Simulcra FTW! How the “link economy” reminds me of post-modern theory i (tried to) read in college

I went to college at Williams in the late 90s, when Mark C. Taylor was a professor there…Mark is a dynamic, passionate and thoughtful teacher, and I dove head-first into the murky depths of psychoanalysis and post-modernism theory through his inspiration. I wrote a paper, called (I kid you not): “Addressing the Threat to Dialectical Structure Posed by the Female Cyborg.” And got an A.

To be honest, this stuff was pretty much over my head, and now I reflect back on it with a wry chuckle. But several themes resonated, including those presented by Baudrillard in Simulacra and Simulation, in which he discusses how modern media society has replaced reality with symbols – the Simulacrum. Some of his most seminal writing is about the First Gulf War, and how the images of war (broadcast via CNN) came to supplant the reality of war.

Um, OK. So what does this have to do with the modern Internet? “The Link Economy“ is a term coined by Jeff Jarvis, a professor of Journalism at NYU. Jarvis is bearish on paying for content (to put it lightly), and instead of thinks that monetizing links is how “content creators” can make money.  In his own words: “Let’s say that the real value in this equation (meaning journalism on the Internet) is not content and information – both of which are now quickly commodified – but links, which are the new currency of media.”

When I read this, I thought: “How Baudriallardian”

Jarvis’ argument calls for prioritizing the signifier over that which is signified (to indulge in a little wordplay.) It is not the “real stuff” that is important, but the links to that “real stuff” The problem here, as Baudrillard laments, is that real meaning (or value) starts to fade. When A links to B links to C links to A…we have just closed a loop without creating any value other than the perception of value which never arrives. (Totally could have written that line in college paper). Simulcra FTW!

To translate this into more stark business terms: where’s the money? If everyone just outsources value capture to the other then nobody gets paid: you circumvent any real value. (And as Dave McClure says, “the Internet wants to get paid on f-inFriday.”  And for that to happen, at some point, somebody needs to deliver value, in order to anchor the entire system. Otherwise it’s nothing more than one big pyramid scheme…or maybe in this case an “infinite loop scheme” is a more apt term?

p.s. I still have that crazy paper on the Internets!

jquery sliding puzzle

another entry in the "hacks while the baby sleeps" series, here’s a sliding puzzle game done in jQuery. (i don’t get to write much code during the day, so humor me, will ya?)

an innovator’s dilemma with pay-per-click search models

what happens to revenues when search gets better?

Last spring, I wrote a post about the conflict of interest with regard to algorithmic search results and paid search listings. This is a follow-up post, with a different spin on the same idea: that there is a problematic conflict of interest in the paid search business model, and that this schism may well emerge more saliently over the coming years.

My thesis here is that there is an "innovators dilemma" for a search engine that makes money on pay-per-click advertising, to improve the quality of its algorithmic results. Doing so, would in theory, more effectively answer a users’ query, and thus make it less likely for users to click on advertisements. Because the pay-per-click model only earns revenue when users click on ads (rather than algorithmically generated “organic” results), lowering the advertisement click would ultimately mean less revenue for the search engine.

Here’s an example case to consider – a query for: "Student Loan"

In theory, a search engine dedicated to organizing the world’s information, should very much be able to provide valuable results for this term. So, suppose a hotshot whiz-bang engineer comes up with an awesome way to spider and store up-to-the minute results on lenders, rates, reviews, etc. laid out in a clean, organized manner, and all based on what is most relevant to the searching party. What would be the response from the "business" side of the house that pays that engineer’s salary?

Here are some accumulated statistics from Google’s AdWords tools for "Student Loan" and 50 recommended related terms:

So – suppose this awesome new search innovation was so good that more queries were now satisfied by algorithmically generated data, and the percentage of clicks on ads falls in half to 3%: this search innovation just cost over $3 M in monthly losses. Take this example to its logical end, and the theoretically perfect search engine’s ad-click rate will be 0, as the algorithm will always answer my query, and 0 x any $CPC will always be 0.

There are two obvious rebuttals here, which deserve more serious consideration that this,

1) Increase Price: boost the CPC that advertisers are willing to pay.

This seems possible, but unlikely. Because that price is determined by a second price auction bid stack, presumably destination sites are bidding based on the value of the arriving traffic, which is exogenous to the search engine.

2) Increase Volume: If more total people search, then total number of clicks may be the same, even if a smaller percentage of people click on ads. Perhaps the search engine can grab more market share because of its (newly improved!) ability to answer queries such as "student loan." Or perhaps the entire search market will continue to grow. But, while this rationale may have been sensible over the past ten years, you can only replace margin with volume for so long, as you either reach market saturation(market won’t grow) or market dominance (you own the market, and there’s no more share to grab from competitors).

There’s more to say on this subject – in the meantime, I am hopeful, though pessimistic, that the technology press will start to think more critically about search business models — as they like to say in mutual fund prospectuses: "past performance is not a good indicator of future success."