So we thought (as we often do), wouldn't it be cool to combine the random meeting of people with the lessons learned from SXSW presentations? After some quick emails back to SWHQ to discuss, the idea for SXSWLesson.com was born.

We think that SL is on to something here - the reason so many people go to SXSW Interactive in the first place is to bump into other people, have inspiring discussions about stuff, make new friends and overall learn a lot. The panels only go so far, and this tool elegantly captures the gestalt of the conference, random topics, spontaneous conversations, and new stuff to learn.

This is one of the very few really good uses for Twitter hashtags that we have seen. Take a suggestion from us and bookmark SXSW Lesson; we think it has a lot of potential. Just wait, you will see increasing activity and new submissions coming in all the time. Plus, it acts as yet another way to generate a list of really awesome people to follow on Twitter, and that's a definite value-add in our book.

Business Models for Web Content

Richard: There's been a bit of discussion amongst bloggers recently about monetizing weblogs - making money off one's Web content. This of course has long been a dream for Website producers - content is king, but how to make money from it? Most commercial publishing businesses have used subscription models to do that, including your company (e.g. Safari Bookshelf). But with bloggers and other independent content creators, perhaps advertising and sponsorships are better avenues for them to explore. Where do you see the future of Web 2.0 for content creators, in terms of making money from their content? 

Tim: Back in 1995, in the early days of the Web, I wrote an article called Publishing Models for Internet Commerce. It was based on the idea that publishing can give us a lot of insight into how the Internet is going to play out. The lesson I drew from publishing is there's not a single business model. There are countless, overlapping business models - from marginal to very successful - in a really rich ecosystem. Take for example, in the US your kids may come home from school with this thing: "Hey, buy magazine subscriptions and you will support our school". There's some company that uses school children to market magazine subscriptions! And there's something else called Publishers Clearinghouse that has contests and giveaways to get magazine subscriptions. So there are these funny business models.

We have subscriptions, and direct sales to consumers and mediated retail sales, and advertising, and combinations of all of the above. We have people who make their money providing infrastructure or assistance in these models - ad agencies, printers, rack jobbers, distributors, retailers. It's a rich and complex environment.

After we sold GNN [Global Network Navigator] to AOL in 1995, I remember talking to Ted Leonisis about this idea - and he said: "Oh, I get it - you're saying where is the Publishers Clearinghouse for the Web?!"

In the early days, a publisher had to do everything, from generating the content to hosting and caching it, to acquiring customers, to selling advertising...and now there are lots of cooperating players, making the job a lot easier. What we're seeing as the Web develops is that we're building a richer ecology of options. So subscription is becoming a valid option. So is downloadable paid content. So is advertising - in fact there are new forms of advertising. You know, we used to think that it was only banner ads - and they got bigger and bigger and more intrusive. Then Overture and Google introduced this concept of context-sensitive text ads and that stuff really enabled what Chris Anderson is calling The Long Tail. But the story's not over - we're going to see more and more kinds of paid content. 

What's its Job?

The other thing you really have to think about with all this is - we often get blinded by the forms in which content is produced, rather than the job that the content does. With eBooks, a lot of people got all hung up on the idea that an eBook was something that you put on a computer or a handheld device that allowed you to read a book. As opposed to thinking of an eBook as the answer to a whole set of different questions - OK, well what job does a book do?

So for example a fantasy novel does the job of entertainment. Using that analogy, I'd say an MMORPG like Everquest is an eBook. It's a very clear successor to Lord of the Rings - an exploration of how you would do a better fantasy novel on a computer. Just like movies grew out of stage plays. Originally they used to point a camera at the stage, then they realized they could move the camera and do all kinds of different things.

A lot of the publishing that I do really has two jobs: one is teaching and the other is reference. Safari is chiefly an online reference tool, so we're exploring new ways of putting our information in a reference context. For example we built a web services API so that Safari could be built into, say, a developer tool and become a help system. We're looking at it like this: what are we trying to accomplish here? Similarly, if you've looked at the O'Reilly Learning Lab, we've recently done online training - because, again, that's one of the things we do. We teach people.

So there's not a single business model, and there's not a single type of electronic content. There are really a lot of opportunities and a lot of options and we just have to discover all of them. 

Take music - the music industry was so focused on selling songs that they completely missed the ringtone business. What new technology does is create new opportunities to do a job that customers want done. 

There's a great talk that I heard Clayton Christensen give (he's the author of The Innovator's Dilemma). He was the one who I first heard using the "job" analogy. He talked about a study that Harvard Business School did for McDonalds, about milkshakes. They are apparently McDonalds' most profitable product, but the company wanted to figure out how could they make it even more profitable. What the Harvard researchers did was they went and watched people at McDonalds - and asked what job was the milkshake doing? And they discovered that the milkshake drinkers fell into two large groups. The bulk of the sales were in the morning and in the late afternoon. And they figured out that in the morning milkshakes were bought by a solitary commuter and the job was to while away the commute. And in the evening the milkshake was bought by the single parent coming back with a crowd of kids from a soccer game or whatever - and the job of the milkshake was to be a reward to the kids and the parent was always saying - hurry up and finish your milkshake! So in the morning the milkshake needed to be thicker, to last longer, and in the evening it needed to be thinner so it'd get drunk faster. So it was doing a different job at each of those times. 

And I think we have to apply that kind of thinking to electronic content - what are we trying to accomplish?

RSS and Web 2.0

Richard: A number of bloggers have noted that RSS was a common theme throughout the Web 2.0 conference. Russell Beattie said that "RSS was always mentioned [at Web 2.0 conference] in the context of Web Services in general". Where do you see RSS and other syndication technologies fitting into the "Internet as Platform" framework? 

Tim: RSS is clearly, far and away the most successful web service to date. And it kind of demonstrates something that happens a lot in technology, which is that something simple and easy-to-use gets overloaded (in the sense that object oriented programming uses the term). 

I mean it's the classic example of Clayton Christensen's innovator's dilemma. When HTML came out everybody said "Hey this is so crude, you can't build rich interfaces like you can on a PC - it'll never work". Well it did something that people wanted, it kind of grew more and more popular, became more and more powerful, people figured out ways to extend it. Yes a lot of those extensions were kludges, but HTML really took over the world. And I think RSS is very much on the same track. It started out doing a fairly simple job, people found more and more creative things to do with it, and hack by hack it has become more powerful, more useful, more important. And I don't think the story is over yet.  

The fundamental idea of syndication and the ability to redistribute content via web services, is a very powerful idea and we're going to see more. There was this whole fascination with Push back in the late 90's with companies like Marimba and Pointcast - and they tried too hard to make that work and to build a business around it. (Although Marimba eventually did make a nice business in the enterprise, with software updates.) It was too early and too freighted with stuff that was good for the companies but not for the customers. As is often the case, it came back from the wilds as something not sponsored by companies with business models but by independent developers who were just trying to make stuff that worked for their own needs. As happened with the web, the business models come later. 

But this whole idea of people subscribing to content that they care about I think is fairly fundamental. We're basically dealing with a world of information overload and being able to tailor your personal portal is a pretty powerful idea. And I think we're going to see it increasingly used. 

My previous post is a classic case in point. It's an interview with the CEO of the top computer book seller in the world and a leading Web visionary. The content of the interview is very compelling (IMHO), if you're at all interested in web technology. Yet so far, about 36 hours after I published it, no big blogosphere 'connectors' have linked to it. I haven't really pimped it round the sphere, other than submitting it to Slashdot (no go, this time) and Boing Boing (obviously not quirky enough). I suppose I could email the link to the connectors in the web tech blogging world - Dave Winer, Doc Searls, Robert Scoble, et al. But frankly I hate doing that kind of stuff... it makes me feel like I'm a court jester begging for the King's attention. (I haven't even linked to said people, such is my shame in even mentioning it).

So what to do? Obviously I want people to read my interview with Tim O'Reilly, not to mention the other things I put so much effort into writing. Maybe I need a "Blog Agent" to whip up some public relations, flick the link around to all the connectors, syndicate it on media websites - and all the other things that you need to do to get read around here. That's not self-pity speaking either - it's ambition...of a Content Creator who is not very good at this PR game.

Of course, it all comes back to that word 'momentum' (one of my fave words currently). Once even 1 connector links to you, the ball starts rolling and the meme spreads - sometimes like wildfire. That's happened to me a number of times before - e.g. my interview with Lucas Gonze got Slashdotted and it was all go after that. The challenge for the vast majority of bloggers is to get that first connector to link to you...

Tim O'Reilly is the founder and CEO of O'Reilly Media, one of the most successful computer book and online media publishers in the world. I won't regurgitate Tim's official bio, but let me put this interview into a personal perspective. As an English Lit major from the early 90's and a passionate Webhead now, my niche is at the intersection of Publishing and the Web. Tim was one of the people who invented that intersection, so it was a thrill to talk to Tim and I thank him for granting an interview to an unknown blogger from New Zealand.

This interview will be published here on Read/Write Web in 3 instalments. The first instalment is focused on Web 2.0 and web technology. In Part 2 we explore business models for Web content - including discussion of RSS. Part 3 is about books and publishing in particular, but also covers social software and Remix culture.

If you'd like to be notified when Parts 2 and 3 are published, I invite you to subscribe to my RSS feed (right-click and copy to your favourite RSS Aggregator). Here is Part 1 for you now:

Web 2.0 Conference Review   

Richard: Before the Web 2.0 conference, in your article Ask Jeff Bezos, Adam Bosworth..., you talked about wanting to gather insights into the success (and future) of Web 2.0 companies such as Google, Amazon, Apple. Now that the conference is over, what were the key insights about Web 2.0 that you personally got from the conference - which you didn't know beforehand? 

Tim: When you work on putting together the program, you know what's in it, so I wasn't surprised terribly much by anything. There were a few things that stood out, though. For example, Mark Cuban's insistence that HD [High Definition] makes movies safer from the MPAA's online piracy fears is an interesting application of an idea that I've been aware of for some time - namely that storage is getting cheaper faster than bandwidth [is getting cheaper]. And of course, we were all waiting to see who Mark would skewer! 

I was also blown away by the lineup of Mitch Kapor, Cory Doctorow, and Larry Lessig. I've heard all of them speak before - each of them has been at my conferences many times - but I thought that together they made a really rousing combination, raising awareness of the profound political and legal dimensions of Web 2.0. As Larry has often said, we can't let the past use legal means to prevent the future from happening! 

There were also a couple of things that came up at the last minute. For instance, we had a High Order Bit by an old friend of mine, Andrew Singer, about reconfigurable computing and the performance and low power possibilities there. It came out because I sent him an invite to the conference and he said: "Oh I'd like to present something I'm doing". That was a surprise thing, because John and I hadn't planned for it in the program until the very last minute. This is the kind of technology out of left field that could really change the rules. I've been following FPGAs and other forms of reconfigurable computing, but I hadn't realized that it could lower the power consumption so much - which could have real implications for portable devices. 

Apple and Web 2.0

Richard: In the blog coverage of Web 2.0 I heard a lot about Amazon, Google and Yahoo!, but I didn't hear a lot about Apple... 

Tim: Apple is in a position they've been in a lot of times before. They're like Moses showing the way to the promised land, but they don't actually go there. In a lot of my talks I use iTunes as an example of what Dave Stutz calls "software above the level of a single device." Here is this application designed from the get-go to span the handheld to the server, with the PC a way station. And that's a paradigm for the future. But because Apple ends up with a closed platform, they don't necessarily take that out to the industry. Someone else adopts the ideas and takes them further. I think we're seeing that the wave of innovation that Mac OS X represented has really inspired a lot of people.

And even as far as their participation in the conference goes, it was a bit of a disappointment. They had promised to send Eddy Cue, who runs the iTunes business, but at the last minute he dropped out and sent a substitute. That's a sign that Apple doesn't take reaching out to this tech audience as seriously as they should. 

Microsoft and Web 2.0

Richard: A key part of the Web 2.0 theory is "the commoditization of software" - how the value is now in the services enabled by that software. It seems though that the elephant in the room is still Microsoft, who remain committed to locking users in with their software - e.g. Longhorn is the next generation of that strategy. Do you think the success of Web 2.0 is dependent on Microsoft's software-focused strategy failing? Or can Web 2.0 and Longhorn co-exist and both succeed? 

Tim: First of all I think that there's never a clear succession. You know, IBM didn't go away when the PC took over as the center of the computing landscape. But they had to change. And I think Microsoft will have to change. I think that the business of Microsoft, the company of Microsoft, is going to continue to succeed. But I think the business model of Microsoft is going to have to change.  

And I don't think that Longhorn will change the dynamics all that significantly. There's some pretty wonderful technology in Longhorn. But if you look at the release cycle, you're talking 5-6 years - and now they're saying, well maybe we better accelerate and take some pieces and put Avalon into Windows XP rather than waiting for the full Longhorn. But they can't just keep up with the pace of a Web-based offering where you can roll out new products to all your users without even asking, and update products dynamically. I just think that [Web-based] software services have a better model. So I think that Microsoft will continue to dominate on the PC, but the PC is going to be a smaller and smaller part of the entire business.  

Similarly I think that Microsoft will increasingly feel margin pressure from Linux as well as people saying: well actually the applications that really matter to me are not on my PC. And so they're going to be able to extract less of a monopoly rent, so to speak. This is very similar to what happened to IBM - they had to shed hundreds of thousands of workers, they went from being an industry goliath to simply being an industry giant! I think that's exactly what will happen to Microsoft. They will lose their pre-eminent position, but they will still be an extremely powerful and successful company. 

Network Effects and Service Levels

Richard: Talking a bit more about how Web 2.0 is about services rather than software... you argue that once a Web 2.0 company reaches a certain level of users and "the network effect" kicks in - it becomes hard for new entrants to break into that market. Is there a danger that service levels at the dominant companies (like EBay and Amazon) will eventually slip and they get away with it, in much the same way that Microsoft has let the quality of Internet Explorer slip? That is, the users will persist with the service because it is "good enough"? 

Tim: Yes I think there's absolutely truth in that observation. I think that companies always become complacent, over time. Or most companies, that is. There are great companies that continue to hold the dominant position for hundreds of years - think Proctor & Gamble for example - by continuing to innovate. And I would say that some of these companies will survive and continue to be innovative companies. Others will struggle.  

And again you can also see companies that coast on their laurels for a while and then wake up - Yahoo!'s a good example right now. Yahoo! started out as an Internet darling and ended up becoming a bit of a stodgy media company in the model of AOL. But they're really waking up now and they're inventing a lot of cool new stuff. The competition with Google has made them realize they've got to get their act together and I think they're responding.  

So I think we'll see a lot of ebb and flow and back and forth, and yes - there will be companies that get lazy because they think they've got it all sewn up. But that's sort of a natural thing that happens in business, I don't think there's anything unique to Web 2.0 about it.

Data Ownership and Lock-in

Richard: From a user perspective rather than a developer perspective, a lot of what Web 2.0 is about is users producing content and not just consuming it. An example you've used in the past to illustrate this is the "user added value" on Amazon, compared to say its online competitor Barnes & Noble. The other side of that coin though is the "data lock-in" of users, where users may not necessarily have control over their content. Is this something for users to be concerned about, given that people are used to having relative control over the data on their desktop? 

Tim: Absolutely. I actually ran a couple of panels on this at our Open Source convention, a year and a half or two years ago - called 'Open Data - Do We Need a Bill of Rights for Web Services?'. We had people from Amazon, EBay and others trying to answer that question: what does it mean when we're investing our online data in these sites? Will we end up with something like the Open Source movement because the companies have ended up locking in their users? And we see this right now - for example the Danger Hiptop. They basically tried to lock-in their users. So there are companies that are trying to use data lock-in as a competitive tool - and there will eventually be a recognition that this is a problem.  

But the actual data ownership is maybe less important, in some areas, than people think. When we talk about user-contributed data, we're not just talking about my data proper (as in having your mail stored on Gmail or Yahoo! Mail or whatever.) We're also talking about a kind of content that users are contributing to a collective work. So for example, Amazon Reviews - people don't really care about that in the same way. They're not saying "Oh I created that review and I want to be able to export it to Barnes & Noble as well". They're creating it in a particular context of that community.  

And when you think about ownership, it really gets portrayed as black and white - when in fact it's grey. It's kind of like valance electrons, where data has a center of attraction but it also is free to move. So when I write an Amazon review, it is mine in some sense - and you'll find that when people submit reviews to Amazon, they may also submit them to somewhere else because they have a copy of it. And nobody particularly cares. It's that data mobility zone that actually creates a lot of the free-flow ideas on the Net.  

In some ways, we're re-defining what fair use means. Sometimes people send round entire stories, sometimes people get sent a New York Times article and they post it to a mailing list. Is that 'fair use' - maybe not, but maybe we're re-defining fair use. And I think there's just a lot of experimentation, a lot of understanding of what this new medium means - that we have to come to grips with. One of Lessig's key points is that we don't know how these things are going to work out, and we need to give them time to develop before we legislate about them. 

But anyway, back to your point. Despite what I've said about redefining the boundaries of fair use, and the free flow of data in collective works, data lock-in absolutely should be a concern. I believe that data lock-in of various kinds is going to be one of the key tools of business advantage in the internet era. I think that as companies realize this, they will figure out how to be evil - so to speak (to use Google's terminology) - and I predict that we will in fact have some major battles in that area. 

To be continued in Parts 2 and 3...