Virtual Economics

P2P liquidity markets and the invisible hand of philanthropy

Now, I'm a big fan of Zopa, the UK p2p loans market that connects lenders with borrowers and cuts out the institutional middleman. This is the same approach that Craigslist took to the classifieds marketplace. The web allows people to establish networks efficiently and the gateway monopolies that currently act as clearing houses for all manner of simple human connections are going to find themselves increasingly squeezed by the online population taking this disintermediatory approach - intermediaries are going to have to offer genuine value-add if they are to take a cut of this action.

This morning I first saw Kiva.org, and my first thought was "wow". In Kiva's own words, "Kiva lets you connect with and loan money to unique small businesses in the developing world. By choosing a business on Kiva.org, you can "sponsor a business" and help the world's working poor make great strides towards economic independence."

Now that Gates and Buffet are giving away their billions the spotlight is on everyone in the developed world to try and help where they can. Kiva is a mechanism that (currently) lets people loan money to developing-world entrepreneurs for no interest. So far, so philanthropic. But given that the loan recipients are building businesses, there is palpably a space here for Kiva - or someone like Kiva - to turn this into a viable business proposition from both ends. Philanthropy is, alas, limited and inefficient, and what makes markets work is the interplay of tangible benefits on both sides. The developed world is swimming in cash but growth is hard. The developing world has almost endless room to grow but negligible investment capital. Something that combined the best features of both Zopa and Kiva, that let entrepreneurs in the developing world get the cash they need to build infrastructure and lets investors in the developed world achieve both philanthropy and capital growth would be big news. Happily, Kiva's FAQ says the following:

"Q: Do I get interest on my loan?
A: No.  Kiva’s loans do not provide a financial return on investment. We hope to offer interest to our lenders someday soon."

Here's waiting for that invisible hand to kick in.

Everything for sale at the right price

An ingenious Finnish company, Igglo, has put flesh on the bones of the old adage "everything is for sale at the right price". Quoth Springwise:

"The Finnish company has photographed every building in Helsinki, with more towns to follow, and combines these photographs with satellite images and maps. Every property is listed, not just those that are currently on the market. (Their tagline is: "Your house is already on Igglo.")"

This is essentially the end-point of the digital marketplace - where absolutely everything is listed by a central facilitator and buyers and sellers come together whenever a price can be agreed, quite regardless of the fiction governing whether or not a thing is "for sale". Everything is for sale. (Incidentally it's not clear to me why eBay isn't doing this already in the  second-hand merchandise market - I occasionally wonder idly if two million cuecat scanners are still going for thee dimes a pop, and if so whether eBay will ever pick them up and send them to users so as to scan in all their possessions against the possibility of a good enough offer? I might not have been planning to sell my George R R Martin first editions any more than I was planning to sell my house, but there are possibly people out there who would offer me enough to change my mind.)

Possibly a similar model will emerge in recruitment - all CVs and all jobs posted online, and if there's someone out there who'd be better at your job and willing to do it, everyone knows it immediately and you're out. (That's pretty much already the model in professional sports, of course. The difference in the professional sports is cultural - that everyone acknowledges this is the situation - and informational - the market is small enough for everyone to have all the information on both sides.)

And so Igglo. A good start. A taste of things to come in a number of other markets. And a hint of what happens when all of the information can be available to everybody all of the time.

Independent News and Media's revenue diversity overstated

Last week IN&M's CEO Ivor Fallon gave an interview to the Press Gazette, in which he echoed the traditional wisdom of IN&M and its supporters that the group's revenue growth is a function of its geographical diversity. He commented,

"People say that newspapers are in decline; well, they're not. Newspaper sales and readership grew last year and will grow this year. There may be a decline in America, but America is not the whole world...We're in Ireland, where it's still growing. We're in India where they're growing like Topsy."

All very well, and a nice explanatory lead-in to the imminent release of IN&M's half-year figures (FT.com) which are expected to show a 3% revenue growth from a combination of circulation and advertising gains...apart from the fact that IN&M's last annual results showed that more than half of the group's overall revenue growth came from its 40% stake in Australia's APN publishing, activities in an English-speaking market than in terms of news publishing is highly mature. Tony O'Reilly commented similarly at IN&M's recent AGM that,

"Critics and Cassandras of conventional media focus entirely on events taking place in the United States, and to a lesser degree in the English-speaking world and in Continental Europe."

But with the majority of IN&M's revenue growth coming from Australia (and much of the remainder from South Africa, another English-speaking market), whither this diversity? (A 26% stake in an Indian newspaper publisher that has yet to show an impact on revenues is not enough of an answer.) In the context, IN&M's persistent harping on the benefits of regional diversification seems...perhaps disingenuous.

Mobile's killer ap - a point&click interface for the real world

This is the mobile application I've been waiting for - the point&click interface for the real world (NYtimes). Satnav plus the hitherto-elusive missing link of a miniaturised electronic compass allow Japanese mobile phone users to simply point at things they see and ask their phone "what's that?"

Perceptric calls it "a new front in the search wars" - absolutely. But it's more than that. It's the missing link between cyberspace and the corporeal world. It's the digital interface for reality. Tie it in to...oh, a Yellow Pages directory with location-targeted special offers, or link it to a property database so you can point at houses and find out whether they're for sale, or make it the gun interface for the ultimate mobile gaming experience...a point&click interface for the real world is a big, big deal.

Death sentence for portals

At the Convergence 2.0 conference, reports TechConfidential, Leo Hindery prophesises the ultimate demise of the portals;

"Hindery … first took all content and distribution and broke it down into three columns using a powerpoint slide: Portals (AOL, eBay, Google, MSN, Yahoo!), Content Providers (ABC, NBC, Disney, et al.) and Non-Broadcast Distributors (Cable, RBOCs, Satellite, Wi-Fi etc.) Hindery points to the portals column and says that the $225 billion market cap represented by those five companies can be directly linked to lost money in the valuation of the companies from the other two columns. This imbalance, he says, will correct itself."

I'm not remotely convinced that the distributors are going to do at as well as content originators from the changes Hilary presages - barring the attempts of cable monopolies in the US to legislatively warp the meaning of "net neutrality", carriage of data packets is heading towards long-overdue commodification and consequent zero or near-zero margins. Paul Kedrosky at SeekingAlpha comments on Hindery's basic premise that the portals' $225 billion valuation is on its way to the wall;

"Why? Because he thinks at least two-thirds of the imbalance is based on advertising dollars and non-proprietary content. Content providers will eventually figure that out, and, he argues, the result will be four of the five aforementioned portals will fold."

Let's face it - portals are the web1.0, pre-search way to find and organise content. The conflict between the search business and the portal business at e.g. Yahoo! is going to become even more apparent than it was when Yahoo! announced its de facto capitulation to Google in the search arena (Micropersuasion). And as for content providers working to recapture that $225 billion that currently sits with the portals - I'd say that NBC distributing content over YouTube (BBC) and iTunes (Variety); English cricket offering its own online TV channel; Warner Bros using BitTorrent (BBC); and ABC streaming programmes from its own website all point towards an acclerating theme of that balance being rapidly redressed.  

Sea-change in the paid search market

So...this week Jellyfish launched, promising users "the Internet's first buying engine". It is, somewhat as I predicted, a cost-per-transaction AdWords-analogue; but, somewhat differently to how I thought it would pan out, everything takes place on the Jellyfish site rather than distributing the search and the commercial relationship to consumers-as-publishers across users' blogs and wikis and personal webpages.

Make no mistake about it, this is a fantastic idea and some of the best commentators (Clickz) are highly positive (Publishing2.0) about Jellyfish's prospects. This is the widening gyre par excellence - a relocation of value from media intermediaries to consumers, a fundamental simplification of the digital media value chain that eliminates a number of unnecessary stages in the buying process.

I have two reservations. One: why is this a centralised model that requires users to come to the Jellyfish site to transact? Why not simply distribute the model a la AdWords and let the consumers-as-publisher transact via their own sites? Two: how, prior to the establishment of a viable network, is this defensible against Google launching the same idea and killing it?

RSS feed playing up

Apologies to readers getting spammed with my spurious updates in their RSS reader today, my feed has been playing up and fixing it has involved reposting a bunch of things, in one case by typing it out again from scratch. (Actually, "my feed is playing up" is a wild stretch of the truth - fairer to the good people of Typepad and Feedburner to say that my deplorable habit of writing my posts in Word and then pasting them in here chose to today to come home to roost with a slew of XML errors. All fixed now though, I think.)

More on cost-per-transaction AdWords

Yesterday I was thinking about the implications of the Jellyfish launch and the potential for a cost-per-transaction AdWords-equivalent. Today I discover that the new eBay AdWords competitor (SeekingAlpha) does just that - rewarding "publishers" only when someone referred from their site actually wins the eBay auction in question.

Now, the line between publisher and consumer, especially online, is increasingly blurred - as I commented yesterday, with blogs and journals and the whole panoply of UCG tools available to all, the digital user is both the audience and the media owner. (In potentia at least - not everyone runs their own site or even their own blog, but the important things is that everyone can.) So arises an eBay transaction-based AdWords equivalent. Thus, I expect, a new geek game - trying to get the things you want to buy from eBay to appear in the ads on your own blog/wiki/site so you can not only buy them but capture the media owner fee for a successful ad as well.

Google finance faring poorly

Much as predicted, Google Finance is struggling to dislodge users of existing finance sites (Yahoo!) from their arrays of customised portfolios and tools. Rafat comments on the lack of cross-promotion from other Google services; in the UK, the ongoing lack of collective investment (mutual fund) data makes Google a poor choice for anyone but the specialist equity-only investor.

In digital media we often ask ourselves "what if Google launches into our space?"

Hearteningly, sometimes the answer is "nothing much".

Print your own Grauniad

In a move reminiscent of the FT's "FTpm" (pdf) of more than a year ago, the Guardian is launching a customisable, self-printed PDF newspaper called G24 (likewise PDF). From the Guardian website (or, I suppose we should say now that they've announced their primacy-of-the-web policy, simply "The Guardian"),

"Users will be able to log on to the Guardian Unlimited and download an eight to 12-page A4 pdf document, which can then be printed off. They can select any of the five news streams.

The Guardian hopes the service will appeal to lunchtime and evening commuters wanting a live print-based update of the day's events."

With the costs of newsprint and petrol spiralling, it's a smart move to relocate the costs of production and distribution from the publisher to the consumer (or more precisely the consumer's employer - though perhaps employers won't even mind if the price of a few sheets of A4 shifts employees news-browsing from the working day to the commute home). It allows the Guardian to distribute a printed, timely newspaper to urban commuters without the expense of bidding for distribution contracts. It moves beyond the debate about whether it's better to offer a morning or evening newspaper (HoldTheFrontPage) by letting the consumers make the choice themselves, and therefore while the first edition will apparently be sponsored by BT some interesting ad dayparting opportunities will be available further down the line.

Over at Adverlab there are some examples of other newspapers that have taken the same approach, and of course not only the FT but also Wikinews has been offering a PDF newspaper (Micropersuasion) over iTunes for a little while.

The questions outstanding for the Guardian's experiment are several. First, will advertisers pay print rates to appear in a document that the consumer prints themselves? (Indeed, one can hardly imagine full-page ads ever being possible the print-your-own-A4 model as some very sophisticated ad-blocking technology called a recycling bin would surely get in the way.) Secondly, FT-owner Pearson has declined to mention FTpm since the launch last April. One can only therefore assume that popular and/or commercial take-up was trivial. Will consumer acceptance of the Guardian's model fare any better? Thirdly, I'm curious to see what sort of content ends up gracing the pages of an explicitly user-customised paper. As we've seen before, when consumers are empowered to choose their own news they often opt for a diet of celebrity gossip and soft porn. Arguably, part of the value of a printed newspaper to its advertisers is that their commercial message appears alongside relatively serious-minded content - indeed, the converse argument that advertisers are wary of appearing alongside user-generated prurience is one of the abiding commercial worries of MySpace et al. Now, in the Guardian's experiment each user will get to choose their own tailored content so the concept of a lowest common denominator is perhaps inapplicable. But if the Guardian's G24 goes, even on average, the way of Chile's Las Ultimas Noticias (Editorsweblog) it seems improbable that the current crop of Guardian advertisers will look upon it with much favour.