Inequality and the web, why infographics win, and contrarianism as a VC strategy

The Web and Consumption Equality

Andy Kessler argues that there are few material differences between the rich and the rest of us (or at least fewer and fewer). One likely reason for this is that more goods are either physically goods bought on the web, or virtual goods consumed there. The math of selling to consumers online is that you make a huge upfront investment, but your marginal cost is basically zero—the big profits come from price discrimination against deep-pocketed customers. Which means that if Andy Kessler is on the side of consumers, he’s something of a class traitor: one thing that keeps the web alive is the countless people who would rather pay extra than comparison shop. If they know that the Internet’s pricing scheme is always and everywhere designed to soak the rich, they may have second thoughts.

(We’ve explored the deflationary nature of the web earlier.)

The inverse of this is that long-tail content is lower in quality, because there are fewer people to price-discriminate against, and they’re more likely to compare notes. Plus, as costs shift from marginal to upfront, there’s more of an incentive to aim for mass-market investments. And on a related note, one web entrepreneur gave up on ‘freemium because of the low-quality users it attracts. At the low end, price discrimination is designed to recoup the cost of support.

Latest Estimates put Google+ at 62mm Users

Paul Allen (the Ancestry.com founder, not the Microsoftie) has updated his Google+ population estimate. As before, these estimates rely on some assumptions about the distribution of last names on the web versus in the real world, so there are some kinks but it’s a great way to estimate things. The continuing story with Google+ is that Google either doesn’t highlight metrics, or doesn’t highlight the ones that would help it directly compare with Facebook and Twitter. They could have plenty of strategic reasons for that, but anecdotal evidence indicates that Google+ is a very popular site to sign up on, but hasn’t achieved the kind of repeat-visitor traction other social networks have.

• In other Google news, rich snippets tend to raise click-throughs. While that’s a win for early adopters, it’s a net win for Google, which can now build contextual databases in any field where rich snippets are common.
• Meanwhile, local search recreates the early days of SEO. Local is often far easier to game, which is unfortunate: Google has bumped down fairly established organic results in order to push users to Google-owned pages. As above, early adopters are winning, but the net beneficiary is Google.
• Google is also testing ads that allow users to subscribe to an email list directly in the ad. It will be interesting to see how big this gets—the biggest users will likely be in the personal finance space, although daily deal sites will of course benefit, too.

The Observer Turns a Profit Thanks to the Web

The NY Post runs a rumor that the New York Observer is profitable thanks to its popular website (edited by Dealbreaker founder and early Gawker writer Elizabeth Spiers). This is hard to believe based on how often the site gets linked, and from where, but there is one kink that makes it more realistic: as the official publication of New York’s elite, the Observer fetishizes residential and commercial real estate. And that dramatically multiplies the value of its audience. BetaBeat may not get nearly as much traffic as TechCrunch, but the BetaBeat audience is much more likely to rent an office or buy a condo (or at least think about doing those things given BetaBeat’s obsession with them). And that could make its audience worth an order of magnitude more, per pageview, than that of competing sites.

The old narrative about the Observer is that it’s subsidized by one real estate fortune (the one inherited by Observer owner Jared Kushner). Perhaps it’s instead subsidized by thousands of much more modest real estate fortunes, instead.

Why Infographics Win

Blogger Epeus’ Epiphany argues that the rise of infographics is in part due to social networks’ reluctance to use HTML, and preference for images. While this is a factor, it ignores the success infographics see on social bookmarking sites, where these advantages aren’t as prevalent. The biggest factor is that infographics are an effective way to combine the feeling of learning something with the act of merely filling time. They’re the fruit roll-up of knowledge, and the average web denizen hasn’t developed a prudent aversion to them just yet. Infographics remain one of the easiest and most effective ways for companies to bootstrap simple SEO campaigns.

The Contrarian VC

Fred Wilson articulates the contrarian investment strategy for the consumer web. Especially for Union Square Ventures, this makes perfect sense: these companies are all somewhat transformative, so for them to do something right, they need to attack existing constituencies and paradigms. But being “mocked and misunderstood” is neither a necessary nor sufficient condition for success: some companies (e.g. SurveyMonkey or Rap Genius) can be successful without much mockery because they take a broken part of the web and fix it. And the path of least resistance for mockery is accurate mockery. But given two companies with equivalently interesting products, mockery is a good proxy for the magnitude of potential.

A Better Resolution on “Likes”

Social media works as a targeting tool because the cost of expressing an opinion is lower than it is for traditional links. But there’s still a social cost. Here’s some interesting research into how to identify social hierarchies based on language use in online conversations. That could be a way to identify latent “likes” that don’t hit the threshold of meriting a click.