Gideon Rosenblatt

The Information Needs of Communities

30 June 2011 by Gideon Rosenblatt

Part 1 of 5:

This is the first in a five-part-series on the decline, fall and possible renaissance of local news.

In this first installment, I’m going to share key excerpts from a very interesting 475-page report on the state of local news by the Federal Communications Commission. The report is called “The Information Needs of Communities: The Changing Media Landscape in a Broadband Age” and it’s not your typical government bureaucracy report.

Most of us don’t have the time these days to read a 475-page report. I didn’t read the whole thing myself, but I did make it through a good portion of it.

What follows below are what I thought were the most interesting excerpts, with a heavy slant toward local newspapers. The FCC report also provides deep coverage of radio, TV and cable and goes into quite a bit of depth on communications policy, so if you are someone who cares about these issues, this report will be an amazing resource for you as well.

What prompted the FCC’s interest in the information needs of communities? Something I hadn’t fully understood about the FCC. In August 2003, FCC Chairman Michael Powell launched an inquiry into “broadcast localism” by explaining: “Fostering localism is one of this Commission’s core missions and one of three policy goals, along with diversity and competition, which have driven much of our radio and television broadcast regulation during the past 70 years.” (page 291 of the report).

The report doesn’t candy coat our current predicament, but the fact that the FCC is even publishing something like this is very encouraging in and of itself. It’s a fitting launch to this series, and the guarded optimism I have for the future of local news.

Old Style Newspaper Economics:

The great unbundling: During the news media’s most profitable days, in many towns, there was only one newspaper, leaving consumers with limited choice. And, though we may not have thought of it this way, purchasing a paper meant having to buy a bundle of goods, even readers only wanted certain parts. A cross-subsidy system had developed, in which a consumer who bought the paper for the box scores was helping to pay the salary of the city hall reporter. (page 17)
The shifting power of “distributors” and “content creators”: In the past, content distributors and creators were one and the same (e.g., the newspaper company wrote the articles and hired the paperboys). They could use the profits generated by distribution to subsidize the creation of content. (page 23)

Monopolies, Chains and Consolidation:

In 1920, 42.6 percent of U.S. cities had two or more newspapers competing with each other. By 2000, only 1.4 percent did, mostly because afternoon newspapers had disappeared. The increasing competition from early news on television, the shift away from a manufacturing work schedule of 7 a.m. to 4 p.m., and the flight of readers from the central city into the suburbs had made delivery of an afternoon paper less profitable. (page 35)
Between 1965 and 1975, ad rates rose 67 percent (remaining below the inflation rate); but between 1975 and 1990, as more newspapers became monopolies, rates skyrocketed 253 percent (compared with 141 percent for general consumer prices). (page 36)
The rise of the monopoly newspaper coincided with another development: the growth of the newspaper chain. Large companies and Wall Street investors saw profits in local newspapers, profits that would grow through the efficiencies of chain management. At the same time, the federal government’s imposition of inheritance taxes had prompted some families that owned local papers to sell in order to avoid having their heirs pay substantial inheritance taxes. In 1920, 92 percent of newspapers were independent. Eighty years later, 23.4 percent were. (page 35)
But chains also led to the corporatization of newspapers. (page 23)
Unlike family newspaper owners, who had long histories with their papers and were rooted in the communities they served, newspaper chain executives oversaw properties in many cities and towns across the country. They often lacked a connection to their readers and to the journalists who reported the news, and they focused more on overall corporate financial performance. (page 36)
For all the controversial aspects of consolidation and profit taking, it could be argued that the high profit margins of the late 1980s led to high employment levels for journalists. In 1989, newspapers employed more editorial personnel than at any time during the previous 30 years. However, journalism jobs began to disappear in the 1990s and early 2000s, as corporations, responding in part to Wall Street investors, squeezed higher profit margins out of newspapers. (page 36)
During the years of the bull market on Wall Street, corporate managements were impelled to maximize current earnings as a way of boosting the price of the stock. (page 37)
“I first heard the phrase ‘harvest strategy’ in the nineties, when it was briefly mentioned in a board meeting at the Baltimore Sun. I was the Sun’s editor then, and merely hearing those two words gave me the willies.“ I sensed what they meant. They meant milking a declining business for all the cash it can produce until it dies. . . . “For the record, I am unaware of any formal decision to harvest the Sun or any other paper. . . . And yet, symptoms of harvest are staring us in the face. They include a low rate of investment, fewer employees, fewer readers, falling stock prices and, most especially, high profit margins. (page 37)
The 2011 Pew State of the Media report declared: “As a result of bankruptcies, private equity funds now own and operate a substantial portion of the industry. (page 38)

The Rise of the Web:

In 2000, revenue from ads for employment, real estate, vehicles, and the sale of smaller items and services accounted for 40 percent of newspaper’s print advertising revenue, but by 2010 it had fallen 71 percent, from $19.6 billion to $5.6 billion, amounting to just 25 percent of total print ad revenue. (page 40)
This led to the saying in the newspaper world that “print dollars were being replaced by digital dimes.” (page 39)
In 2000, one percent of online ad dollars went to the purchase of advertising units appearing in search engine results. In 2009, 47 percent did. (page 17)
Currently only 20 percent of digital marketing spending goes to legacy media companies (TV, magazines, radio, billboards, etc.), and that is projected to decline to 13 percent by 2020 (page 23)
Each piece of content can now be subject to return-on-investment (ROI) analysis. To be sure, companies can decide to sustain money-losing propositions in the service of some greater corporate goal—improving prestige or brand, for instance but each time the CEO or the finance department assesses the performance of the company’s products, the ones that lose money will have bulls-eyes on their backs. (page 23)
Hal Varian, Google’s chief economist, concluded that the “online world reflects offline: the news, narrowly defined, is pretty hard to monetize.” (page 24)

The Overall Impact on the News:

Hyperlocal (neighborhood-based) information is better than ever. Local (municipal and state) information is struggling mightily—with a measurable decline in certain types of accountability reporting. (page 21)
In many newsrooms, old-fashioned, shoe-leather reporting—the kind where a reporter goes into the streets and talks to people or probes a government official—has been sometimes replaced by Internet searches. (page 55)
As technology offered consumers new choices, it upended traditional news industry business models, resulting in massive job losses—including roughly 13,400 newspaper newsroom positions in just the past four years. (page 5)
In some ways, news production today is more high tech—there is nary a reporter in America who does not know how to tweet, blog, and use a flip video camera—but in other ways it has regressed, with more and more journalists operating like 1930s wire service reporters—or scurrying on what the Columbia Journalism Review calls “the hamster wheel” to produce each day’s quota of increasingly superficial stories. (page 13)
While digital technology has empowered people in many ways, the concurrent decline in local reporting has, in other cases, shifted power away from citizens to government and other powerful institutions, which can more often set the news agenda. (page 6)
In another study—of local broadcasters in 175 cities—coverage of city government was found to be about one-third as common as crime stories. (page 13)
The percentage of Americans going without any news the day before they were surveyed rose from 14 percent in 1998 to 17 percent by 2009, according to Pew. The percentage is highest—31 percent—among 18 to 24 year olds. (page12)
The combination of time pressures and the influence of the web has led a stunning 62 percent of newspaper editors to say that “the Internet” has caused “loosening standards” for journalism. (page 57)

Citizens to the Rescue?

Citizens can now play a much greater role in holding institutions accountable. Whether it’s snapping photos of potholes that the city hasn’t fixed and posting it to a website, or scouring documents to help a news website uncover a scandal, a broad range of Americans can now more easily scrutinize government, companies and other powerful organizations. (page 15)
But when Pew’s researchers analyzed the content they were providing, particularly regarding the city budget and other public affairs issues, they discovered that 95 percent of the stories—including those in the new media—were based on reporting done by traditional media (mostly the Baltimore Sun). Even when they are working primarily with the reporting of others, they often add tremendous value–distributing the news through alternate channels or offering new interpretations of its meaning. But we are seeing a decline in the media with a particular strength—gathering the information—and seeing it replaced by a media that often exhibits a different set of strengths (for instance, distributing and interpreting it). (page16)

A Different Approach?

Perhaps we have not gone from an era when newspapers could be profitable to one in which they cannot, but rather from an era when newspapers could be wildly profitable to one in which they can be merely moderately profitable or break even. It is an important distinction, because it means that certain public policy remedies—for instance, making it easier for newspapers to reestablish themselves as nonprofit entities—might be more fruitful than in the past. Or it may mean that wealthy individuals—entrepreneurs and philanthropists—will view newspaper ownership in a different light than most corporate leaders have: not as a profitmaking venture, but as a way to provide an important civic benefit that will help to sustain democracy. (page 56)

Up next… (July 7) Part 2 of 5 - The Great Unbundling and Collapse of Local Newspapers

Part 1: The Information Needs of Communities

Part 2: The Great Unbundling and Collapse of Local Newspapers (July 7)

Part 3: Social Enterprise and the Renaissance of Local News (July 14)

Part 4: Social Networks and the Renaissance of Local News (July 21)

Part 5: Mobile Computing and the Renaissance of Local News (July 28)

Image modified from original by Puzzler4879.

Filed Under: News Tagged With: Local, Ownership, Management & Governance

How the Web Transforms Consumerism and What That Means to Organizations

7 June 2011 by Gideon Rosenblatt

The web has changed a lot of things about the way we consume media. It’s flipped our primary communications infrastructure from a one-way, to a two-way flow of information – and that change in the way we communicate is redefining who we are.

Businesses and organizations of all types need to understand that their customers and other stakeholders are no longer just passive “consumers.” The new media landscape is turning them into active participants in the value creation process.

Medium = Message

It was Marshall McLuhan who helped us understand that “the medium is the message.” By which, he meant that to understand communications, you need to look at both the content of a message as well as the method by which it is delivered. You can experience the story of a lion cub through a book, a stage, an IMAX mega-screen, or an iPad – and in each case, it will feel quite different.

Media can be used both to create and to communicate. The word “medium” can mean a “material used by an artist or designer to create a work“, or it can mean “the storage and transmission channels or tools used to store and deliver information or data.”

In the golden age of television, most of us experienced TV as a communications medium – one that delivered programming to us. For actors, writers, and producers, however, TV was a creation medium - extending the physical medium of film and creating an experience for the rest of us.

Creators and consumers were separate and distinct back then, but as we’ll see, that is no longer the case. With social media, we the people are now the medium – we are how information now moves – and that shift blurs the line between creation and communication.

Television, the Drug of the Nation

Back when TV was king, we could count on Walter Cronkite’s nightly “and that’s the way it was” to help us make sense of the world that day. Sesame Street showed us how to count with cookie-chomping monsters, School House Rock taught us about conjunctions and the legislative process, and a single teardrop helped us think twice about polluting. There’s no denying that TV, like any communications medium, can be a tremendous force for good.

But this silver lining also had its cloud. Sitting alone, together, TV dinners on our laps, we learned to settle for watching “All in the Family” rather than experiencing the real thing. TV helped us tune in and tune out. We trained our attention on the tube, gobbling up its slick, hilariously addictive content for a simple bargain: we exchanged our identities as citizens for new identities as consumers. That’s the advertising-funded economics of television. You watch stuff I pay somebody else to make, and then you buy my stuff.

And in this bargain, the complex wonder that is our humanity got reduced down to a set of eyeballs – receivers for an all-powerful signal that transformed everything in its path into an object to be consumed. As a crucial element of this one-way, broadcast communications experience, we too became objects; objects to be manipulated by ever more sophisticated advertising and marketing techniques in order to fulfill our end of the bargain: consuming more stuff.

Or, as Michael Franti put it:

**Saved from The Tube – by a Series of Tubes**

And then we were saved – by something called “the web.”

It took us a little while to figure out that the the web wasn’t a broadcast model like TV. After a second round of tweaking, we learned that the web’s two-way flow of communication fundamentally redefined what we could do with it.

We learned that the web allowed us to connect with each other on a scale never before possible. It’s helped us build and harness social capital in fundamentally new ways. We’ve used it for noble social change purposes, such as exposing violence and suffering in Kenya and other places, and organizing movements for democracy in the Middle East and throughout the world.

On personal level, we also learned to use the web in ways that change the way we connect with one another. Many of us have re-connected with long-lost friends on Facebook or made important new acquaintances on Twitter.

The web isn’t just a tool for communication; it’s a tool for building social capital.

New Wrench, Same Sockets

We are still discovering all of the wonderful things that this young medium will allow us to do, but there is one thing it does that isn’t new. On the web, we still look at lots of ads. And where there’s advertising, the fundamental economic formula that drove television remains unchanged. You interact with stuff I pay somebody else to make, and then you buy my stuff.

Now to be fair, the web does change a few things about advertising. It’s much better at understanding our personal context than TV ever was. Ford Motors knew something about fans of M*A*S*H, but thanks to cookies and other tricks, Ford now knows a lot more about fans of Mashable.

This isn’t just about information flow though. The web also allows us to interact with information, and that has turned it into a powerful engine for conducting transactions. In the old TV model, companies could only us media to stimulate demand. Now, they can fulfill it too. Whether it’s 1-click buying on Amazon, or group buying on Groupon, the web retail experience adds “getting a piece of the action” to the small list of basic business models now driving the web.

Socket To Me

But none of this changes the underlying model and none of this is the really interesting part of the story. What is the interesting part of the story is that average people are now using the web to distribute information themselves, and this two-way flow of communications is actually changing us. We’re no longer just passive consumers, as with the TV model. We’re now producers and distributers of information – similar in function to the writers, producers, and broadcasters in the golden age of TV.

So how have businesses and other organizations responded to this marvelous new communications medium, this new facilitator of social capital for humanity?

The “like” button. By and large, they’ve responded to this amazing new communications medium by essentially asking us to click a button that says we like them and their stuff. Why? Well, for one thing, “liking” something signals interest, and could prove even more commercially valuable than searching for it.

The other, even bigger, reason for all the excitement about “liking” is that when an organization get us to “like” their stuff, our friends see that we like that stuff. And when that happens, there’s a chance that they’ll buy that stuff and maybe even “like” it themselves, in an ever accelerating spiral of liking and consuming.

So now we’re not just a set of eye sockets, there to stimulate our own body to buy more stuff; now we’re a set of eye sockets, connected to other eye sockets, and therefore able to stimulate other bodies to buy more stuff. Great.

No, We’re More Than Just Sockets…

Don’t get me wrong. I know we need economic models to make the web work, and I know that a good portion of that will ultimately tie back to buying stuff. That’s not the problem.

The problem is that all this eye-socket crap is still working with outdated assumptions about organizations’ relationships with stakeholders. These people are not passive consumers anymore. What they are telling organizations, what we are telling organizations today is that we want to play a more meaningful role. We are people, not consumers. And as people, we have tremendous, untapped potential as partners in creating real economic value with the organization.

It is time for organizations to stop seeing their stakeholders as objects to be manipulated, and to start seeing them as people to be engaged. The web is a natural collaboration platform. It is built to facilitate co-creation. This is the power of third-order engagement. Organizations that learn how to fully tap this power will not only unleash a new wave of economic value creation, they will also build enormous loyalty with their stakeholders.

Liking will pale in comparison.

Filed Under: News Tagged With: co-creation, Co-Creative, Collaboration, consumption, meaning, Meaningful, Media, People Power, Relationship Management - CRM, social capital, Soul, TV

“Square” Pegs Mobile Payments – Round Hole Still Not Filled

27 May 2011 by Gideon Rosenblatt

The latest issue of Wired has an interview with Twitter co-founder Jack Dorsey on his latest venture – Square. If you’re not familiar with Square, it’s a simple way for merchants to accept credit card payments through a little device that plugs into their phone.

Square has now shipped a half million card readers and is already processing over $3 million a day in transactions; it’s growing like wildfire.

The Square business model represents a big disruption to today’s payment processing market and could be an important stimulus to local economies. But that’s not why I’m highlighting them. These guys are rolling out features that look like an even more revolutionary shift in commerce called “Vendor Relationship Management.” But that’s not what Square is actually doing, and it’s worth understanding how a choice of business model can get in the way of building really disruptive, good-for-the world services.

Luckily, there may be hope on the horizon with the recent announcement from Google that it is getting in the electronic wallet business – and that could change everything.

How it Works

As a merchant, when you set up an account with Square, you get you a cool little credit card reader that plugs into the jack of your iPhone, iPad or Android phone. It also gets you an app for managing your purchase transactions.

There’s no setup fee. All you pay is 2.75 percent of the transaction price per swipe, which is a nice simplification of today’s terms, pricing and processes for accepting credit card payments.

How This Changes Things

Square is applying the Clayton Christensen disruptive innovation model to the market for payment processing. Start simple, penetrate the low end of the market and then use volume (and network effects) to work your way up-market.

Many of Square’s early adopters are really small-scale, local merchants who now operate in the cash economy. Yes, many of these folks currently work in black or gray markets (which will be a problem for Square), but there are also millions of people who sell stuff at local farmers market and street fairs, and millions of small-time landscapers and carpenters and other providers of local services for whom Square is perfect. For these small businesses, Square represents a much easier payment solution than having to have customers run to the ATM for cash or even writing out a check.

This is a new market for payments and Square services are likely to stimulate whole new types of businesses that could be an important stimulus for local economies. Think, for example, about a new generation of local entrepreneurs fed with GigWalk assignments and paid by Square. It could make a real difference in peoples’ lives.

The second class of early adopters are slightly bigger, independent businesses that already have credit card payment solutions but are looking to save money and get better functionality than what’s available from today’s payment processing machines. For some of these merchants, Square’s 2.75 percent fee represents a real savings.

The even bigger draw for these merchants though is better management of their sales data and better connections with customers. To this end, Square just announced a new app for the iPad called Square Register, which gives merchants a “Google Analytics-like” dashboard for managing all the transaction data that’s run through Square. It will also give merchants some very innovative tools for staying in touch with customers – but more on that in a minute.

“Register” is Square’s run at the Point-of-Sale (cash register) market. Over time, as the Christensen model predicts, bigger merchants will be tempted by the Square model because of the way it improves the retail shopping experience for customers. If you’ve recently shopped at an Apple store, then you’ve experienced the way employees on the showroom floor can check you out with specially-equipped handheld devices. It streamlines the checkout process in a way that really does improve the shopping experience.

One of the reasons Square is positioned to do well is that – in addition to its disruptive innovation strategy – it’s also running a market-bridging strategy; the kind you need when markets are in transition, as they are today with mobile payments.

The big shift now heading our way is the rise of the electronic wallet. It’s been predicted for years, but we are finally starting to see real progress in integrating payment processing with near field communications (NFC). Google, for example, made a big announcement yesterday about its plans for an electronic wallet for Android based on NFC (more on this below) and Visa is doing its own experimenting. But Visa is also taking an unspecified stake in Square – which suggests that they too believe it will take a few years for NFC to take hold.

Netflix didn’t beat Blockbuster by jumping straight to online distribution of movies. Many people, including the folks at Blockbuster, viewed all that shipping of DVDs through the U.S. Mail as a quirky distraction, but it turned out to be a brilliant market-bridging strategy. Today, Blockbuster is history, and Netflix is the dominant player in movie rentals both offline and online (their movie streaming currently accounts for 25% of North American Internet traffic!). Once NFC is available on a critical mass of phones, you can bet Square will shift to this new technology. But in the meantime, they are busy grabbing up market share based on a tweak on today’s solutions. Smart.

What About Us Shoppers?

Remember I mentioned that the Square Register also has some innovative tools to help merchants stay in touch with customers? Well, that’s the Square “Card Case.” When you buy something from a merchant who’s using Square, he or she sends you a link to the Card Case app for your phone – preloaded with a card for their business. Over time, you’ll add cards from other Square businesses that you buy from as well.

When you click on a merchant’s card in the Card Case, you’ll see your transaction history with that merchant – kind of like a consolidated, organized view of all your receipts from them. Once that merchant has run your credit card, you’ll be able to simply pay them directly from their virtual card in your Card Case (they’ll then run the charge on your card at some point later; it’s kind of like running a tab at a bar).

You can bet that Square will be rolling out all kinds of interesting features down the road to help merchants build customer loyalty and help them promote specific products and services. It’s a smart approach to facilitating commerce – and it definitely makes Square a company to watch.

What is Vendor Relationship Management (“VRM”)?

This is cool stuff. And there’s little doubt in my mind that Square and its fellow payment revolutionaries will radically change the way we buy stuff. But there’s one very important sense in which Square is just the latest rehash of the same tired story.

A few weeks ago, while at the Internet Identity Workshop in San Jose, I found myself drawn into to pretty much all of the sessions having to do with “Vendor Relationship Management” (VRM). While there, I also had a chance to talk with some of VRM’s main champions, including chief VRMer, Doc Searls.

I had heard about VRM years earlier, but never paid it much serious attention. Now that I’ve taken the time to dig into it, I’m here to tell you that there is something quite interesting to this stuff. It’s part of a broader technological trend now unfolding that I’m calling the “personal web.” I think it’s so important that I’ve added a “Peronsal Web” category to this blog and a “Personal Web” section to the blogroll (to the right) to help you connect with folks working in this area. I’ll be adding to both over time.

So what is Vendor Relationship Management and how might it transform commerce even more radically than what Square is doing?

VRM is a set of tools to help customers aggregate and manage their relationships with merchants on their own terms. It’s about flipping the model so that the merchant is no longer at the center, and the customer is. In the old world, companies aggregated and managed all their relationships in a Customer Relationship Management database. When, as a customer, I interacted with that company, all of the data generated from that transaction stayed with the company in this database. VRM flips this. It centers the data with me and I share it, as needed, with the companies I work with – on my own terms.

One of the foundational premises of VRM is that it works on behalf of the customer. If you’re planning to buy a new TV, your VRM tools will help you decide which model is the very best for you – and it will help you buy it on terms that are the very best for you. If you care about the planet, it will overlay sustainability considerations along side product features and pricing variables. You’ll be able to tune your VRM tools with a myriad of other variables as well, and it won’t be difficult because you’ll be able to swap in filters from various people and organizations whose values map closely to yours. There’s lots and lots of cool stuff to elaborate on here, but we’ll have to save those details for another day.

Conflicts of Interest

Again, the key thing to remember about VRM is that it works for you. VRM tool builders don’t get a cut of the sales going through the tool. They don’t get incentives to push this product over that product and there’s no advertising dollars to subsidize the cost of the tool. You pay for the tool and the tool works for you. Period.

This isn’t the world we live in today, of course. We’re used to a world where we use third-party shopping services like Amazon for free. It costs a lot of money to manage all that information and build all the software that goes into making an easy-to-use shopping service like Amazon. I know. I used to run a very large car online buying service and managing all the data needed to make that service work was a significant portion of our total costs of operation. Like Amazon, our business model covered those costs by simply marking up the end price of our products to customers. This is the standard retail model and it’s one we all understand and have come to expect when we shop online and offline.

It’s because of the success of this model that the idea of actually paying for a set of tools to help us shop seems downright strange. But there are two reasons why we are likely to find ourselves doing just that in the years to come.

The first reason that VRM tools will eventually take off is that the cost of managing shopping-related data will drop precipitously with the rise of the Semantic Web. I wrote recently about a demonstration Google is now doing with semantic search for recipes. These “smart” recipes now allow us to assign specific ingredients (like chicken, butter, pine nuts and mint) and Google will magically pull the right recipes from a wide range of sites. The cost of building tools for managing and manipulating this kind of data are will soon proliferate and when they do, the cost of organizing information will drop like mad. Once that happens, the economics change and you’ll be able to buy a really great grocery shopping app for your phone that will work in any grocery store and only cost you a few bucks. And because you paid for this VRM tool – it will work for you – not the grocery store.

The second factor pushing us toward a world of VRM is the growing awareness and concern around the privacy, safety and value of our personal data. One of the reasons we’ve gotten so used not paying anything for the online services we use is that these services are harvesting valuable personal data about us that they are then turning around and reselling to other companies. Most of Facebook’s high valuation is directly related to the goldmine of very personal information about you that’s locked up tight in the Facebook vault. VRM moves all that personal data back to you so that you’re in control of it. If you choose to, you will have the option of sharing it with merchants as you shop, but you will expect to be compensated for it in the form of lower prices or special services.

Thinking Outside the Square

So how does all this relate to Square? Well, on the surface, Square’s Card Case actually looks a bit like a VRM tool. But it’s not.

Square’s business model is based on the standard retail paradigm. The Card Case experience is very merchant-centric. You open a merchant-specific card within your case and that’s the way you shop for a shoe or a pineapple. But in a true VRM app, you simply say you’re looking for a pineapple and the tool helps you choose where to go.

Square makes more money when your Card Case motivates you to spend more – even when that may not actually be in your very best interest. That’s a direct result of the underlying business model that Square has chosen, and, by rolling out Register and the various tools it has for helping merchants promote themselves, Square is moving even further in that direction than the credit card companies. Square is not VRM.

I’ve got nothing against Square or what they’re trying to do with their business, by the way. If I were them right now, I’d probably be making very similar decisions. The NFC infrastructure and availability of semantic data just simply isn’t quite developed enough to make the economics of the VRM model work right now.

But it will one day very soon, and when that happens, get ready Square, because it will be you that will be disrupted. Doc Searls has some interesting thoughts on Google’s launch of Google Wallet. I agree with what Doc’s saying. Google has proven with Android and other technologies that it’s very willing to disrupt existing business models in order to achieve its mission of organizing the world‘s information and making it universally accessible and useful.

Square is well set to make money for the next several years. But over the long-haul, I wouldn’t bet against the disruption of VRM – and if that’s where Google’s betting, then that’s where I’d put my bet.

Filed Under: News Tagged With: Google, Local, Personal Web, Square, VRM

The Mesh: Why the Future of Business is Sharing

17 May 2011 by Gideon Rosenblatt

I just finished reading Lisa Gansky’s The Mesh and there’s much to like about the book. There are a few places where it gets a bit repetitive, but she does share lots of interesting anecdotes and she’s telling an interesting and very important story here – the story of better sharing through technology.

The mesh is the interconnectedness of all that surrounds us; not in a metaphysical/spiritual sense, but in a technological sense. We’re just starting to understand the implications of software capturing some representation of our relationships with people – what technologists call our “social graph.” But what of our relationships to the things in our life – what of our connections to the Internet of Things? It is this connectedness we all have to both people and things that Gansky refers to as “the mesh.”

Gansky’s book is a business book, focused primarily on exploring the opportunities now emerging from the mesh. She calls them “Mesh businesses” and here are their four primary characteristics:

The core offering is something that can be shared, within a community, market, or value chain, including products, services, and raw materials.
Advanced Web and mobile data networks are used to track goods and aggregate usage, customer, and product information.
The focus is on shareable physical goods, including the materials used, wich makes local delivery of services and products – and their recovery- valuable and relevant.
Offers, news, and recommendations are transmitted largely through word of mouth, augmented by social network services.

Some things are better owned and some are better shared. Things we use a lot, and that are relatively low cost, don’t lend themselves that well to sharing through the mesh; think your toothbrush. Things that you don’t use that often, and that are expensive, do make a lot of sense to share through the mesh; think boats, vacation rentals, and airplanes.

A couple friends of mine are proving this latter point quite effectively with a startup called ShareZen. They wisely chose to focus on the mesh sweet spot of expensive, infrequently-used items; and are even concentrating – at least initially – on one market (pilots who need better ways to share aircraft). They are seeing some really nice uptake on the service – some proof that what Gansky’s talking about in this book is very real.

The Mesh in Economic Context

Though Gansky doesn’t really go into this, Mesh businesses are part of a bigger shift that’s been rippling through our economy for many decades; the transition from product manufacturing to service delivery. This macro-economic shift shows up in everyday life too as interactions with companies transforms from products to services. As our lives have grown busier, things we used to do ourselves, we increasingly hand off to professionals.

Fifty years ago, if we wanted dinner, we bought food from the market and almost always made the meal ourselves. Today, we often outsource food prep to a restaurant, delivery or even to upscale supermarkets like WholeFoods. Restaurants have been around for hundreds of years, but today they play a qualitatively different role in the way humans consume calories in developed economies.

Another, more obvious, example? Software as a service. We used to have to go to a store like “Egghead” (who?) to purchase floppy disks or CD-ROMs with software on it. Today, we still do this for many games, but more and more of our software consumption is now delivered as a service over the Internet.

The Mesh Makes Us Strong

The book outlines a number of benefits of Mesh businesses. The first is that they are in more frequent contact with customers, which strengthens relationships and loyalty, and gives Mesh businesses a greater flow of customer data. That data helps Mesh businesses continuously improve offerings over time. Mesh businesses can also utilize their ongoing connections with customers to broker relationships with partner businesses that have complementary service offerings.

Mesh businesses also tend to be more efficient in managing resources since they invest heavily in information technology for managing the way customers share the company’s limited resources. And because they’re built to run via the Internet, Mesh businesses benefit enormously from massive public and private investments in communications technology over the last several decades. This helps explain how a number of mesh startups can so quickly from literally out of nowhere. Think, for example, just how quickly Netflix toppled well entrenched competition from Blockbuster and Hollywood Video.

Finally, Mesh businesses thrive through connections with and between the people who use them – something that helps them spread quickly through Facebook, Twitter and other online social networks. As Gansky says “…part of the Meshy experience is feeling part of something.” This is a very interesting point – and something I’ll explore more in future posts. For now though, think of the mesh as the infrastructure for the intelligent membrane the firm uses to connect with the world around it. It’s a membrane made of humanity, and what makes organizations capable of the kinds of third-order engagement that run through the hundreds of examples in Gansky’s book.

The Mesh Makes Us Good

One of my favorite things about Gansky’s book is Gansky herself. She’s clearly someone I’d want to have beers with – techie to the core, but also passionate about how all this stuff helps build a better world.

Mesh businesses will reduce waste because they help us achieve greater utilization of the stuff we already have – through sharing it. On a more subtle level, Mesh businesses lower their operating costs by using durable, long-lasting products as part of their service offering and developing easy processes for servicing and repairing these products when they do have problems, rather than simply throwing them away – one of the big problems with today’s consumer society.

I’ll end this writeup of this very interesting book with my favorite line – one that Gansky mentions in passing at the end of chapter six. She uses the phrase, the “advantage of access over ownership“ – and I just think it’s worth marveling a bit at the beauty and importance of this simple notion.

Access over ownership is the marvel of our library system. It helps us maintains the rungs of upward mobility in our society by providing access to information for everyone who wants it. Mesh businesses are still businesses. Unlike libraries, they still need to be run in ways that actually make money. But if the exciting vision Gansky paints in this book really were to achieve its full potential, it could helps us maintain upward social mobility – and the American Dream – by ensuring the advantages that come with investing in technology aren’t just experienced by those who can afford to own. Access over ownership may not solve all these problems, but it might be a path for addressing at least some of them.

Filed Under: News Tagged With: Connected, Lisa Gansky, Meaningful, membranes, Mesh, Netflix, Networked, ShareZen, Smart World