Revision3 moved past tech to shows on magic and comic books. Louderback finds talent not on TV but online inviting viewers to submit their own pilots. The internet is an amazing source of new voices if you know how to listen for them. Talent may not be everywhere, but it's not as scarce as once thought.

The key, Louderback said, is to realize that the internet "is a new medium. It's completely different. Think how Ted Turner created CNN. He didn't just think about plopping a broadcast network on cable. He thought about creating an entirely new medium." So did Kevin Rose. His shows are communities. He is the new Turner, Murdoch, Hearst-or Oprah. He is the next-generation media mogul because he thinks differently.

This new relationship we have with-in the words of New York University journalism professor Jay Rosen-"the people formerly known as the audience" is collaborative. I don't mean we'll each end up picking our own endings to a movie. I don't want that. Writing the ending is the job of the author. Still, entertainment is becoming collaborative. When LonelyGirl15-the saga of a pretty teen girl talking about her odd life via a webcam in her bedroom-became an entertainment phenom on YouTube, what was most fascinating was not the LonelyGirl videos but the videos viewers made around them, responding to her, asking questions, affecting the course of the narrative. When it turned out that LonelyGirl was not real but an act of fiction, the audience's videos-many exhibiting anger and disappointment-were captivating. The art was the collection of everyone's work, creators and audience. The art was interactive. Something similar happens on discussion forums such as Television Without Pity, where producers take advice about plotlines and characters in series that threaten to jump the shark. These producers realize that the audience owns a show as much as its creators.

Entertainment can now break out of its old forms. Comedy doesn't need to be 22 minutes long (plus eight minutes of ads). Movies can become serials. Shows can be collaborative. Talent can come from anywhere. Audiences are distributors. We can watch entertainment anywhere.

Hollywood-particularly TV-has not been blind to this change and learned from the music industry as it imploded trying to maintain control in an uncontrollable world. TV networks might just save themselves because they broke their own rules. ABC was willing to hurt its distributors-local stations-when it streamed shows on the internet and sold them on iTunes. NBC and Fox created an impressive player called Hulu; in the U.K., the BBC started its equivalent in the popular iPlayer. Like Google, they learned to think distributed.

What will Hollywood studios and TV networks look like in the Google age? At one level, they won't change: They will still pray for blockbusters and the stars that make them. At the top, the celebrity economy is largely immutable because there can be only so many big stars at once. But from the bottom, we will see more, if smaller, celebrities in many variations on Warhol's Law: Everyone is famous for 15 clicks, links, tweets, or YouTubes. Fame, like talent and audience, is no longer scarce.

Managing this abundance presents many opportunities. More than ever we need guides. Too bad TV Guide is choking in the coal mine. One-size-fits-all criticism won't work anymore. But a system that helps us help each other find the best entertainment would be valuable. If I were to start Entertainment Weekly today, it would be that: a way to find just what I like, a collaborative Google of taste.

Entertainment will be more of a social experience. Though I still want authors to do their duty and polish stories, that doesn't mean I wouldn't like to see other people remix shows and movies. In the old, controlled way of thinking, remixing was a violation of copyright. In the new, open, distributed model, it is how you join the conversation. Comedy Central's Stephen Colbert has-Stern-like-challenged his audience to remake videos of him and of John McCain. Some were great, some were nowhere near that, but in the process, they spread his challenge all over YouTube, Mys.p.a.ce, and blogs. It's a gift economy and it's an ego economy: Everybody who made a video wanted attention and could get it from Colbert and his community. The content was the advertis.e.m.e.nt, viewers were the creators and distributors, and Colbert was the catalyst. Maybe that's what entertainment becomes: the spark that inspires more creativity and attracts not just audiences but communities of creation in a million Hollywoods.

GoogleCollins: Killing the book to save it Killing the book to save it

I confess: I'm a hypocrite. If I had followed my own rules-if I had eaten my own dog food-you wouldn't be reading this book right now, at least not as a book. You'd be reading it online, for free, having discovered it via links and search. You'd be able to correct me, and I'd be able to update the book with the latest amazing stats about Google. We could join in conversations around the ideas here. This project would be even more collaborative than it already is, thanks to the help of readers on my blog. We might form a group of Googlethinkers on Facebook and you'd be able to offer more experience, better advice, and newer ways to look at the world than I alone can here. I wouldn't have a publisher's advance but I might make money from speaking and consulting.

But I did make money from a publisher's advance. That is why you are reading this as a book. Sorry. Dog's gotta eat.

I already do most everything I describe above, not in this book but on my blog, where ideas are searchable and collaborative and can be updated and corrected-and where I hope conversations sparked by this book will continue. I believe the two forms will come together-that's part of what this chapter is about. In the meantime, I'm no fool; I couldn't pa.s.s up a nice check from my publisher, Collins, and many services, including editing, design, publicity, sales, relationships with bookstores, a speaker's bureau, and online help. There's a reason publishing is still publishing: It still pays. How long can it stay that way? How long should it stay that way?

As I suggested that papers should turn off their presses, I have a suggestion for book publishing: We have to kill books to save them. The problem with books is that we love them too much. We put books on a pedestal, treating them as the highest form of culture: objects of worship, sacrosanct and untouchable. A book is like a British accent-anything said in it sounds smarter, even if it's not. But, of course, there are bad books. Any episode of The Office The Office, The Wire The Wire, and Weeds Weeds, to name just a recent few, is better than too many books on the shelf. Yet we dismiss TV as our lowest cultural denominator, and we allow government to censor TV shows whereas we would not permit it to ban books. Books are holy.

We need to get over books. Only then can we reinvent them. Books aren't perfect. They are frozen in time without the means to be updated and corrected, except via new editions. They aren't searchable in print. They create a one-way relationship: Books teach readers, yes, but once written they tend not to teach authors. They cannot link to related knowledge, debate, and sources as the internet can. David Weinberger taught me in Everything's Miscellaneous Everything's Miscellaneous that when knowledge is frozen on a page it can sit in only one place on a shelf under one address so there is only one way to get to it. In the internet age, with its many paths to knowledge, this, too, is a failing of books. Books are expensive to produce. They depend on scarce shelf s.p.a.ce. They kill trees. They rely on the blockbuster economy, which is to say that only a few are winners and most are losers. They are subject to gatekeepers' taste and whims. that when knowledge is frozen on a page it can sit in only one place on a shelf under one address so there is only one way to get to it. In the internet age, with its many paths to knowledge, this, too, is a failing of books. Books are expensive to produce. They depend on scarce shelf s.p.a.ce. They kill trees. They rely on the blockbuster economy, which is to say that only a few are winners and most are losers. They are subject to gatekeepers' taste and whims.

Books aren't read enough, I think we'd agree. Don Poynter at BookStatistics.com compiles sobering stats about the industry and reading. Citing BookPublishing.com, he reports that 80 percent of U.S. families do not buy or read a book in a year; 70 percent of U.S. adults had not been in a bookstore in five years; 58 percent of U.S. adults don't read a book after high school (though this conflicts with National Endowment for the Arts stats saying that in 2004, 56.5 percent of U.S. adults said-said-they had read a book in a year). Books are thrown out when there's no s.p.a.ce for them and end up as trash or pulp. Forty percent of books that are printed are never sold. Books are where words go to die.

When books are digital, all kinds of benefits accrue. Books can become multimedia, like Harry Potter newspapers, with moving pictures, sound, and interaction. They can be searched, linked, and updated. They can live forever and find new audiences anywhere. Conversations can grow around ideas in books, exposing them to new readers. Writing in Library Journal, Ben Vershbow of the Inst.i.tute for the Future of the Book envisioned a digital ecology in which "parts of books will reference parts of other books. Books will be woven together out of components in remote databases and servers." Kevin Kelly wrote in The New York Times Magazine: "In the new world of books, every bit informs another; every page reads all the other pages." When an idea is spread among people, it can grow and adapt and live on past the page. Before a convention of booksellers in 2006, author John Updike called Kelly's vision of "relationships, links, connection and sharing" Marxist and "a pretty grisly scenario."

There's just one problem with these visions of digital publishing paradise (including mine): money. How will authors be paid for going to the trouble of reporting, imagining, and writing when so much of that is free on the internet? The internet is unsympathetic.

Robert Miller, former publisher of Disney's Hyperion, came to HarperCollins-parent of my publisher-as I was writing this book. His mission was to update the business of book publishing and its two d.o.g.g.i.ng problems: advances and returns. The difficulty, he explained to me, is in the middle. At the top, best sellers make money and at the bottom, we now have the means for no end of niches to create small books (six huge publishing conglomerates control the high-end of the market but Publishers Weekly reports that the total number of publishers grew from 357 in 1947 to 85,000 in 2004; that's a lot of niches). In the middle, however, advances to authors (like me) have been rising, increasing risk and losses.

It's a problem of the blockbuster economy: Publishers throw a lot at the wall, hoping something will stick but never knowing what will. Though ownership of publishing houses has consolidated, Miller said that hasn't much affected compet.i.tive bidding among them. All it takes to pump up the price is for two houses to want the same book. That has been the case since 1952, when literary agent Scott Meredith started auctions among publishers rather than sending a book to one house at a time, as the gentlemen of the trade used to do. Today most books don't earn enough to pay for the advance publishers give authors. Miller said a house is doing well if 20 percent of books earn back their advances. Imagine any other industry in which 80 percent of the products you produce lose money. It's a growing insanity.

Miller's proposed solution: He is offering smaller advances-maximum about $100,000-and in return, authors split a book's profit, 50-50, with the publisher (for comparison, I receive a 1015 percent commission of the retail price in hardcover and 7.5 percent in paperback and we split fees from international sales). The idea is that author and publisher share the risk and the reward.

Then there is the problem of returns. Publishing is a consignment business. Bookstores can send unsold books back to publishers-a practice for which Simon & Schuster gets the blame-so it's the publishers who bear the risk, not to mention the huge cost of printing, shipping, storing, and pulping all those unwanted books. Books are atoms of perishable value. Miller wants to offer booksellers, too, a higher cut of profits if they will take the risk of owning the books they order. The resultant risk to publisher and author could be that bookstores won't order enough to meet demand, but Miller said publishers are increasingly good at printing more copies quickly.

Miller's goal is to make the existing print business more profitable. That's fine as far as it goes. He acknowledges that there are other models that need to be tried. Perhaps you could buy a book chapter by chapter as a d.i.c.kensian subscription: Buy enough chapters and you've bought the book (if it's bad, stop and you've spent less; BookPublishing.com says 57 percent of new books are not read to completion). Or buy the book in print and get access to it as an audio book and on an e-reader such as Amazon's Kindle. Some hold high hopes for print-on-demand, which would enable a store to sell you any book quickly, beating Amazon's delivery delays. But that's still expensive and it produces only paperbacks. Still, we know that readers will pay a premium for immediate gratification; that's why they still go to stores. Perhaps publishers could offer their own discounts if you're willing to wait a week or two, enabling them to collect orders until there are enough to print. They could charge less, still, if the reader is willing to take a book in the clumsy PDF format, which enables publishers to sell books to readers with no manufacturing cost. Or perhaps readers could subscribe to an author or series, guaranteeing the publisher and writer cash flow and a reason to publish the next book. Maybe authors could even tell readers that they'll write a book only if so many readers buy it in advance.

Peter Osnos, another publishing visionary on a mission to save the business, founded the Caravan Project to enable publishers to sell books in any form: in their traditional format, via print-on-demand, digitally in full or by chapter, and in audio. "When a reader asks for a book, the seller's answer should always be, 'how do you want it?'" he wrote at The Century Foundation. Osnos told me that the fundamental problems for publishing are availability and inventory management. If he can drive 20 percent of book selling to on-demand and digital, he believes he will save so much in printing unsold copies that he will be able to afford the marketing needed to make the business model work. He read a quote from The New York Times on the day that Google introduced its new Chrome browser arguing that Google needed to control its own destiny. That is the sense in which publishers should do what Google does, he said: control their own destiny.

Rick Smolan-best known for producing America 24/7, America 24/7, which chronicled one week in the life of the United States with 1,000 top photojournalists-has found another way to support his gorgeous and expensive photography books: sponsorship. "Why?" Smolan asked and then explained: "Because no publisher would publish our first book, which chronicled one week in the life of the United States with 1,000 top photojournalists-has found another way to support his gorgeous and expensive photography books: sponsorship. "Why?" Smolan asked and then explained: "Because no publisher would publish our first book, A Day in the Life of Australia A Day in the Life of Australia, we went to the business community in Australia and self-published the book-it went on to become the No. 1 book in Australia and sold 200,000 copies (in a market where 10,000 was a best seller)." More recently, he produced America at Home America at Home and a U.K. counterpart, each underwritten by an obvious sponsor-Ikea, which took little credit. (Smolan had another innovative idea: Readers can pay to get either book with their own photo on the cover.) and a U.K. counterpart, each underwritten by an obvious sponsor-Ikea, which took little credit. (Smolan had another innovative idea: Readers can pay to get either book with their own photo on the cover.) Why shouldn't books have ads to support them as TV, newspapers, magazines, radio, and web sites do? Ads in books would be less irritating than commercials interrupting shows or banners blinking at you on a web page. Would it be any more corrupting to have ads in this book than next to a story I write in BusinessWeek? You'd have to tell me. If I had a sponsor or two for this book, what would you think of my work as a result? If Dell bought an ad-because, after all, I do say nice things about them now-would you wonder whether I'd sold out to them? I'd fear you'd think that. What about a Google ad? Obviously, that wouldn't work. Yahoo? Ha! Who might want to talk to you and a.s.sociate themselves with the thinking in this book while also helping to support it? Would it affect your thinking if the sponsorship lowered the price of the book? From the publisher's perspective, that could lower risk and increase profits. From mine, it could mean the book costs less and so it sells more and its ideas get wider distribution. (Come to my blog and let's debate ads in the paperback. Maybe we'll auction off a few pages on eBay.) All these models still ignore the internet's greatest challenge: free. Free is going to kill publishing the way it killed music, right? Maybe not. Maybe free can save publishing.

The Googliest author I know, who also happens to be one of the most monumentally successful authors alive, Paulo Coelho, has nothing against selling books. He has sold an astounding 100 million copies of his novels and he estimates that another 20 million have been printed without authorization in countries that flout copyright. Even so, Coelho believes in giving away his books online for free. He's a pirate.

Coelho learned the value of free in Russia, where a pirated translation of one of his books went online. His sales there jumped from 3,000 to 100,000 to 1 million in less than three years. "So I said this is probably because of the pirate edition," he told me in a conversation in his Paris apartment. "This happened in English, Norwegian, j.a.panese, and Serbian. Now when the book is released in hard copy, the sales are spectacular. There's confirmation that I was right." He believes this piracy has helped make him the most translated author alive.

The pirated versions helped him so much that Coelho started linking to them from his own web site. After bragging about his openness at the Burda DLD conference in Munich in 2008-where I met him-he got a call from Jane Friedman, who was then head of his publisher, HarperCollins (parent of my publisher). "I was scared to death to talk to her because I knew what was coming: a tempest. She said, 'I have a problem with you.'" Friedman had caught him in the act of self-piracy when she discovered that one of the supposedly unauthorized pirate versions to which he'd linked still had Coelho's own notes and corrections in it. "She said, 'Paulo, come on, don't s.h.i.t me.'" He sheepishly confessed to pirating himself. But he also said that neither of them could afford to lose face by taking the editions down; there'd already been publicity about them. They compromised: Each month, one of his books could be read for free, in full, in a special online reader that doesn't allow a user to copy (or search for or link into) the text. It's a start.

As this book goes to press, HarperCollins and I have discussed many digital options, including using that reader to put the book online in full for a few weeks before it is published, serializing pieces of the book online for a limited time, putting up free PowerPoint and video versions of the book, and more. I'll report on what worked on my blog.

In Coelho's view, the free web has given him more than book sales. He loves writing in a different voice in his blog. "I think your language for your blog is totally different from your language in the Guardian, right?" he said to me as I interviewed him for a column there. "We have to adapt ourselves. I have a lot of fun doing this." When I first met him, he said his blog would not influence his books. But six months later, just as he finished his latest novel, The Winner Stands Alone The Winner Stands Alone, he said his readers had been helpful explaining fashion and the attraction of brands to him.

Coelho Twitters. He uses a small Flip Video camcorder to record video questions for his audience via Seesmic.com, a video conversation platform. Inspired by his wired and eager a.s.sistant, Paula Bracconot, Coelho asked his fans to take pictures of themselves reading his books for a virtual exhibition at the Frankfurt Book Fair in celebration of his 100 million mark. Hundreds posted their photos on Flickr. Coelho also began inviting readers to his parties. The first time, he said on his blog that he would ask the first few readers who expressed an interest to a party he was holding in a remote Spanish town. Responses came in from all over the world and he feared that they expected him to pay their airfare. But they paid their own way, flying from as far as j.a.pan. He webcast a later event and 10,000 people showed up online for it.

Coelho asked his readers to make a movie of one of his novels, The Witch of Portobello The Witch of Portobello. With The Experimental Witch The Experimental Witch, he invited fans to film the stories of each of the book's characters. If there were enough good submissions, he promised to hire an editor to make the final cut. He also found sponsors-HP and Mys.p.a.ce-to pay for the project. As entries came in, he sent me links to them. Some showed remarkable effort and talent.

Note the common thread-from collaborative news gathering to news remixes for the BBC to Howard Stern's listeners' song parodies to Lonely-Girl15 videos to Coelho's open-source movie: Creation itself is a community. BookPublishing.com says 81 percent of Americans believe they have a book in them. None of them will ever be Coelho and Coelho's books will always be his. But creativity inspires creativity and the internet enables us to turn that into a conversation. The moral of Coelho's story, like that of so many here: It's about relationships. What has the internet given him? "It gives me a lot of joy," he said. "Because you are alone when you are writing." But no more. His goal online is to find relationships with more readers and sell more books. Coelho still believes in print. He lovingly patted a 3-D book-a thick biography of his rich life-and talked about the form's perfection.

Publishers treat Google as an enemy for scanning books and making them searchable (though you can't read them all cover-to-cover at Google.com). Instead, publishers should embrace Google and the internet, for now via search and links more readers can discover authors and what they say and develop relationships and perhaps buy their books. Authors can reach the huge audience that never goes into a bookstore. Publishers and authors can find new ways to bring books into the conversation. Books can live longer and spread their messages wider. I don't have the answers to books' challenges. But I know we must be willing to reinvent the form. The internet won't destroy books. It will improve them. Take Coelho's advice to publishers and authors: "Don't be afraid."

Just as I was dotting the final i on this ma.n.u.script, Google announced that it would create the means for publishers and authors of out-of-print books to receive payment from readers who want access to the full text online (Google will keep 37 percent of the fees as commission). Google also may sell ads on pages with book content and share that revenue with publishers and authors. Sergey Brin told a Wall Street Journal blog that the payment system could be extended to video, music, and other media.

This offer came in the settlement of a suit brought by publishers and authors fighting Google's scanning of books-seven million to date-to make them searchable online. But it is far more than a sop to angry book people. In one fell swoop, Google altered the life cycle and economics of books and potentially answered some of their most pressing digital needs. Now books will be able to live past the remainder table and pulper. They'll be searchable. They'll find new audiences over greater time and distance. They'll make more money. Google is not the enemy of books. It is becoming their platform for the future.

Advertising

And now, a word from Google's sponsors

And now, a word from Google's sponsors

Earlier, I argued that marketers' ultimate goal should be to eliminate advertising by improving their products and relationships instead. Consumers should be so lucky. Media companies supported by advertising should pray this never happens.

Media's prayers will be answered. We'll always have advertising and ad agencies because companies will never reach the nirvana of creating perfect products that every customer loves and sells for them. Marketers will still want to introduce new products and to envelop what they sell in the smoke-and-mirrors of premium brands.

In a sense, Google has changed advertising more than any industry I cover here. Google is in the ad business. It revolutionized the ad economy, enabling marketers to pay for performance rather than s.p.a.ce, time, and eyeb.a.l.l.s. It invented new means of targeting ads, making them newly efficient. It opened up millions more places to put ads, ending media scarcity. It attracted countless new advertisers. It dominates not only search ads but now web banner ads, and it has started selling ads in print and broadcast.

Yet for all the upheaval Google has brought to the advertising economy, ad agencies remain largely unchanged. That's because agencies still control the money, and n.o.body wants to mess with the guy who has the credit card. But their Google immunity will expire.

Rishad Tobaccowala, chief innovation officer of Publicis Groupe Media, started Denuo, a think-tank and laboratory inside his company, in an effort to create the next-generation agency. Asked what Google teaches him for this task, he counted five lessons.

First: Focus on talent. "Google feels like it was invented yesterday and it's a 10-year-old company already," he said. "AOL's a grandfather." Agencies are supposed to be fresh and young but Tobaccowala said they act old thanks to the "death grip" of years-long relationships among executives and clients. "Google would have talent running the place versus tenure."

Second: Newness. "In the service business," Tobaccowala said, "you take the form of the people you work for. If you really want to change, you need to get a new breed of clients." Google did that by creating a marketplace to serve the long-tail advertiser before the behemoths, "people who didn't think about advertising, who had no agency." They brought no rules, so they played by Google's rules.

Third: Data. Advertisers love data almost as much as Google does. They think it tells them where to spend their money and the return on investment they get. For decades, advertisers accepted dubious measurements of magazine readership (which a.s.sume that every allegedly well-worn copy is pa.s.sed around to large groups) and broadcast audiences (surely they can't believe the Nielsen ratings). Then along came the most measurable medium in history, the internet, where advertisers can learn more about customers than ever before.

Fourth: Make money through the side door. "Google-and Apple-make money by giving a key part of their business away for free and then making money on something else." Too often, companies think that everything they do has value they must capture, charge for, monetize, preserve, restrict, and protect. Instead, the real value may come from the side.

Fifth: To quote Google's own No. 1 rule, "Focus on the user and all else will follow." Australian ad executive Peter Biggs spoke for much of his industry when he told ABC Radio National's The Media Report: "It's a consumer-driven business, but they are not our most important audience. Our most important audience is our clients, and their brands." Tobaccowala says the opposite. "Our fixation should not be on our clients. It should be on the people our clients want to engage, sell, and interact with. We should be the champions of those people. That is where we are missing the boat."

I wonder whether focusing on the consumer instead of the client ends up usurping much of the job of the agency as we know it. Fixating on customers should be the job of everyone-everyone-in a company. In business, we've long said we're customer focused. But today you have to mean it or your customers will call your bluff. Focusing on customers can't be outsourced to agencies.

Agencies will resist change until the economics of the industry change. Because agencies make a cut of what they spend, they are motivated to spend more on ads rather than to replace ad dollars with more valuable relationships between brands and customers. So clients may be the first to evolve. Just as I tell newspapers to imagine a day when they stop the presses and book publishers to think past the book, so I advise marketers to imagine as an exercise firing the agency, canceling the ad budget, throwing out the ads, and starting over. What is your relationship with your customers then? Where should you put your money? Where should you spend your first ad dollar and why?

Start, of course, by investing in your product or service. Tobaccowala said no amount of advertising will make up for a bad product. "Stop this yelling and screaming about what's your Facebook strategy," he tells clients. "Make absolutely certain that you have a great product or service. Make absolutely certain you have great customer service. Those are the first two rules of so-called advertising in this world. If you don't have those, don't pay any money to anyone to do anything."

Then turn the relationship with the customer upside-down. First, invest in customer service, making it a goal to satisfy every single customer. Remember that your worst customer is your best friend. Second, invest effort in social tools that enable customers to tell you what you should be producing; hand over as much control to them as you can (I examine this idea from another perspective in the chapter on manufacturing). The goal must be to produce a product people love. All companies claim that customers love their brands. But I mean customers love your product so much they want to tell the world-that kind of love, Apple love. Third, hand over your brand to your customers-recognizing that they have always owned it. Don't tell them what your brand means. Ask them what it means.

Every product is great; every relationship is satisfying-shoot for nothing less. So now you are spending quality dollars and relationship dollars over advertising dollars. You have handed over control of the product and the brand and gotten out of the way. If you haven't gone out of business by now and convinced every boss, board member, a.n.a.lyst, reporter, and stockbroker that you've gone mad, then it probably worked.

Won't you still advertise? Ask yourself why. To interrupt and irritate random people? No. To convince customers that a bad product is good? No. To inch ahead of your compet.i.tor with the brute force of media spending? No. To get people watching Sunday morning shows to buy your stock? Please, no. Do you advertise to tell customers something they didn't know and need to know about your product, such as an improvement or a better deal? Well, OK. Tobaccowala defines advertising as "the economics of information" (the t.i.tle of a 1961 essay by n.o.bel laureate and University of Chicago professor George J. Stigler). Advertising is supposed to tell us about a product or its price so we can save effort, time, and money in our search for it. The internet has made that much more efficient. If the customers' goal is to reduce their transaction cost-the effort to find the right product at the right price-then doesn't the internet itself replace advertising? Often, yes.

A 2007 economics honors thesis by Daniel A. Epstein compared the pricing of similar cars listed in expensive newspaper ads with cars listed for free in craigslist. His hypothesis was that sellers who pay to advertise would want to price cars lower to sell more quickly so they would spend less on advertising. His research proved his theory wrong. Newspaper advertisers marked up their cars over Kelly Blue Book by 0.423 percent whereas craigslisters marked up theirs by 0.042 percent-a fraction. You might see this differential alone as motive to buy ads: Advertise and you can charge more. But I chalk this case up to a temporarily imperfect market, a.s.suming that sellers who advertised were cagey and knew to ask for more, whereas craigslisters may have been bad negotiators who didn't know they could get more. As Google and craigslist push the market toward openness and transparency with more information and greater pricing compet.i.tion, that alone will push prices down. Epstein's hypothesis may one day come true: Advertisers won't be able to afford to advertise and stay compet.i.tive.

Of course, there are still people who don't know about your product, who won't know to search for it because it is new or they are uninformed. In the cla.s.sic case for advertising, they also may not know they have the problem you solve. In 1919, the ad agency for the deodorant Odo-Ro-No invented the term "B.O." and the insecurity around it. "Advertising," said the trade journal Printers Ink, "helps to keep the ma.s.ses dissatisfied with their mode of life, discontented with ugly things around them." For good or bad, there will still be a role for advertising.

But ma.s.s marketing will no longer be the most efficient means of spreading a message. Compet.i.tors who learn to target customers-by relevance, not by content or demographics-will increase effectiveness and efficiency and lower their cost. Who has the leading relevance engine? It's not ma.s.s-market TV (with its skippable ads). It's not one-size-fits-all, shrinking newspapers. It's not billboards on the road or on web sites. It's Google.

Another reason to still advertise may be to burnish a brand, to help make it cooler because the ad is cool or it appears in a cool place. There is an ongoing debate in media whether brand advertising works online. Advertisers say they do not get the rub-off of branding on the web. They argue that online is a direct-response medium where countable clicks are king and mood can't be conveyed in a banner people ignore. Media people try to convince advertisers that brand advertising does work online-because they charge more for branding and because they don't want to be paid just on clicks. They're both looking at the wrong issue. As The Cluetrain Manifesto The Cluetrain Manifesto observed, the internet is filled with human voices of friends and peers, so the artificial, inst.i.tutional, huckster voice of brand advertising and sloganeering will increasingly be revealed as thin and false. Google's simple, informative, relevant text ads ring truer. observed, the internet is filled with human voices of friends and peers, so the artificial, inst.i.tutional, huckster voice of brand advertising and sloganeering will increasingly be revealed as thin and false. Google's simple, informative, relevant text ads ring truer.

The marketing that is left must evolve. Advertisers are starting to mouth the right words-it's about relationships, not messages, I hear them say. In his 2001 book, Gonzo Marketing Gonzo Marketing, Christopher Locke-another coauthor of Cluetrain Cluetrain-argued that "the fundamental message of marketing must change from 'we want your money' to 'we share your interests.' In this respect, corporate underwriting is a way-perhaps the only viable way at present-for companies to put their own money where their mouth is." He urged companies to buy ads on relevant blogs-not as a way to distribute messages in banners, but as a way to underwrite blogs, as they would a PBS show. Sponsors say by their support that they share the interests and affections of the blog's readers. Does that co-opt the blogger? It need not so long as the line between content and ad is clear. Locke also pushed companies to allow employees to blog so they could develop direct, helpful, and human relationships with customers. Robert Scoble, now head of FastCompany.TV, was the poster child for Locke's argument when he blogged from inside Microsoft, in his own voice rather than that of the corporate Borg. He almost single-handedly turned around the reputation of even this company online. Your products and your customers are your ads, and so are your employees.

The best way to burnish a brand is no longer to rub up against media properties like Vogue or the Super Bowl. The best way today is to rub up against people: Sally the blogger or Joe the Facebook friend. The medium is the message and the customer is the medium. Sally is the new Vogue.

Separate the functions of an ad agency today-media buying, research and data, and creative. What happens to each?

Media buying, under Locke's theory, now becomes more important than messaging. When your customer is your ad, media doesn't mean content, it means people. Networks of people will become a force in advertising. Already, media companies, including Forbes and Reuters, are running blog ad networks for marketers. A group of fans on Facebook discussing a product is worth a thousand ads.

Each company must take responsibility for its own research and data. It must know everything it can about its customers and how its products are bought, seen, and used. This knowledge is more than raw numbers derived from snooping on behaviors, commissioning surveys, or quizzing random customers behind focus-group mirrors. We're not data. We're people. So understanding will come from relationships. Ask your customers. Listen. Remember it's a gift economy, and they will be generous if you deserve their generosity.

Creative? Messaging? The more you hand that over to your customers, the better. Apple produces great and entertaining commercials. But in 2004 a teacher named George Masters made a now-legendary commercial for the iPod Mini, filled with psychedelic hearts, that was in some ways more powerful than professional ads because it was made with personal pa.s.sion.

What becomes of advertising? For the first time, the ad economy may contract. In the past as new media emerged, dollars shifted from old to new-newspapers to TV, TV to internet-but didn't leave the market, according to Bob Garfield, cohost of public radio's On the Media On the Media and critic for Advertising Age. Garfield observed that while old media shrink, new media are not ready for big advertisers, and big advertisers are not ready for new media. As a result, dollars will disappear into the chasm between. Garfield called this advertising's "chaos scenario." and critic for Advertising Age. Garfield observed that while old media shrink, new media are not ready for big advertisers, and big advertisers are not ready for new media. As a result, dollars will disappear into the chasm between. Garfield called this advertising's "chaos scenario."

In addition, as relationships replace advertising, spending will decrease. The new abundance of media online will drive prices down as supply increases and demand decreases. Google's systems will target advertising more efficiently, reducing cost. Opening the market with Google auctions also lowers cost. These savings will not be plowed back into marketing but will need to go toward lowering prices because the internet gives customers unprecedented ability to comparison shop and price will matter more. Some of those savings must be devoted to both improving the product, which now acts as the ad, and improving relationships with customers, who are the new ad agency.

The agency and advertising need to get out of the way in the relationship between companies and customers. Agencies may help solve problems-teaching companies how to build networks with customers, a.s.sisting them with product launches-but once the consultation is done, the good consultant leaves town.

Tobaccowala suggested agencies remake themselves as networks. He quoted University of Chicago economist Ronald Coase in his seminal 1937 essay, "The Nature of the Firm"-which is also quoted in Wikinomics Wikinomics, Here Comes Everybody Here Comes Everybody, and, it would seem, half the business books published lately. Coase reasoned that firms exist and grow when internal friction is less than external friction, when it is easier and cheaper to deal with insiders than with outsiders. "In a networked world, it's easier for us to work with outside people than inside people," Tobaccowala said. "Google, even in its grandiosity, still is a company that believes in forms of partnering." Agencies and other companies, he said, will look more like Hollywood studios, where 80 percent of what goes into a movie comes from outsiders. Google even provides technology to make such collaboration possible. So Google doesn't change just the essence of advertising. It changes the essence of the company. The network is becoming more efficient than the corporation.

Google is an avalanche and it has only just begun to tumble down the mountain. Media was closest to what Google does and so Google's impact on media has been profound and permanent-and it's not over yet. Next in Google's path is advertising. Even though it, too, is close to Google-they are in the same industry-the rumble is only beginning to be heard. Agencies are about to be buried, and they still don't see it coming. The industries we examine next may think they are safe, far away in the valley, under a bright sun. But the Googlanche will hit them, too.

Retail

Google Eats Google Shops

Google Eats: A business built on openness A business built on openness

What would a restaurant run according to Googlethink look like-other than being decorated in garish primary colors with a neon sign, big b.a.l.l.s for seats, and Fruit Loops and M&Ms on every table?

Imagine instead a restaurant-any restaurant-run on openness and data. Say we pick up the menu and see exactly how many people had ordered each dish. Would that influence our choice? It would help us discover the restaurant's true specialties (the reason people come here must be the crab cakes) and perhaps make new discoveries (the 400 people who ordered the Hawaiian pizza last month can't all be wrong...can they?).

If a restaurateur were true to Googlethink, she would hunger for more data. Why not survey diners at the end of the meal? That sounds frightening-what if they hate the calamari?-but there's little to fear. If the squid is bad and the chef can hear her customers say so, she'll 86 it off the menu and make something better. Everybody wins. She'll also impress customers with her eagerness to hear their opinions. This beats wandering around the tables, randomly asking how things are (as a diner, I find it awkward and ungracious to complain; it's like carping about Grandmother's cranberry sauce on Thanksgiving). Why not just ask the question and give everyone the means to answer? Your worst diner could be your best friend.

The more layers of data you have, the more you learn, the more useful your advice can be: People who like this also like that. Or here are the popular dishes among runners (a proxy for the health-minded) or people who order expensive wines (a proxy for good taste, perhaps).

If you know about your crowd's taste in wine, why not crowdsource the job of sommelier? Have customers rate and describe every bottle. Show which wines were ordered with which dishes and what made diners happy. If this collection of data were valuable in one restaurant, it would be exponentially more valuable across many. Thinking openly, why not compile and link information from many establishments so diners can learn which wines go best with many kinds of spicy dishes? If you want to be courageous, why not reveal that people who like this restaurant also like that one? Sure, that sends the other guys business-it's linking to them-but in an open pool of information, they will also send business back. n.o.body eats at the same place every night (well, there was the time when I went to McDonald's entirely too often). Even a restaurant can think as a member of a network in a linked information economy.

Networks force specialization. In a linked world, you don't want to be all things to all people. You want to stand out for what you do best. That's why chef Gordon Ramsey focuses the menus of the restaurants he fixes on his show, Kitchen Nightmares Kitchen Nightmares, so they know the business they're in. Serve your niche instead of the ma.s.s. Do what you do best.

Now, as Emeril would say, let's kick it up a notch: Open-source the restaurant. Put recipes online and invite the public to make suggestions and even to edit them on a wiki. Maybe they'll suggest more salt. Maybe they'll go to the trouble of cooking the dish at home, trying variations, and reporting back. In the early days of the web, I worked on the launch of Epicurious.com, the online site for Gourmet and Bon Appet.i.t magazines, where I was amazed to see people share their own recipes-there's the gift economy-and also share their comments and variations on the magazines' recipes. For example, a Gourmet adaptation of a bakery's recipe for Mexican chocolate cake brought suggestions to replace the water with espresso (many commenting cooks liked that idea, tried it, and shared their endors.e.m.e.nts); double the cinnamon; add Kahlua or rum to the glaze; use cream-cheese frosting instead of the glaze; use neither topping but serve it with whipped cream and berries; toast the nuts; subst.i.tute milk and orange juice for b.u.t.termilk; coat the cake pan with cocoa powder (helps with the sticking, you see); and even add cayenne pepper (pepper?). With these adaptations, you could argue the dish is no longer the same; could be better, could be worse. I'm not suggesting that recipes or menus become ballots; see the preGoogle rule about too many chefs spoiling the broth. It's the chef, not the public, who will be held to account if the cake is too peppery. So I'll violate Jarvis' First Law-I won't hand over complete control. But why not gather and use the wisdom of the dining room? A good restaurant has people who appreciate and know good food. It should respect their taste and knowledge, the Google way.

People want to create, remix, share, and make their mark. Perhaps a restaurant could be their platform. Maybe it could stage bakeoffs: Try the chef's version of the cake and Jane's-the winner gets on the menu. The public could suggest dishes they would like the chef to cook: "I had a delicious tart at a cafe in Vienna and I'd kill to have it again here in Boise." A cook worth her salt would take that as a compliment.

Of course, the best advertis.e.m.e.nt is a happy customer; this rule is truer with restaurants than with most other businesses. Local restaurants-or national networks of heart-healthy restaurants-can join in relevant conversations and groups online, not to spam them with advertising but to hear ideas and desires and make them come true. Plenty of food fans are already talking online. The FoodBlogBlog counts 2,000 blogs and that's just a start; the U.K. has a Food Bloggers a.s.sociation; Chowhound.com has outposts all across America. See Chowhound's What's My Craving? forum in New York, in which diners ask fellow diners where to find papusa (thick, stuffed tortillas), a proper Indian biriyani, or Korean jajangmyun (noodles with a black soybean paste). If you think of food as the basis of communities-and it is-then you'll think like Facebook's Mark Zuckerberg and help them organize. Perhaps diners would like to gather parties and you can provide the forum to help. Your restaurant could become the venue for blind dates made on craigslist: get dinner, get drunk, get lucky, get married.

A vibrant online community buzzing around a restaurant will help market it. A social restaurant will soar in search-engine results as diners/users discuss it and link to its recipes. A transparent restaurant that puts much of itself online-recipes, wine reviews, taste data-will also rise in Google search, especially now that Google is making search more local (tell Google where you live and the next time you search for "pizza" it will give you joints in the neighborhood). If people search for where to have a killer souffle in the area, the name of a restaurant where diners are discussing said souffle and its recipe should rise as high as the dish.

A Google-driven restaurant won't become a computer-run bistro with the algorithmic menu: roborestaurant. That's not what Googlethink is about. Instead, these tools enable any business to build a new relationship with customers. Not every customer will want a personal relationship; most will eat and run. Following Wikipedia's 1 percent rule, it takes only a small proportion of customers to get involved and contribute great value.

Restaurants are even being crowdsourced. Trend-tracker Springwise reported that a restaurant called Instructables, where customers will make all decisions, is launching in Amsterdam. The Washington Post reported on the creation of an eatery called Elements, whose owners claim it is America's first crowdsourced restaurant. Its volunteers collaborate on concept, design, and logo. The crowd will share 10 percent of the restaurant's profits based on the depth of their involvement. As a fan of sizzling burgers and steaming burritos, I am less than enthralled with Elements' concept: a "sustainable vegetarian/raw foods restaurant" (in the online discussion, there was talk of adding kosher and gluten-free to the mission with round-the-clock breakfast featuring salads and green smoothies). The owner, says The Post, is "creating raw food treats such as oat-hemp b.a.l.l.s." I might find a different crowd.

So far, I've suggested that restaurants use the internet to turn the spotlight on diners. Googley restaurateurs can also use the web to become stars. Judging by the popularity of kitchen-based reality shows, I think it's time for chefs to come out from behind the stove. Restaurants have stories, dramas, comedies, and knowledge to share. If I were a chef, I'd blog about my restaurant; my taste, travels, and inspirations; and the trends I see. I'd be blunt and honest. Howard Stern has succeeded on radio and chef Ramsey has succeeded on TV with that formula. So, too, could neighborhood chefs become local stars. I'd make videos teaching people how to cook-remember that the gift economy works both ways. I'd start a cooking club with my most loyal fans-my best customers, my partners-and let them in on discussions if not decisions on the menu and recipes. I might even hand the place over to my community for a night, playing Ramsey in real life and making the restaurant a show. Restaurants don't just sell food-cooked atoms. They are a platform for the enjoyment and discussion of taste. A community and its creativity can grow around that.

Google Shops: A company built on people A company built on people