One Thousand True Fans: internet economics and ethical monetisation

There’s a big shift going on in the internet economy.

I’m talking about the move to direct business models where writers and creators get paid by the people that value their content.

A thousand flowers will bloom. Independent content creators are thriving and new tools are springing up to help them.

The gatekeepers are dying. The gatekeepers were employed by the old media companies to select who was allowed into the club.

They enjoyed high status jobs such as editors at newspapers, book publishers or A&R people at record companies.

Gatekeepers had a lot of power to block your access to a creative career. As someone smart once said: all power corrupts and absolute power corrupts absolutely (this explains the Hollywood “casting couch”).

The gatekeepers were not always bad people…it’s just that their job was to protect The System and keep out people like you and me.

If you wanted to be a journalist / writer / influencer you had to get into the club. Your odds of getting a job as a Times journalist were a little better than winning the lottery…but not much.

In the bad old days before the internet, production and distribution was expensive. It took a lot money and equipment to print and distribute a newspaper or film a hit TV sitcom in a studio. There were big economies of scale so you had big media corporations like The BBC, ITV, ABC, Disney, CNN, News Corporation, The New York Times etc etc.

Mass market reach is crucial to an advertising funded business model. The problem is that the advertising tail then wags the content dog. The content gets dumbed down to reach a mass market. The advertisers goal is to sell you more stuff, they don’t really care about the quality of the content.

Show me the incentive and I will show you the outcome.

Charlie Munger on the power of incentives

In the 1960s, 70s and 80s most television aimed at the mass market. Advertising revenue was the incentive for media companies and the outcome was bland sitcoms and lame quiz shows that got huge ratings in a world of little choice. The TV content came a poor second to the toothpaste and washing powder ads.

Newspapers fared better before the internet. Readers paid for their newspaper and in return they expected certain standards. The New York Times, The Washington Post, The Financial Times and The Sunday Times etc were trusted brands. Readers could reasonably assume that if they read it in a newspaper of record, it happened.

Journalists were thought-leaders and undercover detectives who hunted down and published the truth. Newspapers were The Fourth Estate and provided a check on government or corporate power. Their high point was the dethroning of President Nixon by journalists at The Washington Post.

The advertising-supported model funded a golden age of newspapers that lasted roughly 200 years from 1800 to 2000. Today, the legacy media are still trading off past glories but people are realising that something changed.

What changed? From about 2000, the internet blew up the old model. Distribution became free and instantaneous. A gold rush started.

A war for clicks and eyeballs broke out. They say that the first casualty of war is the truth. The second casualty was quality. Clickbait took off. The News Media, which had always been political, now became partisan, taking sides in The Culture War. Journalists became activists.

It’s enough to make you wonder if the News Media is really on your side?

There’s an old phrase in business: if you pay peanuts you get monkeys. Well, with internet news, if you pay nothing you get clickbait.

Today some of the best journalists have fled traditional media companies. Many are carving out their own audiences and monetising them via personal newsletters. Platforms such as Mailchimp, Patreon and Substack make this easier than ever.

Today, as a result of a mass shift of advertising revenue to Google and Facebook, the news business is in crisis.

The great journalistic totems of the last century are dying. News organizations—and other entities that masquerade as them—are turning to increasingly desperate measures for survival.

And so we have content farms, clickbait, listicles, inane but viral debates over optical illusions, and a “fake news” epidemic…in the eyes of consumers, journalistic content has lost much of its perceived value.

Precisely targeted and curated content means less noise. In fact, by attributing a dollar value to such content, people can make more focused decisions about their consumption habits…We can have direct relationships with the writers we trust to do high-value work.

And, because online distribution is basically free, writers can find paying readers for content that would otherwise reach only modestly sized or dispersed audiences that are unattractive to advertisers.

Substack

Paradoxically, as the news media went down the toilet, TV content enjoyed a golden age of quality as the era of binge-worthy boxset shows arrived. Consider The Queens Gambit. Who knew that a show about chess would have such appeal? But the production values are stunning and the whole thing oozes quality.

It started with consumers buying the best shows free of adverts on DVDs. Then came streaming. The business model of Netflix and Amazon Prime works by having content so good that people will pay for it direct…without adverts spoiling it. Customers then tell their friends, creating hits via word of mouth. Because the customer funds the product direct, this business model rewards quality.

To understand internet economics you have to understand a Pareto distribution: the 80:20 “rule” where 20% of the people owned 80% of the land. In the new world of the internet, 1% of the people can earn 99% of the income.

When you win the Internet, you win big. For those sceptical about side-hustles, consider the economics of Belle Delphine who makes $1.2 million per month making videos from home in Sussex.

Internet search engines reward the most popular sites that people link to and click through to. This creates positive feedback loops. Wherever you have network effects, you can get runaway “winner takes all” results where you end up with one dominant home delivery company, one dominant search engine etc.

Monopolies usually end up abusing their power but the good thing about the internet is that there is also a Long Tail.

This allows you to create a micro-business or niche following within The Long Tail.

How? By serving a small niche with high quality content that is not available elsewhere. The independent creator must deliver quality and show up consistently with original content to earn the trust of an audience.

You start by serving the smallest possible audience, the niches that are not being well served by the mass market content. This was how the FIRE movement spread online…it filled a gap left by mainstream financial media who delivered poor quality content incentivised by advertising.

Everyone thinking about a side-hustle should read Kevin Kelly’s One Thousand True Fans.. The idea is simple: if you have one thousand true fans who love what you do and each spend $100 on your stuff each year, you’re making $100,000 per year.

Don’t get me wrong, it’s really hard to earn $100,000 per year from blogging (I assume…it’s not something I’ve experienced). This blog is free and has no adverts. But earning a modest living as an independent creator, artist or small business is possible and it’s becoming easier than ever thanks to new tools such as Mailchimp, Substack and Patreon.

Patreon is a crowdfunding platform for writers, artists, and other creatives collect donations from people who love their work. More than a million people every month are making payments via its service, collectively supporting the work of 50,000 creators. As the legacy media empires self-destruct, Patreon is providing opportunities for writers, creators and artists to get paid direct.

The qualities that are in scarce supply today are honesty, authenticity and nuance…the things that the mainstream media mostly abandoned. This is where the opportunities are. The internet supposedly reduced attention spans but comedian turned podcaster Joe Rogan gets huge audiences for 3 hour conversations with intelligent people.

Take the example of RESET : a self published book that serves a micro niche (financial independence in the UK) and has been selling steadily based on word of mouth and internet chatrooms. RESET has now sold over 13,000 copies…more than most professionally published books ever sell.

It’s not just about the money. Getting paid direct is a far more honest business model than an advertising funded model. There is something magical about the relationship you have direct with subscribers / customers of your own micro-business. I’m talking about people that pay for your content and years later tell you how you changed their life.

I love to talk to paying customers and subscribers. I answer emails and take phone calls from them. I meet them on Zoom and in real life (remember that?). The beauty of something-for-something is that it’s a positive sum game where all the players win. I know that customers value what I do and I’m truly grateful to them for that. 🙏

That is the future of independent artisan media and it is brighter than ever.


In Part 2 we consider The Principles of Ethical Monetisation.


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4 comments

  1. Of course, the difficulty now with all this new “news” resources, is that the world is now awash in new media content, and it becomes a truly gargantuan time eater to find the golden needles in a haystack of pure drivel and wasteland “media” content put out there for “consumption” (official or internet new media, all put together).

    Your blog is one of those golden needles I discovered by pure luck, through my FI knowledge building blog reading, looking for a “how to” manual that made sense for me.

    And I now again (and again, and again, and again) want to thank you for providing for free such a high quality blog content to the rest of us “illiterate” peons, who don’t have an army of well connected people to protect our asses from the wolves, crocodiles and other predators out there.

  2. dnmhd86 · · Reply

    Brilliant article. You’ve referenced the author Ryan Holiday in other article but if you haven’t already give his book “Trust me I’m lying” a read. Its all about the media and its unethical methods. It’s a great read!

  3. Another sensible post. Another reason there is so much free ‘content’ is that the barrier to entry is low and there is an incentive of sharing your opinion which human love to do. The ‘legacy’ empires are now competing for clicks against the very people they wanted to ‘inform’ in the past.

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