Tuesday, June 10, 2003

Weblog Business Strategies 2003 XV

Tony Perkins: The Open Source Media Movement

Tony Perkins is creator and editor in chief of AlwaysOn. He is also the creator and editor in chief of the now-defunct VC magazine Red Herring, which he founded in 1993.

Alright you guys, I'm wearing a loaned suit, so if you have a tie, let me know. It's a pleasure to be here. How many people have been on the AlwaysOn Network? How many people have written about the AlwaysOn Network? How many people have been contacted by my PR guy? Not enough. What I'm going to show you in a second is a summary of what I want to talk about.

The first thing I want to talk about is why I shouldn't be a keynote at this conference. Second of all, I want to talk about why it's a great time to be an entrepreneur. In addition to writing the book "The Internet Bubble," I got my own ass handed to me when the magazine I had founded ceased publication. I always want to talk about the opportunities of building participatory journalism as I call it into a great new media brand. It can be leveraged to do great things. Finally, I'm going to talk about the AlwaysOn Network from a business perspective. We've been blessed to go cash flow positive in the first month we launched the network, which was in February.

This is the first time I've used Keynote. It's the easiest PowerPoint I've ever used, which is pretty fun. Let me talk about the first point. In essence, I have been a casual observer of the blogging movement for three years or so thanks to guys like Dave Winer. I always feel like what guys like Dave are doing is a foreshadow of the future. As you may know, I'm not a blogger, per se. I come out of the journalism background. But what I am is a media entrepreneur. The first media brand I started was Upside. And then more recently Red Herring.

After I sold my book in 1999 and sold most of my stake in the company, I was itching to do something new. Entrepreneurs sense trends and try to build businesses around interesting things in the market. While I'm sort of a poser in this community, sort of like the wannabe punk rocker, I have never been so excited and I've never had so much fun in my professional career as I have with AlwaysOn. I want to share some of that excitement with you and solicit some feedback from you, the pioneers, so I can learn more.

Before I get into all that, I want to share with you why I think it's a great time to become an entrepreneur. I've come up with a fictitious representation of what it costs to start up a company. It doesn't consist of any real data, but it's a painting of where I think we are. It wasn't until the fourth issue of Red Herring that we even mentioned the Internet. We were then covering what was called the interactive highway, and interactive cable TV network that never came to be. It was too damn expensive. The good news was that there was always an information highway and that it was called the Internet.

You are the folks who created this new medium. It's at this really interesting time in history where it can be taken and harnessed. Why is it such a good time to be an entrepreneur? If you look at this chart, today there are close to 700 million people who are online. Whatever we did during the bubble, we educated 700 million people about something different. Funding the changing of people's behavior to do something different is a loss leader. That's why we lost so much money in the first stage of the Internet. But now we have a huge market. You had a very expensive proposition. Secondly, you had rough technology. You had a small population of people. AlwaysOn Network I built with a $150 piece of software. That same project back in 1996 would've cost a lot of money to get a lot of people involved.

Here we are today sitting on a huge market. Moore's Law has blessed us. RAM is very cheap. Salaries are very cheap. That's why we're at the bottom of the curve. Why does the curve go back up? Now is the time to establish the brand because of the whole concept of first-mover advantage. The second movers have the real advantage because they're starting their companies now. It's going to become more expensive because it'll become more expensive to build companies and challenge those brands.

These are my daughters. In recessionary times, pull out the family album. This story was part of the inspiration for starting my company. They're teenagers. The blonde is named Kristen. At the time she was a senior in high school in Menlo Park. The brunette is named Julie. At the time, she was a sophomore at Duke. Kristen's boyfriend is named Brandon. He'd started at Duke. I asked he if she'd talked to Julie and if Julie sees him around campus. She looked at me and said, "Dad, do you have instant messaging on your computer?" Mr. technology editor at Red Herring.

I found two studies. That generation is a completely distinguishable generation that's going to lead a lot of opportunity. Just like when I was a kid living around Silicon Valley during the birth of the personal computer era. The most interesting thing here is that 17% used instant messaging to break up with somebody. What other statistics get me excited? Most of the numbers associated with the Internet are going to double. The advent of wireless and its proliferation is going to be a huge driver.

On the business-to-business side, in order to become an always-on business, about 99% of the businesses have not equipped or designed their operations to work seamlessly and automatically on the Web. If I don't become like Dell, I am not competitive any longer. The statistics really support the case. B2B commerce: $3-6 trillion by 2005. Always-on companies will radically increase their productivity.

I'm basically an entrepreneur. I wrote a book. I so believe this editorial position that I started over a year ago based upon observing the great work of a lot of people in this world. My principles for media startups are that it's better to boot-strap than go to a board of directors meeting, build a community that advertisers care about, create multiple revenue streams, build a virtual team, trust your gut but listen to your readers, and building a media brand is black magic. For AlwaysOn, the target community is the exact advertising group we had at Red Herring.

Forgive me for not really being a member of the grassroots community. Some of my observations may seem basic to you. These are the entrepreneurial lightbulbs that went off. There's this trend toward reality TV. We're bored with scripted actors. We perversely like this idea of getting people together in an arena we create. The second thing is the open source movement. The thing that keeps Steve Ballmer up at night is Linux. What I see is applying that concept to the media world, what I call open-source media. We as media can get the guys that journalists would normally interview to post their thinking for the world to comment on. My average viewer stays on three and a half times longer than the viewer of RedHerring.com . The final thing is the Ebay-ization of media. That's what you all are about. You're giving people opportunities to add value to your site. And there's a way to monetize that.

The uniqueness of what you all do is great black magic. Part of our ethic at AlwaysOn is to be completely open. We allow people to post comments. We require that people be members so there are no anonymous comments. Based upon great feedback, members can now post original blog entries themselves. Members are transparent to each other. You can click on their name and email them. Members can also recommend links.

I talked about multiple sources of income. This is how we view the world. We have great sponsors. They're all in for six-month contracts. We're also in the business of creating events. We're holding a big event at Stanford, and we'll take that money to pay off the costs of building the site. In the next version, we'll have a premium paid membership. We're going to be reselling other information products and services. We're building a build-your-own classifieds service. And we're looking and other network opportunities to build other communities we can interrelate.

Why am I here? Most importantly, I wanted to get feedback and meet a lot of people. I want to engage developers. What are the real issues we should look out for? I want to look for new network opportunities. I'm really not a bad guy. I'm out there preaching the gospel of what you've done. I'm very cynical about the media business at large. But I know that because I'm this fancy guy, reporters who want to talk about blogging come to me. I'm an entrepreneur. I've got 10,000 members. There is no limit to what we could do with the AlwaysOn Network. We're going to be doing video journalism and radio segments. I don't, someone else is going do it, and it's going to be a lot more expensive.

Question: If you wanted to learn more, you could've come yesterday and learned a lot more. You used the word "blessed." What do you mean by that?

Everyone sitting in this room is blessed. There are a lot of people who would like to sit in this room but can't be.

Question: You mentioned that you were going to offer pay-per-view for archived events. Have you looked at any micropayment schemes?

Clearly, we want to have a mechanism to power the classified ads so people can pay 5 cents, 10 cents. We fully intend to have a fully integrated e-commerce solution.

Question:You certainly look at the blogging world from the perspective of a businessman, Could you quanitify the size of the oppiortunity for us?

Good. Someone else here likes money. If you look at almost every magazine on the newsstand today, there's a network opportunity. There's the ability to allow the community to participate in a variety of ways The most expensive part of publishing a magazine is building your readership. But if you can get people to add comments and get Eric Schmidt to reply to their comment, you're going to gain a very loyal reader. It's about building a critical mass of people. Most people who want to participate in the New York Times just can't. What I think is really interesting is that there's a window of opportunity before these large media brands are going to let people participate.

David Winer: If you're successful at what you do, how will what you do resemble Weblogs? Won't it resemble Red Herring or Upside?

What I'm borrowing from blogging is giving people the ability to participate.

Winer: How will what you do be Weblogs? Do you know what Weblogs are?

I've read yours for a couple of years. I've never said AlwaysOn was a Weblog. It borrows elements from you. It encourages participation. We had 200 posts in our first four weeks and thousands of comments. That's borrowing on the tradition of what you guys created.

Jeff Jarvis: [I think -- HR] You say that your aim is to build a sustainable media brand. Is that what you think Webloggers are trying to do?

Why would you care whether I know what Webloggers do? Just teasing. I'm a media entrepreneur person. I look at the experience that you Webloggers have created as a very interesting attribute to throw into the overall media offering mix. There are numbers of bloggers who want to keep their blogs in a very intimate way. I understand how the process works. That's a great thing to do. Being entertained is fine. I have to work for a living. I'm not here to tell you all to be like me. I'm just saying here's what I've learned from you and mixed into a business I've been involved in for 15 years.

Halley Suitt: When you have Accenture and Sun and advertisers liking what you're doing and people posting to your site who don't like what they're doing, could you talk about the separation of church and state?

The whole church and state idea sort of breaks down under this sort of model in the respect that the journalistic standards are set by the members. Every morning I get up, go to the site, and remove the stuff that's not gaining traffic. I go with my members. I produced an issue of Red Herring with an interview with Michael Dell, and I'd have two people tell me they thought it was a good interview. I put an interview with Michael Dell on AlwaysOn that was marketing speak, and the members jumped on his ass. As an editor, you know what they like and what they don't.

Question: What happens if Sun signs up for a six-month commitment and there's a discussion in which people are criticizing Sun. Sun threatens to pull. What do you do?

That's what they're signing up for. They understand that that's the tradeoff here. At the same time, our members own their words. Michael Dell got creamed for talking in marketing speak. When I saw him next, he said that he'd learned a lot. I'm learning more as an editor about what really resonates with people.

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