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Basic Web Economics:
How things work in the
'attention economy'

This page explains how people make money from giving away information free over the Web, and how the internet has (arguably) brought about a whole new economy -- the 'attention economy' -- where traditional wealth becomes less important than the ability to capture people's attention. But let's start at the beginning...

I hear that the people who invented the web directory Yahoo! are millionaires. But how does anyone become a millionaire by making a website which doesn't sell anything and which gives away information for free?

There are now loads of people who have become millionaires by devising websites which people want to visit. Their money-making secret is quite simple: advertising and sponsorship. It's just the same as with commercial TV: you don't pay to watch the programmes. The programmes are paid for by advertisers, who, in return, get to display their ads to audiences alongside the shows.

In the same way, you get to access Web services, such as the Yahoo! directory, for free. The only 'price' you pay is being exposed to some modestly-sized but inescapable adverts.

Yahoo! is in a great position to scoop up advertising revenues, because it can 'deliver' adverts to people who are actually interested in particular things. For example, the kind of people who search for information about cats in Yahoo! are exactly the people that cat food manufacturers want to address. People looking for webpages about chocolate will be subjected to mouthwatering chocolate ads. And so on. Since Yahoo! lists everything under the sun, that's a lot of targeted advertising space to sell.

Numerous other Web services, such as free e-mail and free web space, are paid for in the same way. The user is pleased to get these handy services for no money, the advertiser is pleased to be able to flash their messages at the user (and, in the case of free web space, that user's website visitors), and the service provider is pleased to take money off the advertiser.

Not all of these services are actually making a profit at the moment, though.

Indeed -- it seems that some people have become millionaires even though their web concepts are currently making a huge loss. How come?

Investors value Web companies based on an expectation of how powerful they think those companies will be in the future. So, for example, in the late 1990s the well-known internet bookshop Amazon.com had not yet made a profit, but shares in the company had a very high value, because it was widely expected that the company's leading position in the ever-expanding world of e-commerce would bring in huge profits... sometime quite soon.

Similarly, any website that is well-known and visited by millions of people has a high value simply because that's a lot of eyeballs to sell to advertisers, and everyone expects that as the Web is always increasing in popularity, that will mean even more eyeballs in future.

People are used to paying for other information that they specifically want, such as newspapers and magazines. It's surprising that you don't have to pay on the Web, isn't it?

In the earlier days of the Web, it was thought that the providers of on-line content would be able to charge users directly. Some newspapers, for example, started to put their content on the Web for free, but this was so that they could build an audience, and then start to charge an annual fee for site access. However, the latter part of this plan never became possible. Since there was so much useful information available on the Web for free, it was discovered that no-one wanted to pay for it.

Has anyone successfully charged for access to a website?

It has to be content that people are really desperate to get hold of. In other words, pornography. Porn sites which charge subscription fees are highly profitable. Unlike news or poetry, porn is something people are willing to pay for.

In addition, porn merchants can say that they are helpfully protecting children from their content by requiring visitors to give their credit card number. They're not stupid, although they may hope that you are.

Anything less dodgy?

The Encyclopaedia Britannica used to charge five dollars (three pounds) per month for full on-line access. But since October 1999 the famous encyclopaedia, which until recently came in the form of a mountain of books costing 2,000, has been available for free on the Web. In a move which must have made some Britannica managers feel quite ill, all 44 million words are now free. Advertising, sponsorship and e-commerce will be the new ways in which Britannica pays her rent -- in line with most other Web services.

You would think that businesses would have come up with some way of charging for content.

They are trying. Their hopes are currently pinned on the idea of 'micropayments', which means they want to devise a system which will be able to charge you small amounts for bits of content. It's based on the idea that most people wouldn't mind spending a few cents or pence to read an article or listen to a pop song. What the businesses want to develop is an extremely easy system for charging small amounts. This might fail though -- people have got used to getting their information for free now.

But surely, if you want to have success on the internet, you don't start by giving things away? That'll never work.

Ah, but it does work. Netscape built up a huge user-base for its Web browser by giving it away. They were a tiny start-up company whom you would expect would want to sell their milestone product. But by giving it away free over the internet, they got their software onto millions of computers. That brought power and fame, and enabled them to sell other products (such as Web server software) from a prominent position.

Later, once Netscape had started charging non-educational users for its browser, Microsoft demolished Netscape's domination by giving its own new browser away free. (Big business wasn't used to this idea: according to one book about Microsoft, when someone suggested to Bill Gates that his company should give away its Internet Explorer browser, he exploded and called the man a 'communist').

Lots of other success has followed people giving stuff away.

The Web remains dominated by big companies though, doesn't it.

Yes and no. Michael Goldhaber argues that what we have on the internet is an 'attention economy'. The scarce resource which everybody with a presence on the internet is struggling for is attention. On the internet, money is not the most important scarce resource, for reasons which we will turn to in a minute. And information certainly isn't a scarce resource -- the Web contains oceans of it. The Web's scarce resource is attention, because there is so much information out there, and everyone has so little time to look at it. To triumph on the Web is to have lots of people giving attention to your site, instead of giving it to someone else's. Attention is what everyone wants.

So it's an attention economy.

Right. Big companies don't automatically get attention on the Web simply because they have a lot of money. Having money can enable a company to make a diverting multimedia website, and generate awareness of it through conventional media and promotions, but if the website has no engaging content it will not win attention.

Meanwhile, individuals and small groups are relatively empowered in this medium, because if they produce a website deserving of attention then, hopefully and ideally, word will spread around the internet and lots of people's attention will be drawn to that site.

A commercial website, set up to promote a chocolate bar or a book publishing company, say, has the great advantage that it can promote its website address on all of its adverts and all of its products. A non-commercial website does not usually have such an opportunity, and so is at a disadvantage. (The publishing company is also in a good position because it can give away bits of its product directly, on its website, as a 'taster' for the full product, whereas the chocolate manufacturer usually has to settle for offering news, games and quizzes associated with the product).

However, if the commercial website does not have any interesting content, other websites will not link to it, it will not be talked about in email discussions or on newsgroups, and will only ever be visited by curious individuals (and the company's employees, partners or competitors) who have seen the address advertised and who visit the site -- once.

Meanwhile, any website which is full of appealing and regularly updated content has a better chance of getting attention. This is something which has to be worked on -- usually by sending loads of personal e-mails (not junk e-mails, known as 'spam') to potentially interested, and ideally influential, people. The whole thing takes effort, but not a lot of money. By getting linked to other websites, and listed in directories, search engines, and magazines, a website can come to command a lot of attention. And without attention, on the Web, you're nothing.

Goldhaber says: "Money flows to attention, and much less well does attention flow to money."

In other words, you can't buy attention. You can pay someone to listen to you, but you can't actually make them interested in what you have to say, unless they actually find it interesting. So money is less powerful than usual on the Web.

So you have to get attention first, and then money just follows?

Well, you need a lot of attention to make a lot of money. But look at these examples:

  • Netscape, a company established by a student called Marc Andreessen, and friends, got lots of attention by giving away its Web browser, and then was able to capitalise on its swiftly-established position as the best-known brand on the Web. Trying to sell the browser didn't work, but companies were keen to buy Netscape web server software because Netscape had become synonymous with the Web in the mid-1990s.
     
  • Vincent Flanders set up a website called WebPagesThatSuck.com, grabbing loads of attention from all those people struggling to design nice websites. Through website links, e-mails, newsgroups and ordinary conversation, word quickly spread about this witty site where you could 'learn good design by looking at bad design'. People gave it so much attention that Flanders could make money from selling advertising space on his site... and by turning it into a best-selling book... and by charging companies lots of money just to hear him speak.
     
  • Linus Torvalds invented Linux, a reliable operating system for computers -- an alternative to Microsoft's dominant Windows environment -- which is distributed free over the internet. It's 'open source' software, which means that anyone can use, amend, and improve the code. It's becoming increasingly popular: Bill Gates says he's not feeling threatened by it, but commentators say that shows what a big threat it is. Torvalds wouldn't make any money directly from Linux, then, but he has such a stock of attention that translating it into money (by offering his consultancy services, say) would be easy, if he wanted to.

All of these examples are about people who start off with attention-grabbing content, but no money. Money flows to attention.

Meanwhile, there are many examples of companies who have thought that their money would translate, on the Web, into attention and success. But they made boring websites, and failed. Attention doesn't just flow to money.

So how do we work this attention economy?

The number one rule is obviously that you need brilliant content. Then you need to get people to look at it.

How?

Well, one of the properties of attention is that it can be passed from one place to another. If someone who is receiving a lot of attention says, 'look over there!', attention will be transferred, temporarily, to that lucky other location. And if that other location is interesting enough, some of that attention will stay there. Ideally, it will come back, directly, again and again, for as long as that place remains valuable.

In Web terms, this means that you want loads of websites, web directories and search engines to link to your site, in as prominent a way as possible. If your site is good, and good fortune is on your side, small amounts of such attention will lead to larger amounts of attention.

If attention is so important in this new economy, will money die out?

Funnily enough, Goldhaber says that yes, money will become less important, and that attention will be the new wealth. But since money shows little sign of extinction at the moment, perhaps it's a better use of the basic argument to say that attention certainly does equal wealth in the new economy, but that's because you can always translate it into good old-fashioned money, which everyone still thinks is pretty handy stuff.

Aren't new forms of big business grabbing more and more attention on the Web, though? Brash new e-commerce ventures are all anybody talks about regarding the internet these days.

Well, that's more or less true, and some people say that big business has killed off what the internet and the World Wide Web were supposed to be about -- the global sharing of ideas and information. However, that part of the Web still exists, and indeed is getting bigger along with everything else in cyberspace. So maybe it is more helpful to think of the Web now having different spheres, existing alongside each other, but used for different things.

For example, let's say your town has an excellent public library which you enjoy using. One day a company opens a large supermarket next to the library. The library continues to be good and well-stocked, and indeed picks up more users from the influx of supermarket customers. Now, if your friend said, "I see the supermarket has destroyed the library," you would think they were a bit of an idiot.

In the same way, the commercial and non-commercial parts of the internet ought to be able to exist side by side.

But in this town, we would probably see marketing people from the supermarket sneaking into the library, taking down the community notices in the foyer, and replacing them with adverts. They would also interfere with the library catalogue, so that it told library users that the answers to their questions would be found in the supermarket.

Fair point. It's not easy for small or non-commercial operations to get attention. Nevertheless, it remains very possible, in ways which were simply inconceivable with traditional media. The idea of the attention economy is basically correct, except that it underestimates the power of those with money to obtain attention. Money itself can't buy attention, but it can pay people to produce attention-grabbing content, so it's a very similar thing.

However, it remains the case that you can produce attention-grabbing content with no money at all (as long as you have access to equipment). See the New Media Studies DIY Web Kit for details.


A different version of this text forms part of the first chapter of Web.Studies: Rewiring media studies for the digital age; Edited by David Gauntlett; Published by Arnold in the UK and Oxford University Press in the USA; Forthcoming, October 2000.


External links:

This is Goldhaber's main article on the attention economy, published by the online journal FirstMonday in 1997:

FirstMonday subsequently published some follow-up articles. However, if you ask me, their discussions of economic terminology don't add much to the basic model, or in the case of Ghosh's critique of Goldhaber's understanding of economics, don't take much away:

See also:


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