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The Fallacy Of The Link Economy

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Arnon Mishkin is a partner with Mitchell Madison Group, where he consults for media companies on improving legacy businesses as well as making the internet profitable. Prior to MMG, he was a partner at the Boston Consulting Group, where he did some of the firm’s earliest work on the web.

People who “get the web” will explain to you that the economics of the web have everything to do with linking and getting linked to. The more links one can get, the better off one is. Few disagree with that guidepost.

So when the AP and the newspaper owners demanded that they get revenue from the linkers, it was clear that they just didn’t understand the web and didn’t appreciate all the value they were receiving from link traffic. (Here are just a few examples of that critique.)

Well, the data suggests that the web – the “blogosphere”- is less an ecosystem than a one-way street.

The vast majority of the value gets captured by aggregators linking and scraping rather than by the news organizations that get linked and scraped. We did a study of traffic on several sites that aggregate purely a menu of news stories. In all cases, there was at least twice as much traffic on the home page as there were clicks going to the stories that were on it. In other words, a very large share of the people who were visiting the site were merely browsing to read headlines rather than using the aggregation page to decide what they wanted to read in detail. Obviously, this has major ramifications for content creators’ ability to grow ad revenue, as the main benefit of added traffic is the potential for higher CPMs. (Disclosure: I have consulted for the AP and other content creators, though not on this particular issue.)

Even in an absolute best-case scenario for producers of original content, the aggregators get at least as much traffic on linked stories as the creators of those stories because anyone who clicks on the link does so from the aggregator’s site (so each site gets a page view). If you don’t believe the data, consider how often in an average day you visit the home page of your favorite news site vs. how often you click through to the underlying story.

Actually, it shouldn’t be surprising to anyone who’s thought about how people have historically read a newspaper: They’ve scanned the headlines and then turned to the sports, movie listings or recipe pages, depending on their real interest. As the saying goes, “People don’t check the news to read about the fire, they check it to learn that there wasn’t a fire.”

Historically, the value of those casual browsers was captured by the newspaper because the readers would have to buy a copy. Now all the value gets captured by the aggregator that scrapes the copy and creates a front page that a set of readers choose to scan. And because creating content costs much more scraping it, there is little rational economic reason to create content.

This is not just a reflection of economic reality but also captures the changing nature of reporting. Take Iran. When the Shah fell in 1979, the journalistic hero was Mike Wallace, who flew to Tehran and pointedly asked the Ayatollah whether he was, as Anwar Sadat called him, a “lunatic.” This year, after the June election there, the journalistic hero was the blogger for The Huffington Post who stayed in D.C. and linked to every piece of information from Tehran he could find.

Moreover, because they can scrape essentially every content provider on the web, each aggregator gets to build a “front page” to target and win over their chosen segment, or enable each user to tailor a front page perfectly suited to his or her needs. And they can do that by leveraging all the resources of the global journalistic community without paying any part of its cost. As a result, aggregators – often from a standing start – are able to create substantial amounts of daily traffic and viable web businesses.

People will argue that the scrapers create value by pointing to many obscure stories that captured the imagination of linkers and got unexpectedly high traffic for a very obscure site. Fine, but was that site able to monetize the jump in traffic? And, how likely is that site to create a sustainable business by consistently winning a surfing game of serendipity?

Others will say that the site that gets linked to can keep the user using the site. But the opposite is happening – users are being trained to increase their usage of (and thus value to) the linker rather than the creator.

Can anything be done about this? I think publishers need to take three steps:

• Assess how much value the aggregators are getting by virtue of using their content and use that to seek an equitable economic relationship. And be willing to drop the links rather than submit to an unfair deal.
• Consider partnering with other content makers and developing appropriate aggregation sites of their own.
• Develop new ways of sharing their content with other sites – in ways that allow them to monetize some of the traffic on the aggregator site. For example, rather than offering a pure “widget” of the site’s material, the site should offer “wadgets” that contain a combination of content and advertising that could run instead of an aggregator’s scraping.

59 Responses to “The Fallacy Of The Link Economy”

  1. You can’t compare the Internet to the old methodology and old constructs, which you are trying to do.

    I worked as a newspaper webmaster from 2000 to 2007. The industry was too slow and too bureaucratic and most importantly didn’t give enough resources, money, to the Web to develop better technology. They could have made a guy like me a leader and instead they paid me shit and kept believing that their classifieds were more useful than Craigslist. They kept believing that their car, home, and other verticals were more valuable than the new products the Web was offering.

    Now that their advertising power has waned they’re clinging to the content that they shunned in favor of their advertising sales revenue. Consultants have led them astray all the way. Vendors as well; selling them crappy products to prop up their verticals and siphon what they can.

    Newspapers need to be building databases and applications to go with them. They need to stop paying bureaucrats the big salaries and start hiring project managers and web developers. I think the risk of this move is too high for them.

    The problem there is they’ve valued the soft skills of the advertising salesmen so much more than the hard skills of the creators they don’t know their head from their ass.

    Oh, I never heard of I found this page because I searched for “link economy”.

  2. Jamie Poitra

    Just a quick apology. We had a spam attack last night on this article. The related IP addresses used have been banned and we have changes upcoming that should prevent such things in the future. We really apologize to those of you subscribed to this thread who received all of those alert emails.

  3. Erik Sherman

    You had linked to my BNET post titled "Is AP Run By Idiots?" as an example of the critique that AP "just didn’t understand the web and didn’t appreciate all the value they were receiving from link traffic." You either didn't read the whole post, didn't understand it, or I was less than clear. My point is that trying to keep people from quoting headlines and linking is a stupid business move for a number of reasons that will make it ineffective, including being perceived by potential customers as ham-handed, assuming that it could claim financial injury over a quote as short as a headline (meaning that AP would have to agree that something so short is the heart of the economic value it provides), and that trying to police this would become untenable. I've also essentially written that you'd have to be a dunderhead to think that a large publisher could survive via online ads alone and have noted that the problem newspapers in general have is that they can't charge people for reading the headlines, which is how they got audiences in the past, which provided their ability to charge for ads and make huge margins. I think that the business model changes that will be required are far more radical than anything you seem to be suggesting or considering. The newspaper industry has to find a way to undue many decades of associating money with distribution, not content. I also don't think that many outside niche and small local publications are going to survive.

  4. Martin Spit

    Dear Steve and Ed, I think Mishkin's argument was that the value of either "contextual" or "link" economy fails to materialize in monetary terms. The dollar being a relevant metric unless you feel this to be too much a thing of the past as well. I do agree that the whole field of metrics on the web, and the way they develop into ad dollars, is still very weak (anybody really believe the Nielsen numbers?). Any suggestions you have to improve upon it I would consider a valuable contribution.

  5. ed dunn


    I don't care how people feel about me being annoyed so this will be just a circular argument. We can agree to disagree there. I didn't think it was fair to say "have no clue" dismissing the writer as some quack and wanted to understand your first post.

    Thanks for explaining your point Steve and now I understand and I hope others understand your point. I did not realize archaic terms from the 90s like "page views" were used in this article. I read the article again and now figured out why it generated so many comments.

    It appears the true fallacy is how the author constantly reference the outdated science of "web analytics" using server logs. Only people who rely on server logs or even google analytics, use terms like <i>"sites"</i> or <i>"page views"</i> and the author is stone cold busted for using whack terms from the nineties.

    As Steve alluded to, this is 2009 and the Web is a "contextual economy" and never was a "link economy". I also find it confusing to suggest "RSS link aggregators" actually drive traffic. My research shows the strongest incoming traffic is driven by hyperlinks embedded in contextual content with depth, not from mass media aggregators.

  6. sure.

    first off, i could give a sh#t what "annoys" people, but since you ask–

    web "sites" are/were a decent description of online properties in the '90's. things have changed a bit since, no?

    "above the fold", "pageviews", "destination"?

    no wonder they are all on life support.

  7. ed dunn


    Can you kindly explain the "have no clue" comment you made as the first post?

    I get annoyed by people who use half-liner to make a point but they provide depth, which is what you done with the "have no clue" statement.

    I do have a clue, but wanted to make sure you knew what "web properties" truly means in 2009 instead of saying "have no clue"..please give us all that clue you are alluding to..thank you.

  8. mr. mishkin,

    please ask jim spanfeller about posting pieces like this before proclaiming you were "surprised by the venom…".

    he left his gig at forbes after only 2 contributions here.

  9. Arnon Mishkin

    Yes, Tim, I was serious in asking about profitable web content companies. Now, I have no idea about PaidContent’s financials, as I know only the managing editor, and I’ve only met him by phone. As for the other examples you cite, HuffPo just saw one of its first investors installed as CEO, usually a sign of investor dissatisfaction. I had thought Gawker was in profitable, but your term “weathering the storm” makes me question that. And says that they ONLY reason they are profitable is because of their print product. Sorry, it is very hard to make money with content on the web, even for those who’ve never touched printer ink.

    I have to tell you, I expected my piece to be somewhat controversial, and I was expecting opposition from the folks who are most vocal in talking about links, eco-system, etc. (Jarvis&Co;). But I never expected people like Jarvis and his daylife colleague Ellis to rain dance about how web content companies get much higher CPMs and much higher profits than web aggregators.

    In fact, if they (and others, including yourself) thought about it, you all would agree with me. This is the author of WhatWouldGoogleDo, and an executive of a start-up aggregator. They go to investors to get investment in aggregation vehicles. They do not go to investors to get investment in content start-ups. Quite the contrary. They go to foundations to get money to investigate whether there are “new business models for journalism.” If journalistic content creation had such clear economic potential, you would not be seeing all these not-for-profits spring up in all kinds of cities looking to fill the void of the declining newspaper.

    And, I was surprised by the venom with which people assumed I only care about newspaper companies. My analysis is about the challenges facing ALL companies seeking a profitable business model in creating web journalistic content. The only difference is that the newspaper companies, seeing the speed of decline in their core business, have a greater urgency to seek profit on the web.

    I found one negative response particularly insightful. A guy named Erick Shonfeld lectured me “guess what, the media bundle is dead…Each story stands on its own in a world of atomized content.”

    I think that sums up the issue where I part company from you and others:

    You think the decline of the historical bundle is the end game, I think it's only step 2. I believe the companies that are succeeding on the web are the companies that have figured out — through a combination of aggregation, navigation support and innovative processes or approaches to content — how to create real or de facto bundles. Consider: giants such as itunes(apple), facebook, google, or niche players such as: the huff post iran linker, gawker, maybe telecrunch, etc. They are all just that – they become de facto destinations independent of “search.” Some don’t permit links, and others are very smart about what they allow to be searched/linked (for many, facebook is in fact a 'walled garden'). It does not matter one industrial provenance, but if you want to be successful, one needs to figure how to recreate that bundle, rather than try to be the lucky “atom,” who gets a bundle of traffic for one or more good 'stories'.

  10. Tim Barkow

    Oh, looks like I missed all fun. :)

    Arnon, you call me out for saying that there are content-driven businesses on the Web making money. You ask, where are they? Are you serious? How about right here — PaidContent?

    The Web is young, its businesses are early in their lifecycles, hardly any are mature and metrics are different. HuffPo is doing very well, and I bet its investors are happy. Gawker is also weathering an unprecedented economic storm pretty well. The Daily Beast? They just launched, you expect them to be profitable immediately? Regardless, they seem to be doing OK.

    I do like your description of this aggregator activity as "scraping" — you say you're not a lawyer, clearly you're not a programmer either. "Scraping", such a scary word, but one with a very clear technical definition.

    What aggregators are doing is pulling information from public RSS feeds that the newspapers themselves have created and published. The aggregators are NOT "scraping" HTML pages for content. Scraping is manual work and frankly doesn't scale that well.

    If the newspapers were so concerned, they would restrict the content of the RSS feeds to brief excerpts, as many sources already do. But that wouldn't make a good story, would it?

    This is not a technology problem. It's a business problem. Newspapers got out of the business (journalism, serving the community) we thought they were in, and they invested heavily into cheap wire content and classifieds.

    Newspapers didn't just start sucking. They've sucked for a long time. Sometimes they do good work, true. But most of the time, they're filled with garbage. Pick up a Sunday paper outside of NYC, and dissect it. It's not pretty.

    Newspapers stopped caring about their product because the money was flowing and profits were high. And now, the tide's gone out, and they are stranded.

    I would like to think that there's a fix available, but likely, there isn't. You said it yourself, consumers don't want what newspapers are selling.

    What newspapers need to do is look beyond journalism for value. They need intelligent community voices, and they need lots of databases — not co-incidentally, the two primary ingredients of journalism.

    EveryBlock is a great example of this. It could be the future of newspapers. Oh damn, they just got bought by MSNBC. :)

    Until newspapers figure out how to provide value to their communities — to build products the community actually wants — there's not going to be any revenue stream to speak of. And until then, it's frankly premature to start any discussions about the future of newspaper journalism.

    Don't worry though, some enterprising online startup will show up to start doing your journalism. You just won't recognize them. :)

  11. Arnon, I'm calling you out for hating on Nico Pitney of the Huffington Post without even having the guts to mention him by name. I've noticed a few snarky comments from other reporters about Nico and I think it is pure jealosy.

    What Nico did was NOT simply scraping; he was bringing the news to HuffPo readers in a dis-intermediated fashion by giving the sources a more direct outlet for voicing their experiences. Like it or not, there is a hunger for unmediated news in no small part because people are starting to see through the false veil of objectivity projected by major media outlets. Some companies, like News Corp, don't even pretend to be objective any more. Many of us would rather get news directly from the source and Nico's project has been a step in that direction.

    Even the White House took notice of his work, and I sincerely doubt you could have done as good a job of aggregating such a comprehensive set of information sources from inside Iran. So don't be a hater!!!

  12. Tim Nolan

    From William: "When we consider the author’s relationship to “media companies” and their “legacy businesses,” we have a fine example of a commonplace in the consulting profession: people are much happier to pay for the advice they want to hear than the advice they need."

    Actually, all the newspapers want to hear is that everything will be fine…the web is the salvation. Mishkin is arguing that the web is creating no value and probably hurting the declining business at the same time.

  13. Well, I need to say that economics of the web is not just linking and getting linked to anymore. This was the case over 4 years a go prior the birth of social media. It is still, but more importantly, it is now also about online social interaction. So, although linking and getting linked to is important, but since the birth of social media, it is important to add the social interaction component to their site. Ex: when I read an article on the wpost or NYtimes, I will most likely click on more links and spend more time on their site if I feel there are similar minded people on the site who have been reading the same article. This way I can connect with them (assuming they provide me the tool so I can connect)

  14. William

    When we consider the author's relationship to "media companies" and their "legacy businesses," we have a fine example of a commonplace in the consulting profession: people are much happier to pay for the advice they want to hear than the advice they need.

    This article conflates link aggregators and the blogosphere. It confuses value and money. It pretends that there is no new content being created on the internet. It ignores the obvious fact that most of what's in newspapers isn't original in any meaningful sense. And it has that sad air of entitlement, common to so many of these old media defense actions, treating readers as their rightful and hereditary property.

    I look forward to journalists figuring out how to work in a digital world: good journalism is a cornerstone of democracy. But each article like this is just another shovel of dirt on the grave.

  15. Howard Owens

    One problem with this debate is there is just simply enough data and verifiable research.

    To get to any kind of statistically meaningful study, a research would need unfettered access to the data from a large quantity of "original content" producers, such as newspapers, TV stations, networks and even that class of bloggers that does some degree of original work. Next you would need access to the same data from the "aggregators" (with a solid definition of what that means), both their traffic data and how many links they publish in various time frames.

    You would also need access to the corresponding revenue data, including types of revenue (CPM, flat-fee, nationa vs. local, etc.)

    Then gather all that, categorize it appropriately, see what the real impacts are.

    Then you can start getting at some meaningful conclusion about whether aggregators contribute more in a "link economy" than they subtract; are publishers really benefiting, or being harmed, or missing an opportunity?

    Right now you have a lot of guesses. Few people have even closely looked at the data available. And you have people who see a slice of data in their own world (bloggers, say, which get totally different traffic data than a newspaper site, and there's a huge difference in traffic patterns from a large newspaper to a small newspaper) and jump to conclusions that may not be honestly reflective of the web as a whole.

    My links above were attempt to get a larger picture using data I've observed over several years from a variety of sources. It was merely an effort to debunk some myths about the link fetish. However, the study is still incomplete. Somebody with a more scholarly background and credentials (to gain the trusted access needed) should dive deep into this topic and provide some answers.

  16. Tim Nolan

    The argument or the Link Fallacy of just stopping all links is flawed because it asumes traffic to the content creator is free. In effect, the content creator is paying the aggregator through its "lost" vlue but then is compensated by the higher CPM on their own site. Is it a better deal to have to promote the content using advertising, instead of links, on other sites?

  17. Aron Pilhofer

    @V: To the contrary, Arnon is pointing that out exactly! That's part of the fundamental problem here! What you're missing is that aggregators diminish the value of that content to advertisers, and in the end may actually end up hurting the content creator's bottom line. This is one of the least-understood elements of this discussion… that not all page views are created equal. If you don't understand why that is, I would suggest reading Howard Owens' excellent posts, which are linked in the comments above.

  18. You talk about one side of the deal (the money newspapers are "allegedly" losing), but you forget that many of those newspapers have a higher CPM price than the aggregators (albeit not all).

    So, when will the aggregators start demanding a cut from the pages prints that newspapers get?

  19. From what I understand, links will soon go to the AP from all syndicated copies, rather than to the originating source of the syndicated story. Criminal… from an SEO perspective.

    Links ultimately drive search traffic, not just to the original story, but ultimately to all stories published on the site.

    If news outlets don't know how to make the most of that Google Juice, they should maybe hire a competent SEO.

  20. So basically, what you're saying is that people don't value new stories? They don't want to read a single story, but have a quick summary of everything? So, why are newspapers trying to make money from something the customers don't want? Maybe they should focus on creating stuff that readers want, like good short pieces that summarize all the news.

  21. Do you have any numbers on the claims you are making? Do you have an A/B comparison showing that aggregators make more money than content owners without aggregators?

    Generally, these sorts of articles present some fairly reasonable premise with nothing to back it up, and you can just as easily see the inverse. This looks like another unsupported opinion.

    How about some facts?

  22. Walt Daniels

    Personally, I have a very different take on advertising in general. My reading is that all advertising is directed at making me want to do/buy something I don’t want therefore I assiduously never click on any ad and ignore them to the extent possible. However I realize that the price of things I do, especially on the web, are ad supported and by not participating I am killing the goose that laid the golden egg.

    Perhaps the answer lies in the music radio station model where they pay for the songs they play. My ISPs knows what pages I am visiting and could know who to pay part of what they collect from the user for using that ISP. The other half of the radio station model (of where they get the money to pay for the songs – ads) does not apply but the ISPs have in income stream that is not ad related.

    ISPs (and websites) could have a variable payment scale where the home page is free and recent news costs more than older news, or any other scheme you can think of. There needs to be some user interface work so that users can see what they will pay before they click and pay.

  23. Arnon Mishkin

    Jeff Jarvis ( and Ken Ellis do a tag team rain dance to argue about how wrong headed my article is.

    I've responded to each on their respective blogs:

    To Jeff:

    To Ken:

  24. Aron Pilhofer


    I think Howard's point is that there is as yet no absolutely clear iron-clad standard that defines fair use, especially where an aggregator is deriving value themselves and/or depriving the original author of income.

    He will know better than I, but I think the point he's making is that there may not be as firm a fair use foundation in this realm as there is in, say, the right an author might have to link to or quote from a copyrighted work.

  25. Dave Mastio


    My point was that merely writing a restrictive terms of use does nothing to change fair use rights, not that fair use rights are absolute.

    For instance, I am quite sure that republishing a full feed without links or any transformative work built upon the feed would be a violation of copyright. That determination, however, would have nothing to do with the terms of use written by the publisher, which cannot change the standards for what is and is not fair use.