Monday, May 31, 2010

The Impression Economy

Over the last years, the decline of the print business forced the emergence of new business models to align journalist compensations with the brutal truth of their poor publication’s financial situation. An emerging trend seems to be the alignment of journalist’s payments with traffic to their published articles, thereby establishing a very transparent performance metrics system that is rather unusual for large scale organizations and highly educated employees. The number of impressions that a particular article generates determines the compensation that the journalist is receiving. This will definitely lower the average pay for journalists and motivate them to produce primarily traffic generating articles. And it could seriously threaten longer research centric articles and pieces.

But this posting is not trying to engage in the already very heated and difficult discussion but rather explore of how this “Impression economy” (that might be soon the dominant business model in journalism) could have impact on other industries and influence their business models. At minimum this “Impressions economy” could be adapted within the marketing and media industry and for parts of any retail based business that requires physical or virtual traffic.

The key factors of how successful this “Impression Economy” could be will rely on two critical elements:

  • Impression is a rather crude metrics that does not account for the quality of impression. Recent engagement studies try to better understand the different impact of various impressions on consumers and readers. A high engagement impression could have a value of 10 or 20 low engagement impressions. Any expansion of the Impression economy will require smarter, easier, and scalable metrics systems that connect impression with engagement without creating too much complexity. The beauty of impressions is its real time simplicity that can’t be lost.
  • Any seemingly inefficient industry where overall business performance could benefit from a better linkeage of individual versus collective performance and thereby reward high performing employees while reducing they pay for lower performing ones. Journalists were the first to hit by the downward pressure of their compensation because of the high cost pressure on newsrooms and publications. They were perceived as highly inefficient organizations with little to no accountability or smart performance measures. Robert Murdoch famously complained about the fact that every Wall Street article will be reviewed and edited by over 8 journalists before final publications (This has now changed since he bought the newspaper but I have not been able to find the new “improved” number).

One nightmare scenario of the “Impression Economy: is that the middle class of well but not very high paid earners could disappear, since only a few people have the talent or luck to attract a high volume of impressions, most people’s impression would play at the end of the long tail and therefore they would only earn a small compensation.

Compensation would not look anymore like a organizational pyramid but like a wine decanter with a few high earners while 95% of all earners would earn close to minimum wages in this “Impression economy”. The optimist would suggest that there will be a rise of “Impression co-operations” that would allow a broader base of people to earn a decent living. The “Impression Economy” might not expand beyond the realm of journalism but we better be ready to understand its underlying mechanics and consequences.

12 Comments:

Anonymous Nick P said...

If an impression causes an action does that mean it is of high value? I think so.

5:52 AM  
Blogger Steve Schildwachter said...

Nick, it depends on what that action is or what it represents. If it is literally a "hit" and no more than that, with about 5 seconds spent on the page, then the value is very small. On the other hand, if the visitor spent time with the article, read to a second page, signed up to follow the journalist or recommended it via Digg, Delicious, etc. -- well, then, it is of very high value.

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