A picture of me standing at a lectern, working on a laptop computer, on the stage of the FWD50 digital government conference

Hi! I’m Alistair. I write surprisingly useful books, run unexpectedly interesting events, & build things humans need for the future.

Twitter’s attention tax

TL;DR: If you can convince millions of people to test which topics are interesting on a platform you control, you can tax those topics when they become popular. Welcome to Twitter’s real business model.

If I tell you that I’m going to build the next Facebook, your skepticism isn’t around whether I can assemble a technical team to do so. Sure, it will take money, but technology is something I can control. Your skepticism is likely due to a far more uncertain part of my plans: Will anyone care?

Attention is the most precious commodity in an information-flooded, short-cycle-time world because once I’ve captured your attention, I can ask you what you want. If the rest of my organization is set up to take advantage of the resulting market insights—employing techniques like customer development and rapid prototyping—I have a chance to turn that attention into a product or a market.

This is precisely why crowd-backed funding, from Kickstarter and Indiegogo all the way to Kiva and AngelList, has flourished. You get not only money, but a signal about the effectiveness of your positioning alongside early demand and rabid fans.

Getting market insights isn’t the only reason attention matters more than it once did, though. If you play your cards right, you can ransom those who want to retain the attention of others. You can effectively tax attention.

Attention is the new barrier to entry

At the dawn of the web, there was a sense of utopia. Digital storefronts meant the end of market behemoths, cried its proponents. The Internet would launch a million businesses, and the Long Tail would prevail.

Fast-forward a dozen years, however, and it’s clear that’s not true. Frictionless digital markets and networks actually concentrate attention in a few big companies. The long tail is more like a cliff: a few really, really popular things, and a wasteland of neglect. Anita Elberse’s book Blockbusters provides a sobering, if depressing, counter-argument to Chris Anderson’s Long Tail.

The most profitable business strategy, she says, is not the “long tail,” but its converse: blockbusters like Star Wars, Avatar, Friends, the Harry Potter series, and sports superstars like Tom Brady.

Elberse claims that, for “experience goods,” doubling down on a few big projects with the best possible production and known, trusted names—such as familiar franchises and actors—works far better. And these days, everything is an experience good.

Enter the attention monopolists.

More than just good branding

Strong brand recognition has been an advantage since word-of-mouth reputation found its way into broadcast media. Companies with recognizable brand identity must include it in their balance sheet under “intangibles”, and spend millions a year defending the integrity of their mental white-space. Perrier can charge more for soda water because it’s Perrier.

Brands alone don’t command attention, though they do provide familiarity. When faced with too many choices, we choose what’s familiar. There’s a reason superhero movies win at the box office, and why we’ve seen reboots of the Batman, Superman, and Spider-Man franchises in recent years: the audience knows what it’s in for.

But there’s something fundamentally different about companies—like Twitter, Facebook, Google, Foursquare, and LinkedIn—that are part of our digital nervous system. They aren’t just Elberse’s “experience goods,” though user experience is increasingly essential to the fitness of any organization. Because they enjoy network effects when they coalesce attention around something, they have a unique advantage. They can tax that precious attention once it’s grown.

attention-aux-pickpockets by dullhunk on flickr

The search engine business model is pretty obvious: They capture the moment at which you’re interested in something, and lets companies who aren’t as relevant pay for your attention. But there are other, more subtle, forms of attention extortion emerging, that may prove more disruptive in the long run.

Attention extortion

Consider Twitter’s advertising model. Its microsyntax—hashtags and RTs—emerged from users, as they colonized feeds and sought ways to better channel attention around a message or a subject. A hashtag was a way of expressing what something was about; a trending hashtag became a thing worthy of attention. Twitter didn’t create hashtags, which have been around since at least as long as Internet Relay Chat. But once they became commonplace—appearing in movie trailers and on cable news networks—they changed how the company makes money.

Twitter waited until it had millions of users before trying to monetize its business. Prior to turning on advertising, the company knew where ads would go—appearing when someone refreshes a feed. If it had been a simple advertiser, it would simply have counted the revenue per ad and the number of refreshes and have understood the potential revenue from its user engagement.

Because Twitter isn’t just a media platform, but rather a platform for testing and then coalescing attention, it can go beyond simple ads. It can literally extort those who’ve captured attention, taxing the way they reach their audience.

The following message appeared on the #strataconf hashtag during O’Reilly’s Strata conference as a promoted tweet.

Twitter’s letting a competing event (in this case, the Big Data tech conference) invade the attention O’Reilly has created*, and the audience it’s assembled. If a company which gathers an audience wants to maintain that audience, it has to pay to do so. That’s the pact we make with an open, free platform for communicating: we’re helping its owners decide what’s interesting, one like, retweet, upvote, or favorite at a time.

Several event organizers I know say Twitter’s advertising team would send them mails before an event, urging them to “take control of your branding” by running promoted campaigns during the event. This is apparently also a common response when someone complains to Twitter about spammy tweets.

It’s a brilliant business model for an attention age. Millions of users are furiously testing the zeitgeist, creating themes that gather attention, and a resulting audience, atop your platform. When one of the topics in your digital petri dish grows big enough, you can sell access to that audience in the form of an auction. Twitter is just one example; other companies have been trying variations of this business—Foursquare, Yelp, Google, Amazon, even GetSatisfaction—and it’s the basis of app stores from Google, Apple, Salesforce, and others.

Notably, walled-garden social networks like Facebook, where it’s harder for a complete stranger to join a conversation already in progress, will find it more difficult to monetize this model, which may be why Facebook has adopted hashtags, public pages, and other comparatively open, self-organizing concepts. Though when your garden is as big as Facebook’s, what are a few walls among billions of friends?

versailles gardens by aaron krohn on Flickr

At its core is the concept of a self-organizing, self-identifying tag. Hashtags are emergent, unstructured, and often messy. But they serve as a pointer to audiences, and they’re a great example of the monetization and organization of crowds. It’s this core behavior—self-organizing crowds—that is so disruptive, and only a few companies have figured out how to harness it.

What should Intrapreneurs do?

The question for those toiling to innovate within large enterprises, then, becomes: how do I avoid this tax, or at least, anticipate it? And more importantly, how do I shift some of my revenue from pure product or service to attention taxation?

First, build the attention tax into your business models

If your idea takes flight, you’ll have to pay for the audience you convene. That’s a simple fact, but it should mean that you adjust your cost of customer acquisition upwards. Analytics can help you figure out the most cost-effective way to deal with that cost, by optimizing spending so you don’t overbid for a hashtag, over-buy impressions, or spend heavily on a popular term when a few less popular ones would do just as well.

On the other hand, if you’re trying to get access to an existing market (for example, to survey attendees at a conference related to what you do) you can pay the fee and talk to someone else’s market. This is often a good short-term way to discover and evaluate new ideas, hijacking their conversation relatively easily.

Second, think how you can convene, instrument, and tax audiences

Reframing the existing business may require you to rethink revenue models. Just because you make money from transactions today doesn’t mean you should in the future. Twitter intentionally remained free until it was the default platform for emerging attention and trending topics—once it had done so, it could turn on the cash spigot.

(Of course, this is a hard sell for many companies. It also contradicts common Lean Startup thinking: get a customer to pay you right up front, to prove demand is real. But consider how little adoption Twitter would have if it had chosen to charge for access early on.)

Figure out how you can be at the center of signals your market generates. The real value of service models is the perpetual insight you get into usage patterns. Tesla’s cars send diagnostics, but the data can also be used to inform new product ideas, tightening the feedback loop between customers and designers.

Finally, build products that convene audiences, even if this earns the ire of data privacy advocates and traditional channels. If the utility of the product you offer outstrips the perceived value of the data your market is sharing, you’ll win—Facebook’s users happily part with intimate personal details in return for being connected with their friends. Actively look for such rallying points. The hashtag is a great example of something the consumer creates that the convener can then leverage. What’s your industry’s hashtag?

* [full disclosure: I help run @strataconf, so I’m not exactly an unbiased observer in this battle.]