Month / July 2000

by Clay Shirky

It’s Communication, Stupid

How the wireless world missed the boat on e-mail.

To hear the makers of internet-enabled phones tell it, content is going to be king again, because mobile phone subscribers are clamoring for expensive new ways of getting headline news. The feature list for wireless devices reads like a re-hash of every ‘content provider’ press release of the last five years: Travel Updates. Stock quotes. Health tips. And of course all of this great content is supposed to lead to a rise in M-Commerce, a re-hash of E-Commerce. Many wireless analysts have bought this line, and are anointing future winners already, based on their perceived ability to deliver cutting edge content like sports scores (now there’s a brainstorm). The telcos
obviously haven’t asked what their customers want in a wireless device, and when they finally do ask, they are going to be in for a rude shock, because most of their customers aren’t desperate for packaged content, no matter how ‘dynamic’ it is. It seems strange to point this out to the Nokias and Sprints of the world, but the thing
users want to do with a communications device is communicate, and communicate with each other, not with Proctor and Gamble or the NBA. Stranger still, the killer wireless app is already out there, and it’s driving the adoption of a wireless device which isn’t just another mobile phone+WAP browser combo. The killer app is email, and the device in question is a pager on steroids called the Blackberry, manufactured by RIM (Research in Motion).

Building a usable wireless device is complicated, and the Blackberry gets a lot of things right — it gets around the form factor problem of ideal size by offering both a pager-sized version and a PDA-sized version; it provides a surprisingly usable thumb-sized keyboard to speed text input; and it offers always-on connection at flat-rate prices. But the thing that really has gadget-loving CEOs addicted to it is access to the only thing really worth paying for: their own email. No matter what the press releases say, mobile internet access is about staying in touch, and travelling executives have a much greater need to stay in touch with colleagues and family than with CNN or ESPN. RIM has gotten it right where the current vendors of wireless
devices have it wrong, by realizing that email is the core interactive service and everything else is an add-on, not the other way around.

Despite email’s status as the net’s most useful application, it has a long history of being underestimated. In the earliest days of DARPANET, email was an afterthought, and caught its designers by surprise when it quickly became the most popular service on the nascent net. Fast forward to the early 90’s, when Prodigy set about raising the price of its email services in order to get people to stop wasting time talking to each other so they could start shopping, and got caught by surprise when many users defected to AOL. And just this June eMarketer.com expressed some puzzlement at the results of a Pricewaterhousecoopers survey, which found that teens were going
online primarily to talk to one another via email, not to shop. (Have these people never been to a mall?) The surprise here is that phone companies would make the same mistake, since phones were invented to let people communicate. How could the telcos have spent so many billions of dollars creating wireless services which underplay the communications capabilities of the phone?

There are several answers to that question, but they can all be rolled into one phrase: media envy. Phone companies are trying to create devices which will let them treat people as captive media subscribers, rather than as mere customers. Email is damaging to this attempt in several ways: The email protocol can’t be owned. It is difficult to insert ads without being instrusive. It allows absolute interoperability between customers and non-customers. Worst of all, telcos can’t charge sponsors for access to their user base if those users are more interested in their email than headline news. The phone companies hope to use their ability to charge by the byte or minute to recreate the ‘pay for content’ model which has failed so miserably on the wired net, and they don’t want to run into any Prodigy-style problems of users preferring email to for-fee content on the way, especially as serious email use requires the kind of keyboard and screen its difficult to fit into a phone. Vendors of mobile phones are committed to text-based content rather than text-based
communication in large part because that’s what its easy to make a phone do.

The Nokias and Sprints of the world made a strategic miscalculation by hyping the current generation of WAP phones as ‘wireless internet’, Users understand that the most important feature of the internet is email, and it is a pipe dream to believe that users will care more about receiving packaged content than news from home. As with the development of the wired internet, communications will lead the growth
of content and commerce in the wireless space, not follow it. The RIM devices are by no means perfect, but unlike WAP phones they create in their users the kind of rapt attention usually reserved for Gameboy addicts, by giving them something of real value. Ignore the wireless analysts who don’t get that wireless devices are primarily
communications tools. Bet against any service that assumes users are eager to pay to find out what the weather is like in Sausalito. Bet on any service that makes wireless email easier to use, because whoever makes email easier will earn their users undying loyalty, and everything else will follow from that.

by Clay Shirky

The Music Industry Will Miss Napster

If the industry kills Napster, it will lose its best potential partner.

First published in the Wall Street Journal, July 28, 2000.

On Wednesday, federal Judge Marilyn Hall Patel ordered Napster, a
company that provides software allowing users to swap MP3 music files
over the Internet, to stop facilitating the trading of copyrighted
material by midnight today. Now the argument surrounding digital
downloading of music enters a new phase.

In business terms, this is a crushing blow for Napster. Although
Napster gets to keep its “community” intact, in that it can still
offer its chat function, Napster users will have no reason to use the
Napster chat software for any purpose other than trading information
on alternative sources of free MP3s like Napagator and Gnutella. If
Napster is kept offline for any length of time, it will likely lose so
much market share to these competitors and others that it will not be
able to recover even if the ruling is later overturned.

MP3 Files

For the Recording Industry Association of America, which sued Napster,
Judge Patel’s order is a powerful demonstration that it can cause
enormous difficulties for companies that try to shut the major record
labels out of the Internet distribution game. But the recording
industry association should not be sanguine simply because the total
number of MP3 files being moved around the Internet will plummet, at
least temporarily.

There are still well over 10 million users out there who have become
used to downloading music over the Internet. Napster or no Napster,
someone is going to service this enormous and still growing
appetite. The recording industry cannot expect that one court ruling,
or even many court rulings, will turn back the tide of technology.

Closing Napster as an outlet will have no effect on the underlying
ability of average users to create and listen to MP3 files. It is not
Napster that is digitizing music, it is the users themselves, using
cheap personal computers and free software. And it is the users’
willingness to trade copyrighted material, not Napster’s willingness
to facilitate those trades, that the record industry should be worried
about.

For the record companies, the issue is plain and simple — what
Napster is doing is illegal, and Judge Patel has ruled in their
favor. Legality isn’t the whole story, however. The critical thing for
the music executives to realize is that while they have not lost the
right to enforce copyright laws, their ability to do so is waning.

The analogy here is to the 55 miles-per-hour speed limit, which turned
out to be unenforceable because accelerator pedals are standard
operating equipment on a car. Likewise, government cannot control the
fact that computers are capable of making an unlimited number of
perfect copies of a file.

The current legal ruling has not taken a single Rio music player off
the shelves, nor destroyed a single piece of WinAmp music software,
nor deleted a single MP3 file. More to the point, it has not, and will
not, prevent anyone from “ripping” a CD, turning every track into a
separate MP3 file, in less time than it actually takes to listen to
the CD in the first place.

Napster did achieve an ease of use coupled with a distributed source
of files that no one else has been able to touch, so the short-term
advantage here is to the recording industry. The industry now has a
more favorable bargaining position with Napster, and it has a couple
of months to regroup and propose some Napster-like system before
Napster’s users disperse to new services. This new system must give
fans a way to download music without the expense and restrictions of
the current CD format, which requires you to buy either a dozen songs
or none.

If the industry doesn’t meet this demand, and quickly, it may find
that it’s traded the evil it knew for one it doesn’t know. The lesson
that new Internet music companies will take from the Napster case is
that they should either be hosted offshore (where U.S. laws don’t
apply) or they should avoid storing information about music files in a
central location. Either option would be far worse for the record
industry than Napster.

Napster at least provides one central spot for the music industry to
monitor the activity of consumers. Driving Napster completely out of
business could lead to total market fragmentation, which the industry
could never control.

Digital Is Different

It’s very hard to explain to businesses that have for years been able
to charge high margins for distributing intellectual property in a
physical format that the digital world is different, but that doesn’t
make it any less true. If the record labels really want to keep their
customers from going completely AWOL, they will use this ruling to
negotiate a deal with Napster on their own terms.

In all likelihood, though, the record executives will believe what so
many others used to believe: The Internet may have disrupted other
business models, but we are uniquely capable of holding back the
tide. As Rocky the Flying Squirrel put it so eloquently, “That trick
never works.”

by Clay Shirky

Napster and the Death of the Album Format

Napster made the song, not the album, the unit of musical selection.

Napster, the wildly popular software that allows users to trade music over the Internet, could be shut down later this month if the Recording Industry Association of America gets an injunction it is seeking in federal court in California. The big record companies in the association — along with the angry artists who testified before the Senate Judiciary Committee this week — maintain that Napster is
nothing more than a tool for digital piracy.

But Napster and the MP3 technology it exploits have changed the music business no matter how the lawsuit comes out. Despite all the fuss about copyright and legality, the most important freedom Napster has spread across the music world is not freedom from cost, but freedom of choice.

Napster, by linking music lovers and letting them share their collections, lets them select from a boundless range of music, one song at a time. This is a huge change from the way the music industry currently does business, and even if Napster Inc. disappears, it won’t be easy to persuade customers to go back to getting their music as the music industry has long packaged it.

Most albums have only two or three songs that any given listener likes, but the album format forces people to choose between paying for a dozen mediocre songs to get those two or three, or not getting any of the songs at all. This all-or-nothing approach has resulted in music collections that are the barest approximation of a listener’s
actual tastes. Even CD ”singles” have been turned into multi-track mini-albums almost as expensive as the real thing, and though there have been some commercial ”mix your own CD” experiments in recent years, they foundered because major labels wouldn’t allow access to their collections a song at a time.

Napster has demonstrated that there are no technological barriers to gaining access to the world’s music catalogue, just commercial ones.

Napster users aren’t merely cherry-picking the hits off well-known albums. Listeners are indulging all their contradictory interests, constantly updating their playlists with a little Bach, a little Beck or a little Buckwheat Zydeco, as the mood strikes them. Because it knows nothing of genre, a Napster search produces a cornucopia of
alternate versions: Hank Williams’s ”I’m So Lonesome I Could Die” as interpreted by both Dean Martin and the Cowboy Junkies, or two dozen covers of ”Louie Louie.”

Napster has become a tool for musical adventure, producing more diversity by accident than the world music section of the local record store does by design: a simple search for the word ”water” brings up Simon and Garfunkel’s ”Bridge Over Troubled Water,” Deep Purple’s ”Smoke on the Water,” ”Cool Water” by the Sons of the Pioneers and ”Water No Get Enemy” by Fela Anikulapo Kuti. After experiencing this freedom, music lovers are not going to go happily back to buying albums.

The question remains of how artists will be paid when songs are downloaded over the Internet, and there are many sources of revenue being bandied about—advertising, sponsorship, user subscription, pay-per-song. But merely recreating the CD in cyberspace will not work.

In an echo of Prohibition, Napster users have shown that they are willing to break the law to escape the constraints of all-or-nothing musical choices. This won’t be changed by shutting down Napster. The music industry is going to have to find some way to indulge its customers in their newfound freedom.

by Clay Shirky

The Toughest Virus of All

Why viral marketing can never be a general purpose tool.

First published on Biz2, 07/00.

“Viral marketing” is back, making its return as one of the gotta-have-it phrases for dot-com business plans currently making the rounds. The phrase was coined (by Steve Jurvetson and Tim Draper in “Turning Customers into a Sales Force,” Nov. ’98, p103) to describe the astonishing success of Hotmail, which grew to 12 million subscribers 18 months after launch.

The viral marketing meme has always been hot, but now its expansion is being undertaken by a raft of emarketing sites promising to elucidate “The Six Simple Principles for Viral Marketing” or offering instructions on “How to Use Viral Marketing to Drive Traffic and Sales for Free!” As with anything that promises miracle results, there is a catch. Viral marketing can work, but it requires two things often in short supply in the marketing world: honesty and execution.

It’s all about control

It’s easy to see why businesses would want to embrace viral marketing. Not only is it supposed to create those stellar growth rates, but it can also reduce the marketing budget to approximately zero. Against this too-good-to-be-true backdrop, though, is the reality: Viral marketing only works when the user is in control and actually endorses the viral message, rather than merely acting as a carrier.

Consider Hotmail: It gives its subscribers a useful service, Web-based email, and then attaches an ad for Hotmail at the bottom of each sent message. Hotmail gains the credibility needed for successful viral marketing by putting its users in control, because when users recommend something without being tricked or co-opted, it provides the message with a kind of credibility that cannot be bought. Viral marketing is McLuhan marketing: The medium validates the message.

Viral marketing is also based on the perception of honesty: If the recipient of the ad fails to believe the sender is providing an honest endorsement, the viral effect disappears. An ad tacked on to a message without the endorsement of the author loses credibility; it’s no different from a banner ad. This element of trust becomes even more critical when firms begin to employ explicit viral marketing, where users go beyond merely endorsing ads to actually generating them.

These services–PayPal.com or Love Monkey, for example–rely on users to market the service because the value of the service grows with new recruits. If I want to pay you through PayPal, you must be a PayPal user as well (unlike Hotmail, where you just need a valid address to receive mail from me). With PayPal, I benefit if you join, and the value of the network grows for both of us and for all present and future users as well.

Love Monkey, a college matchmaking service, works similarly. Students at a particular college enter lists of fellow students they have crushes on, and those people are sent anonymous email asking them to join Love Monkey and enter their own list of crushes. It then notifies any two people whose lists include each other. Love Monkey must earn users’ trust before any viral effect can take place because Metcalfe’s Law only works when people are willing to interact. Passive networks such as cable or satellite television provide no benefits to existing users when new users join.

Persistent infections

Continuing the biological metaphor, viral marketing does not create a one-time infection, but a persistent one. The only thing that keeps Love Monkey users from being “infected” by another free matchmaking service is their continued use of Love Monkey. Viral marketing, far from eliminating the need to deliver on promises, makes businesses more dependent on the goodwill of their users. Any company that incorporates viral marketing techniques must provide quality services–ones that users are continually willing to vouch for, whether implicitly or explicitly.

People generally conspire to misunderstand what they should fear. The people rushing to embrace viral marketing misunderstand how difficult it is to make it work well. You can’t buy it, you can’t fake it, and you can’t pay your users to do it for you without watering down your message. Worse still, anything that is going to benefit from viral marketing must be genuinely useful, well designed, and flawlessly executed, so consumers repeatedly choose to use the service.

Sadly, the phrase “viral marketing” seems to be going the way of “robust” and “scalable” –formerly useful concepts which have been flattened by overuse. A year from now, viral marketing will simply mean word of mouth. However, the concept described by the phrase– a way of acquiring new customers by encouraging honest communication–will continue to be available, but only to businesses that are prepared to offer ongoing value.

Viral marketing is not going to save mediocre businesses from extinction. It is the scourge of the stupid and the slow, because it only rewards companies that offer great service and have the strength to allow and even encourage their customers to publicly pass judgment on that service every single day.