that up, and they don't trust the public, so unlike, say, a high end restaurant owner who trusts you to pay for your meal so doesn't make you pay first, executives in media are claiming that either you pay upfront--as you cannot be trusted--or the content must be paid for by advertising, and then they don't let you pay any other way.

Their power will be gone. The return to old buying behaviors will make crappy popular television shows a thing of the past, as it will force change, but no surprise, people who had lots of power in the old system can't seem to figure out the simple solution that your barber knows--pay after.

Could it be they fear the loss of that power? That industry executives will cling to it as long as they can even if newspapers go down in flames and later television stations begin to follow?

Tuesday, May 5, 2009

Unfortunate reality, pay models on the web

I've had something of a dismal time recognizing that I've stumbled across the unfortunate pay realities of our world wide web:

1. Pay upfront--the preferred model when you don't trust the customer, which seems to only work best for porn. There is so much crap on the web that people mostly refuse to pay web only things upfront.

2. Don't pay at all, rely on advertising--the alternate model since people in general refuse to pay upfront. But web behavior is not passive like television watching behavior. People routinely ignore ads, so the people who put up ads, don't pay for the full cost of content. But even in television ad behavior is changing as technology in the form of DVR's give people the ability to zip past ads.

3. Pay after--what I call Pay Back Value, which is the model used by high end restaurants which allow people to eat first, then pay. Problem is, no one is offering it on the web to my knowledge, but I did just come up with it a couple of weeks ago!

You may think there are other pay options but my analysis is there are none, except if you wish, completely free, like this blog, where there is no payment at all, and no payment option.

The advertising model may have been something of a fluke anyway, as it is dying in its home territories as people go from being like zombies passively absorbing content to actively choosing content, which is devastating business models across the board albeit some slower than others.

My analysis is that if the news and entertainment world does not figure out how to do option 3. it will slowly starve to death, imploding upon itself--industry by industry.

First up is the newspaper industry, but television and radio will follow.

Industry behemoths are in denial though, and the public doesn't understand what it will lose until it's gone, so we may watch some of these industries die before they accept the inevitable.

Answers are not enough. People have to choose to accept them, as failure is an option.

Friday, May 1, 2009

Value for value

So as I discussed in a previous post money is a way to abstract value, which was a great invention to take people beyond barter, where, for instance, a shoemaker would need to find someone who needed his shoes who had something he wanted in exchange.

Money abstracts value allowing the shoemaker to instead sell his shoes, and trade the money for something he values later on: value for value.

So all money really does is shift the value for value exchange in time because the money has no intrinsic value. It is a symbol of value.

The Web has, however, revealed a weird situation where companies are giving value, like news for instance, and not receiving commensurate value in return, where the perception has been that people will not pay for value, which defies thousands of years of human history!

The subtle answer then is that on the Web people are refusing to pay for something before they see value, which is something that actually occurs in other areas, and I have a story, from years ago when I lived in the Atlanta metro area.

I was at a restaurant having a meal, when I noticed a couple who had ordered a full meal and finished eating it, just get up and walk out the door without paying!!! They had noticed that the one server--it was a slow period--had gone to the back of the restaurant for something, and they just took off--they stole value.

They stole the meal.

I think some people might suppose that most people would steal value on the Web! But most of us I think would not get up and leave just because there were no servers watching. I don't think most people only pay for meals at restaurants because someone is watching over them.

But all restaurants do not force you to pay upfront.

Some do. Fast food restaurants get your money upfront.

The experiment on the Web with pay was like with fast food, but with fast food you generally know what you're going to get, and it's more of a commodity. With the Web people didn't know if they'd value what they were getting.

You still don't. I don't know if I'll value information I receive on the Web until after I get it, but then I have no option to pay for it, so the Pay Back Value concept is just giving the Web something that is already available in other areas.

Advertising doesn't work well on the web. The television model worked with a passive audience for a long time, but it is facing change as well as people with DVR's fast forward through commercials!

If no solution is found then value is being given for less value or nothing in return, which breaks the value for value principle.

Collapsing business models are the result, and we're seeing that now with newspapers, but will see that grow into other areas as time progresses.

Value for value is the very principle behind money.

It cannot be escaped.

James Harris