Internet, Media Business, Startups

The Digital Revolution: Lessons from the 19th Century

Last summer I spent a fair bit of time reading up on the history of the newspaper business. Biographies of Hearst, Pulitzer and E. W. Scripps, along with a few more academic books on how these newspapers actually became big businesses.

The most suprising thing I learned?  That without the twin forces of urbanization and industrialization, there would have been no modern newspaper business, no modern advertising business, and no modern media business.

Those two tectonic shifts in the 19th century created new neeeds; those new needs created a huge array of new markets that flourished well into the 20th century. The newly created needs most relevant to the newspaper business produced by urbanization and industrialization were:

Need for ready-to-wear clothing
Up until the mid-19th century, most people in the West made their own clothes. Buying clothes was beyond the reach of all but the very rich. But with urbanization and industrialization, it suddenly became possible to buy clothes. And, in large urban areas, getting the right clothes (even though mass produced!) became a marker of your status and position in life. Department stores, an invention of the 19th century city, built huge new markets catering to this new need.

Need for Packaged Goods
Most people in the West also grew and produced their own food up until the middle of the 19th century. But as the West became increasingly urbanized and industrialized, that just wasn’t possible. People working at factories or other jobs in cities needed to be able to buy packaged foods and sundries, giving rise to businesses like P&G, Kellogg, and Colgate.

Need for Entertainment
Finally, those living in cities were no longer bound to a full day of work tending to the land or to their animals. The middle and upper classes, and even the poor, suddenly found they had time for leisure, made more abundant still by electricity which extended the day.

Newspapers flourished in late 19th century as they built huge audiences among urbanites catering primarily to this need for entertainment.  The great papers of the late 19th century offered a steady diet of crime trials, sex scandals (tame by our standards today), and increasingly sports news. Publishers like Hearst and Pulitzer added muckraking journalism that entertained and agitated for change.

With millions of readers every day, newspapers offered packaged goods companies (P&G) and sellers of clothing (department stores) the very best way to grow their businesses. Buying an ad in an urban newspaper with a big circulation was the most effective way to market to city dwellers who needed to buy clothes, or packaged goods.  And this gave rise to an entirely new market — for media, and for the creation and making and selling of advertising. That had never really existed, in any meaningful way or at scale, until the late 19th century. And it would not have occurred without the forces of urbanization and industrialization.

It’s obvious to most anyone now that the huge tectonic forces at work in this generation are the combination of computing and digitization (or, digitalization as the English would say).  These new forces have fostered new ways of making existing markets more efficient — you can now buy nearly anything online, for example.

But they’ve also given birth to new needs, desires fresh and new and that perhaps we didn’t know (or still don’t know) we had including these two:

The need for self expression and self-representation
For many on the Internet, it’s no longer sufficient just to go online; you need to be online.  As we spend increasing amounts of time on the Internet, or engaged in a digital life, many people want to have a presence there and assert there personhood there. This began with early online communities like The Well and other BBS, but has gotten a fuller expression with blogs, sites like Digg and Stumbleupon, and media publishing platforms like YouTube and flickr and even Vodpod. Myspace and Facebook (and to a much lesser extent, Twitter) were the first mainstream incarnations of this need.

The need for immediateness
We now live in a world where we expect — and crave — access to anything from almost anywhere at anytime. Google has been the most obvious outlet for this new need, and a whole new market — search-related advertising — was borne from it. But one could also list Amazon, Netflix, Craigslist, e-mail, IM, and real-time services like Facebook and Twitter as tapping into our new need for immediateness.

Other, more recent services and products can be explained as illustrations of these two new needs. I would argue that services driven by game mechanics — Foursquare and Farmville for example — are primarily driven off the need for representation of self. “Leveling up” and earning badges helps to define who we are online, helps to foster our sense of digital personhood.

The iPhone, Blackberry, and other smart phones show the need for immediateness made manifest in the mobile world.  The iPad, if it succeeds, will do so because it satisfies our need for immediateness in some more profound way than laptops and smart phones do (and this is why I’m skeptical about it); and not because it’s a “consumption” device.

Just as markets for clothing, packaged goods, and entertainment begat the entirely new market of media and advertising in the 19th century, it’s interesting to contemplate what new markets might get created from our newly created needs for self-expression and immediateness. Virtual currency, curiously, can perhaps be understood best through this prism; we want Farmville dollars to facilitate our self-expression; we buy virtual currency to satisfy our desire for immediateness.

But what else? What might come next? What other markets might be born as the result of all this?

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