Jobs Reports

If you were hoping for a bad jobs report this month just so that it would hurt Obama's re-election chances, you are sick in the head. And if you were hoping for a good jobs report just so that it would help Obama's re-election chances, you are equally sick in the head. Break the obsession with politics as a spectator sport!

Who's Winning the Battle of the Social Networks?

Who's winning the battle of the online social networks? This screenshot, taken from a Cracked.com page I was just reading, speaks volumes:

The network externalities in the market for social media are perhaps too powerful for anyone to really compete with Facebook in the near future. Whether or not Facebook can fully monetize this dominance is another matter. Facebook's tumbling share price since its IPO indicates that investors are having some of the same doubts I have long expressed about the free-service/advertising-revenue model on which companies like Facebook are based. 

   As an investor, it's important not to confuse dominance over culture with profitability. Yes, Facebook has changed the culture of the entire world. But how much revenue does it have to show for it? Some, but not enough to maintain that IPO price. Perhaps Facebook has only grown to dominate because, to quote the Facebook log-in page: "It's free and always will be." Maybe the success stories of Facebook and Google, and other similarly monetized web-based companies are not the tales of the triumph of innovation they have been hyped to be, but are stories that prove something completely unremarkable: that people like to pay less for things. Yes, people like free stuff, people love free stuff. People will spend their time and energy to get "free" stuff. But there's one thing they won't do, and that's pay for it.

Hijacking The Collective Intelligence of the Web



I've been talking a lot lately about how the collective intelligence of the web will help value-creating enterprises rise to success, while letting unworthy enterprises fail. Well, here's one way that these unworthy businesses are trying to combat this: fake Yelp reviews for pay.    

Screenshot from Craigslist Los Angeles



Notice how for it to be convincing, the paid writers need to have active and established Yelp accounts. Very clever.

If You are Advertising, There Must Be Something Wrong With You, Part 2

I apologize that perhaps too many of my latest articles have covered the topic of advertising. I can justify that to myself because I feel, in today's world of almost unlimited "free" content online (either offered for free, or free through piracy), the issue of monetizing the web in a way that efficiently rewards producers of content (films, software, books, ideas, artworks) is and will continue to be one of the our great economic dilemmas. The current model is heavily based on advertising, and I feel that the monetization model of pay per click, "put everything out for free, because it's just going to be pirated anyway, then pray that someone clicks on the ads" will soon fail.
Why? As I covered in my earlier article on this topic, because if they haven't already, people will soon realize advertising has become a mark of bad quality for the advertiser. In the wired, social media fueled economy, word of mouth and the collective intelligence of the web are king. Not the word of advertising. Ask yourself, of the two following choices, who would you be more willing to trust?: a paid celebrity spokesman telling you that a product is great, or hundreds of user reviews online telling you a product is bad? If you answered the former, you must really like that celebrity.
But there's another more basic reason why advertising is a mark of bad quality. Advertising costs money. And money spent on advertising is money not spent in other areas, the areas of spending that, unlike advertising, help to actually create a good product or service.
Ask yourself the following question: When was the last time you saw a national advertisement for Harvard University? You know, just to spread the word: "Hey everybody, Harvard's a great school!" Probably not very recently.
Now ask yourself when was the last time you saw an advertisement for ITT Tech or other for-profit trade school offering community-college level education at 10 times community-college prices? I see them all the time, on TV and all over the web. These are the kinds of products and services that need to advertise: Scams, predatory lending and herbal "male-enhancement" supplements.
In other words, products and services that suck.
And speaking of sucking, advertising sucks. That is, advertising costs suck money, like leeches from an organization's funds. These funds could be used to help provide a better product or service. And in a world where social media has created 'roided up engines for the transmission of instant, global word of mouth, perhaps the better companies will find that money is more wisely spent on improving their products, rather than simply trying to convince people that their products are good. So if you see a company advertising heavily, ask yourself "why do they need to advertise so much?" and "where is the money coming from to pay for all these advertisements?" It could very well be that the heavy advertising company never counted on offering a quality product or service in the first place, and was just planning on pulling a fast one. And if you want to find out if a product is good or bad, often a quick Googling will suffice. Just watch out for those Google ads.

(Post script: Yes I am a total hypocrite for attacking the web advertising model from a blog covered in ads supplied by Google.)