Tuesday, June 20, 2006

Time More Valuable Than Money in the Attention Economy

In the attention economy, the value of money is limited. The attention economy includes all the goods that require your time in order to consume them. Examples include TV, movies, videos, books, newspapers, magazines, websites, blogs, music, radio, video games, and software. They are all digital/non-physical goods, or at least they can all be distributed in digital forms.

The attention economy changes the rules of time and money in the economy, and leads to different behaviors for consumers and producers from the physical economy.

As an attention goods consumer, the value of your time to consume the good is much higher than the cost of the good itself. A movie rental costs $5 and takes 2 hours to watch. How much is your time worth? The average American gets paid $18 an hour. If you could be working instead of watching the movie the opportunity cost is $36. But, maybe that is too high as watching movies are much more enjoyable than work. At the minimum wage of $5/hr, your time for 2 hours is $10. The value of your time to watch the movie is at least twice as much as the cost to rent the movie.

Other media are much the same. A hardcover book costs $25 and might take 10 hours to read ($2.50/hr). A newspaper costs $.50 and takes 30 minutes to read ($1.00/hr). I took a look recently at the costs per hour of various media goods per hour. Many attention goods (Linux, Wikipedia, blogs) cost nothing at all besides your time. Others (Google, TV, Radio, most online newspapers) are supported by advertisements which cost a additional bit of your time in order to view. On the NerdShit blog it estimate the time it will take you to read any of the articles. This allows you to see how "expensive" in time it will be to consume.

More money does not allow you to consume more attention goods as you are constrained by time. Whereas Bill Gates can purchase as many physical goods as he wants: more houses, more computers, or more boats, he is limited in how many attention goods he can consume. We are all limited by the same 24 hour day in how many attention goods we can use.

Because time is limited, you impart status and influence on the producer of the goods you consume. You are choosing to use your valuable time to read, listen or respond to that person's work.

With attention goods, the recommendation is the gift. If you have Rhapsody and Netflix, you can listen to any song or watch any movie that you want for no additional cost. Why then would you want a CD or a DVD for a gift? The gift giver can't give you the time you need to consume it, and that is the most expensive part of attention goods. Instead, the real value is in the recommendation. If a friend can recommend a song or a movie that you would not have found on your own that is a true gift. In general, there is lots of value in helping you to consume goods that you will enjoy.

In the attention economy you can choose to use your time as either a consumer or a producer. You select how much of your time you want to spend reading blogs vs. creating posts, listening to music vs. creating music, watching TV vs. creating YouTube videos.

From a producers standpoint money still plays a role but it diminished from the physical economy. If you are working full time on creating attention goods, you still need a way to eat and pay the rent. You need a way to pay for the basics (food, shelter, clothing and medicine) and the creature comforts (the latest gadgets). So there will still be a need for money to allow full time attention economy creators (writers, software developers, musicians, actors) to convert their time into old economy/physical goods.

Beyond a certain point, the only reason to acquire more money is for status and influence. In the attention economy status and influence are based on popularity and the attention you can draw rather than wealth. They are determined by eyeball hours rather than dollars. It's not about monetizing the eyeballs, its about the eyeballs.

The attention economy therefore allows for interesting tradeoffs between making money and having influence. The New York Times decided to charge money for their columnists. Tom Friedman hates it because it deprives his audience from being able to read him. The Wall Street Journal also charges for their material, which gives it a much lower readership than if it were free.

It raises the question: if you had a blog, would you rather have 10,000 people read your entries, or $10,000? If you already have all the creature comforts you want, what is the point of more money? Or if you already have a full time job and are just a attention good producer on the side, why do you want more money? What you really want is the status and influence that popularity brings with it. Instead of pricing a book to make the most amount of money, you price it to have the most amount of readers. Instead of taking the money to the bank, you use the money to advertise to get more people to view your work. Instead of cracking down of file sharers, you tacitly allow it.

If money isn't that important in the attention economy, how do you value the impact? Just because your attention good is free doesn't mean it has no value (even though the GDP might say so). You can total up the number of people who view your attention good, or the amount of eyeball hours it created. You can use these metrics to compare with other attention goods to see what your influence is.

One issue is that not all eyeball time is of equal value. Those that are more knowledgeable, smarter or more influential are more valuable. Those that are actively participating are more valuable than passively absorbing material. To take this into account you could assign a value to each users time. As stated previously, one way would be to value the time at that person's hourly wage. Or maybe you figure for those reading or consuming their time is worth $5, and if they are commenting or contributing then it is worth $10. Or maybe you adjust the hourly wages upwards if you have more influential, or knowledgeable consumers.

For example, you might say that each viewer's time on your website is worth $5/hr. If you have 100 viewers spending 200 hours on your website, then this is worth $1,000 of others attention.

The attention economy is different from the industrial economy. Money has a more limited role. For consumers, their time is the more valuable then the money they spend on the attention good. Additional money has limited impact on how they consume attention goods because they are limited by their time and goods are cheap. A recommendation for a great attention good is more valuable than the good itself. From a producer standpoint, some money may be required up to a point. After that point, the producer is motivated by status and influence which is derived from eyeball time rather than money. Valuing the worth of attention goods is difficult, as the consumers time is the most valuable part, and not all time is of equal worth. As the attention economy grows, these rules will become more important.


petesopete said...

If a friend can recommend a song or a movie that you would not have found on your own that is a true gift.

An interesting view. Giving my 2 cents takes a new meaning after this.

Taking more variables into account makes the measure of happiness more exact.

Anonymous said...

Very interesting article

Pariuri Sportive said...

Fascinating article. Certainly, the information overload problem is perhaps one of the biggest and most dangerous of our time, its consequences still going largely unnoticed.

The consequences stretch even further: the open-ended nature of the Internet makes it easy for us to find information sources which more or less match our predefined interests. While this is great, simultaneously it makes us tune out of different viewpoints, clicking away from news, opinions and perspectives that may not coincide with our own, or even oppose them upfront. Liberals will watch The Daily Show, conservatives The 1/2 Hour News Hour, both will mutually complain about the other one within their own forums but rarely resort to mutual exchange of opinions.

At the same time, people are more and more often getting their sources of information already digested and interpreted for them. Information overload means there's less time to look deeper into information sources, fact check or validate what's being said. We've got to evaluate the merit of its claims at face-value, which is often dangerous, and forces us to make decisiones without the minimum necessary information so as to make a good one rationally. The consequences of this are not only economical, but clearly political on a large scale.

Anyway, this all merits further discussion, but somewhat theoretically-minded thoughts like you've shown here are an important avenue for discussion. I must say I had to try real hard to break the habit and not skim through it. Cheers.

Post a Comment

Note: Only a member of this blog may post a comment.