Monday, January 02, 2006

Paying Attention (and Money) to Google

Imagine a company whose business is buying and selling widgets. The company gets type-A widgets from its suppliers and resells them to its customers. Add one small wrinkle on the supply side – the company acquires many of its type-A widgets by barter. It manufactures personalized type-I widgets as trade goods, and asks its suppliers to pay type-A widgets for type-I widgets.So far, there’s nothing unusual about that business. Now let’s replace type-A widgets with “attention” and type-I widgets with “information”. Our company now manufactures personalized information, asks its suppliers to pay attention in exchange for that information, and then resells that attention to its customers.

Sound unusual? I don’t think so – I think that’s the business engine behind media/advertising companies in general, and Google in particular. Audiences are attention-suppliers, and advertisers are attention-customers.

Testing the Model

Q: But wait – why would anyone pay real money for a fuzzy idea like attention?
A: Because they believe that paying attention is often a first step towards paying money – it’s easier to buy something you’ve first thought about. That’s the whole point of (much) advertising.

Q: What are some examples of companies in the information-for-attention-for-money business?
A: Network television delivers information in the form of programs, and resells viewers’ attention by inserting commercials into gaps in the programs and by inserting product placements into the programs themselves. Newspapers deliver information in the form of news, and resell their readers’ attention by inserting advertising sections into the paper and individual ads into the news sections themselves. Google delivers information in the form of search results, and resells searchers’ attention by adding “sponsored links” to the side of the page.

Note that information-for-attention-for-money businesses often serve the same audiences as information-for-money businesses. Cable television, investment newsletters, and subscription websites provide information very similar to that available from the three industries listed above. Information consumers can choose to pay an “attention tax” to the first set of providers, cash to the second set, or some mix. Although the two business types serve the same audience, their business models are very different – in the first case, the audience is a supplier and the advertiser the true financial customer; in the second case, the audience is the customer also.
I --> A --> $I --> $
network TVcable TV
newspapersinvestment newsletters
Googlesubscription websites

Q: Is attention easy to resell?
A: I’m far from an expert here, but my guess is “sort of – it’s easy to resell; it’s hard to resell well.” Attention is easily lost and damaged in transit:
  • Shifting my attention a long way in mental space (e.g. from a TV show about the Rose Parade to a commercial for beer) is likely to lose my attention. Shifting my attention a shorter distance (e.g. from a TV show about the Rose Bowl to a commercial for beer) is more likely to deliver it in good condition. That’s the whole point of targeted advertising.

  • Shifting my attention a long way in physical space (e.g. from a web page to the bottom of the page) is harder than shifting my attention a short way in physical space (e.g. from a web page to a popup ad obscuring that web page). That’s why advertisers are always trying more intrusive ad placements.

  • Shifting my attention dilutes the value of the information I came for in the first place. I choose to pay attention to you because I value the information you provide me. If you move too much of my attention to something else, I’m getting less information bang for my attention buck, and am therefore likely to start paying attention to someone else instead of you. That’s why advertisers don’t always use the most intrusive ad placements possible.
So What?

Is this model useful, and if so, how? I think it helps to understand the forces shaping Google's market, and therefore helps to understand what they and their competitors are likely to do next. If I were Google, I would think about ways I could add more and better attention to my inventory, including manufacturing more and better information to trade. If I were in the information-for-money business, I would think about what it means for my audiences to have a choice of information sources, some of whom only charge attention, not cash. And if I were in the information-for-attention-for-money business, I would recognize that I'm competing directly against Google, and think hard about how to differentiate my information and attention offerings from theirs.

I'll post more on these fronts as my ideas develop.

- dG



Michael Teper said...

Something of note: Google's cost of goods sold is just packaging and delivery; the goods themselves (i.e. the information they scrape from you and me out on the internet) they don't pay for. I believe the book publishers may have been the first to notice this (i.e. the revolt agaist Google Print).

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