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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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