Why Authors & Publishers need to beware geeks bearing gifts

If there’s a single rule that authors and Publishers need to keep in mind, it’s – Beware Geeks bearing Gifts.

Actually, they should beware Greeks bearing Gifts too, especially if they are Horse shaped.

Please Note: If you prefer, replace ‘geeks’ with – Really intelligent and really delusional technology companies that would gladly destroy a market so that they can make a little money. Companies that would also want credit for destroying the market because they are so delusional that they truly believe they were trying to save the market.

Beware Geeks Bearing Gifts

That’s the golden rule.

It doesn’t matter how decent or altruistic or polite or considerate the company seems to be. That company is just trying to use the chaos in Publishing and your struggles to weasel its way in and make some money.

Evolution is cruel. Nature is cruel. The strong prey on the weak.

People who are forthright about their intention to compete are OK – they are a known quantity. The known devil, you can prepare for. People who pretend to be helping you, but are secretly waiting for the right moment to pull a Brutus, are infinitely dangerous.

Authors and Publishers would be well-served by keeping in mind that any person/company always acts in self-interest. Publishers and Platforms are fine – Because they are clearly outlining what their cut is. However, anyone who’s offering you a free ride is going to end up stealing your lunch.

In the chaos there will be lots of companies that will offer opportunities that seem too good to be true – Guess what, they are too good to be true.

Here are some typical promises –

  1. All your problems, mostly due to legacy systems and inefficient ways of doing business, will magically go away if you give us all your books for free. 
  2. We will make you so much money you won’t be able to count it – Except first you have to give us X, Y, and Z.
  3. You can make far more money from advertising than from selling. 
  4. All these people, who don’t read and don’t want to read, will start reading if you do X (which benefits us and hurts you).
  5. Transfer over all your brand power to us.
  6. Let us set up a store for you. See how well it worked for Borders when it let Amazon run its store.
  7. Give away your content for free and make money from other things. Look how much money newspapers are making from this approach.

It’s all trickery. Super intelligent technology companies are tricking you (and sometimes even themselves) and pretending that they want to help you – their true motivation is to steal your market’s profits.

The rule is very simple – Beware anyone who claims that their main motive is to help you. Most of all – Beware geeks bearing gifts.

Why Technology Companies are the Unknown Devil

We have had a big shift from the time when companies wanted to create products and sell them. Now companies want to get users and other companies to work for free and create content/a product/a service, claim ownership of that content/product/service, and profit from it.

Look at YouTube and Social Networks. They are doing nothing other than getting people to work for them for free.

Other, newer sites are going a step beyond. They are selling people virtual goods and are simulataneously selling users’ private information to advertisers.

In this environment, where all we have are looters and arbitrage experts, if a company is telling you – Let us help you, for free. Perhaps it’s a good idea to be very wary.

An Example – Scribd

Here are two things Scribd was, intentionally or unintentionally, doing – making money by running advertisements against pirated material, making money by selling subscriptions for books/content written by other people.

Notice that in their minds this is perfectly justified because they are providing a service.

Publishers partnered up with Scribd to sell books. What part of ‘this site makes money by letting people access pirated material’ did Publishers not understand?

Technology Companies are masters at fooling everyone

Including themselves.

Here’s what actually happens –

  1. Company X sees an opportunity to come in and eat up 50% of the profit in books.
  2. It deludes itself into believing that its real motivation is helping Publishers. Note that this step is critical for it to be successful.
  3. It talks to Publishers as if the spirit of Mother Teresa has suddenly entered its corporate culture and the $23.8 billion in annual revenue books generate in the US never crossed its mind.
  4. It convinces Publishers to trust it and place one or more strategic elements/assets under its command – the starting point, the decision point, the branding, the actual books, the purchase point.
  5. It gradually takes over power. Then it takes over profit.

Publishers won’t realize what’s hit them until they find themselves marginalized.

They should look very carefully at what happened with newspapers. Everyone on the Internet talked newspaper publishers into giving away all their news content for free. Lots of people made money from blogs and advertising. Newspapers got destroyed.

Book Publishers would be well served by looking at everyone who ‘helped’ newspapers and avoiding every single one of them. They would also be well served by reviewing all the arguments newspaper publishers fell for – being on the Internet is necessary, advertising is the future, go for volume rather than good customers, give away your main product for free, you must be on the Internet to survive.

Amazon and Apple and B&N are honest. They are not the enemy

All the companies that Publishers are upset with – Amazon (because it is becoming powerful), Apple (because it won’t share user information), B&N (because it is a big player in both physical books and ebooks) – are not the enemy.

They are forthright about wanting a cut, and about wanting a cut that’s painfully inconvenient to Publishers. Publishers have to understand that they will have to hand out a large cut – one that pains them inordinately.

However, they are still in the thrall of a greed that says they could have everything they desire. And companies are more than willing to exploit that greed.

These companies offer solutions that seem too good to be true. These companies intend to leave publishers and authors with nothing.

Authors and Publishers should run away when they see technology companies with ‘gifts’

Here’s a rough translation of the language the ‘saviors of Publishers’ use –

  1. There’s lots of money in advertising. For us. 
  2. No one reads any more. You should give away your books for free to us. 
  3. You don’t need to change your processes. We plan to take over your customers so being efficient won’t matter. 
  4. Look at how well the music business did. Perhaps you’re stupid enough to believe us. 
  5. You let us do the tough part. That’s the part where all the power and control lies. 
  6. Let’s do subscriptions and make more money. Let us control the customers, the product package, and the content delivery. 
  7.  We really want to help you. Help us get rich.
  8. You could make more money. We could make more money.
  9. There’s an easy solution. This is how you can die quicker. 
  10. Converting eBook Formats is going to cost $5,000 per book.You really are gullible.

It’s tough.

Technology companies see the fear and desperation of Publishers and Authors and promise them a way out. They see the greed and hubris of Authors and Publishers and they promise them ways to make more money.

It’s like a bunch of vultures circling a man in the desert. The man is desperate and fools himself into thinking the vultures are friendly and directing him to the nearest oasis. We all know how the story ends.

On Growing Rice and Growing Wheat

There was a young farmer, barely out of his teens, who lived with his old mother in a small village.

He knew little about the world, but he knew a lot about wheat. He decided he would grow wheat and sell it to the village merchant. The merchant shipped produce to a small nearby town which had a port. From there the wheat would make its way to the big city on the other side of the lake.

Year 1: Rice not Wheat

He went to the merchant and asked about getting the best wheat seeds.

The merchant laughed at him – Wheat is for unsophisticated people. All the people in the big city want rice.

So the young farmer walked back with a heart burdened by the knowledge that there was no market for his wheat, and a pocket burdened by expensive long-grain rice seeds. His mother knew just as little about the big city as he did. She was sad to find out that there was no market for wheat, for she knew how much her son liked everything about wheat.

But what can we do about our fate.

The young farmer worked very hard and grew a fine crop. He went to the merchant and the merchant told him about the huge drop in rice prices in the city. That there was no longer market demand for rice, and his only hope was to see if the Merchant could use his expertise to get him a decent price.

What did the farmer know? He was young and naive.

He agreed to give the merchant a 40% cut. He went home and sat by his hut and talked to his mother and told her about all the things he’d buy for her when the rice crop was sold.

Two weeks later the merchant’s brother stopped by. He talked about how the merchants in the big city were reluctant to take on rice from an unknown farmer. They were even more reluctant given the lack of market demand for rice. There would be little profit for them unless he gave them a bigger cut.

Would the farmer agree to giving the city merchants a 40% cut in return for their expertise in selling rice at a time when there was no demand for rice?

The farmer had hoped to get 80% of the rice that was sold. Now, he would be getting only 20%. He had hoped to know how much demand there was – so he could figure out how much seed to buy and plant for the next crop. Now, it seemed there was no demand for rice.

What choice did he have? He wasn’t exactly going to be able to sell rice himself.

He agreed to the 20%. He was thankful that the village merchant, and the ones in the big city, were doing him such big favors. Selling his rice at a time when there was no market demand for rice.

He sat with his mother and wondered what he would do the next year.

Year 2: The Port

After much thinking he decided that he would go to the Port. He had never left his village and he hated the thought of leaving his old mother alone for a week. But he would go to the Port and find out what there was strong demand for.

The Port was overwhelming. He saw more new people in his first day than he had his entire life. He found his way to the docks and found a merchant who was having a ship loaded. He asked the merchant which crop was in demand in the big city.

The Merchant sized him up and asked him what he could grow. The young farmer talked about growing rice and wanting to grow wheat. The Merchant interrupted him – There is no money in wheat. Rice is much better. Your village merchant lied to you – There is lots of demand for rice and it will be much easier to sell than wheat.

The Merchant in the Port Town told him that for a 60% cut he would take the young farmer’s rice and sell it in the city. The young Farmer was overjoyed – 40% was double of 20%. Also, this merchant wouldn’t fool him by lying about the demand for rice.

He went back and worked twice as hard and grew a crop of rice that was even better than the last one.

He still hoped to one day grow wheat – But he needed something he could sell. His mother was growing weaker and some money would be handy so she could get treatment and be well.

That year he did make double of what he had the last year. He bought his mother everything he had hoped to buy for her. He even took her to the Port to see a doctor. She felt much better and it made the two years of hard work worthwhile.

Year 3: The City

As he was getting ready to plant his third crop of rice, his mother asked him something – Son, how do you know the second merchant isn’t fooling you like the first one did?

He thought about it a lot. In a village as small as his there wasn’t much else to do. He finally decided that he would take a trip to the city with his mother, who was now well enough to travel. He told his mother that it was to get better rice seed. However, in his heart he hoped that he might stumble across a small market for wheat. A market with enough demand that he might at least grow a little bit of wheat.

If the Port was a revelation the City was a nightmare. Both he and his mother were completely lost. A young girl saw their obvious plight and offered to help with directions. The young farmer asked for directions to the market and was pointed to a market unlike any he had ever seen. There were no carts or stalls. There were items just kept freely and people picked whatever they like.

How do the merchants make any money? There is no rice and no wheat for sale – Perhaps the merchants were right.

When he asked one of the men there about the market price for rice the man laughed. The young farmer didn’t know what to make of it.

After much searching he found a rice retailer. One that strangely had no shop – just warehouses. The retailer told him that the merchants had been cheating him. The price of rice was around double of what they had been claiming. He had been getting 10% of the money his rice was sold for the first year, and 20% the second.

He didn’t know whether to laugh from the joy of knowing he could earn double without doing anything, or to cry for two years of being made a fool.

So he turned to the retailer and asked him if he would buy his rice. And the retailer gave him an answer he never could have expected.

Young Man, the future is in health foods and the new fitness craze. I’m closing down my rice business to go into distributing whole grain wheat. If you would be open to growing wheat instead of rice, I’ll buy all that you can bring.

Yet another site making user information 'public' to 'help users'

This is an off-topic post and not Kindle related.

It’s good that Amazon doesn’t have advertising in books and hopefully Apple doesn’t stoop to using iAds in iBooks. However, what’s happening with Free and advertising is important because sooner or later advertising is coming to books.

Gravatar are making all profiles Public and pretending it’s for the users

Apparently Gravatar is a company that provides profile pictures/avatars for comments. They’re integrated with WordPress so all bloggers on it have one (including me) and they’ve been doing some interesting things –

  1. They made the avatars into a social network in March. 
  2. At that time profiles (which some people like me didn’t even know existed) were private.
  3. Now they’re making profiles public.

Read this little bit of delusion –

Back in March when we announced Gravatar profiles, your profile page remained private so that only you could access it.

Now that you’ve had a chance to update your information and make sure that only details you want public are there, let’s open things up. It’s been just over 2 months and more than 300,000 people have updated their details.

If you don’t want to have your profile public – the solution is to delete the fields in your profile that you don’t want public. There literally is no more privacy.

300,000 out of 22 million people updated their profiles

That’s 1.36%.

A company that provided a completely different service from a social network suddenly became a social network, announced into the ether that it was going to make the profiles public, and taking the 1.36% of users who changed profile information as sufficient proof are going ahead and making all 22 million profiles public.

This is pretty important because it’s signalling a new trend.

Companies are now collecting the debt of Free

All the goody-two-shoes companies that were providing free services and we all thought were Free and Open and Altruistic.

Well, it seems they were just using Free to get users vested into their product offerings and using Free as a cover while they gathered up user information.  

Facebook is the poster-child. However, more and more companies are beginning to show their true colors.

Advertising is being replaced by customer debt

The old model –

  • Advertise to users and get them to buy stuff they don’t really want.

The new model –

  • Give users free stuff.
  • Collect lots of information on them.
  • Give it to advertisers so that they get better at selling people stuff they don’t really want.

It’s a very, very big shift.  A necessary shift given that customers are growing smarter and smarter and less and less susceptible to traditional advertising.

People like you and me are the new product

Advertising supported companies are morphing into companies that supply advertisers with users and information that could potentially be used to turn those users into consumers.

It’s literally treating people like sheep or cattle. Let’s get them to trust us with all their private information and when then they do and have put a lot of effort into our site/product/service then let’s turn around and sell their information to advertisers – they are going to be too vested to leave. The gameplan is literally to keep pushing and seeing how much information you can sell before users panic and revolt. 

Consider this exchange between a Gravatar person and a user –

User: Personally, I think it’s pretty cool — but what if someone doesn’t want their profile public?

Gravatar: We only have public profiles, so if you don’t want any information to be public, then just don’t enter anything into your profile.

He actually adds a smiley face after saying that. Mark Zuckerberg is probably jealous he didn’t think of that first. What a brilliant idea – all profiles have to be public or they can’t exist.

The more valuable the free offering the bigger the price the company wants to extract down the line

It’s quite revealing to look at the extremes –

  1. Use a free comment avatar system like Gravatar and they’ll create a profile for you automatically – which probably has little relevant information. So when they magically become a social network and make all profiles public you don’t really lose much privacy. A company that provides a little value gets to compromise a user’s privacy a little bit. 
  2. Use a service like Facebook that connects you with friends and family and they expect a lot in return for the valuable (although not irreplaceable) service they are providing. They want to keep giving out your information to more and more companies and they want to track your behavior all over the Internet and they want to know all your buttons and how to get you to do anything.

It’d be fun to draw up a list of the 10 companies that offer the most free products and then track when and how they start collecting payments on their debt of free.  

Is Free putting companies in a desperate position?

It’s also worth wondering whether the Internet is creating an environment where –

  1. Ethical companies suffer greatly. 
  2. Companies with weak ethics are turned to evil out of desperation.
  3. There are few ways of making money.

Take a company like Gravatar – How could they make money?

Users aren’t going to start paying just to be able to get custom avatars – They wouldn’t pay even if the Avatars talked back to them. If Gravatar try to advertise via the avatars or around them users would revolt – Who wants to be a walking billboard?

That leaves just one option – To make a profit from the service you’re providing users find a way to make money from the information they provide you – knowingly and unknowingly.

Users on their end are ruthless too – If a company moves from free to paid they just move on to the next Free option.

It’s almost a game of who’s smarter – Users exploiting Free based companies or the Companies themselves who are trying to steal and sell user information.