The deceptive appearance of link economics

Original author: Arnon Mishkin
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Arnon Mishkin is a partner at Mitchell Madison Group, where he advises on how to improve your business through the Internet and achieve profitability online. Previously, he was a partner in the Boston Consulting Group, where he was involved in the company's first projects on the World Wide Web.

Those who are “up to date on the Internet” will easily explain to you that the online economy is entirely dependent on links . The more links you get, the better. Few can object.
Therefore, when the Associated Press (AP) and newspaper owners demanded to share revenue with those who link to their sites, it was clear that they simply did not understand the web and did not understand the benefits of these links.
Well, the data shows that the web blogosphere is at least an entire ecosystem, not a one-way street.

The greatest benefit comes from aggregators who link or cite content, not content producers. We examined the traffic of several aggregators that use only news headlines. In all cases, the traffic they collect was at least twice as large as the traffic they directed to those they referred to. In other words, a very large percentage of users consumed the headlines as a finished product, and did not use them as a page for accessing the full texts. Of course, this is rich ground for conclusions regarding the ability of content producers to make money, because the main plus from the additional traffic to your site is the potentially higher price of advertising on your pages. (Note: I have advised AP and other manufacturers, but not on this).

Even in the best case for the manufacturer, the aggregator has as much traffic as the manufacturer. After all, the user goes to the manufacturer’s website from the aggregator’s website. If you don’t believe the research data, try to remember how much on average per day you visit your favorite news aggregator, and how many times you click on the headings of specific materials there.

In general, this will not be a surprise for someone who at least once thought about how people read newspapers: they scan headlines, then go to a sports page, a movie section or recipes, depending on interests. As they say, people read the news not to learn about the fire, but to make sure that there were no fires.

In the old days, newspapermen didn’t care how readers behave, because when they bought a newspaper, they already paid for it. And now aggregators take all the margin for themselves, who take articles and create their page, and there is a certain circle of readers who prefer to scan it.

And since producing content is much more expensive than quoting, the economic sense is lost.

This is not just economics; it affects the nature of journalism. Take Iran. When the Shah fell in 1979, the hero of journalism was Mike Wallace, who flew to Tehran to ask Ayatollah if he was “crazy,” as Anwar Sadat called him. This year, after the presidential election, the blogger became the hero of journalismfrom the newspaper The Huffington Post, who, sitting in the editorial office, made links to all the messages from Tehran that he could find.

Moreover, since the aggregator can use absolutely any content on the network, it can make its own selection better than any manufacturer, tailor it to the needs of any reader. At the same time, they rely on the world journalistic community, without paying him a dime. As a result, the aggregator can receive decent traffic and make your business profitable almost immediately.

Some will object, pointing out that aggregators help discover previously unknown sources of information by including their materials in their area of ​​attention. Great, but can such sites monetize the traffic directed towards them? And will they be able to secure a normal economic existence by constantly chasing the random attention of the public?

Others will say that the site that received the links can deter an occasional visitor and make him a regular follower. But the opposite happens - users value more not the source, but the one who pointed them to it.

What to do about it? I think publishers should take the following steps:
  • To assess how much benefit aggregators get from using their content, and to build appropriate economic relations with them. At the same time, it is better to prohibit making links at all than to sign a deal that is not profitable for yourself.
  • Consider opportunities for cooperation with other manufacturers and create your own aggregators.
  • Develop new ways to use their content with other sites, such as how they monetize some of the traffic from aggregators. For example, to offer to install not purely content widgets, but wadgets, in which content is combined with advertising.

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