Scarcity and the world of digital media

DesertThe favorite discussion topic of the media and Internet elite is currently how the economics of content will develop in our digital age. Several big media conglomerates recently announced that they would start charging for online content. This was mostly greeted with ridicule from the digerati, who are still high on the radical ideology outlined in Chris Anderson’s book “Free”.

Brad Burnham pointed out in a recent blog post that both sides probably lack a deep understanding of the fundamental economic shift that is going on here. He mentioned the work of pioneers like Herbert Simon and Michael Goldhaber on the economics of attention as a framework for better insights.

I think it’s correct to say that we are currently experiencing the rise of something like a parallel economy, driven not (like our currently suffering traditional economy) by money and scarce physical goods, but by information and scarce attention. However, probably nobody really understands yet what this economy will look like as it matures and how its interaction with the “real world” will work. Obviously, the two will have to coexist, because last time I checked, my local supermarket didn’t accept hyperlinks as payment for groceries.

We are all so deeply rooted in the principles of the traditional physical economy that it is easy to forget the basics. The good old economy as we know it revolves around scarce physical goods and (more recently) around scarce services. The goods are scarce because considerable work has to be invested into their production, starting from the (often scarce) raw materials that we find in nature. Services are scarce because most of them require some kind of skill, and acquiring these qualifications needs time, which is limited and therefore valuable. Humans trade these scarce goods and services amongst each other because of course not everybody can produce every type of good or service. And then there’s of course money, which provides a more efficient way to trade stuff by separating value from a lumpy physical item or perishable service. Money is basically condensed value, which stems from physical scarcity.

So far so good. But how is the digital economy different?

Most importantly, value in the Internet economy is detached from the physical world and its limitations. For instance, a digital text can be valuable without having a physical manifestation. Sure, all these bits have to be stored somewhere, but the storage medium is a reusable commodity, not bound to this particular piece of information. Digital information can of course be copied without loss of quality (this doesn’t exist in the physical world) and distributed over a network, instantly reaching every corner of the world. And all of this is remarkably cheap nowadays.

The result is a huge abundance of information. And this changes what is scarce: Not the actual product (information), but the capacity for consumption — attention. Every day more free information is made available to the world than a human being could consume in a lifetime. Obviously, human attention is finite, and therefore it’s the scarce factor in the digital world.

That’s why many Internet users can’t understand that media companies want to charge for their online content. Aren’t they already getting the most valuable thing that an Internet user has to offer, his or her attention? And obviously, attention can be converted into real money through advertising, so what’s the problem?

At this point the discussion typically breaks down, because media companies, and newspapers in particular, have a very hard time financing their costly content production just from online advertising. There are probably two main reasons for this problem:

First, on the cost side, newspapers still apply the old principles from the physical world to their content production process. In the old media world, news has to be distributed physically (or through scarce airwaves), and therefore it is most efficient to produce local newspapers that cover all the important news in one single information product. This results in probably dozens or even hundreds of editors slightly rewriting the very same news agency report, adding almost no value. In a digital world of ubiquitous information, that’s completely unnecessary.

Furthermore, a key value proposition of newspapers is the context that they create by selecting the most newsworthy content. Again, this process is duplicated for every single newspaper. In the online world, there are far more efficient and sophisticated ways to provide this value, even though most can’t exist without at least some human intervention. But frankly, semi-automated aggregators like Memeorandum often provide a better view of what is going on in the world than most newspaper homepages.

About 50% of the total cost of a newspaper goes into physical production and distribution, the rest into actual content production. But if you subtract the obsolete and redundant editorial work that most newspapers are still doing, what would be left? Maybe 5%, maybe 10% of the cost base? Most probably, it’s even less. The percentage of truly original reporting in most traditional media is surprisingly low. But in the digital world, there’s no mechanism to finance the unneeded redundant production of information, because there’s already so much information out there.

Secondly, on the revenue side, advertising is a very unsophisticated and inefficient way to convert attention into money. Today’s advertising models are still built on the scarcity models of the past — the type where ad space is scarce, not attention. If you wanted to reach people in a certain local market with your commercial message, your only option was to advertise in the local newspaper or on local TV and radio stations. Even in big markets, there were only a handful of channels available, with very limited and therefore expensive ad space. Targeting was only very basic, because reaching many people with a lot of wastage through mass media was still more efficient than other methods.

That’s of course fundamentally different in the online world, but ad agencies and publishers are still stuck in old thinking. Most online publishers complain about the low rates that they’re getting for display ads. But that’s not surprising, since online ad inventory is almost unlimited. The trick is to reach the right audience at the right time. But ad agencies still think in big demographic clusters, not in the situation-specific micro-segmentation that the Internet could provide. It’s therefore not surprising that paid search is by far the most lucrative form of online advertising, since Google and its competitors can convert very specific attention (somebody searching for a certain topic right now) into commercially relevant results.

So what needs to happen to make the attention-driven online media economy viable?

  • Clearly, media companies have to become leaner and more focused. They need to concentrate on original content that really adds value and therefore is worthy of people’s attention. That’s frankly only a fraction of the current media production. All the other fluff, as well as the fat corporate structures on top of the actual content production, will simply not be viable online.
  • Also, media companies need to recognize that unique context, filtering and editorial selection are more essential than ever in dealing with people’s limited attention. This will be a great way for media brands to get competitive differentiation. But today’s typical news homepage is still built on an old, generic one-size-fits-all model that is neither cost-effective nor customer-friendly.
  • Publishers and advertisers have to experiment with new ways of converting attention into commercial value, i.e. building the bridge from the attention economy to the monetary economy. I think we currently stand at the very beginning of this process. Traditional advertising is becoming increasingly ineffective. But new ways to channel people’s attention in order to sell them something are still embryonic. Almost certainly, there will be many ways to do this, but no silver bullets.
  • Media companies have to recognize and deeply understand that attention is the scarce commodity in the digital economy and therefore is a currency in itself. The current conflicts between Google and newspaper publishers show that old media executives are starting to get this, although most of their actions go into the completely wrong direction.

But at the end of the day, attention has to be convertible into money somehow, since people still live in the physical world, where scarcity is a reality and money is needed. Companies and their executives will continue to be measured by their financial success, not by the attention they accumulate. Determining the monetary value of intangibles like attention, intellectual property, brand assets and customer loyalty is a thorny problem, and it’s unlikely that there will be a commonly accepted solution anytime soon.

However, people working outside of the traditional corporate framework might be willing to forgo at least some of this conversion. Under some circumstances, people tend to value attention more than money. Let’s be honest: Most people in the Western world already have more material things than they need. Particularly the richest European countries are increasingly turning into post-material societies that don’t necessarily try to optimize their GDP, but instead the general well-being of their population. And getting attention is something of fundamental importance for humans.

So it wouldn’t be surprising if more and more people would add value to the digital economy without getting paid for it in monetary terms. The open source ecosystem is of course a great example of how this can work. And most bloggers blog (and Twitterers tweet) because they like the attention and the good things that can result from it, not because they get paid.

Another example: Craigslist provides fundamentally the same value as the many classified sections in newspapers that it basically killed, but it captures only a fraction of the monetary value. Does that make any sense at all? Yes, because Craigslist created a top 20 website that commands a lot of attention with minimal resources. It provides a valuable service and gets paid with huge amounts of attention and loyalty, as well as with quite a bit of money. It is wildly profitable in monetary terms, but obscenely profitable in attention terms. That’s bad news for the people who used to make a living selling classified ads, but good news for Craig Newmark.

Welcome to creative destruction, attention economy edition.

(Picture: Josh Sommers, CC license)

Software pricing: When does freemium really work?

Free beerFreemium — the combination of a free basic version with paid “premium” versions of a software product — is an increasingly popular business model for software. Many Internet startups and even giants like Microsoft and Oracle are using this model for at least some of their products. A lot of iPhone apps for instance are available in a basic “light” version that needs to be upgraded to the paid version for more functionality or content — a typical freemium strategy.
The advantages of freemium seem obvious: It’s a good way to get free marketing. It can reduce sales costs dramatically, because users can self-educate. It lets the product speak for itself, thereby leveling the playing field, which is a particular advantage for smaller companies with small marketing budgets.

But does freemium really work that well in practice? There are early signs of a backlash against this model. Google recently strongly de-emphasized (i.e. practically killed) the previously offered free version of its Google Apps suite, which used to be free for companies up to 25 users. Potential customers are now encouraged to try the product for free for 30 days and then start to pay $50 per user per year. A similar change can be seen at 37signals, once the poster child for freemium, who now hides the permanently free versions of its products pretty well. Startups like photo sharing site Phanfare and the recently demised LucidEra (a vendor of SaaS business intelligence) tried freemium models, but weren’t successful. And many other startups that use freemium are still far away from profitability.

So the question is: Under what conditions does freemium really work for software vendors? Obviously, customers like freemium, but how can software companies use this model to build a really sustainable business?

It think there are probably six conditions:

1. Your marginal costs have to be extremely close to zero.
Freemium only works if the distribution and support of an additional copy of your product (i.e. the marginal costs) costs you almost nothing. Thanks to the Internet, the digital distribution of software is now nearly free, both for downloadable applications and online apps.

That sounds obvious enough, but I think many companies underestimate how close to zero the costs really need to be. Web-based applications for instance need to provide enough server capacity and storage for all these freebie users. This can quickly add up to substantial amounts, even if the capacity for one single user is cheap.

2. The target market has to be big enough.
There doesn’t seem to be any reliable data about how many users of a free product end up buying a paid edition. Obviously, this will strongly differ from product to product. But from anecdotal evidence, it’s probably safe to assume that typically less than 10% of users convert to the paid version.

If freemium is your main sales channel, this obviously means that your target market needs to be large enough so that you still can build a sizable business just from getting paid by a few percent of the total potential user base. Furthermore, the free marketing benefits (and maybe even positive network effects) of freemium can only kick in if there are enough people to spread the word about your product, and for that they first have to be interested in what you have to sell. In other words, niche products that only appeal to relatively few users are probably not ideal for freemium. Some more targeted form of sales might be the way to go there.

3. Your product has to be very simple.
It’s great that users can self-educate about your product while using it for free. Hopefully, they will soon reach the limits of the free version and feel the desire to upgrade to the paid edition.

But for this to work, your product has to be very, very simple. People don’t read manuals and rarely follow online tutorials. The product just has to be easy to use and has to provide obvious value almost instantly, so that users will have enough motivation to dig deeper. Some of the better iPhone games are a good example.

4. If your product is not simple, you need competent customers.
Not all software products can be and should be simple. This has nothing to do with a lack of usability, but with the scope of features that a product offers. Photoshop is not simple. Database systems and application servers are not simple. Content management systems (the decent ones) are not simple. They’re powerful tools for skilled professionals. Products that satisfy the needs of professional users are almost certainly not as easy to use as consumer software, because you need a certain skill set to make sense of what the product does. That’s a problem for freemium.

LucidEra’s founder tells the story of his company’s failed attempts at selling through the freemium model. Many trial customers were simply not able to figure out what the product was good for. They never really used the more advanced features and therefore never really saw a lot of value in the product.

So if you want to sell a complex, powerful product using freemium pricing, make sure that you address a well-defined, skilled audience. Your users need to already understand what they want to do with your product, and they have to be motivated and skilled enough to invest considerable time into working with it. Only then will they discover enough value to upgrade. If you offer a complex product to a user base that has not previously used this type of software (like in LucidEra’s case, selling BI to mid-market customers), freemium will be tough.

5. There has to be a minimum useful feature set, but plenty of additional functionality.
We’ve probably all used freemium software for which we didn’t see a need to upgrade. There are probably two cases where that happens: When the free version of a product doesn’t offer enough functionality, you don’t recognize that this is a useful product that is worth paying for. On the other hand, some free versions offer so much functionality that it will only make sense for relatively few users to upgrade to the paid version.

Google Apps prior to the recent strategy change was an example of the latter case: Small companies got almost all the functionality for free. If you had less than 25 users (and most small companies are way smaller than that), there was simply no good reason to upgrade.

Most successful freemium vendors now use a carefully designed combination of feature restrictions and a limit on the amount of data you can store or the number of users you can sign up. It’s clearly not easy to strike the right balance. Setting the right restrictions is probably the single most difficult thing in the freemium model.

6. You need to really understand the demand curve.

A demand curve in economics describes how many people are willing to buy a product at a certain price. If you can have only one price for your product, you lose a lot of potential customers (who don’t want to pay that price) and you lose a lot of potential profit (by undercharging the customers that would have been willing to pay more).

The solution for this dilemma is price differentiation. Why does Microsoft offer eight different versions of Windows Vista at different price points? Because it wants to ride the demand curve and extract as much money as possible from different customer groups. If Microsoft would offer only one version at a low price, it would leave a lot of money on the table (but maybe have happier customers).

Freemium is of course a form of price differentiation. The assumption is that there are many people who have a very low willingness to pay, but still find a certain product useful enough to spend some time with it and maybe tell their friends about it, some of whom will be willing to pay something. Most freemium products offer several different paid product levels with different feature sets — price differentiation at work.

The problem is that it’s really difficult to find out the shape of the demand curve and match it with your cost curve. One question is what the price point for your cheapest paid edition should be. Will many people pay $9.99 a month? Or is it better to start at $99/month and hope that you get so much free marketing out of your free version that many people will sign up who are willing to pay that price?

A key consideration is your cost curve and the usage pattern that users at different levels have. In some businesses, the most active users who use the most resources are also the most profitable ones, because they have a high willingness to pay. In that case, it makes sense to have a relatively high minimum price. But there are also cases where the low-intensity users are the most profitable. Then it makes sense to extract money from as many people as possible, even if it’s a far lower amount per user.

Conclusion: More an art than a science. And watch out for pitfalls.
There are obviously many variables that go into effective software pricing. Freemium can be a great model, particularly for smaller companies. But it is hard to get it right, and it can also be dangerous on several levels. If you get the demand structure wrong, you might leave a lot of money on the table. If you underestimate the costs caused by your free users, it will reduce your profits dramatically (and it’s not easy to get rid of these users without risking a hit to your reputation). Oh, and how about liability? If you lose a freebie user’s data, can he sue you? Better make sure that your terms of service are watertight.

Freemium is not a panacea for the software industry, it’s just another tool for the hard task of getting software pricing right. It’s great for certain market segments, but software companies should avoid to go freemium just because it’s convenient and reduces sales costs. Sure, a freemium model can get you more users relatively quickly, but in the long term, it might hurt your bottom line and growth prospects dramatically.

Finally, what would Google do? There’s probably a good reason why Google basically got rid of the free edition of Apps and now does pretty conventional software marketing with billboards and the like. They now even do competitive upgrades, as well as channel sales through resellers. Sounds more like traditional software industry tactics than the wonderful world of free Internet-based software.

(Picture: Timothy Lloyd, CC license)

What Media Companies Could Learn From Microsoft: Smart Bundling

BundleThe media industry is desperately trying to find new business models for the online age. A lot of the current discussion revolves around micro payments: Is it possible to get users to pay small amounts for each newspaper article? The metaphor “iTunes for news” seems to become a favorite model of many media people, and major players such as News Corp. are already planning to roll out micro payments.

I think they couldn’t be more wrong about this. It’s actually amazing that traditional media companies seem to be largely blind to the factors that made their traditional business models successful.

One factor is the control of distribution channels (I blogged about this earlier). This is difficult to replicate in the digital world, because digital content is so easy to replicate and distribute.

But the second element is actually much easier to implement for digital content: Bundling.

When you buy a CD (if you are still old-fashioned enough to do that), you pay $15 or so for a collection of around 10 songs. Chances are that you are only interested in one or two of these songs. So why don’t you just buy the single? Mainly because the music industry since the 50s consciously pushed the album format, suggesting more value. Look, you only pay $1.50 per song on the album, but singles often cost $5 or more for just one song.

How about your newspaper (if you still read one)? How much would you be willing to pay for today’s front page story in the New York Times? How much for the top article in the business section or sports section? A dollar? A few cents? Nothing at all? This probably depends strongly on your interests. On any given day, there are probably a handful of articles in a newspaper that you would be willing to pay for specifically. Most of the rest are worth almost nothing to you. But you are willing to pay a couple of dollars for the whole thing.

This is bundling at work. It’s extremely difficult to set the right price for a piece of content, since different people will see very different value in it. Therefore, it’s often the most profitable solution to sell bundles of content items at a relatively low total price to extract the maximum value from customers.

A great example for this from another industry is Microsoft Office. This suite of productivity programs today completely dominates the market. Most people would probably agree that that’s not because Microsoft had the best programs –some people still have nostalgic feelings for WordPerfect and Lotus 1-2-3. It’s because Microsoft sold the most attractive bundle of adequate programs at a very nice total price.

Here’s a simplified example that explains why this is smart: Let’s assume that User A wants to do a lot of word processing. He’s willing to pay $250 for a good word processor. He also wants a spreadsheet program, but is only willing to pay $50 for it.

User B is a finance guy and needs a good spreadsheet, for which he is willing to pay $350. He has no use for a word processor, but will pay $50 for a presentation program. And User C, a consultant, is willing to pay $200 for a presentation program, $100 for a word processor and $50 for a spreadsheet.

So, if you’re a spreadsheet vendor, what’s your ideal price? You could charge $350 and only sell to User B. You could charge $50 and sell to all three users, but that would leave money on the table. It’s really difficult to set the right price.

The best solution for this is to sell a bundle of a word processor, spreadsheet and presentation program and charge $300 for it. At this price point, all our fictional users will buy the whole package and will be very happy, because they get a solution at a price they are willing to pay, but with much more overall functionality. The vendor could only make more money if he were able to charge each user an individual price (what economists call perfect price discrimination), but in most markets, that’s impossible.

Microsoft is great at coming up with bundled editions of its software. There are five different versions of Microsoft Office, all with different elements and at different price points, but of course all based on the same code base. Of course, it’s dangerous to overdo this. The seven different versions of Windows Vista were just confusing.

Obviously, bundling works for software. It also works for most forms of content, and it can work particularly well for digital content, because it’s so easy to build bundles of digital content at almost no additional cost.

Unfortunately, the music business largely missed the boat on this. By allowing Apple to sell individual songs through iTunes, the music industry broke the album model, and there’s probably no way to get it back. The new subscription models that some record labels are experimenting with are of course nothing but another form of bundling, although at a much lower average price point.

Newspaper publishers don’t seem to get bundling at all. That’s probably because in the world of the physical paper, they can only sell a very limited number of different bundles (maybe a local and a national edition). Even the only two newspapers that successfully charge for online editions, the Wall Street Journal and the Financial Times, only sell one or two different online bundles. That’s simply stupid. Why isn’t there an expensive Pro version of the FT with full access to all market data, maybe even bundled with additional data sources? A cheap student version? A standard version just with the news and opinion columns? A version for people who want to read the FT primarily on their mobile device and just want the most important headlines? This kind of creative price differentiation would certainly extend the number of subscribers dramatically.

And the same applies to other parts of the media industry: Why doesn’t Hulu (or iTunes) sell an attractively priced subscription for its most popular shows, for instance a bundle that gives you The Office, Family Guy and Saturday Night Live, but also throws in a number of less well-known shows? If that’s the easiest way to get these shows, many people will sign up. The TV industry seems to believe that many people are going to pay $2 or more per episode on iTunes, they are almost certainly wrong. Nobody does that in traditional media. People pay for a satellite or cable subscription, which is a classic bundle. Deciding for each show individually if it is worth $2 is simply too much work. Pay-per-view only works for big-ticket items, and there’s no reason why this should be different in online media.

It’s really remarkable how little media companies seem to get the basic rules of bundling: Sell a bundle of products that have different value to different people at a price that seems really, really attractive when compared to the prices of the individual items. Make sure that you offer different editions that appeal to different target markets. That’s all. Just ask Bill Gates.

(Picture: My aim is true, CC license)

“Attention Economy” is the Wrong Metaphor. It’s All About Persuasion.

The concept of the “attention economy” has been around for a few decades now. And many people think that Web 2.0 is the first real-world manifestation of this economic theory.

Briefly explained, the concept assumes that in our modern world — with its constant information overflow — human attention has become a scarce good. Since scarcity creates economic value, attention becomes valuable. Some even think that attention can be traded like commodities.

The conventional way to monetize attention is to sell advertising against it. Media companies publish content that grabs people’s attention, and they resell a part of that attention to advertisers. (Here’s a great article by Dharmesh Shah that explains the difference to what he calls the “wallet economy” where people pay you directly for a product).

Sounds simple enough. But the problem is that the theory doesn’t really explain the commercial nature of attention.

From the point of view of somebody who receives attention, there are two possible value components to it:

1) The intrinsic reputation value of attention, i.e. social status. Example: A programmer who contributes to an open source package doesn’t do this because he expects to make money, but in order to get a higher reputation with his peers.

2) The value of possible persuasion that needs attention as a starting point. An advertiser is not interested in your pure attention as such, he’s interested in selling you something. That’s only possible if he gets your attention first. But the real value is only created if the subsequent persuasion process is successful.

While the first component (reputation) might become more important in advanced societies where people already own most material goods that they could possibly want, the second component (persuasion) is the only one that can really be monetized.

The problem with the oversimplified view of attention is that attention is not uniform, particularly not if it’s supposed to be used for persuasion. You know this from real life: When you go to the mall on a Saturday, you are easily persuaded to buy more stuff. You are already in a buying mood, your attention is tuned to consumption. Not so if a telemarketing firm calls you in the evening during your favorite TV show. They will get your attention, but they won’t persuade you. You’ll probably hang up on them.

The same difference exists in the online world, and it is the reason why Google makes a ton of money, but social networks don’t.

Google probably makes most of its money from searches where people are actively looking for certain products or solutions to problems. The users are in a buying mood — think of the mall on a Saturday afternoon. A relevant ad delivered at this moment is highly effective, and a click is worth a lot of money, because it’s a great starting point for successful persuasion.

Just check a few AdWord prices, and you’ll see this immediately. A click on “Britney Spears” (high attention, consistently in the top 10 search terms every year) costs $0.30. A click on “life insurance” costs $15.80. The Britney-related ads actually receive twice as many clicks per day as the insurance ads, but they’re worth a fraction.

Why do smart advertisers who want to sell to a teen/tween audience not simply buy Britney Spears-related clicks (=attention) and then use the traffic to sell something else that appeals to this target demographic? Because it doesn’t work. If somebody clicks on a specific keyword, they are not in the mood to be persuaded to buy something completely different. Attention doesn’t equal persuasion potential.

Unfortunately, this is the fundamental challenge for advertising on social networks and many other Web 2.0 sites. You go to Facebook to catch up with friends or share stuff, not to be persuaded to buy something. Metaphorically speaking, you’re not in a mall, you’re at a dinner party. And somebody who’s trying to sell you something at a dinner party will likely not be invited next time.

Obviously, there’s an opportunity here. The trick is to catch users when they are in a buying mood or at least in an online environment that is tuned towards consumption. The ad industry is however very far away from really understanding this, because in traditional media, an eyeball is an eyeball.

But at some point, advertisers will start to understand that smart micro-targeting delivers far more relevant forms of attention than having a generic product page on Facebook or slapping an ad on MySpace’s homepage. The rule is clear: Follow the money. And the money is where people can be persuaded.

(Picture: hansol, CC license)

Why the Internet Still Doesn’t Have a Business Model For Content

Boston Globe TruckTimes are tough for media companies. One newspaper after the other slides into bankruptcy, and most other sectors of the media industry are suffering too. This recession seems to hit media companies harder than expected as consumers migrate to the Internet and advertisers are cutting their budgets more than ever.
Most media companies still hope that revenues from their new digital channels will replace much of the lost sales volume in their traditional businesses. But so far, digital revenues have stayed far below expectations. It looks like “digital pennies” are replacing “analog dollars”, as NBC CEO Jeff Zucker recently put it.

Why is there still no really viable business model for content on the Internet? All the big Internet success stories — Google, Amazon, eBay, Facebook … — are based either on commercial transactions or on context-creating technologies, i.e. services that help users make sense of the vast jungle of information on the web. There are a few somewhat successful web-only content plays — the Huffington Post comes to mind — but their size and profitability is very modest compared to the kings of the Internet.

I think the biggest misconception in this discussion is that traditional media companies are all about content. They’re not.

The most important (and expensive) asset that a media company has is its distribution channel(s). It costs hundreds of millions to build and run the production and distribution infrastructure of a major newspaper. TV networks are even more expensive, and even somewhat simpler media like radio require very large investments.

It’s actually interesting to talk to owners of regional newspapers after a glass of wine or two. Many still see their companies primarily as a printing business. Their newspaper is just a monetization strategy, and the content they distribute is just an input factor they need to attract advertising. But the core of the business and the real pride of its owner is typically the printing press and the capability to bring printed matter into every household in their area.
The huge capital outlay for distribution is the main barrier to entry in the media industry and the reason why so many traditional media companies enjoy a cushy oligopoly or even a regional monopoly. Of course there are some companies that produce content independently of a distribution network — independent movie producers or record labels for instance. But these smaller companies often struggle to survive or have to enter into agreements with a big distributor.

In other words: For traditional media companies, content is just the bait. The real, defendable and profitable business is in distribution.

The Internet is fundamentally different. There are no comparable barriers to entry for content producers. Content distribution on the Internet is almost free. Sure, the infrastructure in the background still costs many billions, but this cost is shared by so many participants that access to the net is affordable for everybody. Every Internet user is not only a consumer, but can be a producer of content, even if it’s just one Tweet at a time.

The result is a huge abundance of readily available content. Of course, much of it is of terrible quality, as you can immediately tell from a brief visit to Youtube. But there’s more great stuff out there — literally just one mouse click away — than a single human being could possibly ever consume.

Since distribution is not a barrier anymore in the digital age, the only way for a media company to differentiate itself is through the superior quality of its content (and maybe through its brand, but that’s secondary). Unfortunately, that’s not necessarily the core competence of old media. Let’s be honest: How much of the stuff that you get on TV or read in a newspaper is really, truly great? Exactly. Not that much. The main reason we put up with inferior content in old media is because it’s more complicated or expensive to get to the really good stuff. That’s not the case anymore on the web.

But even for producers of really great online content, it’s difficult to stand out and get compensated for their work. For several reasons, both cultural and technical, it’s difficult to charge people directly for web content. And the volume of Internet advertising still hasn’t reached the level it would deserve given today’s consumer behavior. There’s another simple reason for this: Advertising agencies (in particular their media arms) don’t have a real incentive to sell Internet advertising. They make far more money pushing TV and newspaper ads.

Media agencies are a bit like financial advisors: Theoretically, they only have the best interest of their clients in mind, but in reality they will of course always prefer to sell the products that give them the highest commission. At some point, online advertising could grow to a point where it can finance many more content sites, but it will take a lot of time to overcome the ad industry’s inertia.

Until then, the way to profitability will be to try to control content distribution even under the particularly difficult circumstances of the digital world. Interestingly, a technology company (not a media conglomerate) has managed to do this for music: Apple with its iTunes store. And another tech company is trying the same for e-books: Amazon with its Kindle e-book reader. Both companies are following a similar strategy: Control the whole chain from content licensing to the end-user device — not the content itself, but its distribution. Old media companies have failed with similar projects because rivaling conglomerates were never able to agree on a common platform. Old rivalries sometimes destroy new opportunities.

To summarize: The Internet doesn’t have a business model for content because the world of old media didn’t have one either. The media industry has always extracted its profits from the control of distribution channels, not content itself. And it’s unfortunately not clear yet what will replace this model on the open Internet.

Entrepreneurship: It’s the Value System, Stupid

As a Swiss entrepreneur who lives in the United States, I often get asked about the differences between Europe and the U.S. for entrepreneurs. Or more specifically, why the U.S. seems to produce so many successful technology startups, while Europe still lags badly.

Hint: It’s not about technology parks or labor laws or tax incentives for investors — the stuff that politicians tend to discuss most frequently.

I think the many differences boil down to two aspects: Market size and the value system of society. And both are unfortunately hard or impossible to copy.

Market size is easy to explain: The U.S. is the only country in the world that has a domestic market of over 300 million people who speak the same language, use the same currency, follow the same legal system and typically have a middle class income. Europe on contrast is very fragmented by its many languages and cultures. India and China, while significantly larger than the U.S., are still relatively poor. The result is that the U.S. market alone represents consistently about 40-50% of the global market for most advanced technologies. So it’s simply a great (although very competitive) place to start a tech company because you can immediately access so many domestic customers.

The second aspect, the value system of each society is probably even more imporant and certainly more complex to analyze.

In each society, the smartest and most ambitious people tend to be attracted by the occupations and careers that are most highly regarded by society. I think that’s fairly obvious from history and our current world. In medieval Europe, being a high-ranking member of the clergy was a great career that brought access to power (and in many cases even wealth). In the old dynasties of China, a smart person probably wanted to be a mandarin at the court of the emperor.

In today’s modern, open societies these preferences are not quite so clear, but obviously there are still occupations that enjoy a much higher status than others. There is a connection to material rewards too, but it’s not a perfect correlation. It’s really all about what society holds in high esteem.

Psychological research has found out that money — or to be more precise, the power of money to buy material things — is only a motivating force up to a certain point. After that, acquiring more money mainly provides advantages in terms of social status. Let’s be honest: nobody really needs a fancy sports car, and getting from A to B in a Ferrari might even be less comfortable (though probably more interesting) than in a Toyota Corolla. Most material status symbols have only one single purpose: To impress others.

What we seek in the end is social status. The question therefore is of course how societies differ in their value system to assign status to certain occupations, and in particular to entrepreneurship. We hear all the time from politicians that we need more entrepreneurs to get us out of the economic slump that the financial services industry got us into. So which societies are best prepared to encourage entrepreneurs?

From observing the countries that I know relatively well (Switzerland, Germany, the U.S.), I think I can say that none has a value system that perfectly favors entrepreneurial activity over other, maybe less productive activities. But there are clearly huge differences.

The United States of course seems to have almost a cult of entrepreneurship. It’s difficult to find an American who has never considered starting his or her own business. Entrepreneurs are generally admired. The pioneering spirit is clearly alive and well in this nation of immigrants.

But there is also dark side to this American ambition: Making money seems to be more important than making useful stuff that really adds long-term value to society. Of course people admire Bill Gates or Steve Jobs, but just as much they admire Warren Buffet who — let’s face it — is more of a speculator than an entrepreneur. The current financial crisis was only possible because the smartest people were attracted by financial services firms that don’t really add value to society, but simply trade it. Somebody who made his money by building a company, inventing things, and creating jobs does not necessarily enjoy a higher status in American society than somebody who just buys and sells assets.

This could be a fundamental problem in the long run, and it probably already is. Over the last two decades, U.S. companies have systematically outsourced not only many manufacturing jobs, but also the engineering and design of many advanced products. Almost all of the work that goes into the production of a HP or Apple notebook is now done in Taiwan and mainland China. Sure, the U.S. companies still provide their brilliant marketing, but is that really enough? It’s not terribly surprising that the latest wave in PCs, the cheap laptops referred to as “netbooks”, was started and is completely dominated by Taiwanese companies under their own brands. The outsourcers are already eating their customers’ lunch.

I don’t think a society can survive just by providing financial services, bold marketing ideas and pure speculation. But that’s what American society rewards. Hopefully the current recession will help to change this.

In German-speaking Europe on the other hand, high-quality engineering and the creation of jobs still enjoy the highest status, often at the expense of financial success. When a German entrepreneur wants to boast about his success, you are more likely to hear about the number of jobs he created or the outstanding quality of his company’s products than about things like net worth, market value or profitability.

These are useful priorities up to a certain point. It’s not surprising that European companies dominate many high-tech niches. The famous German “Mittelstand” companies — medium-sized, typically family owned corporations — often have a 80%+ market share in their particular narrow niche. Germany is the largest exporter in the world, and Switzerland and Austria have very high export quotas relative to the size of their economies. The most important industries all make high value-added products such as luxury cars, pharmaceuticals or high-tech machinery.

The problem with the European mentality is that it promotes risk aversion and a radical focus on quality at the expense of agility and aggressive marketing. Many of the building blocks of the Internet — the Web itself, MP3, Linux, MySQL, Skype, and so on — were invented by Europeans, but commercialized by American companies. Europeans seem to be very reluctant to bring anything to market that is not yet perfect. That’s why they often miss the best opportunities.

But the biggest obstacle for European entrepreneurs is probably the stigma that is still associated with failure. The failure of a company is often seen as a catastrophic event, not (as in the U.S.) an unfortunate, but ultimately useful learning experience. The concept of serial entrepreneurship — starting multiple companies over the course of career, some of which succeed and some of which fail — is completely alien to most Europeans. Many European entrepreneurs have a dynastic view of company creation: A company is something that you start, that you control for the rest of your life and that you want to pass on to your children. That’s great for certain types of companies, but not helpful in rapidly moving markets.

Europeans also have a very inconsistent attitude towards wealth: In most countries, there’s an equivalent to the Forbes 400 list of the richest people, and Europeans are no less fascinated by these lists than Americans. But at the same time, openly displayed wealth is frowned upon.

This puts successful European enterpreneurs in a difficult balancing position: They enjoy a high status in society if they continue to be successful and are a “good boss” who creates a lot of jobs. But if their company becomes too profitable or if their lifestyle seems too frivolous, they can rapidly lose support. And if they take large risks and fail, they can be sure to get mocked. It’s not a coincidence that “schadenfreude” is a German word.

It’s therefore not very surprising that many European entrepreneurs and managers try to copy American values and behavior patterns — in the hope of moving their own countries’ cultures into a more entrepreneurial direction. Unfortunately, this often ends in disaster. The latest example: European banks and the real estate markets in some countries are suffering much more from the financial crisis than their American counterparts. Why? Because European companies tried to imitate aggressive American business concepts, without really understanding them. But a bad copy often ends up with a far worse outcome than the already bad original.

OK, so obviously no country has a really perfect environment for entrepreneurs that also sets the right incentives for “useful” companies. But I think the good thing that could come out of the current recession is that people on both sides of the Atlantic rediscover what made Western societies so wealthy in the first place: A healthy, open attitude towards risk taking and entrepreneurship, but also a focus on the creation of real value. Maybe even a bit of nostalgia is in order: the 1950s and 1960s were probably the times when Western societies really created the foundation for their wealth. Sometimes a crisis helps to dust off the best aspects of some solid, old values.

The Complexity Challenge of Social Media Marketing

Advertising on social networks continues to struggle. But whose fault is this? Are advertisers simply too ignorant and conservative? Are the advertising opportunities that social networks are offering not attractive enough? Or is there maybe a much more complex reason?

There’s little doubt that the social web (formerly known as “Web 2.0”, and often called “social media”) is the media phenomenon of our decade. Hundreds of millions of Internet users spend unbelievable amounts of time on Facebook, Youtube, Twitter, countless blogs, discussion forums and other social media sites.

But even though these Web 2.0 sites are amazingly successful in terms of usage hours, their financial success is modest. Facebook’s costs seem to rise siginificantly faster than its ad sales. Youtube is still losing money, to the tune of hundreds of millions of dollars per year (according to some analysts). Big advertisers such as Procter & Gamble are openly saying that they’re unhappy with the success of their social network campaigns. Many companies dabble in social media marketing, but real success stories are rare. For example, Dell sold PCs for $1 million through Twitter. That’s nice — but Dell needs less than nine minutes through their traditional channels to make that kind of money.

So what’s going wrong here? Are advertisers too conservative? Or are Web 2.0 sites simply not innovative enough when it comes to monetization?

This article wants to make a different case: The social web is so fundamentally different from traditional media that we will need decades to really understand it and find the right way to commercialize it. We are at the very beginning of a long development path because social media is structured so differently from everything else that we know.

Until recently, we’ve known two types of media:

First of all, there are media that enable a 1:1 communication between two people. Examples are the telephone or e-mail.

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Communication in 1:1 media is closed, which means that no third party (under normal circumstances) can listen in. This secrecy is explicitely guaranteed by postal and telecommunications laws. This intimacy is the reason that 1:1 media don’t really work as advertising channels. Unsolicited telemarketing calls and spam e-mail are the least popular forms of marketing and are often even illegal.

The second form of media are 1:n media. A single sender (for instance a newspaper, a TV or radio station, a traditional website) broadcasts its content to many receivers who typically can’t (or don’t want to) react directly to this communication.

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It’s of course well known how to use 1:n media for marketing: Advertisers pay a media company to insert their ad message in the context of the normal media content.

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The advertising company basically injects its message into the normal communication stream between the media provider and its customers. The spectrum ranges from a subtle presence with small ads to intrusive interstitials that completely interrupt the flow of content.

MerrillbootsadAll of this seems natural enough. But historically these “classic” forms of advertising needed a surprisingly long time to emerge. Almost 150 years passed from the invention of the printed newspaper (around the year 1600) to the first publication of paid advertising in a paper. The modern ad agency, and with it the professionalization of advertising, emerged around the middle of the 19th century. Modern TV advertising was only invented in the mid-1950s, almost a quarter of a century after the first TV broadcasts. And modern advertising in general, with its strongly focused, typically very emotional messages, packaged more or less creatively, was first developed in the 1960s.

The media industry obviously needed many years to “monetize” 1:n media in the modern sense. It’s therefore maybe not surprising that after only 15 years of the Web as a mass medium and five years of Web 2.0, we have not yet found the ideal form for advertising in these new types of media.

But back to the social web: The specific new quality of this form of media is that it connects many senders with many receivers in a mostly open way. The social web, in other words, is an open n:n medium.

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That sounds pretty mundane, but it isn’t. We all understand intuitively how n:n communication in the physical world works. A discussion at the familiy dinner table is n:n, and on a bigger scale a classroom discussion or a town hall meeting would be typical examples.

But when n:n communication suddenly occurs over an open, global, technical medium with persistent storage of all communications, we don’t understand the consequences at all. There is no equivalent in the physical world for an interaction between people that can be accessed by pretty much every person in the world, instantly and (thanks to search engines) with high precision.

Because we have such a limited understanding of this phenomenon, it’s not surprising that ugly social media scandals happen all the time. The recent Youtube scandal around two Domino’s Pizza employees is a typical example. Very obviously, these two people didn’t grasp the consequences of uploading a disgusting video that could signifcantly hurt their employer (not to mention their own future) to a globally accessible platform. But they’re not alone — most Internet users probably don’t fully understand what happens with the content they put on social web sites.

If this is difficult for individuals, it is even more complicated for companies. Big organizations are structured for 1:n communications. Traditional advertising is 1:n. So is customer service: When a consumer tries to contact a company, for instance by calling a 1-800 number to complain, it is a case of 1:n communication. Other customers of the same company don’t learn about that customer’s complaint.

callcenterTraditional market research works in 1:n mode too. A company surveys customers, conducts focus group studies or sells its new products in test markets. The company thereby receives information about what customers think, but the other customers typically don’t get any insight about each other’s opinions, and they don’t influence each other.

Modern corporations master 1:n communications on a very high level of sophistication. They invest significant resources to standardize their communication processes, to push a consistent marketing message and to react to customer contacts in a clearly defined manner. A call center script is a typical part of these standardized communication processes.

All of this works very differently in a n:n medium, and that’s something that completely perplexes most marketers. In a n:n medium, there’s inherently no way to push a marketing message in a controlled and consistent way to a big audience. Consumers can simply ignore the message, can react to it directly or will even come up with parodies or adversarial messages. Advertising in the social web can’t be intrusive, or else it will trigger very negative reactions.

How and where marketers should position their ad message under these conditions is obviously a difficult question. Should they just put ad banners on social media sites? Is sponsoring the right tool? Viral marketing? Direct engagement with users? Or should companies build their own online communities?

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The diversity of platforms, formats, interaction modes and ad vehicles in today’s online media is confusing even to experts. Most marketers grew up in a world with a manageable number of different ad channels — TV, radio, newspapers, magazines, direct mail. So it’s no surprise that they are completely helpless when they face the overwhelming complexity of the online world.

Even worse: Consumers are now suddenly able to react to ads, in a very public way. They can also describe and publish their (often negative) experience with a particular product, and this opinion is — on Twitter for instance — made available to a significant number of people, but not necessarily to the actual manufacturer of the product. Some users now even think that it’s the manufacturer’s job to actively get all this feedback. There’s a growing number of people who expect that companies read their tweets and react to complaints automatically. And some companies already do this. Over time, customer service could change from a push to a pull medium.

This rich feedback loop is highly dynamic and impossible to control. Many a well-intentioned viral campaign turned into a marketing disaster, simply because the blogosphere or twittersphere reacted in unexpected ways. A recent example is the “Motrin Moms” Twitter storm. A pharma company put a somewhat unconventional commercial for a pain reliever on its website. It was intended to be ironic and funny. Unfortunately, some female bloggers perceived the video as insulting and started online protests, which in the end forced the company to cancel the campaign. In the world of old media, a campaign stop would have silenced critics very rapidly, but in the echo chamber of online media, the waves of outrage continued for weeks. This is a real nightmare for any old-school marketer.

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So what about all the advisors that big companies pay to develop marketing strategies? Unfortunately, they’re not much help either. Most traditional ad and PR agencies are masters of 1:n communication, but are not less confused about social media than their clients. The frequently outright negative opinions about social media expressed by ad executives are easy to explain: Somebody here feels threatened, and rightfully so. Not even most interactive agencies are strongly positioned when it comes to social media. Let’s be honest: Most corporate websites that are produced by these agencies are just traditional 1:n advertising in a digital form. Real interaction is not their strength.

Traditional companies, particularly large corporations, are fundamentally badly equipped to deal with the open, complex communication processes in n:n media. Their carefully cultivated marketing skills from a 1:n world are actually a detriment to success in a n:n medium, because the discipline of strongly focused 1:n communication directly prevents real interaction with users in social media.

Blogosphere luminaries like Robert Scoble tell companies to simply start very, very transparent “conversations” on social media and to interact with consumers in an authentic and unscripted way. But that’s like telling an elephant to increase its speed by simply starting to fly — great idea, but almost impossible to implement.

So what’s the conclusion?

First of all: The problems of insufficient monetization of social media platforms can’t be solved simply by finding better ad formats or by hiring more competent sales teams. This is a fundamentally different medium, and the biggest and most professional advertisers in the world — large corporations and their ad agencies — are structurally badly prepared to take advantage of this new channel.

A lot of time and many bold experiments will be necessary to find the best way to commercialize social media. Of course, coincidences will play a role, as they have in the development of traditional media. For instance, legend has it that the modern 30 second TV commercial was only invented because TV stations were not able to find enough customers for the sponsoring of a whole show.

Who will be the winners? In the short to medium term, social media is a great marketing opportunity for smaller companies that can interact with their customers in a flexible and personal way. This is a great way to build a loyal customer base without huge resources, just through authenticity and focus.

Larger corporations will need years to adapt to the new reality of 1:n social media, and many will fail. The more Internet users participate in social media (and since even Oprah is now twittering, it’s definitely mainstream), the more important social media will be as a channel to reach customers — just not with the mechanisms of traditional, hierarchically structured advertising, but with new, networked structures that have more in common with real marketplaces.

This is a step of the same magnitude as the invention of mass marketing at the beginning of the 20th century. Mass marketing became possible through 1:n mass media, and it changed the structure of the economy fundamentally. The modern corporation would not be possible without it. It is conceivable that we will see new forms of corporate organization that are driven by the new media that are shaping our private and commercial communication.

In all the daily noise around new social media apps, platform wars or industry scandals, it’s easy to forget that we are experiencing the birth of an entirely new, unusually complex medium. It will take decades to find stable structures and explore viable business models. And we are in for a lot of surprises.

(This is a translated and updated version of an article that I wrote for netzwertig.com, the leading tech blog in German-speaking Europe.)

Banker, Boni und volkswirtschaftlicher Blödsinn

Auf beiden Seiten des Atlantik wird gerade heftig über Banker und ihre Boni gestritten. Die Volksseele kocht angesichts der Tatsache, dass an Mitarbeiter von staatlich gestützten Banken (UBS, Bank of America, etc.) Boni in Milliardenhöhe ausgeschüttet werden sollen. Die Banken verteidigen sich: Erstens seien diese Zahlungen vertraglich vereinbart, und zweitens hätten ja viele Mitarbeiter auch einen guten Job trotz Finanzkrise gemacht.

Leider wird meiner Meinung nach diese Diskussion auf der falschen Ebene geführt, nämlich wieder mal nur aus einer sehr kurzfristigen Perspektive. Die langfristig eigentlich interessante Frage ist, welche Stellung die Banken in unserer Wirtschaft bisher eingenommen haben und nach diesem Schlamassel einnehmen sollten — und nur danach als Folge daraus, wie die Bankangestellten fair entschädigt werden sollten. Denn dass die Exzesse der letzten Jahre aufhören müssen und werden, ist wohl allen klar.

Zunächst: Die aktuelle Diskussion ist zu stark von Sozialneid beeinflusst. Dass Leute als Belohnung für echten Erfolg aussergewöhnlich viel Geld verdienen, finde ich absolut normal und unterstützenswert. In einer Marktwirtschaft dient das einem wichtigen Zweck, nämlich die talentiertesten Personen zu den wirtschaftlich erfolgreichsten (und damit auch wirtschaftspolitisch wünschenswerten) Tätigkeiten zu steuern.

Gern weisen Banker darauf hin, dass sie zwar viel verdienen, aber auch in der produktivsten Branche arbeiten. Auf den ersten Blick stimmt das sogar. Ich habe mir mal die Mühe gemacht, aus Daten des Schweizer Bundesamtes für Statistik (BfS) auszurechnen, wie wirtschaftlich “gerecht” das Lohnniveau in verschiedenen Branchen der Schweiz ist.

Die folgende Grafik stellt zwei wesentliche Aussagen gegenüber: Erstens den Anteil der Bruttowertschöpfung verschiedener Branchen an der schweizerischen Gesamtwirtschaft, also das, was die einzelnen Branchen wirklich an nützlicher Leistung produzieren (blaue Balken). Zweitens habe ich den ungefähren Anteil dieser Branchen an der Gesamtlohnsumme eingezeichnet (rote Punkte), berechnet aus dem Medianlohn pro Branche und der Anzahl Vollzeitstellen, die in diesen Wirtschaftssektoren angeboten werden. Die Daten sind von 2006.

Lohnbws-1

Von der Logik her müssten die produktivsten Branchen (also die mit der höchsten Bruttowertschöpfung) auch die höchsten Lohnsummen zahlen. Wie man sofort sieht, ist das nicht der Fall: In der herstellenden Industrie wird scheinbar etwa fair bezahlt, das Baugewerbe oder das Gesundheitswesen zahlen aber eher zu hohe Löhne. Hingegen erscheinen die Mitarbeiter im Kreditgewerbe (also Banken) und der Versicherungswirtschaft relativ gesehen unterbezahlt zu sein. Zwar sind die Durchschnittslöhne in diesen Branchen tatsächlich absolut gesehen am höchsten, aber die Mitarbeiter scheinen pro Kopf auch am meisten Wertschöpfung zu produzieren.

Sind unsere Bankmitarbeiter also eigentlich unterbezahlte Überflieger, die man für ein schlechtes Jahr nicht auch noch durch staaatlich verordneten Bonusverzicht bestrafen sollte?

Im historischen Vergleich scheint sich das zu bestätigen: Die Banken haben ihren Anteil an der wirtschaftlichen Produktion 1994-2006 um etwa 50% gesteigert, aber die Angestellten verdienen “nur” etwa 15% mehr. Umgekehrt hat die herstellende Industrie (und dazu gehört z.B. auch die Chemiebranche) weitgehend stagniert, aber trotzdem nehmen die Mitarbeiter fast 4% mehr nach Hause.

Nun stellt sich aber natürlich die Frage, wie die beeindruckende Wertschöpfung der Banken eigentlich entsteht. Der betrachtete Zeitraum 1994-2006 war mit einem kurzen Unterbruch eine der stärksten Phasen, die die Finanzmärkte je erlebt haben. Wie wirkt sich das auf die Ergebnisse der Banken aus?

Wenn man den Wertschöpfungsanteil der Banken mal einfach so naiv der Börsenentwicklung (in diesem Fall dem Swiss Market Index) gegenüberstellt, zeigt sich ein erstaunliches Muster.

Wertsmi
Ganz offensichtlich war die Börse die entscheidende Triebfeder für die so beeindruckend gestiegene Wertschöpfung bei den Banken. Die Statistik unterscheidet nämlich nicht, ob da auch wirklich etwas “produziert” wurde, sondern berücksichtigt ausschliesslich finanzielle Grössen, auch wenn die aus volkswirtschaftlich weniger attraktiven Tätigkeiten wie etwa dem Eigenhandel von Banken stammen.

Schauen wir uns als Beispiel mal an, wie etwa die UBS ihr Geld verdient. Im wesentlichen macht eine moderne Bank aus drei Geschäftstätigkeiten Gewinn:

1) aus dem klassischen Zinsgeschäft, also dem Entgegennehmen von Spargelden und dem Gewähren von Krediten
2) aus Dienstleistungen und Kommissionen, primär im Investmentbanking und der Vermögensverwaltung
3) dem Handelsgeschäft, in dem Banken auf eigene Rechnung an der Börse dealen (also letztlich spekulieren).

Gewinnsmi

Wenn man diese drei Komponenten der Börsenentwicklung gegenüberstellt, zeigt sich ein nicht unerwartetes Muster: Das Handelsgeschäft geht im Gleichschritt mit der Börse hoch und runter. Die UBS reitet da also lediglich die Marktentwicklung, wofür sie als grosse Bank gut positioniert ist. Ähnlich sieht es beim Dienstleistungs- und Kommissionsgeschäft aus, da das klassische Investmentbanking stark von der Aktivität an den Finanzmärkten abhängt.

Und hier kommen wir langsam zum Kern des Problems: Ausgesprochen beunruhigend ist die Tatsache, dass die UBS beispielsweise im guten Börsenjahr 2006 nur gerade knapp 19% ihres Gewinns mit dem klassischen Brot-und-Butter-Zinsgeschäft erwirtschaftet hat. Der Löwenanteil von 81% kam aus den börsennahen Geschäftsbereichen.

Wenn man die Zahlen noch etwas genauer auseinandernimmt, kommt man schnell zum Schluss, dass die UBS — genau wie die meisten anderen Grossbanken — in den letzten Jahren etwa 60% ihrer Gewinne mit Tätigkeiten produziert hat, die man etwas bösartig verkürzend als “Zocken an der Börse” umschreiben könnte. Der volkswirtschaftlich eigentlich primär wünschenswerte Tätigkeitsbereich einer Bank — das klassische Zinsgeschäft — ist in den letzten zwei Dekaden immer mehr zu kurz gekommen.

Die stolz rapportierte “Wertschöpfung” der Banken bestand also zu einem grossen Teil aus weitgehend fiktiven Gewinnen, Resultat immer komplexerer Finanzinstrumente und aufgeblähter Börsenbewertungen. Und eins ist klar: Dass diese grossen Banken, die einst so stabil erschienen, jetzt in so fundamentalen Schwierigkeiten stecken, ist ausschliesslich dieser Tatsache zuzuschreiben. Im Moment werden weltweit hunderte von Milliarden an Steuergeldern investiert, um die wirtschaftlich erwünschten Teile von Institutionen zu retten, die sich schon lange dem puren Casino-Kapitalismus verschrieben haben und damit dramatisch gescheitert sind. Denn leider lassen sich die für die Wirtschaft essentiellen Teile des Bankensystems nicht einfach so aus diesen Gebilden heraustrennen. Offensichtlich ist das alles volkswirtschaftlich absurd, aber bedauerlicherweise wohl unumgänglich.

So gesehen ist die Diskussion um Banker-Boni auch umso befremdlicher. Das Wachstum der Unternehmensergebnisse, mit denen die stattlich gewachsenen Bankerlöhne über viele Jahre hinweg finanziert wurden, stammte keineswegs aus dem “seriösen” traditionellen Geschäft. Sicher, der durchschnittliche Bankmitarbeiter am Schalter hat nie exzessive Vergütungen kassiert. Aber man kann wohl klar sagen, dass es der ganzen Branche dank dieser Finanzblase unverhältnismässig gut ging, nicht nur den Topmanagern und Investmentbank-Gurus. Die Bankbranche hat fast in allen Bereichen über ihre Verhältnisse gelebt.

Darum ist es wirklich unverständlich, wenn jetzt Politiker zulassen, dass staatlich gestützte Banken auch noch Boni ausschütten. Das Gegenteil wäre richtig: Die Banken sollten sich so schnell wie möglich gesundschrumpfen, und das betrifft nicht zuletzt das Vergütungsniveau. Da darf es nicht um Sensibilitäten gehen oder um einzelne Abteilungen, die ja möglicherweise gut gearbeitet haben. Die ganze Branche braucht einen umfassenden Reset, und zwar schnell.

Und zum oft vorgebrachten Argument, dass die besten Leute die betroffenen Banken verlassen würden, wenn sie keinen Bonus bekommen, kann man nur sagen: Hervorragend. Gut so. Denn das ist genau der Zweck von Lohnunterschieden: Die fähigen Leute in die Firmen und Branchen zu ziehen, die gut gemanaged sind und wirklich etwas Substanzhaltiges produzieren. Denn genau so sollte Marktwirtschaft funktionieren.