Feb 25

Tim O'Reilly

Tim O'Reilly

Gift Economy or Honeymoon?

Peter Brantley pointed to an interesting discussion on if:book entitled Gift Economy or Honeymoon? about the economic difference between a search engine like Google (or Google News) and a community content site like YouTube:

It seems to me that there's a difference between a search service like Google News, which shows only excerpts and links back to original pages, and a social media site like YouTube, where user-created media is the content. There's a general agreement in online culture about the validity of search engines: they index the Web for us and make it usable, and if they want to finance the operation through peripheral advertising then more power to them. The economics of social media sites, on the other hand, are still being worked out.

That's a key insight. I wish more people in publishing understood it. In my debates with publishers over Google Book Search, I see them conflating building a search index with providing actual access to the content. Muddying the water in the public's mind doesn't serve anyone very well. We need to make these distinctions, because only then will we be able to develop the appropriate economic models for each type of service.

Here, if:book goes off the rails:

For now, the average YouTube-er is happy to generate the site's content pro bono. But this could just be the honeymoon period. As big media companies begin securing revenue-sharing deals with YouTube and its competitors (see the recent YouTube-Viacom negotiations and the entrance of Joost onto the web video scene), independent producers may begin to ask why they're getting the short end of the stick. An interesting thing to watch out for in the months and years ahead is whether (and if so, how) smaller producers start organizing into bargaining collectives. Imagine a labor union of top YouTube broadcasters threatening a freeze on new content unless moneys get redistributed. A similar thing could happen on community-filtered news sites like Digg, Reddit and Netscape in which unpaid users serve as editors and tastemakers for millions of readers. Already a few of the more talented linkers are getting signed up for paying gigs.

There's no question that we are in a honeymoon period, that free will be replaced or supplemented by paid, and that YouTube will lead to a new generation of paid content producers, but I don't think it will come through collective bargaining to get the long tail a slice of the big dog. That's always the wet dream of people who missed the boat: they hope through coercion to get what they missed out on through lack of innovation. I don't see the small content providers thinking like this -- it's just people from existing content industries who think this way. I think the small content providers will just figure out the new economics of the medium, whatever they are.

Right now, even Google hasn't figured out how to monetize YouTube. When they do, I'll lay odds that they will provide self-service mechanisms that content producers can use to monetize their content, with some kind of revenue-sharing arrangement, just like Adsense for Content. And from there, I'll lay odds that it will be the content providers themselves who lead the charge, just as they have done in blogging. Entrepreneurial content producers will find ways to extend whatever mechanisms are provided, and will invent new ones. And they'll do it in-band using the service mechanisms provided by YouTube, and out-of-band by becoming celebrities monetized in other media. And there will be a rich ecology of players who grow up to help with that monetization (just like FM Publishing (in which I am, incidentally, an investor) in blogging). FM shows the right kind of collective action: build shared infrastructure for business services that exploit the opportunities that the new economy provides.

tags: web 2.0  | comments: 6   | Sphere It

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Comments: 6

  Benjamin Koe [02.25.07 06:25 AM]

I understand why some are calling it a honeymoon, but I don't believe it is mutually exclusive from the Gift Economy. The Gift Economy has been there for the longest time, and the social media is just making it more obvious. Also, one cannot just look at the usage on YouTube and and judge the nature of its volunteers. Many bloggers do make money off their own blogs with ads or affiliate programmes, and these same people use YouTube simply as a medium to host multimedia/bandwidth they can't afford as well as try to draw as many visitors to their blogs. Do they necessarily want YouTube to pay them? "Payment" through traffic might be enough for some.

  steve [02.25.07 06:44 AM]

My bet is that YouTube is irrelevant, because sharing can be done by peer to peer. Why place content on someone else's site when you can serve it out?

This doesn't mean that you have to use your own computer, as you can use sites like Amazon's S3 to handle peak hits or unexpected popularity.

Social sites only exist at the moment because it's not click'n run at the moment, but it's easy enough and will happen. Look at game servers for an example.

Every ISP will have their own YouTube, every company will have their own blog (eg, Apple's 10.5 OS X Server), and people will stop using sites that profit from them for nothing much in return.

Spam problems, privacy problems, copyright problems, all these problems are due to the flawed model of these sorts of sites. People will handshake for connections that their software maintains.

The important issue is that privacy of information on computers needs to be legislated to the same level of protection as information in people's heads.

  jason [02.25.07 07:01 AM]

BTW The link to fmpub is broken, points to .com instead of .net

  Tim O'Reilly [02.25.07 07:49 AM]

Benjamin -- my point exactly. It's not either-or. In a mature ecosystem, there are lots of niches.

Jason -- I fixed the link. Sorry about that.

  Thomas Lord [02.26.07 01:07 AM]

On the topic of Google's efforts re scanning books:

Please read the federal code about copyrights paying special attention to the exemptions afforded libraries as well as the explicit prohibitions of what libraries may not do. It's only a few pages and easily found, well, via Google. In those explicit prohibitions, you will find a legal description of what Google and its partner libraries have informed the public they are doing.


  Tefnina [02.26.07 08:43 AM]

The webcomics community has been down this road before. Around the dot-bomb era bandwidth costs were high enough that a terribly successful (in # of hits) comic like PvP or Penny-Arcade lost lots of money giving away their content for free. Moderately successful creators felt the pinch too, and advertising was not sufficient to make up the difference. Subscription model associations sprung into being as a viable alternative. (e.g. Modern Tales, which is still around.)

Subscription models for content are lousy way to grow your userbase but make a sensible model when distribution resources are scarce (=expensive). If Google/Youtube and friends are not able to make sufficient money off of ads for some period of time, expect subscriptions to show up.

I'll note that since bandwidth costs have decreased, and ad revenues have returned to helpful levels, that most creators distribute their work for free. Almost all do sell some related physical products as well - print versions, t-shirts, etc. I don't know if video is going to be that much different - selling little plastic disks might be very un-web 2.0, but if it works...

Anyway, someone can probably make a nice graph plotting cost of bandwidth vs. potential (ad) revenue that would tell you which economic models make sense when.*

*Optimistically assuming bandwidth always becomes cheaper and more plentiful doesn't take into account the health of different revenue systems. (What if the advertising market in the US collapses? What if distributing little plastic disks becomes dirt cheap? Etc.)

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