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broadstuff"broadstuff" - 5 new articles

  1. The Distraction Economy
  2. Google - it ends not with a bang, but with regulation
  3. The demise of Brands...
  4. Unbundling the Banks - Convulsion or Chromewash
  5. Suing Facebook for data tracking YOU!
  6. More Recent Articles
  7. Search broadstuff
  8. Prior Mailing Archive

The Distraction Economy

Everywhere you turn there is this focus on the "Attention Economy", defined by Wikipedia as follows:

..content has grown increasingly abundant and immediately available, attention becomes the limiting factor in the consumption of information. Attention economics applies insights from other areas of economic theory to enable content consumers, producers, and intermediaries to better mediate and manage the flow of information in light of the scarcity of consumer attention


Which is all very well, but what has really occurred is an arms race between various service providers to divert your attention to their new new thing, rather than any others, and certainly not to the (slightly dull) thing you probably really should be doing.

I call this the Distraction Economy, and its really an anti-economic effect as:

- many (most) of the products of the "attention economy" accrete very litle value to the user, most of the value goes to the provider. Whether its your content, attention or personal / activity data
- in their attempts to grab attention, recruitment techniques are starting to resemble "addictification" rather than "gamification" or UE-ification.
- they are value destructive to you - removing attention from added value tasks you should be doing has a double whammy - not only are you doing less of the staff that adds value to you, that time is used less effectively

Taking these in turn:

Accrete no or very little Value

There is an infinite array of diversions seeking to distract you. The internet is always wrong, there is always one more interesting tweet-link to read, one more comment for someone's Facebook wall, one more go on the game du jour. And what are you losing - they are all free, right? Well that is the billion dollar question. What is the value of your time spent on these distraction? There are two ways of measuring this:

(i) The net present value of your future spend - now that's a high value number, and that's what the service provider is getting from you. Trouble is, they aren't paying you - they are giving it to their real customer, the advertisers and people who use your data (hint - a Customer is someone who gives them money, a User is someone who creates value for them for free)

(ii) The opportunity cost of your time - what are you getting for doing this vs doing something else (like your job, for example). The formula for the value of a follower of yours is typically written as some form of:
Total no. of followers (potential) x Total no. of events (actual ctivity - likes, twts etc) x Conversion rate (how many saw/give a sh*t about what you did) x Conversion Value (real dollars you get from that interaction).

Problem is that, for the average joe (or josephine) in the New Digital Economy the Conversion Value is near zero, as is the Conversion Rate, so this is an essentially zero-value accretion. So the +ve value is near zero

However, there is a negative opportunity cost - chances are most distractions reduce your own time and effectiveness actually spent on valuable tasks - i.e. unless you have zero valuable tasks to do, paying attention to the "attention economy"'s products is going to cost you (see part 3 below)

Addictification

First came the idea of the Great User Experience, then when that arms race was tailing off came Gamification, now that is reaching its limits there is Addictification - the best and brightest minds of a generation are being used to try and ensure that people will pay attention to non essentials. Neuroscience, behavioural science, mathematics and a fistfull of 'ologies are being used to try and make this or that piece of digital bubblegum register in people's attention-span and grab that 15 minutes of fame.

Value Destructive

As noted above, time being diverted is very unlikely to be accretive in itself, and is highly likely value destructive as:

(i) Less time being spent on valuable tasks - that has to have an opportunity cost impact in the medium and long term

(ii) It has been shown, in study after study, that distracting yourself from a task reduces your efficiency in performing that task, plus also imposes a "setup" and "teardown" time penalty as your brain switches over from task A to task B. The worrying thin about the distraction economy is that it feels like you are more effective, when in fact the hard metrics show the opposite.

What's the answer?

Firstly, it is to recognise that most of the bright shiny products of the "attention economy" are not there to make you money, they are there to make money out of you.

Secondly, to recognise there is an entire industry out there trying to make these grab your attention, with a miniscule industry building antidotes.

So the only real solution is to time-limit the channels - turn off ambient alerts, make a time to do emails/twitter/facebook etc, and keep to it.
    


Google - it ends not with a bang, but with regulation

TS Eliot wrote that the world ends not with a bang, but a whimper. It is our observation that the worlds of most monopolies effectively end with regulation of some sort or other, either breaking them up , forcing access, or regulating away super-profits (or some combination). And now, after several years of rumblings, the EU has finally started to look at Google. Today Margrethe Vestager, the European Union competition commissioner, announced an investigation into Google's practices for favouring its own shopping sites in guiding searches - NYT:

The abuse charge focused on accusations that Google diverts traffic from its rivals to favor its own products and services, particularly websites for shopping. That led the European Commission to issue a set of formal charges, known as a statement of objections.

A large number of online operators have complained about Google in other areas, like travel and mapping. Ms. Vestager said that the inquiry might eventually expand beyond shopping sites.

Google has been accused of these things for quite a few years, and there have been rumblings of EU action for some time so the only question in our minds is "why now". The NYT notes that:

“The decision by the commission to position itself as the lead competition authority for the digital age may trigger anger among some U.S. politicians

It also allows the EU, currently embattled by internal accusations of being sclerotic, unrepresentative, comatose etc etc to actually look like it is taking a lead in Doing Something in an area of considerable concern to EU technology firms.

The EU is also considering looking at Google's practice with Android:

The European Commission also said on Wednesday that it was stepping up a separate investigation into whether phone makers that agree to use Android — and that also want Google applications like YouTube — face contractual requirements to place those applications and other Google-branded applications in prominent positions on a mobile device.

“Smartphones, tablets and similar devices play an increasing role in many people’s daily lives,” Ms. Vestager said, “and I want to make sure the markets in this area can flourish without anticompetitive constraints imposed by any company.”

If these are proven true, it will be clear that Google, a noisy advocate of net netrality on others' platforms, does not practice net neutrality on it's own.

Throubles usually come in threes, they say - any bets on an EU investigation into tax avoidance practices by US multinationals in Europe soon?
    

The demise of Brands...



Fascinating chart in HBR (above) on the relative change in valuation of Brands and Customers since the emerge of Digital monitoring and social media as it becomes easier to measure customer behaviour and brand impact, and to know which half of advertising works:

...we looked at the value of brands and customer relationships as revealed by M&A data covering over 6,000 mergers and acquisitions worldwide between 2003 and 2013. The beauty of M&A for examining valuation trends is that M&As reveal the dollar valuations of all assets at the time of the acquisition. Upon acquiring a business, companies have to value the different assets they acquired for their accounts and balance sheet in accordance with accounting and reporting standards. These valuations include – among other assets – brands (trademarks) and customer relationships.

And the results...

As the graph bracingly shows, brand valuations declined by nearly half (falling from 18% to 10%) while customer relationship values doubled (climbing from 9% to 18%) over a decade. All other categories of intangibles remained stable. These numbers reveal a dramatic shift in the strategic approach to marketing over the last 10 years. Acquirers have decisively moved from investing into businesses with strong brands to businesses with strong customer relationships.

Oh dear - the demise of Brand Marketing will no doubt fill millions with gloom......
    


Unbundling the Banks - Convulsion or Chromewash

Went to Chinwag's Fintech event last Thursday to catch up on what's going on, well in Fintech really, looked like an interesting variety of speakers. Notes follow below:

To kick it off, Cass Professor Gianvito Lanzolla set the secene with a discussion of the current structure of technology change in Finance, he looked at the drivers of change

1. Tech drivers in the near future
- SMAC - Social Mobile Cloud Analytics
- 80% of global population on mobile
- The future - c 50bn "intelligent" devices & trillions of sensors

2. Market Drivers of Disruption - "Demand" side
- network effect
- long tail
- convergence - products are converging but producer capabilities are not
- low transaction costs & zero marginal cost - means competitive advantage is v hard to keep going in some areas

3. "Supply" side - Market Driver Cost of innovation has crashed
- lean startups
- disruptive S curves, not continuance S curves
- Moores law performance dynamic - things will get inexorably smaller, faster, cheaper

4. Forces
- Where industry overshoots what customers want then industry is disruptiable, esp if they are in diminishing return territory
- Demand side - increasing customer utility, matching to expectation = quadratic function?
- Long tail - easy to build a niche, hard to outgrow


Dave Birch of Consult Hyperion followed up with his view on what people are doing today

Tech in banking is a "William Gibson" time (aka future is here, just unevenly distributed). The Meme of the Moment is around "mobile", but what that seems to mean in practice is contactless mobile devices - which is hardly disruptive. Dave introduced the concept of "Chromewash" e.g. - Apple Pay (today's darling) runs on "yesterday's rails", i.e. merely a continuance of what has come before but overlaid with New New hype.

He looked at revenues from European banks - c 50% comes from Interest, Transactions c 30 %, Fees c 10%, Other c 10%. The raft of Fintech innovators are already in most obvious spaces of stuff banks do, so profit pools most at risk are the large ones - loan areas (Interest revenue) and Transaction disaggregation - he pointed Braintree as an example of a startup and to an Anthony Jenkins FT article last week, noting that the pressure is on to end universal banking:

“The universal banking model is dead,” says Antony Jenkins, Barclays’ chief executive — and not only because of tougher regulation and capital requirements.

Mr Jenkins says the need for vast investment in technology to stay ahead of the rapid wave of digitisation sweeping the industry means the bank he took over in 2012 has to be more selective.

We shall see....Dave also made the point that you can't dissociate Tech pressures from regulatory pressures (not new news - cf Carlota Perez et al), Regulation drives tech to huge degree eg regulations forcing direct API access to customer accounts means that banks can't compete on regulated API anyomre, so must compete on other "added value" (to whom areas:

- non regulated
- non payment
- create new types of transaction


His view is that a major area of disruption will be Identity, it's a mess and identity theft is out of control, opens field to players from other industries. Endgame is Amazonisation of banks, banks are no longer where we store money, they are where you store identity.

The Panel session had the above people plus Jonathan Kramer, Sales Director of per-to-peer lender Zopa and Mutaz Qubbaj, CEO & Co-founder of Squirrel, moderated by Ben Rooney, co-Editor in Chief at startup Informilo, ex WSJ - who quipped that Chair is journo who has just started up - quip "you know you're in a bubble when journalists leave good jobs to form startups"

The main Panel Discussion issue was "where are the opportunities in the near future? These broke down into:

Working with banks
- KYC, CTF, AML (and other incremental improvement of all TLA technologies....)
- Authentication

Competing with banks
- where banks do things inefficiently eg consumer and SME lending
- where they are not customer focussed
- where solutions are "designed by committee"


Banks are hugely vertically and horizontally integrated, tend to ossify and can be outmanouvred. But banks always have 1st option on trust and first mover advantage - though are everywhere slow and reluctantly trusted, much less liked (even less than RyanAir apparently).

Then came the issue of Innovation vs. Regulation:

Regulation not bad per se, but is usually poorly done/enforced (and typically regulating the stable where the horse has already bolted).

There is very little startup activity that is better (from a major's point of view) than can be gained than by playing a regulatory arbitrage game that only big boys can play ("Too big to fail" being the zenith of this issue).

Any truly radical new, small play, if it gets too big gets regulated (ie Zopa can scale, but how big does it get before regulation comes in). Zopa said it now wants peer to peer lending to be regulated (to be safe from high risk-adopting new entrants who would force tighter regulation, I presume). Another example, Funding Circle who make loans to small companies, is not regulated yet - but what happens if this market grows - there is always going to be a rotten apple/major incident and brings in tighter refulation. (Ditto Crowdfunding.... )

And finally - The obligatory Bitcoin question!

I think Dave Birch had this one down best - bitcoin itself is not particularly interesting, but blockchain is interesting as it allows trading without settlements. This is not just for currency, but for all sorts of 3rd party transactions like managing dishwasher guarantees, and also has a strong intersection with IoT

Anyway, to a large extent it showed that change will probably be slower than the enthusiasts think, as startups have a hard time plus negative inducements in growing too large and/or too fast, and regulation can often be used by incumbents to protect positions to a very high degree.

My "Note to self" was to look again at mobile payments in Africa and what else is being done on these platforms, as there are no legacy systems and typically that is where "next gen" disruptive technologies prove themselves.
    

Suing Facebook for data tracking YOU!

Now this is interesting - Wired:

At least 25,000 users, led by Austrian law graduate Max Schrems, are suing Facebook for allegedly tracking users' data illegally. Schrems claims Facebook has a "Wild West" attitude to data protection, and says its collection of data from non-Facebook users violates EU regulations.

We've wondered aloud on this blog several times about:

- when a backlash to being tracked will result in regulatory challenge and lawsuits
- what the legal redress will be for people who are tracked by commercial social applications

Its all a very murky area, as we have noted quite a few times over the years, and really needs case law to sort it out. Now it's starting:

The lawsuit, which will be heard for the first time at a civil court in Vienna on 9 April, has technically been brought against Facebook's European office in Dublin, through which all of its non-US and Canadian accounts are registered. Launched in August 2014, the lawsuit quickly attracted huge numbers of people wanting to participate and claim their share of any damages, which are being sought at a "token level" of €500 (£360) per claimant. While 25,000 users are involved in the first stage of the lawsuit, another 55,000 have registered to participate in a second round if proceedings develop as Schrems hopes.

"Basically we are asking Facebook to stop mass surveillance, to (have) a proper privacy policy that people can understand, but also to stop collecting data of people that are not even Facebook users," Schrems told AFP.


In essence, the case alleges Facebook is in contravention of EU data protection laws and is in effect pushing the EU to face up to it and apply the law. The case also alleges Facebook was involved in the PRISM spying program that Edward Snowden blew open. It is expected that Facebook will argue the case is inadmissible in Austrian law.

One to watch.....this strikes at the heart of the business model of nearly every "for free" web and app service going today, including most of the so called "Unicorns" ($1bn+ valuation social business companies).
    


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