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The Critical Path #153

Jun 22, ’15 7:40 PM
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A transcontinental journey, WWDC and listener questions.

Source: The Critical Path #153

  • GlennC777

    Thank you Horace as always for a wide-ranging and thought-provoking discussion.

    A few random thoughts:

    – Monetizing ads via direct payments to ad recipients. I think the value proposition breaks down as soon as the end user is faced with a direct view of cost vs. benefit. The valuable ad recipient will not accept such small payment for their attention, and the user who accepts the payment is not worth advertising to. As a corollary, my feeling is it may be that ad-based business models are an accidental innovation that persists only because of non-transparency and non-granularity with regard to the actual exchange of value.

    – India vs China as iPhone markets. People are fundamentally the same everywhere, but culture is powerful, and attitudes towards money are deeply cultural. Apple’s ability to adapt its approach to different markets can be seen as one variable, but cultural diversity should perhaps be seen as another variable. The equation may have a solution for China but no solution for India.

    – The importance of CEOs. This is very interesting, since Apple is the classic counter-example to the idea that the CEO is not particularly important. If we assume that both markets and innovation are efficient, then the CEO shouldn’t matter much, and I’d agree this is usually the case. Markets are usually efficient, and innovation is usually efficient. However, this ignores the very important concept of unpredictable change. Geology, biological evolution, culture, and business all seem to follow a general pattern of punctuated equilibrium, or punctuated evolution. This is characterized by periods of predictable progress punctuated by intermittent rapid changes of state. It seems to me that the idea of sudden changes of state, applied to business, might be a pretty good analogue for the concept of disruption. It also seems that the CEO becomes very important when an opportunity exists for such a change of state. Apple has presided over several such changes of state, and certainly Steve’s presence was a critical catalyst. Where market participants are most often mistaken is in the failure to sufficiently discount the very low likelihood of such a change of state occurring under a given CEO.

    • Walt French

      I’ve been a vocal proponent of micropayments but recognize there’s a huge mental barrier to clicking on “Read now for 5¢.”

      Even if 5¢ is more than the blog gets from ads, it’d turn away what…90% of the potential readers? That means 50¢ or more.

      This blog is a fine case in point. Is there a better one regarding insights into the future of mobile tech? … one that investors, analysts, enthusiasts can use to anticipate the future any better? And yet, how many would pay the $1 per posting that’d make it a huge bargain for all but the merely-bored-in-search-of-Apple-news?

      • GlennC777

        I’m curious how reader or listener attention is valued by advertising on, a per-minute, per person basis. My guess is it works out to a relatively tiny number that most people would reject if offered to them as a direct payment.
        The psychology is another impediment, as you point out. I recognize the irrationality you’re referring to in my own behavior. As crude as it is, the advertising model works.

      • Jacob Williams

        Here’s where I believe online ads are heading:

        Companies and creators will increasingly approach each other and bypass the platforms altogether. I have personal relationships with all my sponsors.

        There’s an important piece to this: I make a living off of my content because I pitched companies on sponsoring my content. The producers that learn the art of sales have the advantage.

        None of my sponsor companies had ever sponsored a content creator directly before. And only after I showed them how to do so and gave them a free trial that produced results with a 10X ROI compared to traditional online ads, did they realize how much more effective buying ads from the producer, rather than the platform is.

        I buy ads from Amazon and Adwords to generate traffic to my content. The bidding online ad space has continual pressure on the ROI to move downward.

        Automated bids eventually leads to awareness of companies that are willing to lose the most trying to break even.

        Companies want to lock in a rate with a producer of $5 a click that will stay $5 a click for a year and not worry that their competitor will come in next week and outbid them at $5.01.

        I’m not in the business of axing those I work with and have built relationships with. Facebook will gladly kick you to the curb for an extra penny.

      • Steve O’Dell

        If there was a Standard Internet currency, and you could buy $20 gift cards, then clicking that five cent here, five cent there barrier would go away

        Sometimes I look at a 99¢ app and think, can’t afford it right now. Then I pick up $100 iTunes gift card from Costco for $84, and I’m buying apps like a drunken sailor on shore leave. ( I missed a step in that metaphor, but you know what I meant .)

      • Walt French

        I’d do it a bit differently, but yes, a robust micropayments system is necessary.

        My approach would be what I’d do If I Ran Twitter. I’d ask a bunch of firms to create debit accounts for me, where *I* (Twitter) validated every 5¢ button with a message that the user & publisher agreed to a 5¢ transfer. I would know the start-of-day balance for that user account and not O/D it; the “bank” in turn would agree to guarantee transfers up to the start-of-day balance. Users would sign w individual banks that would set their own costs, balances, top-up policies, etc; I would skim X% of each transaction. The “tipster” who highlighted the “NYT’s Krugman has wonky piece on macro” would get some share of the 5¢ from the NYT, to be negotiated by them. (Likely, the tipster would be the one of the NYT twitter accounts.)

        It’s a bit complex at the front end but seems resistant to scamsters and once the user puts in his initial $10 balance, easy to use.

  • Walt French

    The trucking usage & infrastructure you saw on your road trip is a result of the Interstate Highway system of the 50’s. It transformed the rural & semi-rural economies of the US, perhaps is a big contributor to the rise of the South, which has previously been attributed largely to air conditioning.

    Today, we’re looking at drone delivery. Again, a quick way to bypass limitations of the previous infrastructure, but with the tradeoff of increasing the energy cost.

    But while drones & trucking can expand quickly, it’s far from the most efficient way to move goods between well-identified and stable points. Rail, even if diesel-powered, must cut a huge slice out of the energy cost.

    I don’t know what will succeed drones. Maybe UPS trucks will be fitted with cannons or catapults that fling your packages from the street to your door. We’ll need better packaging.

    • stefnagel

      It’s the asphalt.