Arnon Mishkin says he has found the fallacy of the link economy but I think his argument is itself built on some fallacies, among them:

* If links are not valuable, then fine, get rid of them: refuse all aggregators’ and search engines’ robots, complain so much about links that no one bothers to link to you (a la the AP). Or put all your stuff behind a pay wall where the links won’t pay off. Where are you then? Without discovery. Without audience. Without a means to monetize audience. Links may not be worth as much as you wish they were worth, but that’s an unstated and unmeasurable standard and quite meaningless. You’ll discover just how much they are worth if you don’t have them. That’s the only meaningful analysis.

* Links are worth what the recipient makes of them. See my second imperative of the link economy: He or she who gets the links is the one who has to monetize them. So the value of links is, in the end, set by the recipient of the links. It’s up to you how well you take advantage of the traffic you get. If you’re bad at selling ads or products or subscriptions or whatever you sell, then links are worth less. But that’s your fault, not the linkers.

* Implicit in the argument by Mishkin and others is the assumption that readers fill up sufficiently on news on aggregated headline pages and so they don’t click on the links and thus the aggregator delivered the value rather than the content creator. But this assumes that the reader was going to click on at least one or all of those links. Who’s to say that’s true. Often in a day, I look at a page filled with links – nevermind the aggregator; I go to the NYTimes.com homepage or to my RSS reader – and I click on nothing simply because nothing interests me or nothing’s new. There is no basis to assume that if I don’t click on a link, that’s a click lost. And in any case, if I do click, isn’t it better to be there?

* The math of Mishkin’s argument falls apart for me. He says that aggregators get more traffic on their pages than link recipients get on theirs. Well, yes. If I come to a page about the latest news on the iPhone and see 10 links, I’m likely to click on just one of them and so that site and the aggregator’s got equal traffic but the other nine got less. So the aggregator will, mathematically, almost always get more traffic that the sum of the link recipients on the page. In his “study,” Mishkin says there “was at least twice as much traffic” on the links page as on the destination pages. I’d think it would be much higher. On a page with those 10 links and 0 to 1 clicks, the links page will get more traffic than 90 percent of the recipients. So? What this tells me is that you’d better write damned good headlines.

* Simon Owens did his own study of linking and found, anecdotally, that simple headline links didn’t send him as much traffic from Huffington Post as rich links that took a lot of his content. Stands to reason when you think about it: The better and more tempting the link, the more traffic it will generate … if , of course, the content is relevant to the reader and good enough. This argues more more linking and more in each link, not less.

* I would argue that ads on the link aggregator’s page are worth far, far less than those on the destination pages and that must be calculated if trying to compare relative value gained. If I’m on a link aggregator’s page, I’m likely to click on a content headline and not an ad. When I do click on that page, I’m going to spend time on the page absorbing all that content and when I’m sated, I’m more likely to click on an ad. Again, it’s up to the content creator to make sure there are relevant ads on that page to extract full value from them.

Mishkin writes:

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.

I see two fallacies there:

* First is the essential fallacy of newspaper, television, and radio advertising: that all consumers see all ads and so the content creator charges every advertiser for every consumer for every ad. We all know that’s false. Online gives the lie to that media fiction, for online advertisers pay only for the pages on which their ads appear. Of if they’re doing business with Google – and this is why they do – they pay only for the clicks. Yes, newspapers used to capture that value but they captured it by ripping off their advertisers and those days are over.

* Second, he throws out the baby, the bathwater, and the tub and plumbing aguing that there’s “little rational economic reason to create content.” God knows what he’s telling content companies, then: give up? That’s overdramatic and patently ridiculous. He then complains: “This year, after the June election [in Iran], 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.” Well, Mr. Mishkin, that’s because every journalist was deported, locked up, or forbidden to report and so aggregation of links to witnesses’ accounts – none of them paid or monetizing – was the only way to get news and it wasn’t just Huffington that did it, it was The New York Times, the Guardian, and The Atlantic. You point, then?

* Though Mishkin doesn’t name them, he’s surely targeting Google News for getting so much value. Except Google News didn’t have ads for years and now has only limited AdSense advertising. It is hardly getting rich on Google News. Eric Schmidt said at the Aspen Ideas Festival that the only way for Google to pay news sites because of Google News would be to take money from other parts of the business; it would be nothing but a subsidy. I am a partner for Daylife another aggregator, and it has network ads on some page which – I don’t think they’ll kill me to say this – aren’t worth much. It makes money by licensing its functionality to publishers – content creators, almost every one – who use it to create topic pages to link to their own content and then outside content, creating more inventory as a result. They prove both Mishkin and me right by finding value in both aggregation and content. That’s what I’d advise publishers to do.

* Mishkin says he advises his clients to, “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.” Be careful what you wish for, because I believe this will show that Google is creating more value and in an “equitable economic relationship” should be paid. Even if not, forcing such negotiations – as the AP, one of Mishkin’s clients (but not on this matter) is threatening to do – will only cut off links because it is not worth the hassle for the linkers. That’s a good way to cut off links and traffic and audience and advertising, then. See my first bullet above.

* He advises clients to partner with other content makers to create aggregation sites. Well, doesn’t that argue for the value of aggregation and the links it brings? If aggregation brings content creators no value, why have it?

* In the end, Mishkin and I agree on only one point: that content creators need to find new ways to distribute their content. That will be the subject of another post.

: AND: Ken Ellis, chief scientist of Daylife, says I am too congenial here. Ken analyzes the numbers further:

Value online means selling ads, and there are premium ads, and there are remnant ads. Aggregators mostly get low-value remnant ads, but publishers get premium ads in some cases. A page view for a publisher is on average more valuable than a page view for an aggregator. How much? The number Jarvis and his group at CUNY came up with was $5-7 RPM for a small publisher. For a major aggregator like Digg, its around $2 RPM based on numbers from Silicon Alley Insider, at 400 million pageviews per month. That’s on the high end for aggregators, most are getting less. So lets say publishers have three times the revenue per view than aggregators, which I think is conservative.

Next, there is his claim that he saw “twice as much traffic on the home page as there were clicks going to the stories”. This is misleading. He’s comparing pageviews with visitors, and those aren’t equal. A visitor generates at least one and often more pageviews. Lets say each visit leads to 3 page views, that’s about average for news publishers, although you might argue that traffic from aggregators is less likely to stick around. Also, news outlets generate their own traffic, it doesn’t all come through aggregators. For the NYTimes about half comes from other referers, only some of which are aggregators. So there’s another factor of two. Cranking through the numbers, that’s 3*(1/2)*3*2 = 9 times more revenue for publishers than for the aggregator. So is that a “vast majority” of the value? To me a majority is more than 50%, lets peg a “vast” majority at somewhere in excess of 75%. Even allowing for some errors, and I’d have to be off by a lot, aggregators aren’t getting anywhere near 75% of the revenue from online news….