Our Blog

The Value of Content, Part 1: Adam Smith never expected this

by Melissa Rach on September 2nd, 2009

At lunch the other day a friend asked me, "Where can I find somebody smart, but really cheap, to be my ghost-tweeter?"  A guy next to her obviously thought she was loony.  Not me; I’m used to it.

Twitter-as-content-commodity was a new twist, but her conundrum was very familiar. What she was really saying was, "I know I need smart content, but I don’t want to pay for it." On a grander scale, many organizations have the same attitude.

Most people understand that content has value. Big value. They just can’t prove or measure the ROI. And, therefore, they have no concept of how much content is worth.

Proving and measuring the value of content is complex. But, as content professionals, we have to do it. I have some ideas about how to do it, but before I even go there, let’s talk about why everybody is so confused in the first place.

Brace yourselves, content folks. We’re going to talk economics. I promise there will be no math involved.

1776: Defining product value, Adam Smith style

adam smith
I’m no expert in economics, but I know this much: Adam Smith was a smart dude. Back in 1776, he wrote The Wealth of Nations, a book that basically defined economics as we know it. His ideas still influence the way we assign value to things today.

For the market economy to work, Smith said products of value have three characteristics:

    • Excludability: The seller can "exclude" you from owning or using the product unless you pay for it; the product is difficult to replicate so you have to buy it from the seller.

    • Rivalry: It’s more expensive for two people to use the product then one person (So, I can buy a pair of shoes for $10, but if we both want to have shoes it’ll be $20).

    • Transparency: Customers can see exactly what they’ll get before they buy the product.

These rules work pretty darn well for things like apples, shoes, or kazoos.  Those are the kind of tangible products people bought in 1776. (Well, kazoos weren’t invented yet, but apples and shoes surely were.) 

1956: A funny thing happened on the way to the factory
Smith’s theories worked pretty well for 180 years, but in 1956 something happened that would have surprised Adam – in the U.S. the number of white-collar jobs surpassed blue-collar jobs. 

So, instead of people working in factories and farms making tangible products, people were sitting behind desks making  …  information. Accountants creating reports, lawyers creating legislation, advertisers creating TV spots, etc., etc. In 1956, content/information was red hot. The first computers were up and running (Check out the photo below of a home computer in 1956 for proof).  Heck, Marilyn Monroe even married Arthur Miller, a playwright (you may have heard of him).

1956

The industrial age was over. The information age had begun. Information was in demand in a way it had never been before — and Smith’s three pillars of economic value had started to blur.

1990s: Content breaks all the rules
Until the 1990s, Adam Smith three pillars seemed to be adequate, if not perfect, even for content. Before then, if you wanted some information, you bought a book or newspaper (tangible items). Sure, you could lend your book to a friend, who would get the content for free, but content creators were largely paid for their work.

But, with the advent of the internet, the pillars of value for content collapsed. 

    • Excludability: Content is now easy to create, use, and replicate.

    • Rivalry: When content is posted online – even if you make me pay for access – I can easily share it with millions of friends without paying a cent.

    • Transparency: Once you’ve looked at content in-depth, you really don’t need to buy it, do you?

Simultaneously the business importance of good content went sky-high AND the value of content tanked (according to Adam Smith). On top of it all, the internet movement suggested that all content should be free. And society agreed. 

2009: Classical economics is toast
So, let’s recap. Today, content is one of the most important business assets in the world. AND, according to traditional economics, content has little value. AND people expect to get it for free (see newspaper industry stats). AND we’re experiencing the worst recession in 80 years.

The economic system is just plain out of date.

I wish I could tell you about the economic model of the future. (Not only would that be nice for you, but I’d make zillions.) Lots of brilliant economists have been trying to figure it out for years.

No wonder people are confused about what to pay for content strategy and creation. 

COMING SOON: The Value of Content, Part 2 (The Sequel)
Here’s what I do know. Content makes money. Content saves money. And, ROI of content can be measured.  That’s what my next blog post will be about in a few weeks.  (It’s just like when the Brady Bunch went to Hawaii – two whole episodes of non-stop fun! Just. Like. That.)

Until then if you have any great examples or ideas about content ROI, send them my way (melissa.rach@braintraffic.com). I’d love to hear about them, and I’ll include them in the blog when I can.

 

  • http://www.winwithoutpitching.com/ Blair Enns

    Can't wait for part II, but I want to comment on your friend's remark, “I know I need smart content, but I don’t want to pay for it.”

    Really, the conundrum is, “I know I need smart content, but I am unable to create it. So I want to…” There are content creators, then there are aggregators/dispersers (distributors really) but re-distribution of others content is still just distribution in a world where content is king.

    You've really got two choices: 1. create content (which among other benefits, makes you smarter) or, 2. distribute the content of others. 1 is better than 2 but 2 is better than buying content. That's as hollow as buying followers. It's not really a long term option.

  • DougBTX

    > I promise there will be no math involved.

    This reminds me of the article about kids not being able to walk to school because of scared parents, very sad state of affairs.

    http://www.nytimes.com/2009/09/13/fashion/13kid...

  • http://www.six-degrees.com/ Elaine

    Melissa, I am very interested in learning more about your comment that “Content makes money. Content saves money. And, ROI of content can be measured. ” We know that content costs money (as your friend realizes) and many people only see the cost side of the equation. Can't wait for your follow on post.

  • http://www.cabedge.com WordGeek

    The I-can-do-that Problem.

    The “difficulty to replicate” issue tends to be at the core of my troubles as a content producer. Developers write in code which virtually no one understands, so very difficult to replicate (read: do on your own). Graphic artists use computer applications that have a high learning curve which makes replication difficult as well. But, not impossible. The ubiquity of cheap/free apps and cameras tends to make people think they can do it on their own.

    And, then there's writing. Ability to replicate…depends on what you mean by replicate. Since virtually everyone in the business world is literate replication seem easy. “Who needs a professional writer? I can write.” But, for those of us that produce content we know the difference. We feel like driver for NASCAR or even shipping that hears someone say, “Driving racecars and 18-wheelers…no problem. I can drive.”

    Adding value to written content may have to start with warning people:

    “Please step away from the keyboard. If you are not a professional writer, creating your own content could be dangerous.”

  • http://keypointe.ca/ Theresa Putkey

    I'd also like to hear part II!

  • http://www.stagekid.com Blake N. Cooper

    The success of Web 3.0 (I can't stand this label; you would think the collective Interweb masterminds could come up with something better that x.x or Semantics) lies in (1) the quality of content produced and (2) the delivery system. Laptop and desktop computers? Too complex (hardware and software); their time is passing fast. Bundled tree shavings? Ask the once proud paperboy now boxing thighs at KFC.

    The device that will take us into the future? The Newspaper 2.0 (the yet to be created digital paper you can roll up and stick a rubberband around). We're almost there! In the mean time: keep teaching the masses the value of content.

    Great post–looking forward to Part II.

  • kevincesarz

    Well done. Waiting for episode 2.

  • Lois Nilsen

    Very interesting, and spot on about the paradox of the online economy. It's an interesting time to be alive.

  • Dave

    that photo of the home computer is a ho-ax.

    http://www.snopes.com/inboxer/hoaxes/computer.asp

  • http://contentomenon.com/ Scott

    It just so happened that I found your post at a time when I will need to present a business case for content development (creating teams and a process)… so, I'm going to have to demand that you provide part II… soon. =)

  • melissarach

    Excellent. Now I can use myself as an example when I give presentations and advise that people check the accuracy of their content. Do as I say, not as I do. Thanks, Dave.

  • melissarach

    WordGeek. Good point. I was actually talking about replicate as in: I could cut-and-paste published content into my email and send it to you. Thanks for pointing out another aspect of it.

  • staffpower

    I very much enjoy to read this. Thanks you.
    staffing power

  • staffpower

    I very much enjoy to read this. Thanks you.
    staffing power

  • Collins Flannery

    Where is Part II? Thanks ~

blog comments powered by Disqus