Monetizing Information - The New Content Economy

As one of those so-called "content creator"-type persons in the world today I've often struggled to come to terms with how content is treated in the digital age. I've studied and practiced for years to create content that can (and I oftentimes believe should) just be given away. There's this internal conflict constantly going on between the part of me that's worked hard for years to create this valuable content and the part of me that says, "¡Viva la revolución! Make it all free!"

So I was really excited to see this video of a presentation on 'Monetizing Information' given recently by my friend Eric Neuman in New York. I've been friends with Neuman since college and besides being a brilliant programmer and entrepreneur (he's co-founder and CTO of DecisionDesk) he's an extremely insightful visual artist and theorist. He's one of those rare individuals that can analyze a problem from almost every angle, break it down into its raw parts and come up with radical, yet practical solutions--something he not only does every day in his work with DecisionDesk but also in the realms of artificial intelligence and, in this case, the future of the economy and its impacts on society.

Anyone who's ever graduated from college with a major in the arts, academia, economics, engineering--or really anyone who's ever thought about what the economy will look like in 10 years and how they can fit into it--has something to gain by checking out these ideas. Instead of taking a side in that struggle between trying to sell content and giving it away, he explains how to think outside of those terms to find new (and very old!) ways to both make money on information and give it away for free simultaneously.

For convenience, a slightly abridged transcript of the main presentation is included below with some italics included to highlight main points. The video also includes an animated Q&A session after the presentation that raises some interesting points, especially about 3D printing.

Without further ado, enter Eric Neuman:

Monetizing Information

Most of the content that we're talking about is digital content which, at its root, is actually information.

So, you can't legislate away file sharing. It's too big. There's too many people doing it and there's no way to enforce it. And you can't lock out file sharing either through things like DRM because that really alters the ability of people to use the content they've purchased in the way that they want to. DRM prevents you from moving your mp3s from your phone to your car or doing anything you actually want to do with it after you've paid for it.

These two things [legislation and DRM] don't really fit. They're based on the old model of monetizing information and they don't really fit.

So why don't they fit? They don't fit because our economy that we are used to is based on supply and demand, which in turn is based on scarcity. Scarcity is the idea that there is only so much of any given thing--there's only so much supply for any given demand. That drives prices up or down, respectively. This doesn't apply to information. If I make a copy of an mp3 I have no way of reducing the functionally of that mp3. It's still just as good. Whereas if I steal your car, it's not as good--you don't have that car anymore. So what we're talking about here is a fundamentally different kind of economy that we need.

The time between when you release something to the internet and when it can be shared with everyone is so short, that you can really only sell a piece of information once. One time to one user. Anytime after that, they can release it to everybody. And if they can't do it, it's a pretty good assumption that somebody will.

So how did we get ourselves into this situation? To tell you the truth, it's kind of a modern thing. Some people say this situation has only existed this way for maybe a hundred years, some say maybe more. But really what we're talking about is that at some point in time, we took the ethereal concept of information and we as a society figured out how to make it physical. We figured out how to take stories and spoken word and put them into books. How to take images and put them into photos. How to take sound and put them into recordings. But before that, for essentially all of time, these physical manifestations of information didn't exist. So information is once again--now that we have the internet--removed from its physical shackles. It is once again free to be ethereal.

So I told you a lot about what information is not. It's not scarce. It's not physical. So what is it? Before we can really talk about that we need a sort of metaphor in order to discuss it. Because of the ethereal nature of information it can be difficult to talk about it without one. I like to think about information as a gas. it's not a perfect metaphor, but it's pretty good.

So let's think about the internet as one big giant room with everyone in the world standing in it. Then let's say this (*claps hands together to signify some of the gas in the room*) represents some piece of content, some piece of information. It could be an mp3, a video game, whatever it is. So if I want to share this with somebody and I give it to someone, it's out there. Everyone can get it. Everyone has access to that information--that "gas". There's no way for me to get it back. There's no way for me to tell you, "Don't share this with anyone else in the room." It'd be ridiculous to try to stop the gas from flowing throughout the room.

So how can we possibly make money on something so ethereal? Well, if we look to history we can actually find some answers. Like I said, you can only sell a piece of information once. But that isn't to say you can't sell it to a lot of people all at once. And that is an experience: a concert, a show, a baseball game, anything you can go to. Statistics over the last few years have shown people are more than willing to pay for experience, much more than they are willing to pay for albums or movies or anything like that. Because sharing and acquiring these kinds of information is so easy and the ability to consume this information at home is so easy, the experience is being elevated into this new alternate thing. People want to be there when that information is released. They want to be able to say, "I was there." And in some cases (*points to audience member with a camera*), they actually want to be the person doing the recording and streaming. They want to be able to say, "Not only was I there, but you can experience this second-hand through me." They are re-bottling this information, this "gas," and redistributing it out through the internet.

So another way is one of my favorites. This is actually how I make my money. If you want to make money on information, you can do so not just by selling the experience of it, but you can do so by being paid to create information for somebody else. Selling information is very difficult, as I said, but there are tons of people that are paid to create information. You don't buy a graphic design--you pay a graphic designer to create a design for you. You don't buy a piece of code--you pay a software engineer to build the code that you need. And this is the direction where we're headed. If you want to make money on information, don't sell it--sell the service of creating it. That's where the money is.

When I talk about this stuff, almost invariably what people bring up to me is that this is all well and good, but what about art? What about real art? Graphic design may be beautiful, but it's not someone's true artistic expression. How can we possibly hope to have artists in a world where you can't sell art? And for that I again have to look back to history. In history there is a thing called "patronage", which is an idea that monarchs or other rich type people would bestow upon the poor starving artists oodles and oodles of money to create some piece of content, some piece of art, to be given to the world. Nobody was buying Mozart's pieces, they were being commissioned through patronage by monarchs and then given to the public for free. If we look at the modern world, we have some analogues of that. We don't have monarchs that are investing in rock musicians or anything like that, but we have the next best thing: corporations. One of my favorite examples of this is a band called Pomplamoose. Pomplamoose got famous on YouTube by giving away their content. They made really cool music and really cool music videos and just gave it away--anyone who wants to see it can see it for free on YouTube. They then got famous, garnered themselves an audience, and were approached by Nissan to make a car commercial. Now Nissan is like a monarch in this situation and they bestowed upon Pomplamoose oodles and oodles of money to create a piece of content that was then given, for free, to the world. Monarchs wanted to have content created to show off how great they were, and that's what corporations want, too. There's also Kickstarter, but that's kind of a different story for a different talk.

We've learned about how to sell the service of creating, but what about the people who are buying--the people who need that software, the people that need that graphic design? Well software is also essentially information--it can be shared, leaked and spread around the internet just like an mp3. And it's very important in some situations that it is not. If the "secret sauce," the code that makes Facebook 'Facebook' got leaked, any one of their competitors would be able to replicate what they do. Maybe a better example would be Google--if Google's search algorithm got leaked anyone would be able to rip it off. So it's very important that they keep it safe and bottled up. And they do. It's contained. Google has their algorithm but they never share it. It's connected to the internet, but it's not ON the internet. You can't go and download it. They would never sell a copy of their algorithm to one person and say, "Shh, don't share this with anyone else." That would be ludicrous! So by keeping your information contained, you can still have that information do work for you--provide a service--and make money on that service. And it doesn't have to be software. The information that you keep bottled up could be a particular workflow or some kind of interpersonal work or really any process or information that you use to provide a service.

Here's where it gets really interesting. A 3D printer is a device that prints out things. And this is why this subject I just talked about is so crucial to everyone, whether you're a content creator or not. Everyone is going to be effected by this. 3D printers are right around the corner--they're being used by hackers, makers, and small companies as we speak. 3D printers are going to make it so that everything that you buy--shoes, cars, refrigerators, every physical thing that you buy--is going to have all the same rules that I just laid out applied to it. So all the disruption we've seen in the last ten years in digital media is barreling down the pipe right now for the rest of our physical manufacturing industries. You won't be able to say, "Hey I'm NIke, I make these sneakers and I'm the only one that can do it," because if you sell one sneaker, someone can scan it and print out a copy. So Nike is going to have to change what they do--it's just fact. There isn't any real way to stop it and no reason it should be stopped. What we and big corporations need to do is what people and companies have always needed to do as economics and technology have changed the world: either change, or die.

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Be sure to check out the video for the Q&A session that follows the main presentation!

This video was originally posted on Eric Neuman's blog, simple actually.

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Monetizing Information - The New Content Economy