Don't Blame Google And Scribd For Your Own Business Model Problems

from the try-this-on-for-size dept

Another weekend goes by and another old school newspaper guy writes a long screed condemning Google as a menace hellbent on destroying all that is good and right in the news business. This one, by Henry Porter in The Guardian is particularly amusing due to the logical inconsistencies within. It starts out, first, with a rehashing of the misguided attack on Scribd, where Porter seems to blame Scribd for actions of its users (who knew it was so difficult to separate out the drivers from the automakers). To him, Scribd is pure evil:

it still allows individuals to advertise services for delivering pirated books by email, which must make it the enemy of every writer and publisher in the world. In effect it has turned copyright law on its head: instead of asking publishers for permission, it requires them to object if and when they become aware of a breach.

Yes, that's why many authors and publishers are using Scribd to help promote their books. Apparently the fact that Scribd might be useful never occurred to Porter. It's the same complaint by plenty of folks who refuse to even think about new business model possibilities, to immediately condemn any useful new service as killing off any hope of a business model even as those willing to embrace the technology are finding it enhances rather than diminishes their opportunities.

Then, right after he complains that Scribd isn't doing enough to prevent books from getting online, he complains about Google for the exact opposite thing:

Google presents a far greater threat to the livelihood of individuals and the future of commercial institutions important to the community.... When the Performing Rights Society demanded more money for music videos streamed from the website, Google reacted by refusing to pay the requested 0.22p per play and took down the videos of the artists concerned.

This is the very next paragraph. So, let me get the logic straight: Scribd is a problem because it allows books to be posted online without permission and doesn't do enough to take them down. Google, on the other hand, is a problem because it has taken down music videos rather than leaving them up and simply paying.

So, apparently, the lesson of the day is that content creators should be able to demand a specific amount of money from any service provider for actions done by their users (not the service provider itself), and if that service provider can't pay up, too bad. Oh, and then, of course, there's the popular claim of the content creator that Google adds no value:

Google is in the final analysis a parasite that creates nothing, merely offering little aggregation, lists and the ordering of information generated by people who have invested their capital, skill and time.

Fair enough. If it adds no real value, then remove your works from Google, Mr. Porter. But, the truth is Mr. Porter is wrong and he knows it deep down inside. If Google "created nothing" and offered no value, no one would use it. But the fact is that it creates tremendous value, hence all of the usage, including some that drives traffic to Mr. Porter's weakly argued, poorly reasoned rant. The fact that Mr. Porter or his bosses are somehow unable to capitalize on that traffic is their fault alone, not Google's.

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Misunderstanding The Problems Of The Patent System

from the it's-got-problems,-but-not-these dept

Earlier this year, Alex Iskold wrote up a piece on why the economics of "free" was somehow bad. That didn't make much sense and we tried to explain why. Now he's written another article trying to explain why the patent system is in crisis, and it seems equally as confused. We absolutely agree that the patent system has some serious, serious problems -- but it's not for the reasons Iskold describes. First, he claims that the patent system used to work -- when historical evidence suggests otherwise. Almost every look at the patent system over history has found little to no evidence that it increased innovation. From Fritz Machlup to Eric Schiff to the more recent research of Scherer and Weisburst and others have consistently found little evidence that patents increase innovation.

Iskold, oddly, suggests that the reason why we're seeing open source rise up and an open sharing of ideas proliferate is somehow because of the patent system's failures (despite the fact that both became more prevalent and common long before software was considered patentable), and warns that this is somehow dangerous, because: "What happens when a big company copies a startup? What happens when dozens of startups copy each other?" Of course, that's what most people consider competition, and we tend to think it's a good thing in a capitalist society. It's what actually drives innovation, as pretty much all of economic history has shown. If someone copies you, you continue to innovate and beat them to the market. If you really understand your market better, then you can out-innovate them. And, despite continuous worries about "big companies" copying startups, history shows that it's not quite so easy. If the startup is successful, it's not so easy to just copy, because the startup has built up a reputation, which isn't so easy to copy. Witness how Netflix outran Blockbuster, despite Blockbuster copying Netflix. Witness how Google outran both Yahoo and Microsoft. Witness how Microsoft outran IBM.

It's not so easy to just "copy." And just copying isn't enough to actually gain marketshare.

From here, Iskold's column skids off the rails completely. It claims that the real problem of the patent system is the time between filing the patent and when the patent is granted, because that allows plenty of other companies to copy your patent and beat you to the market. That's so wrong it's difficult to know where to start. First, patents aren't published until 18 months after being filed. So, no matter what, you have an 18 month headstart. And if we're talking about software firms, that seems like a pretty damn big headstart. Furthermore, there's very little evidence of startups or even larger companies in the software space scouring patent applications to "steal ideas" from others. No, they tend to focus on what the market is actually asking for. And, in fact, there's ample evidence that many software firms actively forbid employees from looking at patents, as doing so may open them up to treble damages for "willful infringement."

Iskold seems to think that this patent scanning is what leads to tons of "me too" startups -- but the truth usually has absolutely nothing to do with the patent system. It's because multiple people recognize the same or similar markets, and over time are likely to attack it in similar ways. Again, that's competition -- and it's a good thing.

Oddly, towards the end, Iskold finally admits what he calls "the biggest irony in this patent debacle": it actually benefits consumers. That's not "irony." That's correct. Competition benefits the customer. That's how it's supposed to work. So what's the problem?

Well, according to Iskold, this isn't sustainable: "To not have patents at all means that at the end of the day big companies will always absorb all the best innovation for free." But, again, as we already pointed out, that's simply not true. Sometimes big companies win, but quite often, they do not. Big companies are slow and lumbering. Small companies are faster and more nimble and can often out innovate the slow companies with legacy issues. Competition is a good thing, Alex. Don't fear it.

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New Website Measurement System Just A Little Less Useless Than Previous One

from the keeping-score dept

In a bid to improve the relevance of its ratings, Nielsen/NetRatings has announced that it will no longer use page views as its primary metric for measuring the popularity of websites. Instead, it will focus on the amount of time that users spend on the site. Obviously, there have been a lot of problems with the current system, as the use of page views grossly inflates the popularity of some sites, like MySpace, while penalizing sites that aren't refreshed or reloaded as often. As the above article notes, the new system will give YouTube a boost, but will ding Google's main site, which isn't designed to keep users around. Of course, therein lies the flaw with this new measurement system. Google is incredibly profitable and successful, precisely because it does a good job of whisking users away to other sites, either through ads or its search results. The idea of penalizing it because users don't spend a lot of time on the site is absurd. When it comes to TV shows, it may make sense to adopt a uniform measurement system, because all TV shows have the same purpose: to sell ads. Websites, however, have a variety of different business models, so trying to define a standard metric of success is going to prove impossible. Ultimately, the most meaningful measure of a site or service is its profitability, which, unlike page views or time spent, isn't so easily gamed.

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