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September 29, 2009

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Drawing Circles Around the New Economy

Way back in the late 90s and early 2000s, the “dot com” boom was fueled by companies posting big revenue growth, and as it turned out, much of that revenue turned out to be what was known as “round trip” — it wasn’t all that real.

For example, AOL would pay People Magazine $200K for exclusive online rights for photos of some 90s celebrity’s new baby, and then People Magazine would buy $200K worth of ads on AOL. By sheer coincidence, People Magazine and AOL were both owned by AOL Time Warner, so in effect, each subsidiary now had $200,000 in “revenue growth” that didn’t improve either company’s profits one dime.

Startup entrepreneur and angel investor Chris Dixon wrote a hilarious send-up of the Facebook economy and the Zynga games people are playing inside of Facebook. (Just because I have no free time, I’ve studiously avoided all of these, despite numerous opportunities to join someone’s mafia family or become a pirate or ninja.)

While the Facebook Economy by no means has the “fakeness” of round-trip revenue, it certainly makes for some good laughs and we will see how much real cash makes it into this ad-and-game-supported business model that is supposed to eventually pay for the social networking craze (as well as make some smart people very rich).

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  • I personally believe the digital revolution is going through the final stage of development, which is when people realize digital is a great tool, but not a real tangible asset in and of itself. As a photographer, I find it is the physical photographs that people are once again craving, not just a CD with the digital representations of the physical item.

    It's like DNA, if you have a pile of it in your hand it doesn't really mean anything, but if you "print" it, you get a physical, living being. The same goes for the digital world, when the end game is realized, people still want something they can touch and experience physically, not just digitally.
  • We'll see -- just wait until we have digital screens that handle like paper and are incredibly inexpensive. :)
  • So, what happens when the power goes out? :) We had an outage last week, and when the laptop battery was gone, it was gone. I love technology, but when it comes down to it, I'd rather have a real book instead of a digital one even if the digital copy is much more convenient.
  • Again, this is fairly futuristic, but extremely long life and miniature batteries, combined with low power screens, should allow these devices to blend into the background (much like paper does) and operate without any noticeable friction like power.

    My Kindle is already close to this, although it's still too thick to truly "disappear" like paper does. The extraordinarily low power screen is very paper-like, and I rarely think about charging it because a battery charge lasts me at least a month. (Of course, if I had time to read more, it might need to be charged weekly.)

    Imagine disposable paper-thin screens with tiny built-in batteries. You never charge them, you barely notice the screen is there. It's just that the content changes on this piece of paper. It costs 2 cents to build, they are everywhere, and you toss them when you're done.

    I'm just saying -- I'm sure people had trouble getting used to paper over leather parchment, but eventually, paper improved and blended into the background, and the convenience made it win. Digital screens will do the same someday, although it's always possible it's not in our lifetimes.
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