Thanks to this site lurching up a notch in traffic and visits, with a corresponding lurch-up in various revenue streams (coffee, Amazon Affiliate sales, Google AdSense), an interesting set of economics questions has been on my radar. Over the last two months, ribbonfarm.com made a few hundred dollars (mainly due to the Gervais Principle articles). That’s still pretty much a rounding error in relative terms, compared to my real job, but in absolute terms, it is actually worth thinking about. Here is the main question: what percentage of revenue should someone like me devote to contributions to all the fantastic open-source infrastructure that makes this blog possible? So far, I’ve behaved pretty randomly. Last month, I donated $20 to the guy (Ankesh Kothari) behind the “Buy me a beer” plugin (which you see on this site as “Buy me a coffee”). I also donated another $20 to Wikipedia. But I’d like to think about this more systematically, and figure out how much to contribute, how, and who gets it. Here are my opening thoughts.
Pay-It-Forward and Gift Economies
The emerging Internet is only partly driven by what Chris Anderson is calling “Freeconomics.” We are all starting to realize that without disciplined sharing, we’ll hit a Tragedy of the Commons pretty soon. Some pieces of infrastructure, like Linux, are important enough that institutional support will probably suffice. Others, like the WordPress core, will be part of the freemium business model of a steward company (Automattic). But that still leaves out a huge deficit in stuff that needs support and doesn’t get it.
Here’s where bloggers come in. We are at the money-making edge of the new long-tail economy of content. Bloggers are among the “edge” creatives who can expect to make money directly off the content audience. You (or my Mom) are not going to dig out and pay the “buy me a beer” plugin guy.
For most of us, it is trivial amounts of money, to be sure. The Darren Rowses of the world, making six-figure blog incomes, are rather thin on the ground. The money also does not compare to traditional writing incomes. The few times I’ve written for pay in traditional ways, I made a lot more, for content that was nowhere near the quality I shoot for on this blog.
But still, the moment revenue gets to the point where sharing can influence the survivability of other ecosystem players, the question needs to be answered. Sure, some writers of plugins and other bits and pieces of useful Web infrastructure have good consulting business models of their own (with their plugins being marketing tools). Some players are so good (like Chris Pearson, the creator of the Thesis theme that I use on this blog, $89), that they can charge and we’ll gladly pay. But for the rest, I think figuring out a rational sharing formula is important.
Two concepts can help. The first is a gift economy. Donating to Wikipedia (they’ve currently raised $1.4 million out of the $7.5 million they need) fits this model. Services that are so big, broad and generally useful that they need no-strings-attached support. The other is pay-it-forward economics (voluntarily passing on value to people/organizations whose work supports yours). It is best-faith, honor-system payments down a de facto infrastructure maintenance supply chain. It is not quite a special case of a gift economy, because there may be non-binding personal expectations. I might request a new feature from a plugin writer. You might send me an article request (in fact, I’ve framed my “Coffee” link as “… if you’d like more articles like this,” a crude vote-with-money system).
These abstract frameworks provide some basic guidance, but here is the issue. It doesn’t get us to practical sharing formulas. Remember, I am talking rational economics here, not charity. I have a selfish interest in wanting WordPress and the plugins I use to thrive. I have a stake in Chris Pearson’s survival.
The Practical Questions
The main practical questions are how much and how and who gets it? Viewing the Web’s content infrastructure as a network of economic actors, each consuming resources and adding value, who should be paying who, and how much? You cannot think of this in terms of charity, since quite often, the money will flow upstream. There might be a plugin writer who makes 10x what I do through “donations,” so me donating to him would be a case of the poorer donating to the richer. But then, he might actually deserve it, in opportunity cost and value-addition terms. Clearly, we need a better term. But I’ll let that go.
I think the how much question should be framed as a percentage of revenue, not profits. For two good reasons: one, most bloggers will not make a profit if they factor in their time. Unless you are homeless and blogging for food with no other income, that’s just too convenient an excuse to not contribute. Second, contributing to infrastructure should be viewed as a cost of doing business in an honor-system, non-tragedy-of-the-commons economy. Not an “if I am locally profitable” thing. If you cannot show a profit after contributing, you are not really making a profit at all. You are free-riding. So how much, in numerical terms?
The high end I think is in the 33% range. I get this calibration point from the standard overhead tacked onto federal research grant proposals in the US. If a professor wants $100,000 for a research project, he or she will need to ask an outfit like the NSF for around $150,000, based on the current value of a standard indirect costs support rate, which varies by university/discipline etc., but hovers around 50% over the base. This overhead is supposed to help pay for all the university infrastructure faculty use in doing research (classrooms, labs, libraries…).
At the low end, I think it should be 10%. I have no reason for this calibration point other than religious tithes as a precedent.
Here’s a challenge: find me a rational formula to pick a number within that range. Left to themselves, I (and most other actors) will not contribute enough.
Now, for the how. I can think of a few models, some that exist, some that don’t.
- Pass Through: This is the most transparent. Behind the scenes, set up a pass-through fractional contribution scheme for every piece of “free” infrastructure you use. I think this is the only honest way to do pass through. If you merely display badges or links asking your contributors to also contribute to your value sources, you are fooling yourself and avoiding responsibility. I can’t expect you to properly understand and evaluate what makes this blog possible. Unfortunately, the financial plumbing, by and large, does not exist.
- Direct: pay to someone/some organization which supports your work in some way, one step removed. This can get hard to scale since there are so many contributors out there. But it has the advantage of the being almost as transparent as pass-through. The one-step heuristic helps here. I should support the WordPress ecosystem, but not the PHP ecosystem. Whether PHP or Ruby deserves more support is a question for application writers, not me.
- Communal Pot: Groups of related economic actors band together in guilds (example, a collective of political bloggers or WordPress plugin writers). Since you cannot predict easily who will have a hit month to month, the band helps balance risk, the way insurance does. Many faculty departments have a system of contributing portions of successful grant proposals to the department, to support students of faculty whose proposals bomb. The guilds must police themselves and maintain standards, and throw out people who consistently fail to pull their weight. People who consistently do better than the average will obviously either move to a better guild or go solo, out of self-interest. Contributors are asked to add to the pot rather than individuals. Pot-sharing is determined by some formula that must not be too focused on valuing contributions. Something like “everybody gets an equal share” or “share weighted by number of words written” (for bloggers). Whether a guild member is pulling their weight should be determined qualitatively (there might be some guy who never posts a hit, but is a great brainstorming buddy for others).
- Indirect: Pay to intermediary organizations which then figure out how to redistribute. I don’t like this model because it starts to seem seriously like charity or even taxation. Transparency and the pay-it-forward/gift character is best maintained by transactions without intermediaries. I would be personally very uncomfortable accepting money from a “blogger support foundation.”
- Micropatronage Annuities: One way to lower transaction costs and reduce the volatility of all these models is to average risk over time. So I might, for instance, pay a fixed amount to a key value-chain partner. Or an annual amount. This spreads risk out over time the way communal pots spread risk out across groups of individual creatives. On my own supply side, as an “edge” creative, a couple of people have suggested I set up a micropatron scheme on this blog, but I haven’t had time to really think it through yet. It’ll need some sharing built in. Like, if I set up a $100 “Support Ribbonfarm for a year” contribution scheme, some X% of that ought to be earmarked as a direct pass-through contribution to whoever I ought to be contributing to.
That’s the “how” on the payee side. On the pure payer side (people who are not active prosumers in the Web content economy), I have no idea what might be a rational economic model.
Who Gets It?
This is where it gets seriously tricky. And also where we segue into the whole conversation on using non-traditional models to finance traditional media. I honestly think that the New York Times or some other such outfit does not really deserve any special treatment based on their higher cost structure and formal status as an organization of record. Cost-plus accounting is a terrible idea here (a big “save the newspaper” argument hinges on the argument that investigative reporting, for instance, requires a lot more backend expenditure than things like my blog). Higher costs do not justify special treatment. Higher value does. I ought to be distributing my 10-33% (whatever point I settle on) based on what actually contributes to the value-addition of my own writing.
But the big candidates are:
- Big software and content infrastructure foundation pieces, like Linux and Wikipedia
- Manufactured content players (beat journalism etc., where legwork matters more than creative effort)
- Mid-sized infrastructure players (like WordPress)
- Micro, long-tail players (plugin and theme writers)
- Peers (people who contribute in ways similar to you)
“Who gets it” needs to be modulated by who is already thriving with a successful stand-alone business model (a function of both ecosystem position and business savvy), who is getting institutional support (Linux for instance) and some sense of whose work fundamentally is important but not monetizable directly. A last factor is to make sure you aren’t double counting people who are already getting paid through supply chains that work. For instance, I work off books a lot more than I work off other bloggers. But book writers already earn royalties, and each time I make an affiliate sale, they make money too, and get some direct PR. So they are already accounted for in part.
Some will want to add “social justice” to this, but I disagree. Choosing creative outlets for money-making is a choice. Writers, programmers and poets do not deserve the benefits of the “minimum wage” argument the way construction workers do. Yes, the line is blurred, especially when you extend the argument to basic journalism, which arguably can be a basic necessity. But if the argument for absolute social necessity can be made, so can the argument for support through taxpayer dollars. Nobody expects police or fire departments to run on “buy me a coffee” buttons.
So, those are my opening arguments. What do you guys think?