Time is not Money

Jim Morris

6/6/2005

Time is a magazine about current events; Money is about personal finance. Furthermore, Health is not Fortune; the former is about personal health, the latter, about business.

Figure 1 shows all Time, Incorporated’s 140 current magazines. Hair isn’t In Style; an Ideal Home isn’t Real Simple; Wallpaper isn’t Uncut; Now isn’t Time for Kids; What’s on TV isn’t Entertainment Weekly; Baby Talk isn’t Prediction; Woman & Golf isn’t Nuts; and Sports Illustrated isn’t Popular Science. They are all different. Yachting is different from Yachting Monthly, is different from Yachting World. Ski is different from Skiing, is different from Skiing Trade News.

Who would imagine that there could be so many magazines? Why are there so many magazines which most people don’t care about, each different from the other? What allows and causes such incredible diversity?

The evolution of magazines is fascinating, and I really mean “evolution” in the Darwinian sense. Magazines come and go. Each one has a particular editorial philosophy, its DNA; and, if it finds readers and advertisers, it survives. Like a plant, it must find its niche in the ecology of readers and advertisers. We can study the rich array of magazines the way a biologist studies plants and animals in an effort to understand what interests our society and what segments of the economy capture the attention of the public.

Our communications and broadcast infrastructure is changing rapidly and will be significantly different in twenty years. Traditional broadcast outlets will have disappeared, replaced by Internet services that make current and past information—whether text, audio, or video—available on demand. With the exception of things you insist on seeing as they happen—a Steelers’ game perhaps—you will never need to schedule your time to receive a broadcast. You will never have to listen to or watch a commercial.

Someday you’ll be talking to your TV system the way you talk to Amazon, the Internet bookseller. The TV might say, “Since you’re watching Law and Order, you might want to watch CSI; 72% of Law and Order viewers also like CSI.” Then your TV might say, “Consider going to Duquesne Law School.”

We should study magazines, not for themselves, but to learn what they tell us about the desires of the readers and businesses that support them. Those readers and businesses will be the clients of the new media channels just as they use magazines today.

I’m going to discuss the magazine business and suggest how its essential functions are being served by new, Internet media. I’ll discuss four broad areas: diversity, focus, advertising, and the implications.

Diversity

Ben Franklin might forgive my contradiction of his aphorism, “Time is Money,” because he started the whole magazine business in America. Figure 2 shows the cover of Benjamin Franklin’s magazine, the second published in America by a few weeks.[1]

Initially, there were few magazines, they duplicated each other, and all the ones started in the 18^th century in both America and England died quickly.

How diverse are magazines? Here is a graph of the circulation of the country’s 100 most popular magazines in 2004. Reader’s Digest sold about ten million copies followed by TV Guide at seven million down to Jet at 900,000. Print magazines exist in a highly evolved ecosystem. One could take this curve to represent the natural interests certain population groups. For example, Better Homes and Gardens sells more than twice the number of copies as Cosmopolitan. Maybe that will reassure husbands and fathers.

This curve illustrates a famous empirical fact called the power law which predicts that the circulation of the n^th most popular magazine divided by circulation or the most popular will be one over n, raised to the cth power (1/n^c) where c is some constant .

Figure 4 shows the actual circulation curve in yellow, compared to a theoretical curve in which c = 0.47. So the divisor is close to the square root of n. For example, number 100 Jet is predicted to sell approximately10 Million divided by 10, close to the actual 900,000.

The amazing thing about the power law is that it applies to all manner of things. Figure 5 shows the population of the world’s cities, ranked from biggest to smallest.

The first person to observe this phenomenon was an Italian mathematician, Vilfredo Pareto, who observed the 80-20 rule: 20% of the population earned 80% of money—a more quantitative expression of the aphorism “The rich get richer.”

Why does this pattern emerge? One natural cause is word-of-mouth and other human relationships. For example, the more people living in New York, the more people get invited to New York. The more people who read Reader’s Digest, the more friends they recommend it to.

The power law theory is a way to measure the diversity of our information space. The exponent, c, of the power law curve is a measure of diversity—the smaller the exponent, the slower the descent, the longer the tail of the curve, and the greater the diversity. Since there are 100,000 magazines today, the magazine tail is pretty long.

Figures 6, 7 and 8 show pairs of communication networks and graphs suggesting how our media landscape and its diversity have been evolving. The first shows things around the time of Gutenberg and Martin Luther.

In those days, there were not a lot of books to read; and the strongest advice came from the Church. So the Bible was virtually the only thing to read. In other words, the curve plummeted from the number of Bibles sold to virtually zero for all other books.

By 1950 the network and graph might have looked like Figure 7. By then, the options of what to read as well as the sources of advice were much larger. National ratings, best seller lists, and newsstand shelves all singled out the very top publications, but many smaller, local venues employed word-of-mouth promotion. In addition the information flows became bi-directional; readers and reflecting their preferences upwards towards mavens and gatekeepers. The intermediate connection points raised the circulation of some items with them becoming national best sellers, as reflected on the 1950 popularity distribution.

Finally, Figure 8 predicts even more diversity on 2050. Then, there will be international communications channels, allowing many small groups to chatter on any subject they wish. Maybe Google News will define the hottest information for the planet, but many other, extremely specialized services will be cultivating interests for very small, geographically dispersed communities. Amazon and the blogs—about which, more later—are just two of the early services. In any case, the popularity curve should get flatter.

As an early indication, here is a comparison of music CD sales through conventional channels compared to the Internet.[2] The curves look about the same, but the one for Internet sales is really significantly higher on the right, more than twice as large at the end, showing that the Internet purchases are more diverse.

Blogs are the latest form of Internet publishing. “Blog” is a contraction of “Web log” which is a personal journal. Tens of thousands of people write in their blogs daily. As you can imagine most are of limited interest, but many have avid readerships; blogs are believed to be part of journalism’s future. Like much of the Internet, blogs have no central authority or standard of excellence.

Figure 10 shows the measured readership of the most popular blogs. This is a very steep drop-off, not what I would expect if the blogosphere, as it’s called, were diverse. Maybe this species hasn’t matured yet, and there aren’t enough independent channels supplying word-of-mouth advice.

Internet pundits believe that diversity is growing, and that it’s time to start going after the 80% of the customers left out by the 80-20 rule—those people falling under the long tail. Figure 11 summarizes some interesting observations from Chris Anderson, the editor of Wired: Online merchants have roughly 20 times the items for sale as the bricks-and-mortar merchants and derive over 20% of their sales from those items. Anderson believes that the supply of increased diversity will stimulate demand for even more diversity so that the curves will get flatter.

The trend toward diversity is sometimes called narrowcasting, the word we use when the traditional broadcast media are re-purposed to send information to smaller, and more specialized audiences.

What is behind this trend? It’s easier to see what drove the previous trend of broadcasting and mass markets. When KDKA harnessed radio to reach a large audience it made what had been a person-to-person communication technology into a broadcast technology. Strangely, the inventors of the telephone thought it would be used to broadcast music. So the inventors of these two technologies each misjudged their appropriate uses.

From Eli Whitney and Henry Ford onward, our industries arranged themselves to produce a vast number of identical products and it was perfectly natural for our communications media to follow suit with mass entertainment and mass advertising. Mass production and mass communication are very efficient from the production side, so efficient that they sometimes produce gluts.

When production capacity outstrips the needs of consumption, Darwinian competition sets in; and everyone has to find niches they can exploit. Narrowcasting and diversity might simply be the result of a shift from scarcity to plenty. There are so many people capable of saying or playing something interesting to someone and so many ways of delivering it to listeners and readers that the receivers are kings and the senders have to specialize.

In 1950, television began to replace general interest magazines as the main channel for reaching national markets. Several venerable magazines died, Life and Colliers among them. Most of the survivors had to find niches, just like good plant species. Now that all the media are threatened with competition from cable TV and the Internet, they must learn the diversity game that magazines have mastered.

Focus

The word “magazine” originally meant “store house.” Historically, magazines have been called other things suggesting collections, like museums and even caskets. Essentially, a magazine bundles many things together that are of interest to similar readers. While a newspaper’s contents are generally connected only by their timing, a magazine collects materials that has a particular focus. If one is designing a new magazine, the first question is “Who the audience?” The audience can be very broad but usually there is a common theme, if only economic status or political orientation.

The articles must be connected somehow. Making these judgments is the job of the editor, who decides based on quality and subject. Ideally the editor has a well-developed philosophy about the subjects and styles of the magazine, that’s the magazine’s DNA.

Magazines approach the quality and focus issues from the top down. A magazine editor employs his intuition and taste to decide what to put in each issue. The editor gets feedback from readers, ultimately from how many copies they buy. Feedback also comes in letters. Editors may ask focus groups and advertisers for advice. Generally, however, the magazine pundits say, “Go with what you want to read yourself, and go out of business if you’re wrong.” The founder of Runner’s World was a runner before he was an editor. He did very well simply selecting material he wanted to read.

Listening to advertisers can be dangerous. Sassy magazine had found a great niche: talking to teenagers frankly, in their own language, about sex and other taboos. Its advertisers got nervous, however; and Sassy toned down. It lost all its readers and went under.

The new Internet channels take a very different, bottom-up approach. What they lack in human intelligence, they attempt to supply with large amounts of current data and a little artificial intelligence. Instead of experienced editors guessing at what their readers might like, Internet outlets let the readers express their opinions directly.

Amazon makes suggestions to book buyers based on similar content and similar buying patterns. They use all the records of purchases to discover clusters of similar books. This system works so well that I’ve found myself buying Amazon-recommended books I already own. Figure 12 is a snap shot of Amazon’s current recommendations for me. The first item is about parent-child relations because my wife has been buying that kind of stuff for her radio program, using my account. The next few are about magazines because I bought several books while writing this paper.

Also, Amazon accepts and publishes volunteer reviews of books.

The book Touching the Void was languishing in obscurity until another mountaineering book, Into Thin Air became a best seller. Amazon began recommending the former to buyers of the latter, and it became a best seller, too.

Google is simply a search engine, but think of the answer to a search as being a microscopic magazine about one very specific subject, the terms in the query. Google delivers us a long list of web pages that may be of interest, based upon our search criteria, ranked by the pages’ popularity as measured by the count of other web pages that reference it. Thus it crudely performs the two functions of a magazine editor, deciding relevance to the reader by the text of the query and estimating quality of the item by the number of web links to the item. Unlike Amazon, Google makes no use of knowledge about the person asking the question or their history of questions.

The New York Times uses another way to collect votes from readers. It offers one the option of emailing articles to friends. Then it counts how often each article is mailed by anyone and lists the top ten. This gives later readers a hint about what they should read. Figure 13 shows what the most people were mailing one Saturday in May.

In general these Internet techniques use a lot of information about peoples’ opinions and a lot of computing to integrate those opinions in order to play editor. All of these methods are like popularity contests in which undifferentiated voters can vote as often as they wish. The old fashioned channels get results by cultivating editors, reviewers, and mavens who make considered recommendations and develop reputations themselves.

Another possibility for winnowing out the best recommendations comes from blogs. The most popular blogs are ones that spend most of their space referencing other things on the Internet, including other blogs. Thus they are a sort of magazine table of contents and letters to the editor section in which the editor mostly comments on the contributions of others. Just like Reader’s Digest.

Figure 14 shows one of the most popular blogs. I’ve circled all material from other places.

We have depended on magazines to structure our reading world. The Internet is trying to do the same thing with a much bigger world, faster and semi-automatically.

Advertising

Advertising is a crucial component of magazines and other media. The first ad in Franklin’s magazine was a modest offer to ferry people across the Potomac. Originally ads were unobtrusive, like today’s want-ads. Until 1850 advertising was a small part of magazine revenues, but then a publisher discovered that selling ads aggressively allowed him to reduce the copy price from 35 cents to 10 cents. His circulation increased tenfold in two years! Advertising became very big in the twentieth century as mass markets developed.

There are two kinds of advertising: Product ads inform about specific items for sale, and brand ads simply promote the company and all its products. Until TV, magazines were great for national brand advertising and they flourished. Later, they had to shift to more product ads.

Magazine publishers spend nearly as much effort choosing the nature of their ads as they do their editorial content. For the sake of both their readers and their advertisers they want the ads to be appropriate and useful to the readers. Magazines devoted to things like computers, stereo equipment, and clothing are read as much for their ads as their stories, and those stories are often reviews of products.

Here are some startling numbers that show how much more effective magazines are than TV: An average magazine devotes 60% of its space to advertising, while television ads take up about 25% of the broadcast Yet 83% of adults find magazine ads appealing while 69% find television ads appealing. Also, 44% of magazine readers report shopping for things advertised in a magazine while 36% of television ad viewers did so. What’s behind these differences? First, television forces the ads on you. Second, magazines and their ads are often narrowly targeted so that the readers are pre-disposed to be interested in the ads.

Most of us think we dislike advertising; but we don’t dislike ads that help us buy something. Those ads have told us something we needed to know. In that sense, an article that doesn’t interest or inform us is just as bad as an ad that doesn’t offer something we want.

The superiority of targeted, magazine-style advertising to TV broadcast advertising was recently played out on the Internet. In the 1990s Internet portals like Yahoo and AOL would devote large portions of their pages to ads forcing ads on computer users whose screen space is precious. These ads were hard to ignore; some were animated. To make matters worse, advertisers deployed pop-up ads: little windows that jump onto to your computer screen obscuring the pages you are trying to view. This was awful.

Because the web sites offered users the opportunity to click on ads to learn more about the products, the advertisers were able to measure interest by the click rate—what percentage of people who viewed an ad clicked through. They made a horrible discovery: virtually nobody clicked! This sent everyone into a funk, casting doubt on Internet advertising and suggesting that maybe much of print advertising—which no one could measure directly—was also ineffective.

But now Google and others have Internet advertising figured out. They only charge when the person clicks on an ad, and they target ads to peoples’ very narrow interests. Here’s how it works: A year ago I noticed a pain in my heel. So I went to Google and typed in “sore heel.” Figure 15 shows the page I got.

This page points to an impressive treatise on the subject by an amateur. Most of the other answers I found were ads for devices like arch supports. The amateur said his favorite product was a particular kind of arch support, so I clicked on an ad, ordered it, and had some in my shoes a few days later.

Pre-Internet I might have called a doctor, but getting her attention for such a minor pain would have been inappropriate. If there was a magazine called Heal Pain, I would have bought a copy, but that subject is too particular to justify a print magazine. More likely, I would have consulted a home medical book, then the yellow pages, for an arch support store.

Now let’s look at this process from the seller’s side. In the old days, the seller of arch supports would probably advertise in podiatrists and runners magazines, and put his product into shoe and sports stores. He could not have afforded to place an ad in a mass publication. Getting sales was expensive and hit-or-miss. Decisions about where to advertise and sell took many months to play out and achieved inconclusive results.

In the Internet world the seller has new, much more powerful tools. The seller of arch supports contacts Google and says, “Whenever someone inquires about sore feet, arch supports, running, podiatry, or plantar fasciitis, please show them my short ad. For each person who clicks on my ad, I’ll pay up to $2.” Soon thereafter, the seller gets a lot of immediate information about interest in his product including how often inquiries lead to sales. His ads are shown only to people who have already expressed an interest, and he doesn’t have to pay unless they express further interest in his product by clicking.

Now, everyone’s motivations are aligned. If I search for information about a problem, I’ll be happy to see ads for solutions. The ads are unobtrusive and brief because Google wants me to click on them to see more. The sellers will be happy to pay Google if I click on their links, and Google will be happy to be paid.

Let’s return for a moment to my original question: Why is there so much diversity and why is it growing? Just as the needs of mass production supported broadcasting, the current marketing needs of business will drive diversity. Sellers want qualified buyers—ones who are interested and able to buy their products. Therefore, they like niche magazines or other outlets that pre-qualify the buyers. Just as a Google reader is searching for the answer to a problem, the Google advertiser is searching for people needing his solution. Therefore, he wants the material attracting the reader to be as specific as possible. In other words, we’re getting more diversity not just because we might like it, but also because the sellers use it as a tool to sort through the population in their search for buyers.

Implications

One the whole, the increase in media channels and the diversity it enables is a good thing. Giving everyone more choices of what to read and watch suits our libertarian traditions. In fact, the US has been distinctive in its nurturing of diverse media. But there are other reasons to be cautious about the new media even if you’re not a TV station owner.

As usual, the new media channels are used for large amounts of pornography. This bothers a lot of people who have forgotten that the pornographic film industry is bigger than the respectable one and that porn was the savior of the VCR in the early days. I’ve been told that Gutenberg actually printed the Kama Sutra before the Bible. When the public spotlight turns to any new medium, we’re forced to recognize again man’s preoccupation with sex.

Privacy is another concern raised by the Internet and the precision tracking it allows. People don’t seem to mind when Amazon suggests books to them, but Google’s efforts to collect information about its clients always seems to raise alarms. While I look forward to receiving an online newspaper titled, “The Jim Morris Gazette,” containing precisely the news and information I need and don’t already know, others reading a copy of it may learn more about me than I want them to know. We were all anonymous in the old broadcast media; now we’re not.

My preferred solution to this conflict between privacy and communication is better tracking of the trackers. I don’t mind if Lands’ End™ knows I’ve been gaining weight or even that they pass the word to Weight Watchers, but I would like to be informed of all the information about me that is circulating. Such rules are currently being followed in medicine under the HIPPA statutes.

A more serious aspect of diversity is its support for political fragmentation. In the 1930s Roosevelt could arrange to be the only voice on radio. This allowed him to unify us towards a single purpose. Of course, the same was true of Hitler in Germany. In the 1950s we had just three TV networks from which to choose our nightly news, and they all were politically middle-of-the-road. Now I can fill my media day with NPR, Jon Stewart, Al Franken, Bill Moyers, the West Wing, and other liberal outlets while conservatives can listen to Rush Limbaugh, Fox News, Pat Robertson, and speakers for the right. We can live in alternate media universes.

Our media are becoming bigger and far more diverse. Magazines, already very diverse, represent a glimpse of the future. No matter how the information and advertising is delivered in the future, it will be focused the way magazines do it today.

Scraps and Notes

We’re living in an age of too much information.

Advertising is not well understood.

Other things, besides printed magazines are devices for narrowcasting: Cable TV, TiVo, and the Internet.

Magazines represent a highly evolved system of packaging information as part of the economic system.

Time, Inc. is one of the most venerable yet dynamic companies in the country.

Magazines as information markets

Technological convergence.

There are other things in a magazine besides these two categories. There are letters from readers, that the reader sends for free and the magazine publishes for free. Then there might be editorials or other messages from the editor that are a little like ads since they are generally trying persuade the reader of something.

The advertiser pays the magazine to print their messages while the magazine pays the writers of articles for there contributions. Does this mean that the articles are desirable and the ads undesirable? Not necessarily.

The strange thing about these categories is that the money the magazine pays or receives for them don’t really reflect the value to the reader. The value to the reader might be estimated by time the reader spends reading it, but it may be much more valuable. For example, a short ad for a car I want and eventually buy may be very valuable to me if it turns out to be a good deal. Strangely, the value to the writer or the advertiser is also proportional to the time the reader spends reading the item. The longer they read the more they are persuaded, one would think.

An economist will tell you that these unilateral solutions are bad because they decrease net social welfare and we should be looking for mechanisms that promote the transmission and reading of precisely those messages above the diagonal. To do so, they recommend the obvious: exchange money to pay the partner who is reluctant to communicate: pay the sender to divulge information valuable to the receiver and pay the receiver to read items valuable to the sender.

Apparently economists don’t frequent singles bars, despite the scene in A Beautiful Mind in which John Nash discovers Nash equilibriums. Paying someone to read an ad doesn’t work anymore than offering a woman $5 to talk with you does. You can pay for her drink, but don’t offer to pay her. Either she is offended; or, worse, if she takes the money and blows you off. The economists embellish this scheme by suggesting you escrow the $5 and she take it only if she doesn’t like your line. No wonder we call them dismal scientists!

The point is: advertisements are not “information transactions”; they are inducements to learn more and eventually pay for something far more expensive than the ad. They are flirtations; and, as any frequenter of singles scenes knows, where and how you flirt is very important because you are signaling about the kind of relationship you seek.

But, let’s not ignore the economists’ main point: the arms race between spammers and browsers is wasteful because it leaves a lot of social welfare on the table, namely the red and yellow regions of the picture above. We need to find ways to get more of those messages through.

Magazines are a way of bundling information in a way that accomplishes this. The magazine pays authors for content that might fall in the yellow region and it charges advertisers for things might fall in the red region. The reader pays the magazine, presumably for the content; but the reader also submits to the ads that come along. Note that a message in the green region is the ideal outcome; whether it is a story or an ad the sender is happy to provide it and the receiver is happy to read it. The measure of a magazine’s success is the relative size of the green rectangle.

Note that the answer to a Google query is a personalized magazine, generated on the fly.