Note: this is a little more meaty than my regular posts, so feel free to skim or skip — you’ve been warned. It’s also only about 82% fully thought out, and probably significantly less accurate, so don’t hold back if you have something to contribute, especially if it’s critical.
This post was originally going to be about “how to strengthen your copy”. I was just going to write something about how the fewer words you use the more time you save the reader; and time is money in the online economy. But that got me thinking about the extremes of that statement, and I realized it’s not always true. One word is not more valuable than two, and neither is usually enough to form a coherent thought. And two sentences are not always more valuable than two paragraphs, and so on. So, that first thought led me on a little 4-hour economics bender to explore the theory behind this, which ended up as the following – and ironically much longer – post…
INTRO
This essay will explore two aspects of the online economy as it relates to content production. First, that online economics displays a decreasing rate of return for consumers that is not present in traditional economics. Second, that there is an inherent expected value present in online economics that is not present in traditional economics. Both of these theories not only explain fundamental aspects of our online economy that must be understood by all sellers, but also identify the most efficient point of production for content creators.
PART I
In a traditional economy of short-term media consumption, the relationship between total cost and total benefit to the consumer is linear. Cost in this environment is dollars, and benefit for any content consumption – traditional or digital – is self-defined, but could include knowledge, entertainment, or social credence. For each dollar we spend on traditional media, we expect to receive a set value in return. If we read a book that costs $40, we expect to get 4 times as much value as from a book that costs $10 dollars. In reality this doesn’t always happen, but this is what we expect, and what we strive to find. Our dollars are constantly seeking out this balance between invested money and returned value.
It should be noted that classical economic theory states that marginal utility decreases for the consumer with all goods. But while this decrease may occur, I believe that in short-term microeconomic consumption of traditional media content (eg a newspaper article, a book, a TV show), the diminishing marginal utility is negligible. Therefore, in these equations I have negated its effect.
In an online economy, the consumer experiences a decreasing rate of return in media consumption. Cost in this environment is clicks and time, and benefit is still self-defined. When we click on a link to a piece of digital media, we usually need an increasing rate of return to keep us there. After the first article we read, we need a substantial incentive to click on another article, and in order to convince us to read the entire second article, it usually must be even better than the first. There are some conditions for which we ignore this trend, such as when a friend recommends a site to us, but for random, unknown, “control” sites, we experience decreasing returns with each click and minute we spend reading, listening, or watching.
This decreasing rate of return is a result of the massive supply of content in the online marketplace and the expectations we all display towards digital media that have created an almost perfect elasticity of demand. Whenever there is more of a quantity supplied, the value of that product will be less. And whenever there are close substitutes readily available for a given product, consumers will be less willing to pay a given price for it. There are so many websites, blogs, podcasts, videos, ebooks, user forums, iPad apps, etc readily available to us that we place little value on our ability to access content. This reality is clear from the massive trend away from pay or registration-walled sites, and the huge drop-off in traffic that these walled sites experience. Nobody wants to pay more than they have to for any product, and for digital media the volume of quantity supplied means we don’t have to pay anything most of the time.
When these trends are applied to digital currency they create preferences where consumers want to click as few times as possible and spend as little time as possible accessing and consuming content online. After that first click, we are already thinking about the other websites and media that could be providing us with more value for our time. Just as we ended up on the current site expecting to receive a certain marginal and total benefit, we expect there are hundreds of other sites that could provide the the same or greater benefit only a click away. These realities are significantly less relevant to our experience with traditional media; the economic and social trends just aren’t as developed.
When this relationship is graphed out, we can visualize (and theoretically measure) the difference between rates of return for media consumers in traditional and online economies. In mathematical terms, the total ROI in a traditional economy is constant at 1 (eg for every dollar spent, an equal unit of value is expected in return), but in an online economy, the total ROI gains less with each added cost after the first, creating a slope that is less than 1. A marginal ROI slope of 0 in the traditional economy means that for each dollar spent the added benefit is the same. In an online economy, for each click and minute we spend the added benefit is less, which produces a marginal ROI slope of less than 0. (You can ignore the grey box in the online economy graph for now. I’ll explain it in Part II.)
General best practices for digital media producers are already common knowledge: quality content, easily accessible, easy to consume, etc. But when considered more analytically, there is a stark truth that should be restated: after a visitor lands on your site, every added minute and every extra click they spend there adds less to the total benefit they derive from your content. Therefore, the best product for the consumer is one that takes the least amount of time and clicks to consume. A similar rule exists in the real world (i.e.”don’t waste my time”), but because of this decreasing rate of return it’s MUCH more relevant, strict, and necessary to implement in the digital world.
PART II
As you can see in the graphs, the total ROI curve for a media consumer in a traditional economy extends all the way to the origin, meaning every incremental added cost from 0 – no matter how small – delivers an incremental benefit. We might not buy anything for one cent anymore, but the expected value of something we bought for one cent would be proportional to the expected value of something we bought for one dollar. And with digital tools we can even trade traditional currency in fractions of a penny. For example, when we buy a book, we buy each page and every word. But we could theoretically buy a single page from that book for a price determined by the value we place on that page. Or we could even buy a single word from that book because there would be a traditional economic value that defines that word’s worth. It might be only 1/10th of a cent, but it exists and could be paid. This reality is what allows the curve of the traditional economy graph above to reach the origin.
In an online economy, the total ROI curve does not extend to the origin because the lowest possible cost (the click) has a set value that cannot be subdivided like the dollar or penny can be. Even though we can theoretically subdivide our time down to zero just like the penny, we cannot start spending that time until we have clicked on something. Clicks are the base-level currency of our digital economy, and must be spent before time can be invested. The lack of a divisible base currency creates certain realities that don’t exist in a traditional economy, namely an expected value inherent to every click we make.
Because the cost of consuming digital media cannot start at zero (ie you can’t access content without clicking on it first), the expected benefit does not start at zero either. Just as you would expect to receive something more from spending more than you might want to, you expect to receive something more from your full click when you are forced to spend it before you can choose what value you place on the content. The expected return on this click is very low, so low that it’s almost always reached, meaning we usually don’t even consider it in our daily online activities. But sometimes we experience it. For example, when we click on a search result link and end up on a site that we immediately exit after realizing it was an empty user forum or spam, we tend to be frustrated or annoyed not because we wasted time on the site, but because we invested in a click that didn’t return the minimum expected value that we place in our click.
The inherent expected value of a click varies depending on both the circumstances that induced us to click and the circumstances of the media itself. For example, if you click on a link about US Foreign Policy from the New York Times that was shared by a close friend, you will place a higher inherent expected value on that click than on a link from the fourth page of Google search results for “free Justin Bieber tickets.” However, it is only after the link succeeds in providing this inherent expected value that we can start to value content based on the allocation of our time, as discussed in Part I.
This inherent expected value is what creates the grey box in these graphs. Consumers in traditional economies can spend any value of money, allowing the ROI slope to reach the origin. But in online economies the lowest cost for any activity is one click. Therefore, the return that would be offered by less than one click is not possible, a reality represented by the grey area in the graphs.
This grey area represents a dead zone in online economics in which no value is derived for the consumer, representing a loss of future value for the producer in both the short-term (more clicks, more time spent on the site) and long-term (returning to the site, sharing content). The dead zone is small and easy to avoid for producers who have no credibility or dedicated users, but as the quality of content produced and the brand equity increases, the dead zone expands. As you can see below, the single click you invested in NYTimes carries a significantly higher inherent expected value than the same click invested in FreeJustinBieberTickets.com. Digital media producers must recognize and understand this dead zone and ensure their content never falls within it.
When both of these economic realities are combined, we can extract a law for digital media content producers: the rate of highest productive efficiency exists at the point of inherent expected value for the consumer’s first click. Assuming the rate of value per minute spent remains constant, this is the point of highest marginal benefit for the consumer, as each minute spent after the first click delivers decreasing marginal benefit.
Theoretically, this means that as soon as a customer starts consuming your media they are already experiencing decreasing rates of return. However, in reality, this just means that customers want to access the value of your content in as little time as possible after their first click. Content producers should strive for productive efficiencies as close as possible to this point of inherent value. There are plenty of examples of this reality, but one only needs to acknowledge that digital media tends to take less time to consume than traditional media. These economic forces create a market in which blog posts are shorter than journal articles, podcasts are shorter than lectures or radio shows, and video advertisements are shorter than commercials to an extent significantly greater than dictated by technological constraints; these are economic realities created either directly, or as experienced through socio-cultural norms. But in the end, each sentence or graphic that doesn’t add to the purported value of the content creates an incentive for readers to spend less clicks and time on your site and with your brand.
CONCLUSION
All this theory and analysis boils down to two words: quality and brevity. The inherent expected value will largely be set by previous content and user experience, so quality must be maintained vis-à-vis consumer clicks and time. Brevity is needed to deliver the value proposition of the content as soon as possible to avoid decreasing marginal returns for consumer’s digital spending, but only becomes relevant after expectations on quality and added-value are met. Therefore, content should be as concise as possible while still providing the value for which it was created. For real world application as content producers, finding the MOST efficient point of production is not as important as finding the MORE efficient point of production. The science of economics tends to only be possible in the controlled environment of essays and graphs; when it reaches the real world it becomes art. Furthermore, these ideas represent realities we already know, or are at least familiar with; we live them ourselves as digital consumers. But hopefully, by approaching and describing the cause and effects a bit more scientifically, we, as content producers, can derive more from our knowledge.
