How the link economy benefits Reuters

August 7, 2009
Chris Ahearn and David Schlesinger -- have been weighing in on the subject of the "link economy", and have been encouraging the rest of us to join the debate. Which I'm very happy about, and very happy to do.

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A couple of very big cheeses at Reuters — Chris Ahearn and David Schlesinger — have been weighing in on the subject of the “link economy”, and have been encouraging the rest of us to join the debate. Which I’m very happy about, and very happy to do.

Both of them have nothing but good words to say about linking; that stands in stark contrast, of course, to their luddite counterparts at the AP. Schlesinger explains that the lack of hyperlinks in Reuters news stories is a function of “the particular ecosystem of our professional products” which “will change over time” — what that means in English is that the technology driving the Reuters wire isn’t really up to hyperlinks yet, but it will be, promise! And Schlesinger’s entirely right about this:

The real danger in not being extremely open to linking, it seems to me, is that by moving yourself out of the mainstream debate you risk irrelevancy.

This means, of course, that as much as your content as possible has to be freely available online: people don’t link to content behind subscription firewalls. And in turn, that means Rupert Murdoch is making a huge mistake when he says that he intends to charge for all his news websites. (Although I don’t actually believe Murdoch is nearly as stupid as that, and I’ll believe it when I see it.)

But then Ahearn adds an interesting twist:

I don’t believe you could or should charge others for simply linking to your content. Appropriate excerpting and referencing are not only acceptable, but encouraged. If someone wants to create a business on the back of others’ original content, the parties should have a business relationship that benefits both.

The back story here appeared in the NYT last week: a start-up called Attributor has estimated that publishers of news online collectively lose $250 million a year from the unauthorized copying of their articles. The story quoted Ahearn:

Mr. Ahearn said there was “tens of millions of dollars worth of inventory that is likely being created that we are not getting our fair share of.”

The first thing worth clarifying, as Ahearn told me yesterday, is that he didn’t mean that Reuters’s share of the $250 million was tens of millions of dollars. Instead, he estimates the total market in pirated news copy at tens of millions of dollars, and would like some fair share of that. So it seems to me that Ahearn is not as far as it might seem from Mike Masnick, who is pretty persuasive in his case that there really isn’t much of a piracy problem for newspapers, or, for that matter, for newswires.

I know a lot of bloggers who get upset when their material is stolen without their permission, but I have yet to see any evidence that such activity has any visible effect on their own pageviews. As Masnick writes:

There are plenty of “parasitic aggregators” (we usually refer to them as “spam blogs”) that copy all our content. We track them, just because they tend to show up in searches, and one thing quickly becomes clear: they get little to no traffic at all, and any advertising revenue they bring in has to be close to nil. The average lifespan of such sites is usually about 3 months before they go away, and the argument that they take money away from us is silly.

Is it the parasitic aggregators that Ahearn has in mind when he talks about wanting to build a “business relationship” with people who “create a business on the back of others’ original content”? If so, I fear he’s in for disappointment. For one thing, they don’t make much money — probably less than it would cost, in terms of management time and legal fees, to collect some percentage of it. And more to the point, they don’t want a business relationship: these people are hard to track down and pretty sleazy and in any case not the kind of publishers that the likes of Reuters really wants to get into bed with in the first place.

If it’s not the parasitic aggregators that Ahearn is thinking of, then that leaves two other constituencies who use Reuters material, nearly always while linking to it: small-time bloggers, on the one hand, and bigger-time web publishers, on the other, such as Gawker, HuffPo, and even Yahoo.

The relationship between Reuters and Yahoo is one of the oldest on the web, is very much a formal business relationship, and indubitably benefits both parties. But the interesting thing with that relationship is that insofar as any money changes hands it goes from Reuters to Yahoo: we value their links — and the resulting traffic — so much that we’re willing to pay for it.** The traffic we get from Gawker, by contrast, comes free, and I suspect that if Ahearn ever does enter into a formal business relationship with Gawker (and I doubt he ever will) then he’d be looking to be paid by Gawker. Which really gives Gawker no incentive to enter into such a relationship. Gawker tried syndicating its content, once, to Yahoo; the deal fizzled out with neither side getting much out of it, and I don’t think that Nick Denton has any particular desire to repeat the experiment.

One of the great things about the link economy is that although there’s a huge amount of value embedded in all those links, that value largely sits at quite a distant remove from cash money. Schlesinger talks about how links create value “when the linker extracts real gold that was hidden in the original and gives it more prominence”, and “when the link or retweet uses the original as a jumping off point for argument, debate, or development”. He’s right; that’s blogging, in a nutshell.

But bloggers don’t extract all that gold and engage in all that debate for the sake of a few pennies from AdSense. Blogging has lots of value for bloggers, but insofar as it’s monetized, it’s monetized indirectly: the money comes from book deals or consulting gigs or speaking fees or even just job offers, rather than through selling ads. And if someone offers me a job on the strength of my blogging, there’s no way that I can or should pay some percentage of my new salary to the people I linked to as part of getting that job.

When Ahearn calls for a conversation and for building some kind of consensus on business models and fair use and blogging ethics and the like, I get the impression that he feels Reuters is somehow being shortchanged by the link economy right now, and both can and should be benefitting more from it than it does right now. And I can see why he might feel that way, because he works for a big corporation where value-added is measured in dollars and cents. While the blogosphere happily creates and extracts lots of value which exists largely in the reputation economy, Ahearn has a business unit to run, with a P&L which he wants to see going up rather than down.

My feeling, however, is that the way that Reuters will benefit most from the link economy won’t show up in Ahearn’s P&L at all. The Reuters news product is primarily monetized through terminal sales, not through ad sales on, and that’s how we’ll make our money from the link economy too: insofar as Reuters becomes a central hub of the link economy, it will increasingly be a must-have product for the financial-market professionals who pay $1,000 a month* for their terminals. Could those professionals, in theory, find the same content online for free? Yes. But not nearly as quickly or as conveniently as they can find it on their terminal, where it’s pushed to them with ultra-low latency and long before the story in question finally gets put up on our website. As Reuters becomes increasingly authoritative and important online, largely through all the inbound links it gets, it will become that much easier for us to sell those terminals and make lots of money doing so.

If I were Ahearn, then, I’d be looking for recognition that the link economy in general, and in particular, has value to Reuters far beyond the cash money it brings in. If we didn’t have a strong an open presence on the internet, we would be, as Schlesinger says, doomed to irrelevance. And it would become increasingly difficult to sell our terminals. By embracing the Web’s link economy, Reuters is building a strong competitive advantage over its rivals. Which is worth much more than any amount of ad sales.

*Update: Which, to be clear, is a very round number I more or less pulled out of thin air: it should not be taken as a hard empirical datapoint of exactly how much the terminals cost.

**Update 2: While it’s true that Reuters pays Yahoo to link to us, it’s also true that Yahoo pays Reuters to syndicate and publish our content off the media wire, just like any other media outlet. Net-net, Yahoo pays us more than we pay them.


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