Livingstone

The Curator’s Dilemma

[Full disclosure: I work on Abnormal Returns]

In my first post, I stated that community powered curation will yield higher conversion rates than search and aggregation because there is an increased perception of value. While this is a critical point, there is also a key architectural difference. Curators do not crawl and index the web.

The dominant publisher business model is a version of freemium. Generally, publishers will give away some type of free content in order to coerce a user to become a paying customer. This comprises, but is not limited to: content summaries, free articles coupled with a premium service, and metered access. It is important to note in some cases users will pay for an experience as opposed to content itself. While some of these models have better conversion rates than others, they all fair poorly when converting search traffic.

Search engines index the web and rank data. Because an entire site is captured, free and premium articles are mixed within search results. To comply with fair use laws, search engines display the title of the article and first sentence or two. If a premium article is not clearly marked, a user will be unable to distinguish free from paid. Clicking through to a premium article leads to high bounce rates. Users perceive the news market is saturated to the point where a competing article can be found free of cost. Although bounce rates are high, search can exist without free content.

The curator’s dilemma states that curators have an obligation to highlight, in their opinion, the most interesting content from every source. Similar to the prisoners dilemma, the most rational choice results in an inferior outcome for all stakeholders. In order to deliver the best user experience, highlighted content must be available free of charge, in turn, limiting the amount of sources available to a curator.

Publishers who put up pay walls are effectively opting out of curation. It is difficult to imagine curation having a significant impact on the advertising business. This is because it will never drive the same volume of traffic as search. However, publishers might be losing access to a sophisticated community that is more likely to pay for content than a user who arrives via search.

Unlike search, curation can’t exist without free content. Curation needs to deliver as much value to publishers as it does to end users. That means driving traffic with higher conversion rates. To succeed, curators will need to work with pay walled publishers to deliver maximum value to all stakeholders.

[Note: I am not against curators linking to premium content. In fact, I think curation can help spur micro payments. Prospective customers need some sort of validation before purchasing a single piece of content. However, it seems unreasonable to expect a user to pay for a more full subscription to access a single article.]

Community Will Power the Curated Web

[Full Disclosure: I work on Abnormal Returns]

The curated web has become a heated topic. When I began writing this post, I intended to avoid the debate regarding search engine, aggregator, curator and publisher economics. It seems impossible to omit. I believe that search and aggregation lead to curation— a critical component of the internet that will drive massive amounts of valuable traffic to different websites.

Aggregators generally come in two forms. There is the algorithmic aggregator such as TechMeme, which, although relies on a human element, uses a formula to look at specific sites to determine relevance. The second type of aggregator is a network which asks for permission or licenses before repackaging content. Both models are profitable because the cost structures are more favorable than those of the large publications they drive traffic to, and in some cases, compete against.

Publishers who are against search engines and ultimately aggregation cannot effectively monetize traffic. At scale, the internet is about converting analog dollars to digital pennies. Large publications with high overhead costs cannot achieve the same type of margins as search or a lean aggregator.

The internet continues to be one of the most disruptive business forces in existence. In every industry, incumbents will generally fall as new companies find better models. Many of the world’s largest companies from 50 years ago cease to exist today. It is possible for an incumbent to survive if they are able to adapt to a new climate.

In publishing, fragmentation is disruptive. The issues facing incumbents are more about the collapse of the classifieds market than search and aggregation. Publishers are forced to leverage a less profitable revenue stream— content. So, in a highly saturated market, is opting out the proper adaptation?

The economics between Google-publisher and aggregator-publisher are vastly different. Google’s market share is so large that a publication who opts out loses a significant amount of traffic— a devastating blow to the eyeball business.  Aggregators will never see these economics. The market is too fragmented for one company to dominate a vertical.

Although aggregators can be highly disruptive, both types push massive amounts of traffic around the internet. Publishers have trouble monetizing this traffic because a user is relying on an aggregator’s brand name as a means to establish reputation. Each user has a different perception of a brand which can impact how they associate a publisher’s brand and content.

While valuable to users, aggregators have their shortcomings. Type I often pulls in popular stories. Popular is not synonymous with interesting, actionable, and certainly not scarcity. Type II will repackage content and might relabel with catchy or misleading headlines. Typically this type of aggregator will buy traffic to monetize their offering.

Aggregators have laid the groundwork for the curated web. Although curation is not a new concept, we are on the cusp of witnessing explosive growth. A curator sifts through the news within a vertical and highlights stories that are interesting, actionable, and/or scarce. A true curator differs from a type II aggregator because they don’t have the luxury of writing interesting headlines. Rather they are highlighting pieces of information with no added spin.

The curation model is compelling because curators are not appointed. If visitors don’t enjoy the links or particular taste, the site will drive little traffic to publishers. A curator can only become influential if he/she is empowered by a community.

Publishers need embrace community backed curation and worry less about search and aggregation. A user who arrives at a destination through Abnormal Returns via StockTwits is more likely to convert than someone who arrives at an AP article through search or an aggregator because there is some perception of added value. This same theory drives digital goods. If a community perceives an item as something of value, others are more likely to follow suit and might even pay to participate. Additionally, a publisher has the ability to participate in the community and generate goodwill. The curation model delivers more value to both the end user and publisher.

Community driven curation has the potential to see Google-like economics within a specific vertical. An underlying community drives brand reputation. The larger and more engaged the community gets, the stronger the network effects.

Search will become less important with respect to news. I am not suggesting that Google or aggregators will suffer a death by 1000 cuts. Rather, the traffic that is driven to news publishers is harder to monetize because the perception of value is not strong enough. If I was a publisher, I would reach out to community powered curators— they’ll happily help you monetize the traffic. It’s a quid pro quo system. Remember, community is key. Without it a curator’s a-list links are only a list.

A Man With One Leg Can’t Run As Fast As A Man With Two

The concept of success and failure is quite damaging and actually erroneous, because there is no such thing as success and failure. There is one’s experiences and challenges, and how the individual faces up to all of that. A man with one leg can’t run as fast as a man with two, but running might well be more Herculean on the face of his difficulties.

Throughout my whole life I’ve worked towards achievements. But who said I have achieve anything? Professional athletes are great examples. They perform with their whole being at the pinnacle of sport. And there may be enormous satisfaction in doing so. But is that really an achievement? Or is it just something few people get to experience?  At the end of the day, it’s actually irrelevant how it compares to anything else. It’s totally irrelevant. People try to rate achievements, but in truth, they’re only relevant to—and only able to be rated in connection with—the potentialities of the individual involved.

It’s a bit disconcerting that potential implies luck. No matter how determined or skilled, one can fall short of their aspirations due to bad luck.

Luck is fascinating. My favorite thing about the concept of luck is that everyone has their own definition. Whichever way you put it, luck is defined as the probability of an event occurring; chance.

Luck is a difficult concept to understand because an event is invisible. If five people witness an event with a clearly defined outcome, you can be certain that there will be five different accounts as to how that outcome occurred. Don’t believe me? Just listen to the TV announcers of a football game argue whether a touchdown was due to a great pass or block.

I view luck as a series of accidents, for lack of a better word. Basically you are striving for a result but got there in a way that you might not necessarily understand. People are predisposed to make certain decisions in a given situation. You can’t all of a sudden try to use a strategy that you don’t know is a good strategy. In our example above, it is possible that the touchdown was a result of a past play. Maybe something happened that forced a specific player into a situation that they weren’t comfortable with. I’m not trying to be specious— only trying to make a point.

These accidents, successful or not, drastically alter the outcomes of events— from games to careers. The interesting thing is that if you apply this concept on a micro level, that is, within an industry, these situations become exploitable over time and you will find less accidents. Unfortunately, in life we don’t have that luxury. You only get one swing of the bat. There are certain situations that you just cannot be prepared for. It is possible that these events will alter your trajectory. If you want to realize your full potential you need the right situation to meet the perfect accident.