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Information’s Price Tag
The hacker credo “Information wants to be free” set the stage for the second
golden age of the internet. The origin of the phrase is worth reviewing. First
proposed by Stewart Brand, the founder of the
Whole Earth Catalog
, at the
1984 Hackers Conference, his formulation was:
On the one hand information wants to be expensive, because it’s so
valuable. The right information in the right place just changes your life. On
the other hand, information wants to be free, because the cost of getting it out
is getting lower and lower all the time. So, you have these two fighting
against each other.
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Information, like the rest of us, desperately wants to be attractive, unique,
and well paid—
really
well paid. Information wants to be expensive. The
most successful media company in America, other than Google and
Facebook, is Bloomberg. Michael Bloomberg never fell for it—giving
information away. He mixed other people’s information with proprietary
data, added a layer of intelligence and—here’s the trick—made it scarce. It
was expensive and had its own vertical distribution (storefronts) in the form
of Bloomberg terminals. If you want breaking business news that might
impact the price of a stock in your portfolio, you sign up with Bloomberg, get
a terminal installed in your office, and soon the screen is rolling with an
endless flow of news and financial data.
The “information wants to be expensive” part of Brand’s quote seems to
have been erased, like Trotsky from photos, by firms looking for content for
free. Indeed, it was the tension between the two that Brand was interested in,
and it was in that tension where he foresaw innovation. Google (and
Facebook in a different context) has mastered that tension. It takes advantage
of the declining costs of distribution by giving its users access to a world of
previously expensive information, then extracts billions in value by being the
new gatekeeper.
Facebook too has leveraged the tension between information’s ever-lower
costs and its persistently high value. Its jujitsu move is even more dramatic
than Google’s. Facebook gets its users to create the content, then it sells that
content to advertisers so they can advertise to the users who made it. It’s not
“stealing” our baby pictures and political rants, but it is extracting billions of
dollars from them using technology and innovation unavailable to us as
individuals. That’s world-class “borrowing.”
Facebook built its foundation on a second lie, repeated thousands of times
in early meetings between Facebook’s army of sales reps and the world’s
largest consumer brands: “Build big communities and you will own them.”
Hundreds of brands invested hundreds of millions on Facebook to aggregate
enormous branded communities hosted by Facebook. And by urging
consumers to “like” their brands, they gave Facebook an inordinate amount
of free advertising. After brands built this expensive house, and were ready to
move in, Facebook barked, “Just kidding, those fans aren’t really yours; you
need to rent them.” The organic reach of a brand’s content—percentage of
posts from a brand received in a fan’s feed—fell from 100 percent to single
digits. Now, if a brand wants to reach its community, it must advertise on—
that is, pay—Facebook. This is similar to building a house and having the
county inspector show up as you’re putting on the finishing touches. As she
changes the locks she informs you, “You have to rent this from us.”
A mess of big companies thought they were going to be Facebook owners
and ended up Facebook renters. Nike paid Facebook to build its community,
but now less than 2 percent of Nike’s posts reach that community—unless,
that is, they advertise on Facebook.
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If Nike doesn’t like it, tough shit, they
can go cry to the community on the world’s other two-billion-member social
network … oh wait. Similar to someone dating a person much hotter than
them, brands complained and took the abuse.
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