Sam Lessin
Letter.ly

Dave Morin Argues Information Is More Valuable When You Pay For It. He's Wrong.

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Lately there’s been a backlash against blogs and open information on the Web, in general. It started with newspapers putting up paywalls again, but even former blogging kingpins are now hiding behind email subscriptions. And now Dave Morin, the CEO of stealthy startup Path and Facebook’s former platform chief, is arguing that information is more valuable when it is locked up behind a subscription paywall.

If you want to actually read Morin’s argument, “The Age of Premium Information,” you have to pay $3.99 a month for his email newsletter, The Dispatch, on Letter.ly. Or you can just read on below and I’ll summarize it for you. Before I start, keep in mind that Letter.ly is a project started by Sam Lessin, the CEO of Drop.io, another person who famously quit blogging. Letter.ly is a service that allows people to create and sell subscription newsletters, and publish them on the Web behind a paywall.

Morin’s first newsletter is a paean to the paywall. It is essentially an advertisement for Letter.ly, backing his friend Lessin’s endeavor. My favorite line in his post, which I agree with actually, is that: “Advertising is simply information which has no audience other than the one that the advertiser purchases.” Yet, here he is charging for what amounts to an advertisement:

I have been a student in the school of Sam Lessin for several years now, but I believe that Letter.ly is, to date, the best manifestation of a set of ideas that Sam has had for a very long time around the evolving line between private and public information and its interaction with capitalism and society.

His argument boils down to the fact that information is no longer scarce on the Web, and thus, it is not valuable. To make information valuable, you must charge for it. (Yup, he sounds just like Rupert Murdoch). Except he’s wrong because information does not exist in a vacuum. It becomes richer and more valuable the more it informs and links to other information, the exact type of thing paywalls prohibit. If someone says something interesting behind a paywall, it will find its way onto the open Web, just as Morin’s argument is here. I’ve extracted his key point below so that we can all discuss it:

I believe that we are sitting at the dawn of a new age of premium information and content. For the last 10 – 30 years we have been working intensely as a society to build out the first manifestation of the web. According to a recent speech by Eric Schmidt of Google, the web has brought us information abundance to the tune of close to 5 exabytes every two days. That is more information created every two days than was created by the human race throughout all of time leading up to 2001. As I mentioned in my blog post leading up to this letter, information is subject to the same simple economic rules of scarcity as anything else. Information by definition is scarce. Because of the mostly open (and by open I mean open in the public sense) nature of most of the most popular networks on the web (Google, Facebook, Twitter), when you publish information onto today\’s web it faces an immediately diminishing marginal utility curve.

Most information on the web as we have currently defined it is now a commodity. As those of us whom have attempted to build web companies throughout this time period know well, the tension between different types of information, user, and business value has been increasing. Because of the commodity nature of most information moving around the web, it has been hard to develop business models for web businesses which do not involve the lowest quality kind of premium information: advertising. Advertising is simply information which has no audience other than the one that the advertiser purchases. An advertiser hopes that they can purchase a relevant and contextual audience. At best, with social and local technology, advertising is beginning to find a more relevant audience than it ever has before. But, it remains to be low quality content in most cases. Until only recently, most information, services and communities on the web were open and therefore quickly trending towards zero.

There have been examples of premium services and communities on the web, but they have never been broadly accepted. And, so most entrepreneurs have spent their time building broad, generalized, businesses which rely on advertising to run the business. I believe this is changing. And, that the age of premium information, service, and community is here.

Morin then cites the Wall Street Journal and other news paywalls as examples of premium information, along with virtual goods and the types of mobile applications you pay for on the iPhone and iPad as proof that people will pay for articles and opinions.

Yet, just putting something behind a paywall, does not make it valuable. But it does certainly make it harder to find. The way Letter.ly works is that you subscribe, then you receive the newsletter via email. Because what the world needs more of is email.

Photo credit: Flickr/Steven Depolo

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