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Old Wine, New Bottles

by Laura Fillmore

Part 2

Presented to the Network Advisory Committee of
The Library of Congress, Washington, D.C.
December 5, 1994

Copyright © 1994 by Laura Fillmore; written permission required to reprint.
laura@obs-us.com

Economic Models for Online Publishing

We have identified and implemented five working models for publishing on the Internet: per copy sales, sponsored publishing, site licensing, subscription, and event publishing. Both the per-copy and the subscription are reader-pay options; we employ the per-copy model at the OBS today, in our BookFinder service, as well as files for sale. The site license possibility means that a third party pays for the right to distribute content files to their specific audience, such as EUnet did for the Stephen King short story. The site license model addresses the "profit paradox" -- to make money you need to give it away for free -- by shifting the income stream from the reader to the site licensor, and enabling that licensor to give the files away for free and thus achieve an advantageous position in the marketplace.

The sponsorship model is the model described above for marketing front ends, and is the prevalent Internet publishing model today, because it combines an income stream from a third party and free access of the files to Internet users. Publishers such as HotWired and GNN use the sponsored model, where the published text is "free" to online customers in exchange for the subscription information those customers give the publisher, which information in turn is selectively passed on to advertisers or sponsors. Again, just as a publisher establishes what rights he is granting to a reader or user, so the reader or user should be made aware what rights he is surrendering to a publisher or commercial site by submitting his "audience definition" information. Such privacy ground rules need to be established because of the power, combined with the unfamiliar nature of this medium for many of the millions of new users.

The subscription model, a reader-pay model, is one we are looking toward with hope and optimism in 1995, as the many online authentication and billing mechanisms now in their respective beta stages make their way to the market, and as online inhabitants determine that they would rather pay for their own customized, objective, and timely information, than rely on sponsored sources for an exponentially increasing bitstream of free, multimedia files.

"Event publishing" is a rapidly evolving field for us. Where two years ago we organized collaborative Internet Start-Up Booths for book publishing industry shows with ISPs, telcos, the Internet Society, and publishers as sponsors, now we are sponsoring seminars for K-12 educators on internetworking, and conducting classes in publishing and advertising on the Internet. These

classes themselves, with curricular material and online URL tours, constitute a form of original publishing, and a tuition-based as well as sponsor-based charging model.

For the moment, though, in an environment where sponsored publishing reigns, we can see that the heavily trafficked sites are the real estate of the moment. For example, consider the recent change in management--announced to the Internet community after the fact--of the What's New Page, which is listed as a "Starting Point" on every copy of Mosaic, and which according to Jayne Levin's November "Internet Newsletter" gets 3.5 million hits per week. The computer book publisher, O'Reilly and Associates, recently volunteered to take it over from NCSA, and in exchange for managing the submissions to the page, they put a hot link into their own commercial site from the top level, and also sell advertising space to companies such as Intel, which advertising money is shared with NCSA; NCSA claims that they have maintained editorial control over the page and the content is not colored by the advertisers. But one point we should glean from this is that, in an environment where high hit counts spell sponsor dollars, those highly trafficked sites which have been developed with public monies should be treated as the income-producing real estate they are.

Like the site licensing model, sponsored publishing addresses the fundamental paradox that in order to make money on the net you have to "give it away for free;" the traffic coming by the site becomes what's for sale--the attention of the individuals. This attention, when voluntarily or involuntarily diverted, can becomes income--or valuable R&D information--for a sponsor.

Rich Wiggins' "Internet For Everyone" (McGraw-Hill) is a good example of a potential third-party sponsorship income stream. In his book, Rich discusses Commercial Publishing on the Internet, and includes a screen shot of Novell Network's Home Page. In the online version, he made that a hot link. Let's consider what happens when we click on Novell in that chapter. We have effectively drilled a hole in the book and allowed our reader to escape--chances are he is a literate individual with a disposable income and some credit cards in his pocket--to another server, in this case, the server of Novell. One can see how this politics of pointing might easily become a business transaction: the pointee ( person or organization pointed to) pays something--pennies perhaps--to the pointer (OBS, and through us, the author and publisher), and ideally offers a link back to the pointer so that the reader can return to the book he started out reading in the first place.

This politics of pointing or bipolar reciprocal linking procedure, doesn't have to assume a dollar value in order to be useful.

When we first published "The New Middle East Magazine," the first collaborative monthly magazine published by the Palestinians and Israelis, in time for the Frankfurt Book Fair in October, we put in some kinetic links, such as to a specially sorted ClariNet electronic news feed on stories about the Middle East, and the weather report, but more importantly, established reciprocal linking arrangements with other Middle East Internet sites.

With this project, the politics of linking again became clear, and to dispel in advance any criticism about the links we had chosen to include, we invite readers to participate in this reader-driven environment and submit their own link selections. It certainly would be useful to have color-coded links, to differentiate between typed or levels of links, such as commercial and editorial links. Again on the Middle East Magazine, the reader would want to know whether a link was paid for by a company or organization, or whether a link reflects editorial contextualization of the content.

Sponsored publishing isn't for everyone: we have been looking for a sponsor for Charles Gallenkamp's "Maya: The Riddle and Rediscovery of a Lost Civilization", and asked the publisher, Viking Penguin, if they would either pay for the HTML coding of the files so we could post a new and unique edition of the book on the Internet, or allow us to find a third party sponsor such as a travel bureau to sponsor the book. They don't want us to publish this book as a sponsored publication because they feel it will compromise editorial content, yet they agree to allow us to publish it on a subscription basis.

How to Cope with Advertising

The easy answer to this is of course: don't do it. At least, don't do it in the conventional sense. Companies are advised to let their work be their own best advertisement. More than any other mass human environment before it, the Internet has the potential to become a meritocracy of mind, so, without overlapping onto yesterday's agenda, I would have agree: if you build it well, they will come. As an example of this, consider NetScapes, which seems to have developed quite a following in a very short time, in the absence of up-front vaporware hype, or full-page, four-color print ads in all the major trade magazines. It serves as its own advertisement.

The politics of pointing is also itself a powerful new form of advertising, more potent than print or TV advertising because it actually delivers the customer to the server of the advertiser. The politics of pointing advertising comes in two distinct flavors: that which is paid for (such as the Cisco link on the OBS K12 seminars) and that which is a spontaneous affirmation of quality (such as the link to MIT's version of Shakespeare from our online book of prayers, "Bless This Food" by Adrian Butash [Delacorte]). One is not necessarily better than the other, but it seems logical that the latter is worth more than the former, because it involves objective human judgment, which, we will see later, will play a key role in weighting links in the for-pay (reader paid) environment upcoming.

As a company, OBS has engaged in one-way, direct-mail type email advertising only to people who have specifically requested to be on the online publishing mailing list we have been building since starting OBS in 1992. Independent of the mailing list, we guarantee the privacy of people who come to our site, and will not resell names, online reading habits, or individual thoughtpaths to outside individuals or organizations.

Order Fulfillment and Validation?

Like most businesses on the net today, we have adopted a hybrid approach to money transactions. Though it's fairly clear that things will change radically in 1995 as far as online charging goes; the fax machine is the predominant way people pay for goods and services on the Net today. Up until recently, ordering individual items on the net has not been our major source of income. Our goal at this time is to get an Internet front end that is as seductive and easy to use for buying as Prodigy's. Such systems are rapidly being deployed now, and we will welcome more usable options than gopher+ and telnet. Available on the market now are some more advanced ways of ordering, such as OpenMarket's shopping cart (gumball) approach, where we could sell by the paragraph or by the page. DigiCash also bears close scrutiny, because it is a private, encrypted alternative to the popular "500-channels, single-source" approach to online publishing advanced by some phone and cable companies getting into this arena.

The initial idea for the BookFinder service came in response to our desire to promote per-item sales of our publishers' books, because we were not satisfied with the gopher+ and telnet options. Though the service is too new to assess success, the idea is that the 800 phone numbers in USA, Germany, UK, France, Japan, Netherlands, Australia, will knock down any real or perceived roadblocks in the geekiness of today's Internet ordering systems. Perhaps this sale will reveal that there really is a hesitancy to spend money on the net.

Beyond the nuts and bolts of cash changing hands, the key to BookFinder is that again, we are plugging into existing business structures, serving as a catalyst. We are enlisting the existing book selling and book wholesaling businesses into key roles in the act of online publishing.

Hacking

As a rule, we are less afraid of hackers than of slick marketeers. Hacking has not been a terribly threatening issue for us. Generally, we would rather hire than hate a hacker.

What is the Potential?

One potential, illustrated by the apparent convergence of marketing and publishing on the Internet, is the potential for Orwellian nightmare. Attendant to the sponsorship models, comes the issue of audience definition, being adopted by popular online "magazines": in order to access the free information and free subscriptions, you have to tell the publisher of that information (and their advertisers) who you are. This Audience Definition, and is not unlike what exists in the paper environment today, with the exception that it is immediate, and that thoughtpaths and reading habits can be regularly monitored in this fashion. Quite naturally, the deeper and more detailed the audience definition, the higher the dollar value to the advertiser. Readers must be made aware of what privacy rights they are surrendering to whom and for how long in exchange for the right to access "free" files about UNIX or the latest way cool web server.

There is a distinction to be made between audience as raw numbers or hits, and numbers as individuals identified. For example, if we were to sell an "ad" on our server and claimed 1 million hits per month, that would be worth advertising dollars to us, even given the presently undefined nature of what the hit/user ratio is. But if we could identify not only how many people as opposed to hits on our publishers' files, but also who those people are, what their buying power and reading history is, then that is worth significantly more money to advertisers.

The sponsorship model is not all darkness, of course, and the biggest roadblock for traditional publishers engaging in successful publishing on the Internet is not Big Brother at this stage, but rather a poverty of imagination when confronting the untapped and to a great extent undefined riches of the new environment.

As an example, it is useful to look at what might be the most successful publishing site on the Net: the MCI server for Gramercy Press. It is an entertaining site, not terribly subliminal in its profiling of MCI communications software and its effort to get users to use MCI software. But it is new, unique, fresh--precisely because Gramercy is *not* a publisher trying to retrofit 500 years of literary tradition onto a new, rapidly evolving and still undefined medium. MCI invites the reader to play on the server.

On one recent trip to Gramercy, I clicked on Darlene, one of the attractive employees, and checked out her IN box--sent her some real-time email and even thought about submitting a manuscript. To my mind, MCI has succeeded where other publishers failed to get people interacting with their company. Darlene wrote back and I began to get suspicious; she was too upbeat to be a publishing professional! I responded, asking if she was a knowbot or a human, and the mail bounced.

The point is that, whether knowbot of human, the publishing business MCI has created is interesting and person-to-person--it is new, and reflects and uses the medium that created it. The fact that it is a totally empty publishing house is another point......

It seems clear that the sponsorship model for online publishing will soon be supplemented by a reader-paid system. But unlike the model we are familiar with, where the reader pays for a book or publication and then owns reading and "fair use" rights to all or part of that book or publication, we should be prepared for the evolution of a suite of "recorded thought and redistribution use" rights to publications. In the online environment, where initially it seemed that Content would be King, it seems fairly evident that, rather than being based on the paper-based practice of sticking fixed price tags on static content packets, the charging model of the successful reader-paid models will involve the customized contextualization of clusters of context. The act of buying a book will become an act of buying access to a hierarchical structure of publishing rights, from

1) The right of visual consumption--the ephemeral, on-line, on-screen right (a fundamental right to all free peoples) to access ASCII files for all online ideas and information, in their raw ASCII form. Readers roam freely in this environment, and while their online behavior is perhaps observed, their identities are not necessarily known. Analogy: free public library to

2) Possession and Format control: Right to download files to a reader's own machine and the right to manipulate formats. With the introduction of online publishing tools, such as browsers & viewers, the reader can format, combine, and recombine elements from distributed sources. Again, this is a private act.

3) Context control; interlinking of content and creation of new ideas online; publishing thoughtpaths among others' documents. Fees are modest to access others' ideas and information for personal use, but increase significantly in an environment of

4) Redistribution. As soon as one makes publicly available the private recorded context web he has created, this initiates a new level of rights from the publisher and chunked costs.

The relative worth of online publications, or hyperlinks thereto, may be determined by two essential components: the inherent value of the idea or infobit, as assigned by the publisher or author; and the value put on it by the user, as measured by the citation frequency (quantity) and the citation value (quality). (Quantity might be equated with popularity or needfulness of a particular item of information at a particular time, and Quality by qualities of the user himself, such as corporate status.)

As we move increasingly online, the differentiation between being and having becomes essential. "Having" or owning files of one's own becomes a private and creative act, and key roles may evolve for repositories of authentic versions of files, along with the customizing and reselling of information and ideas to individuals. The key to this reader- based system is the Transaction Site itself, which records the trafficking of infobits and assigns the dollar values.

It is in the reciprocal, reader-driven nature of online publishing where the greatest potential lies. The notion of Internauts being participants and contributors to a commercial site, as well as customers, introduces yet another paradox to the newly commercial Internet, a place where paradoxes are becoming standard fare, where competition and collaboration are mutually reinforcing.

Understanding of this essential underpinning is seldom simple or permanent; frequently when doing business on the Internet, we notice that the very individuals and corporations who publish about and are helping to build an acephalous, open-platform, distributed and internetworked environment, striving for a "powerful" central position, seeking to become "*the* site where everyone goes for..." whatever. We can view these actions and power plays as attitudes left over from the age of scarcity, where it made sense to hoard and protect one's physical manifestations of wealth, where copying meant stealing instead of sharing wisdom and strength. On the Internet, where copies are free and hoarding yields bitrot, the new currency, the coin of the realm, likely will be discovered through bringing to life the distributed architecture in a collectively accessible fashion.

Copyright © 1994 by Laura Fillmore; written permission required to reprint. laura@obs-us.com

OBS White PapersPart 1