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So all this time, Gawker Media founder and evil genius Nick Denton has been pretending to be a mild-mannered blog network CEO, when in reality he is a behavioural economist doing ground-breaking research into the mechanisms of human motivation and productivity. Of course, it could be that even Nick D. doesn’t realize the extent to which he is experimenting with such things — but Felix Salmon’s piece in Portfolio makes it pretty clear that’s exactly what he is doing.

In a nutshell, Valleywag bloggers are paid a low base salary and then have to “earn” that salary through page views generated on their blog posts (instead of being paid a flat rate per post, as they used to be). Once they have done so, they get paid for any additional page views on a per-thousand basis. The number used to be $9.75 per thousand, and now it is $6.50, As Felix points out, that means bloggers at the Silicon Valley scandal rag will have to produce 50 per cent more page views just to keep their income the same. Needless to say, no one is impressed.

As Salmon notes, one reason for the change could be that Denton underestimated the page view growth at Valleywag, and wound up paying his writers more than he budgeted for, so decided to cut back. In a similar vein, the rates paid to writers at the Wonkette political blog were recently cut — likely because Denton knows that page views will skyrocket with the approaching U.S. election, and therefore writers would stand to benefit without having to do any more work.

There’s an even more in-depth discussion of the behavioural economics of this kind of move at the Crooked Timber blog, where Henry Farrell talks about the somewhat perverse Catch-22 that such incentive schemes can run into when they make contact with the real world: for example, if people know that working hard will mean that their salary gets permanently pegged at that higher level and it takes them even more page views to make a bonus, then they won’t work as hard — in a sense, the incentive reverses itself and becomes a disincentive.

If you still can’t get enough of all this kind of talk, I recommend that you set aside half an hour or so and go read Part One of the latest Marc Andreessen series on entrepreneurship, in which he writes about Berkshire Hathaway executive and Warren Buffett sidekick Charlie Munger’s theories on incentives.

This isn’t really relevant to much of anything, but I think it’s extremely cool: it’s a “tattoo” — or more of a micro-etching, really — done on the side of a single human hair with a focused ion-beam microscope, by the engineering department at McMaster University in Hamilton, Ontario. The tattoo would be cool enough all by itself, but the fact that my oldest daughter goes to McMaster makes it extra cool 🙂

A New York-based entrepreneur named Hank Williams has a guest post over at Silicon Alley Insider about how the tech economy is being ruined by the “freetards” (although he doesn’t use that term). In a nutshell, Hank believes all the venture-backed startups that are littering the Web with their free apps are ruining it for hard-working guys like him, who just want to make an honest dollar by providing a quality service in return for actual money.

This is an appealing story — but is it true? There’s no question that a lot of Web-based services are going the free route, and there is a certain segment of the VC world that believes you need to build something up to a large enough scale first, and then find ways to monetize it. But is this really something that VC’s invented and have forced onto the tech startup market? Hardly. If anything, it is a phenomenon that has grown out of the reality of what it costs to run a Web business.

Why are so many things free? Henry Blodget suggests an answer in his comment on Hank’s post at SIA: because they can be. In other words, things — primarily services, information and so on — used to cost a lot because of the nature of those businesses, embedded costs, etc. Now, a large proportion of those costs have been removed. Does that mean everything can be free? No. But many things can come pretty darn close. And once the value of that service or content has been established, then it’s a lot easier to start either advertising around it or charging money for it.

This is the essence of the “freemium” approach. Give people some of what you have for nothing, and see if they like it. If they do, then offer them more for a fee. It works for SmugMug.com, it works for 37Signals.com and other companies. Did Craigslist choose to offer its services for free because its VC backers forced it to? No. It did so because Craig wanted to do it that way — and because he could do it that way. Only when it had become obvious how valuable it was did he start to charge for certain things, and then only in a limited way, and still the company makes close to $100-million a year with virtually no more effort than when it was free.

That is the power of the “free” model — it’s not some kind of snake-oil trick that VCs desperate for an exit have foisted on Web startups. While that may be happening, it certainly isn’t to blame for the entire Web-based freemium approach, and it has nothing to do with whether Hank Williams gets paid an honest wage for an honest day’s work.

Update: See Hank’s comment below. Don MacAskill of SmugMug also has a thoughtful response, in which he notes that lots of industries have a stratification between commodity (i.e. free) and premium brands — and also notes that SmugMug actually benefits from the free services that compete with it. For what it’s worth, I think Alan’s “Freetardis” offer at Broadstuff is hilarious.

So the hot story that is currently top of the pops on Techmeme is that Loic LeMeur’s video-streaming service Seesmic has bought Twhirl. Or rather, Seesmic has acquired Marco Kaiser, who developed Twhirl. Just one question: Why is this such a huge deal? Is it a slow news day? I could see everyone getting excited if Seesmic had bought Twitter itself — but Twhirl is just a client for accessing Twitter, right?

Don’t get me wrong — I think Twhirl is great, and I use it all the time. It’s a great example of an app built using Adobe’s AIR platform, and it has a lot of cool features. But why should I care whether Seesmic owns it now or not? I know Marshall thinks that this is a vision of the Web’s future, but I have to say I remain skeptical on that front (and it seems like others, including my friend Om Malik, share some of that skepticism). If what this deal means is that I get more “I’m streaming — come chat!” invitations every 10 minutes on Twitter, then count me out.

Update 2

The blogger that Craigslist sent a cease-and-desist letter to earlier this week isn’t going to back down quietly, it seems. He has published a response on craigslistblog.org to Jim Buckmaster’s recent post, in which he says that the ads were just to “cover some hosting costs.” He also says that with his misleading post, the Craigslist CEO has “tarnished Craig Newmark’s reputation forever,” and that Buckmaster should “do the right thing and step down today.” Gee, Tim — hyperbole much?

Update:

Craigslist CEO Jim Buckmaster has posted an entry to the new Craigslist blog in which he apologizes for the “ham-handed” C&D letter described below, which the site sent to a blog called Craigslistblog.org. But Buckmaster also provides some more details about why the classified service went after Tim White’s blog; among other things, he says the blog was running misleading text ads with Craigslist’s name in them (the ads were apparently removed from the site before the blog post got a lot of attention).

To me, that changes things substantially. One of the principles behind domain-squatting cases is that in order to avoid such accusations, a domain should have been registered and used in good faith — in other words, not to generate revenue based on the potential misunderstanding generated by a similar domain name. It seems pretty clear that Craigslistblog.org was designed to do that, and so I am backing Craigslist on this one. Jim Buckmaster’s post, incidentally, is a nice example of how to apologize and still make your point.

Original post:

Seems like Craigslist is in some hot water over a blog. But not because its new official blog is really ugly, poorly-designed and difficult to use, which it is — although given the somewhat… er, “distinctive” look and feel of the classified site itself, it’s probably not surprising that the blog looks like my daughter’s fifth-grade class designed it using a version of Microsoft’s FrontPage from 1998 (Craigslist doesn’t have ads? Not to be outdone, the blog doesn’t have comments or an RSS feed).

In any case, it’s not Craigslist’s official blog that’s the issue — it’s a site called Craigslistblog.org, which was started up about a month ago by a guy named Tim White as a way of getting some discussion going about Craigslist, both good and bad. Then he got a rather brusque C&D letter from none other than Craigslist CEO Jim Buckmaster, which Tim has posted on his site. In no uncertain terms, it directs Tim to stop using the domain and the name Craigslist immediately or face legal action.

Tim,

We need you to stop using the infringing domain CRAIGSLISTBLOG.ORG immediately, and arrange for tranfer of it to us asap – using/selling/transfering infringing domains is illegal, and penalties up to $100,000 per domain can be applied.

Tim, however, responds that Jim has “gotten some bad legal counsel” and asks whether the company plans to shut down other sites with craigslist in the name, such as craigslistmap.info. Jim then copies Tim on a letter to Craigslist’s attorneys, in which he not-so-subtly mentions that the law firm does intellectual property work for “Google and a lot of other prominent companies.” As far as I can tell, Tim isn’t planning to back down.

Is Craigslist in the right here? I’m not a lawyer (although I sometimes play one on TV), but from my reading of past cases involving domain disputes, both WIPO rules and U.S. law require complainants to satisfy several conditions in order to win such a case. The first one — whether the domain name is confusingly similar — is a slam dunk for sure. But the other criteria are whether the defendant is making legitimate fair use of the name, and whether it was registered in bad faith (i.e. whether the defendant registered it with intent to profit from the confusion).

Those last two are a lot harder to answer, and I happen to think Tim has a pretty good case. Whether he can withstand a legal onslaught from Craigslist — which has about $60-million or so a year to play around with, as far as I can tell from the recent revenue numbers — is a separate question. It’s also interesting to note the anti-Craigslist comments on Tim’s post. I expect plenty of criticism of the classified site based on the contrast between its touchy-feely ethos and its actions.

It’s been a couple of days now since I read it, but I keep thinking about an article I read in The National Post, which has been running a series of pieces about the seven deadly sins. The one I read on Tuesday was all about greed, and in particular, about how some people hoard music. But these people aren’t collecting antique wax cylinders used in Edison’s time, or 78 rpm slabs from the Victrola days; they are collecting mp3 files — in some cases hundreds of gigabytes worth of them.

For example, the story describes a member of a group on Last.fm (called the People With an Absurdly Large Music Collection group) who has more than 75,000 files, or about 368 gigabytes worth, which would take almost a year to listen to without a single repeat. Depending on how you calculate it, that’s equivalent to about 7,000 albums or CDs. One of the good things about collecting mp3 files, of course, is that you can have 75,000 of them on a single hard drive, whereas 7,000 albums or CDs would fill several rooms in your house and/or your basement.

Collecting albums seems to make a certain amount of sense from a sort of fetishistic point of view, though, just as having an absurdly large library does (like one of those ones where you have to climb a giant ladder that runs on tracks around the room). Albums and even CDs are physical objects that you can look at and hold, and album covers were a great art form at one time, something that has sadly been lost with the move to CDs and mp3 files. I was just talking with a friend today about how much I loved to look at the old Yes covers by Roger Dean, and Pink Floyd and so on.

But what point could there be in collecting 75,000 mp3 files. Not only would sorting them and tagging them and so on be a gigantic pain, but you can’t even really look at them — unless you run them all through iTunes and use the Coverflow view, I suppose. But still, are you going to flip through the equivalent of 7,000 albums? No. Of course, I guess the guy (and they are always guys) with 7,000 or even three million actual albums probably never looks at half of them either.

I only have about 3,000 songs — but the main reason I do is because I like to put them on shuffle and get surprised by a song that I can barely remember ever downloading or ripping, but one that I remember listening to way back when. That’s a great feeling. And it’s even better when you can do it with a select group of songs you love, rather than just waiting for one to come on the radio by accident. What if you had access to a constant stream of all the music you could possibly want — the way Fred Wilson describes in his recent post? Would people still want to download and keep songs?

I debated whether to write this post on the brouhaha (or is it a kerfuffle?) between TechCrunch50 — which is being run by Mike Arrington and Jason “I’m more famous than you” Calacanis — and Chris Shipley’s DEMO conference. After all, it’s really a lose-lose situation: if I agree with Mike then I’m one of Arrington’s toadies (as some commenters have accused me of being), and if I agree with Shipley then Mike will take it badly.. But I just can’t resist a good blogosphere donnybrook or “bitchmeme,” so I figured, what the hell, why not wade in.

Off the top, I think Mike saying that DEMO “needs to die” is a little strong. As Carla Thompson of DEMO writes at Guidewire, we’re just talking about a couple of tech conferences here — it’s not the Battle of Biscayne or the War of the Roses, or even the battle between MacLeod and the Kurgan in Highlander (great movie, even if Christopher Lambert’s Scottish accent is laughable). Still, there’s no call for Carla to say that Mike’s ego is over-inflated and he needs to “get over himself.”

The bottom line for me is this: Jason Calacanis (unfortunately) is completely right when he says that DEMO’s model is completely untenable — or should be. Charging companies $18,500 for a three-minute pitch is just ridiculous, no matter how many times you talk about all the mentoring and coaching and contacts and stage managing you get. If I’m a startup, why don’t I just keep the $18,500 and buy my own mentors and coaches and whatnot? Or better yet, buy some food or pay the hosting bill.

Now, TechCrunch50 (which started as TechCrunch20 and then became TechCrunch40) is hardly a charitable enterprise, as Cynthia Brumfield has pointed out in the past. The two lads are likely to pull in several million at least, depending on their costs — and yes, there are fees to take part in the “demo pit” (which I picture as a sort of Jell-O and dirt-filled kids’ swimming pool type of arrangement, like something you would see on the Gladiators TV show), but they are an order of magnitude smaller than the fees that DEMO charges for a few minutes of glory.

There’s no doubt that Mike’s pugnacious attitude (much of which is for show, as far as I can tell) can rub people the wrong way — and I would expect it’s doubly irritating when he happens to be right, and when he’s also making you look bad in the process, as I think he is in this case.

After months of rumours — and years of talking about it — MySpace is launching a comprehensive music service involving three of the four major record labels (for some reason that remains unknown, EMI wasn’t part of the announcement, although some say it will soon join the venture). According to PaidContent’s description of the conference call, which none of the labels participated in, the music service is a joint venture that will have separate management, and will involve downloads and possibly streams at some point, but may not be riddled with DRM.

Almost from the moment it became a social phenomenon, which would be three or four years ago now, MySpace has seemed like an ideal vehicle for music — and in many ways it has been an ideal vehicle for musicians to reach their fans, to communicate with them, to share tracks (or in many cases only short snippets of tracks, thanks to the paranoia of the record labels) and to generally build awareness. But it hasn’t been a great place to actually buy or sell music, despite being a giant platform for social networking between artists and fans.

Some of that could be blamed on a largely stillborn music venture with Snocap, the startup backed by Napster founder Shawn Fanning, which promised to allow musicians to sell songs through a Snocap store widget that could be embedded on artists’ pages. Although that too seemed like a great idea, it ran into technical difficulties and Snocap changed gears several times before finally laying off 80 per cent of its staff. The assets were later acquired by the music network Imeem, which also has deals with several of the major record labels.

According to MySpace, there are 5 million musical acts on the network and more than 110 registered users (although some of them are likely people like me, who registered just so they could see someone’s profile, and have rarely been back since). So it seems like a slam-dunk to turn at least some of those 5 million into revenue-generating opportunities. So why hasn’t MySpace been able to do it before now? The record labels themselves are partly to blame for that, of course (and reading between the lines it seems as though this venture is at least in part a peace treaty to settle the lawsuit between Universal and MySpace).

Whether this new venture can break some of those old rules remains to be seen.

At this point, I couldn’t really care less who eBay sells Skype to, whether it’s Google — as the current crop of rumours seems to indicate — or Microsoft, or even Dunkin Donuts for that matter (don’t laugh; I can see a business model there). As Fred notes, it has never made any sense as part of eBay, and certainly not $4-billion worth of sense, and it doesn’t make any sense now. Meg Whitman managed to sell that idea to a gullible board desperate for growth of any kind, and instead they got a bag of goodwill the size of Manhattan, which they eventually wrote off.

Skype could have a huge amount of value as part of Google. Maybe even as much as eBay offered in the beginning, but certainly a lot more than it has produced for the auction provider. Google has made it obvious that it wants to move into mobile with Android, it’s financing wireless initiatives — voice calling either on the PC or on a mobile makes sense as a place for Google to go, if only because it could integrate the app not just with Google Talk but with its core search business and its money-spinning keyword ad business. Let’s hope this one actually comes true.

The book publishing industry seems to be slowly coming to the realization that digital media affects them just as it does the music and movie business: The Times has a story about a bleak forecast from the London-based Society of Authors that “book piracy on the Internet will ultimately drive authors to stop writing unless radical methods are devised to compensate them for lost sales.” Hey, I know — what about a tax on ISP accounts? Some of those in the music industry seem to think that will solve all of their problems.

The story talks about how the Internet is “awash” with copies of entire books by J.K. Rowling and others, as well as chapters or excerpts from popular novels and other books, and throws in some scare-mongering about Google’s book-scanning project. Then the chairman of the Society of Authors, Tracy Chevalier, comes up with her view of the dark future that lies ahead if the Internet isn’t stopped somehow:

“For a while it will be great for readers because they will pay less and less but in the long run it’s going to ruin the information. People will stop writing. There’s a lot of ‘wait and see what the technology brings’ but the trouble is if you wait and see too long then it’s gone. That’s what happened to the music industry.”

Is the music industry gone? Hardly. It may in the midst of a painful transition from one business model to another, but it is hardly gone. Apple has sold billions of songs through iTunes, and both artists and record labels that are open to new ideas are finding ways to use the Web instead of just complaining about it. So are authors: Brazilian novelist Paul Coelho, for example, has been actively pirating his own books, and has found that his sales have increased by leaps and bounds.

He’s not the only one either — other authors are either providing copies of their own books for free or as a “pay what you want” download, or are offering chapters for readers to download. As one author put it on his blog, for a writer obscurity is a much worse fate than piracy (as Tim O’Reilly noted back in 2002). Ms. Chevalier would be better off helping her members experiment with some of these new models, rather than sitting behind the barricades waiting for someone to rescue her.

Update:

On reading Mike Masnick’s take on the Times piece at Techdirt, I think I may have been a bit too harsh with respect to Ms. Chevalier’s comments — although I will note that one of the prospects she raises as an alternative is government intervention, which seems to me to be a slippery slope leading to something like the music industry’s ISP tax. In any case, Mike makes a good point that at least she seems to be open to new models, and to that extent she should be congratulated.

During a semi-desperate search for something — anything — not April Fool’s Day related, I came across an interesting post by Sarah Perez at Read/Write Web about the psychology of blogs and “bitchmemes” (as MG Siegler calls them) and comments, and I thought she really hit on something. Her jumping off point was a recent post by Paul Graham called “How To Disagree.” As befits a post written by a thoughtful geek, it describes a kind of taxonomy of disagreement, and I’m sure every blogger who reads the list has either engaged in or been the target of one or more of those options.

As Paul and Sarah both note, disagreement seems to be far more prevalent in the blogosphere than agreement. Why? They have their theories — as Paul describes it, agreement “tends to motivate people less than disagreeing,” in part because disagreeing takes you into new territory (sometimes). And as Sarah says in her post, this phenomenon makes its way into blog comments as well, with the number of positive comments generally outweighed by the number of negative ones. As she says:

“It could be that 90% of the readers think the author is correct in their opinion, but only the 10% who feel differently have made their voices heard.”

This is something that we’ve seen at the Globe and Mail as well (and I’m sure other newspapers that allow readers to comment on news stories have seen it too). I call it the “radio phone-in show” phenomenon. Whenever you listen to call-in shows — at least the really popular ones — there tends to be an overwhelming number of callers who disagree, either with each other or the topic. And even if they agree, they are often incensed about whatever the subject is, whether it’s government waste or some stupid move by whoever the call-in show happens to be talking about.

Why is this? A couple of reasons, I think. One is that agreeing with someone is a sort of ambivalent feeling at best. Violent agreement is an unusual thing to see, in most cases. But disagreement is almost always emotional — even if it’s couched in logic. And it’s a strong emotion. People who disagree with something are motivated to pick up the phone and call into a show, or click the mouse and comment. People who agree are much more likely to just nod their head in agreement and get on with their day.

This phenomenon extends to those reading and/or listening as well, and is related to the “car accident” effect. People enjoy watching or reading about disagreement and in some cases actual violence, or the threat of violence. They may say that they don’t — but all the evidence suggests that they do. Perhaps because it’s a strong emotion, perhaps because they want to feel superior to someone, or maybe just because it’s fun to watch. Why else would DVDs of hockey fights and car crashes sell so well? It’s human nature. And the blogosphere is a Petri dish for human nature.

Kevin Kelleher has a post up at GigaOm with an interesting proposition: he says Google should duplicate the kinds of cloud-based services that Amazon has — the S3 storage business, the EC2 virtual server business and so on — except do it all for free. He rightly argues that this would be an easy way to eat Amazon’s lunch (the idea stems from a post by my old friend Dave Winer, who wrote about a pig coming up to his car and talking to him, which may or may not be some kind of metaphor).

I’m not saying Google should make its cloud services free because I want free storage space and a virtual disk drive that is 100 gigabytes and free blog hosting that doesn’t go down for an hour or two every few days, the way my current host does — well, okay, that’s part of the reason I think Google should do it. But I also think it makes perfect sense for the company. Offering things like Gmail and Google Docs and Google Calendar for free is in their DNA. Why not use the spare space on those 500,000 servers to the maximum? It’s a slam-dunk.

Nice to see that Google has finally launched offline access for Google Documents — or at least for text documents anyway (apparently presentations and spreadsheets are coming later). I guess we should be grateful, although I still have to wonder why Zoho has had offline capability for its document-sharing service since way back in November sometime, which is based on Google Gears. I thought having inside knowledge of features helped companies triumph over their competitors — or is that the kind of thing that only works for Microsoft?

Late to the party or not, I still think Google is the one to beat. Zoho’s services are great, and I use Zoho Show in particular a fair bit, but when it comes to trusting a company with my data I would have to come down on the side of Google. Doesl being a multibillion-dollar company mean that they won’t be vulnerable to outages that take down the cloud? Hardly. But I expect them to have some pretty mean backups and redundancies, thanks to those 600,000 servers they have in warehouse farms around the world (or however many they are up to now).

Some — including Frederic of The Last Podcast — say the sharing part of Google Docs doesn’t interest them much, and that they need features that only an offline or desktop version of a word processor can offer. I have to say I don’t need the latter, and I think the former is a critical feature, especially as companies try to make it easier for their employees to collaborate and become more creative. (Note: Rafe Needleman at Webware points out that Mozilla is planning to build this feature into its browser).

According to a piece in The Telegraph this morning, Virgin Media — the Internet service provider run by Richard Branson’s Virgin conglomerate — has volunteered to play copyright cop and yank the Internet account of users who share infringing material. Virgin and the British Phonographic Industry are apparently working out the details, which will likely involve the “three strikes and you’re out” approach.

Under this system — which has been proposed by several copyright enforcement bodies as either a voluntary process or one that could be legislated — Internet users would get a letter from their ISP after the first “offence,” then their account would be suspended (no word on for how long), and after a third infraction they would be disconnected completely. It’s not clear whether Virgin is going to play ball with cutting people off, but the story says that “remains an option” (although Torrentfreak says there could be a silver lining to the Virgin move).

As more than one person (including me) has pointed out, this approach sounds like a great idea right up until you try to imagine how it’s going to work. Would users be cut off for a single shared file — and if not, then how many? Would they be cut off for days, or weeks? What if the account holder isn’t the one sharing the files? How is the BPI going to track activity? How will the money be shared? Determined pirates won’t be the ones caught by this plan — only the unwitting or stupid.

As I mentioned in my previous post on this topic, not only would turning ISPs into Internet police open up a giant can of worms — especially since Virgin would be voluntarily turning over the names and addresses of users suspected of engaging in illicit behaviour — but criminalizing copyright infringement on such a massive scale is all out of proportion with the damage that is allegedly being inflicted on the music industry. And yet, we seem to be facing either an ISP cop or ISP extortion.

The more I think about it, the more it looks like this could be the beginning of Act Two of the music industry’s ongoing self-immolation, with the lawsuits by the RIAA as Act One.

Congratulations to Scott Karp and his team at Publish2, who just announced that they have closed a $2.75-million round of Series A funding from Ross Levinsohn’s Velocity Interactive Group. Scott was one of the most perceptive writers about the future of digital media while he was with Atlantic Media (which publishes The Atlantic magazine), and last year he left that job to pursue his vision of how traditional media can use social tools — such as the Publish2 social bookmarking platform — to improve and extend their reporting onto the Web.

I’ve been trying out the beta for awhile and reading what Scott has written about the trials he has done with U.S. papers, and I think he is definitely on to something. I’m looking forward to finding out what else he has up his sleeve. There are some more details at VentureBeat and Jeff Jarvis (who is on Publish2’s board) has a post as well. Steven Hodson at Winextra thinks that by focusing on journalists, Scott has turned his back on the blogosphere (but see Scott’s comment on Steven’s post for clarification).

Update:

Om Malik (a former journalist himself) says he thinks Scott is a smart guy, but he doesn’t see the business potential in Publish2. Mike Arrington also seems skeptical — or maybe it’s just because he didn’t get an invite to the beta 🙂