Content may be free, but the format in which we buy it certainly is not. As Apple, Google, Red Hat, and others increasingly demonstrate, consumers and enterprises are happy to pay for "free" when packaged in convenient formats that add value to digital goods.
Over the years, I've paid Morrissey several times for his Bono Drag album: cassette, CD (twice), iTunes, concerts. I'm reading Moby Dick (again), and have bought it in hardback and paperback, not to mention Kindle, formats. The Economist? I pay for the right to read it in magazine format, because I hate the thought of trying to read it online.
All of these (re)purchases strike me that the media world may have problems, but they are mostly of discovering convenient formats in which to deliver content. Formats that suggest, and sometimes demand, payment.
Along came iTunes and it became easier to buy the song for 99 cents than to steal it.
Of course, iTunes wasn't the only "format" pioneered by Apple. Its iPod also made the music portable. The iPhone increased this advantage by meshing digital entertainment with work (phone).
Indeed, the iPhone introduced another winning "format": the App Store. Over 2 billion downloads and 85,000 available applications later, Apple has demonstrated significant value in aggregation of "content" (in this case, applications) in an easy to discover and consume format.
But it's not just Apple that benefits from such format shifts, as SourceForge's Paul Huff comments:
It seems like Red Hat, Apple, Google, and Microsoft...all win because of value added via aggregation/packaging/ease of use, which is why business models like Cloudera['s] and Lucid Imagination['s]...make a lot of sense to me: packaging can add immense value.
And maybe packaging is the wrong word...[It's really about] surrounding something free with something that facilitates the use of the free.
To me, too. Whether software or music, the key is finding the right format to make "abundance" manageable, as I've described before.
Importantly, such formats must facilitate and not inhibit the ease of distribution that digitization enables. This is why DRM worked fine for Apple's iTunes but why its rough equivalent--the pay-wall--may not work nearly as well for newspapers and magazines.
If I'm following a link off Twitter the last thing I want is to have my interest bogged down by a pay-wall. I might, however, be happy to subscribe to a Twitter service that automatically lowers the pay-wall. In other words, a walled garden around The Economist may annoy me, but a metered garden accessed through Twitter, similar to iTunes and music, would not.
It's all about getting the format right.
In software, I've described current business models for open source as a transitory period, the "awkward teenage years" before models mature. I suspect we'll come to see cloud computing as a convenient new format to distribute otherwise free software. Or, as The 451 Group's Matt Aslett suggests, perhaps cloud computing is a natural evolution from open source.
Good content is a necessary precondition to getting paid, but it's not going to be reason we pay anymore. That reason for payment is the format in which the content is delivered.
Perhaps it's always been that way, but the physicality of the delivery mechanisms confused us: we were buying the paper but thought we were buying the news.
Follow me on Twitter @mjasay.
The Internet largely abolishes scarcity in digital goods, shifting competitive advantage to those that can profit from abundance, not scarcity, like Red Hat, Google, and Facebook. For this reason, the more Hadoop grows as a community, the better the business opportunity for Cloudera, the start-up that distributes a commercial version of Hadoop.
Let me explain.
As CNET's Tom Krazit explains, "Hadoop is essentially an open-source version of the software Google uses to run its Web indexing servers." Yahoo also uses it internally for roughly the same reason, and has released its own open-source version of Hadoop to nudge adoption by other firms and to encourage contributions to the Hadoop project.
As Savio Rodrigues points out, however, Hadoop is already getting significant contributions from outside Yahoo. While initially dominated by Yahoo employees, Rodrigues points to recent data that indicates that 70 percent of Hadoop's community isn't employed by Yahoo.
That's great progress for Hadoop, and it's also great for Cloudera, the company that aims to make Hadoop relevant and useful for companies that lack the scale of a Google or Yahoo. Cloudera actively contributes to the Hadoop project, but perhaps its greatest contribution is in providing a commercial distribution of Hadoop.
The more contributors to Hadoop and the more complex it becomes, the greater the need for a Cloudera to provide a conservative, trusted distribution of Hadoop for enterprise customers. In other words, the greater the abundance of community around Hadoop, the more enterprises need scarcity: one throat to choke for their Hadoop deployments, not many.
As Yahoo and others contribute heavily to Hadoop, in short, they're also contributing to the likelihood of Cloudera's success.
Follow me on Twitter @mjasay.
Google has come out and said something that many in the industry - including I - have long suspected: Social networks are poor advertising platforms. For those who can't get beyond the advertising fetish, here's a critical data point that suggests you'll need to indulge that fetish elsewhere. Whereas search is a great indicator of customer interest, social networks are not. Said Google's CFO:
We have found that social networking inventory is not monetizing as well as we would like.
Of course it isn't. The model for monetizing them should be much different. Advertising is not the be-all, end-all for the web.
Nick Carr thus correctly asks of Facebook:
... Read moreIn perusing Nick Carr's blog today, I read his analysis of Google's voracious appetite for data and, in so doing, bumped into this exceptional blog post from Brad Burnham in which he dissects the importance of data to Google.
In the course of his argument, Burnham says something that hit me like a thunderbolt:
Data has this really weird quality. In economic terms data has an increasing marginal utility. Anyone who took Econ 101 knows that most physical objects have a decreasing marginal utility. When it is raining my first umbrella keeps me dry, a second may be handy if the first blows out, but a third is unlikely to be used. This is true of shirts, steaks, houses, of almost anything you can think of except data.
... Read more
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