The True Cost of Good Content

Jesse Weaver: “We want our web and we want it for free. However, the inconvenient truth is that there is a cost to doing business and at some point companies have to make money …. And so we sacrifice the magic. We devalue content and products by refusing to pay for the work it takes to create and maintain them. We are satisfied wading through poorly designed, ad-based experiences. And we allow our most precious resource, our time, to become a commodity to be traded, sold and manipulated. Our data is mined, our privacy discarded and our actions tracked all in the name of more targeted advertising.”

“And it’s not even the best scenario for companies either. In Q4 of 2015 Facebook brought in $5.9 billion in revenue with 1.59 billion active users/month. That’s roughly $1.23 of revenue/user/month. If, in the same quarter, Facebook moved away from ads and instead charged each active user just $1.50 a month for the service, their Q4 2015 revenue would have increased by $1.2 billion dollars, from $5.9 billion to $7.1 billion.”

“Now, what if Facebook started using that extra $1.2 billion to pay content creators for posting quality content on the platform? … Suddenly the revenue sources for content creators starts to diversify. The reliance on advertisers wanes. Feeds … are designed to promote connection and shine a light on creators. Bloated, ad-filled UIs start to disappear … Creators develop more immersive content experiences focused on the people using them. The balance of power flips back to the user … we stop being the commodity and we start being the driver. And when users are the driver, companies will focus on adding value, not just grabbing our attention.”

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Shakespeare & Co: Amazon Isn’t Its Problem

Wall Street Journal: “Soon after Dane Neller bought Manhattan bookseller Shakespeare & Co. last May, he shut the doors and built the bookstore where he wanted to shop … After Mr. Neller got done tinkering … the store, on Manhattan’s Upper East Side, had a distinctly different look. Space inside the store dedicated to books has been cut by nearly 40% to 1,200 square feet.”

“Mr. Neller … is also chief executive of a company that makes a desk-sized device called the Espresso Book Machine, which prints new paperbacks in five minutes or less. An $85,000 unit is featured prominently at Shakespeare & Co. ‘It’s the secret sauce,’ says Mr. Neller. ‘The machine enables a bookstore to have a much smaller footprint’.”

He “says book sales from September through the end of March are up 10% compared with the same period when the store was under different ownership” and “attributes the gains to better-chosen titles, increased store traffic attracted by the store’s new cafe and the Espresso machine … ‘Amazon isn’t my problem,’ he says. ‘My customer is here because they care about more than price. They want to be greeted, they want a sense of community, and they have a craving for culture’.”

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Tractor Supply: It Has What Amazon Does Not

Forbes: “The typical Tractor Supply customer owns land, keeps pets, raises chickens and drives a pickup … Tractor Supply has approached retail’s cardinal rule of ‘Know Your Customer’ as both mission statement and math problem, and in the process has become an (albeit unlikely) lifestyle brand, famed for an in-store experience so satisfying that its rustic-chic brick-and-mortar operations are well fortified against the onslaught of consumers who want to buy everything on their smartphones.”

“Tractor Supply has 1,500 locations spread across 49 states; the company plans to open around 115 stores in 2016 and about 120 stores per year after that until 2,500 are in operation, mostly in rural or exurban areas … Roughly 15% of store merchandise is tailored to each ‘hyperlocalized’ market: One Kentucky store may cater to equestrians while another mere miles away carries products for life in coal country … the average 16,000-square-foot Tractor Supply store is manned by a team of 12 to 15 local ‘lifestylers’–the type of people who would shop at Tractor Supply even if they didn’t work there.”

The store’s “exclusive lines ensure that customers can’t find an item cheaper on Amazon … Not that Amazon is a big concern. Less than 1% of Tractor Supply’s revenue comes from e-commerce, and increasing that number isn’t a top priority. Physical stores and a deep connection to the countryside remain at the company’s core.”

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Upgrade Downgrade: Bad News for Apple’s iPhone

The Wall Street Journal: “The death of the two-year cellphone contract has broken many Americans from a habit of routinely upgrading their smartphones … Citigroup estimates the phone-replacement cycle will stretch to 29 months for the first half of 2016, up from 28 months in the fourth quarter of 2015 and the typical range of 24 to 26 months seen during the two prior years.”

“Since the early days of Apple Inc.’s iPhone, most customers have avoided paying for the full price for the latest model. But the success of AT&T Inc. and Verizon Communications Inc. since 2013 in shifting customers into plans that force them to pay the full price for devices—and separate that cost from monthly service fees—has consumers holding on to their devices longer.”

“Analysts see the longer device life as positive for the carriers because it could lead to fewer service cancellations or defections in the competitive industry … The longer upgrade cycle lowers equipment revenue for the telecom companies, but Verizon’s Chief Financial Officer Fran Shammo argued last month that the top-line shift is painless … The shift isn’t as benign for Apple. BTIG analyst Walter Piecyk recently cut 10 million units out of his fiscal 2016 and 2017 iPhone estimates because of shifting upgrade rates in the U.S.”

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App-arel: The Internet of Evrythng Wearable

Quartz: “Avery Dennison will attach special labels, sometimes including sensors, to clothes when they’re manufactured. The firm counts Nike, Under Armor, Hugo Boss, and others among its clients. These labels function as unique identifiers for each piece of clothing, and the data is stored in a platform developed by Evrythng … a London internet of things startup.”

“Unique identities pave the way for brands to write apps that can account for a specific item of clothing, so a pair of sneakers might advise you how best to recycle it when it’s worn out; or you might be able to verify that those yoga pants are indeed made of organic cotton. You might also track down whether your shoe size is available in a particular store. ‘The internet of things is still at the margins in the way it hits consumers’ lives; now you have billions of everyday objects with identities in the cloud,’ says Andy Hobsbawm, a co-founder of Evrythng.”

“Evrythng says its platform is different because of its granularity–giving an identity to each product, and not classes of products, as is common with QR codes–and because it formats the data so it can be manipulated with popular programming languages … Evrythng stresses data privacy and security. It says brands will control what data gets accessed by whom, and that it has safeguards in place to ensure data is adequately protected.”

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Humbug: The Truth & Other Lies

The New York Times: When P.T. Barnum, the great 19th-century impresario of public entertainment (and co-founder of the Barnum & Bailey Circus) popularized that word — ‘humbug’ — he was talking exactly about things like Sea-Monkeys. Most assume … that the word is synonymous with total nonsense and absolute fraud.”

“But that overgeneralization misses Barnum’s sly nuance. ‘Humbug’ is not a lie, the great promoter used to say: ‘No humbug is great without truth at bottom.’ It’s unfair to say that Barnum peddled pure fantasy. Great humbug simply took off from a small truth and used that to show people what they wanted to see. In his own way, P.T. Barnum was the greatest cognitive scientist of the 19th century. He understood that when you pit humbug against harsh cold reality, reality doesn’t stand a chance.”

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Late & Great: Giorgio’s Fred Hayman

The New York Times: The late Fred Hayman “was the banquet and catering manager at the Beverly Hilton in 1961 when he invested several thousand dollars to become the silent partner in Giorgio, a struggling women’s clothing store off Rodeo Drive … The location was nothing special.”

“They saw the street, in their dreams, as a rival to Bond Street in London or Fifth Avenue in New York. Mr. Hayman showcased top designers new to the West Coast … He created a sunny, eye-catching exterior with awnings in bright yellow and white and a clubby interior with a pool table and an oak bar, with free drinks, so men could relax while their wives or girlfriends shopped.”

“Drawing on his hotel experience, he lavished the attentions of a concierge on his customers. He sent handwritten thank-you notes, set up a valet parking service and delivered packages to his best customers in a 1952 Rolls-Royce. By the mid-1970s the A-list clients were pouring in … spending tens of thousands of dollars in one go. Some patrons arrived with an extra limousine to haul away their purchases.”

“It was incredible how the money just flowed in,” Mr. Hayman told The New York Times in 1991. “You really didn’t have to sell. You’d just stand there and the customer would say, ‘I’ll have that and that and that and that.’” Fred Hayman was 90.

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Smoke & Mirrors: Online ‘Bargains’ Can Be Illusory

The New York Times: “Boomerang Commerce, a retail analytics firm, compared the list prices of dozens of pet items on Amazon and the specialist pet site Chewy.com. In only a handful of cases did the retailers even agree on what the list price was. So a 22-pound bag of Blue Buffalo Basics Limited Ingredient Grain-Free Duck and Potato dog food had a list price of $131 on Amazon and $84 on Chewy. Yet the retail price at both sites was the same: $49.49.”

“Some e-commerce experts said nothing needed to be done about illusory discounts, because the merchants needed them so much. The process ‘can seem dishonest to consumers, but let’s consider the retailer’s side,’ said Daniel Green of CamelCamelCamel.com … ‘If they weren’t using the list price as the benchmark, what would they use?’ … A few retailers defended themselves in off-the-record conversations by saying there are no victims here. That view got support from a Massachusetts judge in February, who dismissed a case alleging the use of fictitious prices by Kohl’s.”

The judge said: “’The fact that plaintiff may have been manipulated into purchasing the items because she believed she was getting a bargain does not necessarily mean she suffered economic harm.’ For others, however, e-commerce is not living up to its promise of being transparent and pro-consumer.”

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Nickels & Dimes Keep Airfares Low

“Air travelers love to gripe about fees: $25 to check a bag; $34 for early boarding; $129 for a few more inches of legroom,” writes Rafi Mohammed in The Wall Street Journal. “The challenge for this kind of model is managing perceptions … Customers may feel nickeled and dimed, but the a la carte model gives them the option to save money. Theoretically airlines could bake the cost of amenities into the base fare and then offer ‘discounts’ for giving them up. But that isn’t intuitive: Take $9.95 off if you don’t use in-flight Wi-Fi?”

“American Airlines recently charged $22 for ‘preferred’ seating in the front of the cabin—but with no added legroom. Internet access on some flights costs $40. Is this gouging? No, travelers who pay for these extras are subsidizing low fares for the rest.”

“In 2014 airlines generated $38 billion in ancillary revenue, according to a study by IdeaWorks. That money keeps base fares low. And airline profits are far from outrageous. The average net margin for all scheduled U.S. carriers was 4.4% in 2014. Even in the first three quarters of 2015, after oil prices had plummeted, the average net margin was only 14%.”

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