More NewsSearching for a Greater Fool

Searching for a Greater Fool

Dana challenges the idea that you've got a guaranteed profit if you own both the pipe and what goes over it. The concept is catching on with AOL TV and a French cable service. The play is: You own the pipe; you own what's featured on the pipe; you don't pay for the house ads that push your own content while competitors do, and you own all the profits. But it's foolish to think consumers will act like sheep and won't see through cross-promotion.

Today marks the Summer Solstice, the longest day in the Northern Hemisphere. It’s a day for fertility rites, for bonfires that celebrate the sun’s power, and for the feast of St. John the Baptist – the best time to collect the mood-leavening St. John’s Wort (nature’s Prozac).

It’s also a time for initiations and for renouncing the temptations of the world in favor of service to others.

Unfortunately, it’s not a day for renouncing Cluelessness, nor is it a day that supports the idea that if you own both the pipe and what goes over it, you’ve got a guaranteed profit. This concept, too, is achieving its ripening today.

The first ripening is in the form of AOL TV, a competitor to Microsoft’s Web TV (everyone has that, right?) through which AOL users can pay more money to chat with each other on TV about what they’re watching. Initial prices are $200 for the box, $21.95/month for the Internet service and $24.95/month for the AOL membership ($14.95 if you already get it on your PC).

However, with Time Warner cable systems, I expect this will be a basic offering in the next few years, and that’s the power of it. You run your “free” content past a captive, paying audience, fill it with house ads, and they’ve got as much chance of getting out as a Disney World patron has of forgetting the words to “It’s a Small World.”

The second ripening is Vivendi, formerly the French water authority (money just flows there) and now its leading pay cable service (Canal Plus). It agreed (finally) this week to be Edgar Bronfman’s greater fool for $34 billion. That’s a 46 percent premium over Seagram’s current price, much like the premium AOL offered for Time.

However, the play here is the same: You own the pipe; you own what’s featured on the pipe; you don’t pay for the house ads that push your own content while competitors do, and you own all the profits. Run it through a single set-top box, offer it for nothing (or next to nothing) and voil`! Instant stability is the result.

There are two reasons why I call this Clueless. First, it’s based on the idea of controlling the audience, something that the Internet forbids by its nature. Second, it assumes that a single technology (the cable) will reach the home – something that technology is guaranteeing won’t happen. (Third, of course, some bureaucrats may not like it, but that’s a minor worry.)

The fact is there are lots of ways to reach the home: You can reach it with a phone line; you can reach it with a power line or you can even reach it without wires at all. The idea that consumers will act like sheep in this regard is silly.

But that’s where the search for the greater fool ends. It ends with the customer. It ends with the assumption that consumers are lazy, that they really prefer a gated community to the wide world of the Internet, and that they can’t see through cross-promotion.

Related Articles

GDPR: The role of technology in data compliance

Data & Analytics GDPR: The role of technology in data compliance

3w Clark Boyd
What companies can learn from the We-Vibe lawsuit about the Internet of Things

Legal & Regulatory What companies can learn from the We-Vibe lawsuit about the Internet of Things

8m Al Roberts
Has advertising arrived on Google Home?

Media Has advertising arrived on Google Home?

8m Al Roberts
Target is the top retail digital marketer, so why is it struggling?

Ecommerce Target is the top retail digital marketer, so why is it struggling?

8m Al Roberts
YouTube is "on pace to eclipse TV" thanks to savvy algorithm use

More News YouTube is "on pace to eclipse TV" thanks to savvy algorithm use

9m Al Roberts
YouTube is getting rid of 30-second unskippable pre-roll ads

Ad Industry Metrics YouTube is getting rid of 30-second unskippable pre-roll ads

9m Al Roberts
Is Twitter slowly dying?

More News Is Twitter slowly dying?

9m Al Roberts
FedEx launches fulfillment service to take on Amazon

Ecommerce FedEx launches fulfillment service to take on Amazon

9m Al Roberts