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The Business Problem of the Link Economy

I've certainly been none too easy on the Associated Press's apparent intent on charging people for quoting as few as five words -- and the organization's refusal to discuss the topic as it's "done" talking. Makes me think of certain White House administrations. However, absurdities and legal considerations aside, there is a basic reality of the web that has been making the AP and many other media companies go completely nuts. It's that the assumptions of how the business of the link economy work are badly flawed.

For example, last week Arnon Mishkin, a partner with media consulting firm Mitchell Madison Group, wrote about tests they ran on some aggregator sites that provided "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.
I'm only surprised that even a third of the traffic clicked on story links. I would have guessed a much lower number. Click-throughs are relatively rare. Based on what I've seen on my personal blogs, I would have guessed that the percentage would have been at most ten percent, and possibly single digit.

But other evidence suggests that the whole "people will click to see" premise of the web business enthusiastic is flawed. Even as of 2007, apparently ad click-through was well below 1 percent, when not boosted by behavioral targeting. Put a link onto Twitter and chances are you'll see maybe a few percent of followers actually click.

There have been successful attempts to improve click-through rates. Even changing the color of the link can apparently provide a significant boost. That actually proves something interesting: the fallacy of the assumption that if you link, people will follow. They won't just because the link exists. You have to put effort into getting them to act. It sounds just like direct marketing, a field in which I worked for a number of years.

That should raise red flags for many in the tech industry, because there are a lot of business plans predicated on the concept of the link economy. It seems that the best laid plans really need is something that may not be there: a click-through economy.

Image via stock.xchng user nkzs, site standard license.

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