At the heart of the commercial internet is a conflict between technological structure and economic interest. The net’s technological structure, developed without regard to the possible profit-making interest of any future commercial site owner, is one of openness, providing the individual user with unfettered freedom to go where he wants, see what he wants and do what he wants. The economic interest of the commercial site owner is usually in conflict with the openness of the technology. The dependence of much of the commercial internet on advertising means that the commercial site owner is rewarded for maintaining control over the user, keeping him within the bounds of the site in order to expose him to more ads.
This tension between technological structure and economic interest has been one of the main formative forces influencing the commercial internet since profit-making players first appeared. But it has become even more salient with the rise of Web 2.0, which amplifies openness at the technological level (by encouraging the free flow not only of the user’s attention but also of underlying data and applications) while at the same time increasing the economic rewards for keeping the user within a particular site (by making advertising even more important to profit-making).
The tension, which often lies hidden beneath the popular rhetoric of openness that characterizes much of the discussion of the internet in general and Web 2.0 in particular, erupted into view yesterday when News Corp’s COO Peter Chernin discussed MySpace’s relationship with other Web 2.0 companies like YouTube. As Multichannel News reported:
At the Merrill Lynch Media & Entertainment Conference in Pasadena, Calif., Tuesday, Chernin said that because most of YouTube’s traffic starts at MySpace, it may be time for the No. 1 social networking site to cut out the middle man. “If you look at virtually any Web 2.0 application, whether it’s YouTube, whether it’s Flicker, whether it’s Photobucket or any of the next-generation Web applications, almost all of them are really driven off the back of MySpace,” Chernin said at the conference. “There’s no reason why we can’t build a parallel business.”
While Chernin said MySpace’s video efforts are small at the moment, that could change. He estimated that 60%-70% of YouTube’s traffic comes from MySpace … “Given that most of their traffic comes from us, if we build adequate, if not superior, competitors, I think we ought to be able to match them, if not exceed them.” Chernin also added that News Corp. is experimenting with offering some of its studio content on the Web, also through MySpace. “You’re going to see us starting to play more aggressively on the entertainment side of that site,” he said.
Much has been made of the ease of launching Web 2.0 sites – the costs of the equipment are relatively low and most of the necessary coding is relatively simple. But for entrepreneurs, that cuts both ways. It’s easy to launch a site that, by capitalizing on the net’s open technological structure, “plugs into” other popular sites, drawing users that can then be fed ads, but it’s also easy for the popular sites to incorporate new services and tools, in effect blocking the exits. And because it’s in the economic interest of popular sites like News Corp’s MySpace to maintain control over the user, you can expect them to aggressively incorporate new tools and services into their sites, either through acquisitions or by building the components themselves. Profit-making companies are going to pursue their economic interests.
The same tension can be seen influencing Google’s evolution, though with a twist. On the one hand, Google’s very existence hinges on the technological openness of the net. On the other hand, as an advertising-driven operation, Google has strong economic incentives to keep users on its own property. Because it not only sells ads but also auctions them – that’s the twist – it’s been able to relieve some of the tension. Its AdSense program enables it to make money even when users explore other sites. But the tension remains. Because it gives the bulk of AdSense advertising revenues back to the site owner, Google makes much more money when it keeps the user on its own property. And so we see Google perform an exquisite balancing act, supporting openness while also extending its own tools and services, through acquisition and in-house development. Google would never say what Chernin said, but its strategy in the end is not so different from the one Chernin laid out.
The reaction to Chernin’s remarks, in the blogosphere anyway, has been reflexively negative. That’s to be expected. Openness is not only the technological structure of the net but also its reigning ideology. But it would be a naive mistake to assume that economic interest will inevitably lose out to technological structure in determining the future shape of the commercial internet. The tension is far from being resolved, and its effects are complex and hard to predict. But in pinning their hopes on the advertising model, the proponents of a diverse and open Web 2.0 may have also sealed their fate.
Nick, I think you just beat me to the punch with a negative take on the web’s negative reaction :)
However, I don’t think the tension is just between economics and technology. As you mentioned, the technological barriers to entry for the services we use are dropping all the time, which means that technology is actually tilting us towards what the economics want. When there’s only one company that can figure out how to host pictures, you’ve got to work with them. When that feature is a commodity, they need to justify their value to you (by things like community… which may be of no value to certain consumers, like MySpace).
I think that this issue is very familiar with more traditional economy. Where specialisation goes more and more. And when you make a business you have to decide what to outsource and what is your core. Of course when the market player is gorilla he can decide to be more everything to everyone and incorporate more stuff under its wings, but only when he can do it better and/or chipper then other can do it for him.
I think your point about Google touches on their relationship with information, too. They freely spider online information (on an opt-out basis) yet their own information is locked down by their Terms of Service (TOS). This is the accepted practice. But I think Google goes too far by scanning and indexing copyrighted books against publishers’ wills.
It seems that Google has more respect for TOS than copyright — perhaps book publishers should employ both? I could just imagine: “By opening this book, you agree to these terms …”
Anyhow, I’m sure Google and book publishers will come to terms.
I think this is a topic that’s just beginning to surface. Eventually, the general public will realize that their identities are generating revenue for somebody, right now that somebody is Fox News Corp. Once that becomes common knowledge, I think there will be a movement to take back ownership of online identity so that the individual can make the choices and profit from the online presence instead of a middleman like Myspace.
Myspace is terribly designed, they have error messages every way you turn, it’s ineffienct and hard to navigate. They need to fix these problems before they can even *think* of adding new features like video.
They better pray that Facebook never opens its doors to all users, I predict that if Facebook were to do this, they’d overtake myspace in a matter of months. Ask any college student who has both a facebook account and a myspace account, they all agree that Facebook is ten times better.
The position MySpace is taking is precarious. Their technology isn’t difficult to copy and their users aren’t really there for MySpace at all, but rather are joining their friends.
As MySpace tries to build their revenue, perhaps the folks there should study AOL’s history.
There are indeed ‘control’ issues, on the new platform.
http://www.cooperationcommons.com/cooperation-commons/why-the-commons-may-not-work
“Openness is not only the technological structure of the net but also its reigning ideology.”
You got that wrong Nick.
What happens in technology projects, especially in complex ones, is a couple of high priests, are the only ones who know the inner core workings of the flow chart. This is how, they establish their ‘value’, within the organisation. Read the book by Bill Blunden, Cube Farm, to get a full picture of how disfunctional this can be.
My old university, had the best curriculum anyone could ever write. And the teaching staff there, went about their business for years, thinking that their ideology, was what was important. You had this group of high priests, who spent their careers protecting this little bit of inner sanctum knowledge.
The truth was though, their actual everyday structure was hopeless. But the attractiveness of the ideology, was so great, that it prevented them from looking closely, at how things happen everyday. They wasted each decade, in trying to create a more perfect ideology.
That is exactly the same problem we witness today with the web. There is an abundance of wonderful descriptions of platforms and how they work. They are like religions, great competing ideologies. Everyone wants to be the inner sanctum.
Those descriptions are so attractive, to the people who study the platform, that it prevents them from making the thing actually work. By getting into the engine, looking at the classic flaws, its weakness and helping it work. It is all the same concept anyhow, all the same notion. All the same problems.
Kevin Kelly talked about a combination of human and machine intelligence. The machine part is fine. But the human part is often rubbish. Janor Lanier is correct, the Marvin Minskys of this world, with their flashy ideologies have ruled all along. The Human Intelligence augmenters, like Englebart or Brooks, have been in the background. They only spoiled the party.
All the platforms – the Long Tails of advertising, of journalism, of retail, of music. The platform of globalisation 3.0, supply chains, productivity software, Smart Mobs, hive minds or wikis. They are all just the same platform. It is just that different labels, and different authors who write the books about the different platforms, competing for a bigger slice of the venture capital, in a market, chocha full of platforms, and books, blogs and broadcasts about platforms.
Kevin Kelly wrote a very inspired book in 1994, Out of Control, which has had many off shoots, which describe the wonderful things that the universal platform can achieve. Now, what we badly need, is the leader who can stand up, like Fred Brooks, or Doug Englebart did in their day, and deliver the counter-punch. Why platforms don’t work. Who is going to write this book Nick?
Great article. Some thoughts:
Isn’t the fundamental conflict between what the user wants and the economic interests of companies?
Doesn’t the “open” technological structure of the Web create opportunity after opportunity for entrepreneurs to launch products that are more open and better than their competitors?
In a nutshell, you are bringing attention to the Web 2.0 implosion point which is also the Semantic Web inflection point :-)
Web 2.0 is averse to Open Data Access as I explain in my “Web 2.0 Open Data Access Connundrum” post at: http://www.openlinksw.com/blog/~kidehen/index.vspx?page=&id=1034
James Gosling has some interesting points to make about visions and engineering projects over here:
http://blogs.sun.com/jag/entry/boiling_oceans