The Attention Merchants

by Tim Wu

  On later, closer inspection (some of it performed by federal law enforcement), much of AOL’s new advertising money was coming in based on methods that were unorthodox and unsustainable. It didn’t begin that way: in the early days, Berlow and Pittman tried the traditional sales approach. As the biggest “interactive” firm they figured they might land the whales of advertising: companies like Coca-Cola, Procter & Gamble, General Motors. But there were no takers. Ad buyers at major brands can be conservative, and tend to favor established channels with well-worn metrics. And to be fair, there was at the time absolutely no empirical evidence that Internet advertising worked. As Michael Wolff wrote in the 1990s, “No products have disappeared off America’s supermarket shelves because of the Internet…no commercial fads have been created, and no buying habits have shifted.” AOL was well known, but it lacked the data that advertisers had grown to crave, and on the basis of which it made buys with the established attention merchants, like television networks and newspapers. Even with access to millions of minds, AOL advertising seemed to most big brands like throwing money into the vortex.

  Deciding to try something more “synergistic,” Pittman changed tack. With Berlow and another colleague, David Colburn, in the lead, the firm turned to less orthodox approaches to reach its revenue goals, approaches ranging from the merely questionable to the clearly unethical and, ultimately, criminal.

  AOL started treating its users as a captive audience, and replaced the limited “content” and “services” that subscribers were ostensibly paying for with sponsored content and services—i.e., companies that paid AOL—in what was later called its “walled garden” strategy. Consequently, in the 1990s CBS was paying AOL to be the primary provider of sports reporting, and ABC paid to be a general news provider; 1-800-FLOWERS was designated the flower delivery service, and so on.*6 Whether such sponsored content was a form of advertising is an interesting question, and the paid-for news surely blurred the old line between editorial and advertising, but no one seemed to care. Instead, Pittman likened it to renting real estate in AOL’s garden—“location, location, location,” he liked to say.18

  The walled garden proved AOL’s first good means for booking advertising revenue. It got better when, while selling those rights, Myer Berlow had a brilliant realization. Perhaps his gambler’s instinct picked up a tell. When negotiating with a company named Music Boulevard, at the last minute he tore up the price sheet and doubled AOL’s asking rate from $8 million to $16 million. Shockingly, Music Boulevard was still prepared to do the deal. So Berlow upped it again, to $18 million plus a cut of profits. No problem.

  Berlow had struck gold. It was the IPO-mad late 1990s, and the dot-coms, as it turned out, were willing to do nearly anything to make their deal with AOL, so as to prove to potential investors that they had “made it” in the online space and thereby gain support for the outrageous valuations characteristic of the era. Thus the executives negotiating those deals with AOL had personal stakes in them worth millions in each case. In gambling terms, AOL held “the nut hand”—one that could not lose. And thus began what professor William Forbes would call the “systematic looting of Internet ventures seeking an advertising deal.”19

  As another AOL employee put it, “It was life or death to them if they couldn’t cut a deal with AOL. It was ludicrous.”20 Consequently, AOL would sometimes set up auctions between two dot-coms—say, two online grocery services—to extract the most it could. Using that method, it scored an astonishing $60 million from a start-up named HomeGrocer.com. It all followed from a bracingly direct internal mantra—“Kill ’em.” The team’s goal became taking at least half of the partner’s venture funding in any deal.

  The problem with this approach is that it depended on the unusual—indeed insane—conditions of that moment in time. It also sometimes left the partner companies so cash-strapped that they quickly began collapsing (though their generally weak business models were surely a contributing factor, too). Music Boulevard, for example, was gone by 1999; HomeGrocer toppled by 2001. With the level of rents being asked, the walled garden turned out to be fairly poisonous for its resident saplings.

  Years before Facebook or Google undertook a similar mission, AOL’s business team also began coming up with ways to cash in on the “big data” they had collected: that is, the addresses, phone numbers, and credit card numbers of millions of users. The walled garden, by its nature, was already giving companies direct access to users and some of their information; now AOL also began allowing them, for instance, to insert ads into emails (making the service, in effect, a spammer of its own users). But there were more audacious plans still. AOL sold its users’ mailing addresses to direct mail companies. It was going to sell the phone numbers to telemarketers as well, shamelessly describing these maneuvers in its terms of service as a membership benefit. Alas, an inadvertent leak of the plan prompted a user revolt and the telemarketing part was abandoned.

  Finally, when these methods failed to produce enough revenue to meet the aggressive targets set by Pittman, the business group would resort to “special deals.” For example, money owed AOL for other reasons might somehow be accounted as “advertising revenue.” Sometimes, pre-booked advertising contracts were recorded twice, even though the revenues would have already been booked. In a pinch, AOL might also take a “barter” deal from a dot-com start-up, counting the barter—usually worthless web services—as revenue. As a last resort, it would just find ways to pay companies to place ads. While the methods of accounting fraud are myriad, AOL seemed to find ways to practice most of them. We know all of this because the Securities and Exchange Commission would eventually charge the firm with knowingly executing a scheme “to artificially and materially inflate the company’s reported online advertising revenue.”21 But by then most of the earlier executives had already taken their money and run.

  “Project Confidence” was, in short, a type of confidence scheme, undertaken to make AOL seem like the almighty owner of millions of eyeballs that serious advertisers were intent on reaching. It impressed Wall Street sufficiently (albeit, a Wall Street not asking particularly hard questions) that by 2000 the company had a stock price valuation of over $160 billion (General Motors, for comparison, was then at $56 billion). AOL’s turn to advertising was widely lauded as an inspired strategy play; and once again Pittman was hailed as a “hard-driving marketing genius” and “synergy master.”

  Even if it really did have some 30 million subscribers at its height (maybe it lied about that, too), it didn’t have particularly good control over its members’ attention or interests.*7 The walled garden made AOL money, some of it real, but also hastened the site’s loss of allure to the Internet, whose open design was the opposite of AOL’s, and which was by now growing a greater variety of things to see and do. By 2000, many people were just using AOL to connect to the web, finding ways to escape the walled garden and avoid AOL’s advertising blight altogether. These were only some of AOL’s many hidden weaknesses that contributed to its catastrophic implosion over the early 2000s. It was already, in Steven Levy’s memorable description, a “dead man walking”22 in advance of a meltdown fully chronicled elsewhere. Suffice it to say here: despite a $164 billion merger with Time Warner and its rich troves of content, AOL, as originally conceived, would become irrelevant, ultimately brought down by the rise of the popular, open Internet and its fast-multiplying attractions.

  Prodigy did no better. As it continued to shed users and cash, by the late 1990s the original owners had given up and sold out for $200 million to a group of executives funded in part by the Mexican telecom authority, Telmex. The company was later sold to AT&T, where, after a short-lived effort to co-brand it with Yahoo!, it was never to be heard from again. Yet the original management was onto something, for all of the ideas that Prodigy pioneered would eventually come to fruition in other places. Its reliance on advertising was not only copied by AOL but most of the Internet’s most successful companies. Paying professionals to m
ake content that was accessed online would look less foolish by the mid-2010s, the age of Netflix. Finally, online shopping also turned out to be a source of decent revenue. Prodigy’s masters didn’t have the wrong ideas, but they blew it anyway.

  In the big picture, by 2000 change had come; the present was one we would now recognize. Millions of people—soon to be hundreds of millions, and then billions—were now spending leisure time logging in, catching up on email, attending to other business, or chatting with strangers. In its totality, online check-in became a daily, or even hourly, attention ritual, one second in importance only to prime time in our story. While still primitive in various ways, and still offering nothing like the draw of television, the computer, the third screen, had arrived. In the end, AOL was no corporate Ozymandias; though a failure, it would have a lasting and monumental legacy. True to its name, it got America online—reaching out to one another, ready for the biggest attention harvest since television.

  * * *

  *1 Before this, personal computers had come in the now unrecognizable form of hobbyist kits, assembled and programmed by guys like Steve Wozniak of Apple. For more, see The Master Switch, 274–75.

  *2 Example: +++, ATDT (416) 225-9492.

  *3 The movie also proved an opportunity for the first meetings between AOL and Time Warner executives: Steve Case and Jerry Levin met at a White House screening of the film. See The Master Switch, chapter 19.

  *4 The “floppy” disk was a magnetic storage medium used in the 1980s and early 1990s, originally the size of a dinner napkin, that was inserted into a “disk drive” that resembled a toaster. Its name was derived from the fact that, unlike the metal “hard” drives that remain in usage today, the floppy disk was made of a flexible plastic.

  *5 The AT&T breakup and the 1996 Telecom Act had made reselling long-distance services appear attractive. See The Master Switch, chapter 21.

  *6 In this, its pay-for-play content, AOL was setting up a system that would be the exact opposite of the Net Neutrality that prevailed on the Internet. That, in the long term, set up another reason for AOL’s downfall, for the walled garden ultimately was a weaker offering than the full variety offered on the Internet.

  *7 As detailed in The Master Switch on pp. 265–68: “But by 2000 AOL was less a destination in itself…than simply the most popular way to reach the Internet. While it could boast 30 million subscribers, it could exercise no meaningful control over them. Once online, a user could go wherever he wished, the Internet being set up to connect any two parties, whoever they might be.”

  PART IV

  THE IMPORTANCE OF BEING FAMOUS

  AOL’s alignment of the new technology entering American homes with a new social interest of individuals was not without cultural context. No adoption of technology ever is. In this case, it might be seen as part of a progression we have been following right along in this book, that of the individual in society. We have seen it as the attention industries shifted their focus from the mass of consumers to a diverse range of identities and variously constituted market segments.

  But to understand where the attention industries would wind up, why our present attentional environment looks the way it does, another phenomenon centered on the individual must be addressed: the individual as deity, as object of worshipful attention.

  The first great harvester of human attention, it must never be forgotten, was religion. The impulse to idolize has not faded in our secular age, only gone seeking after strange gods. The very expression “celebrity worship” may seem a figurative exaggeration; but insofar as intensity and duration of attention can separate devotion from other motivations, it would be hard to argue that what we have seen in our culture is anything less than an apotheosis. Still, in our predominantly monotheistic sense of religion, the idea of describing our intense regard for people who are famous as being essentially religious may ring false. But if we would remember that the ancient version of celebrity was a hero, and that the line between heroes and deities was never absolute, who could dispute that our attention industries have enabled the creation of a new pantheon? And as we shall see, it was the indefinite expansion of that pantheon that would carry the attention merchants into the twenty-first century.

  CHAPTER 17

  ESTABLISHMENT OF THE CELEBRITY-INDUSTRIAL COMPLEX

  In 1972, the magazine publisher Time-Life Inc. was facing serious trouble. Its legendary founder, Henry Luce, was dead, and one of its two flagships, Life magazine, was in terminal decline, having hemorrhaged some $47 million since 1969. Like nearly anything mainstream or conventional, it had suffered during the 1960s, becoming “irrelevant” to youth; it was now on course toward that form of extinction peculiar to the attention economy, not dying but being forgotten. Life’s essential levity, its tendency to gloss over unpleasant details, fit the 1950s perfectly, but by the 1970s it read like propaganda to the furrowed brows concerned with civil rights, the Vietnam War, and the remaking of American culture. “Gone is the almost palpable air of invincibility,” declared New York magazine in 1971, “that was as much a part of Time-style in palmier days as its fabled expense accounting.”1

  Luce’s successor, Andrew Heiskell, shuttered Life in 1972. He had been Life’s publisher during its golden years, and so the decision was painful. But seeing no alternative, he went ahead and scattered its five million subscribers to the winds and swore to himself that he would invent a replacement: “I kept reaching and scratching for a good, big idea that would restore the company’s health.” The “if you can’t beat ’em, join ’em” logic of television networks and advertising agencies during the 1960s might have argued for launching a magazine to ride the countercultural wave, something serious yet hip, like Esquire or Rolling Stone. But Heiskell had something else in mind—something closer to the founder’s original vision, and a key to Time-Life’s earlier success.

  Back in 1923, the twenty-four-year-old Luce had founded Time relying more on bravado than experience. He was a “with-it” young man, whose idea was that readers wanted their news in a breezy, conversational style, one more in line with the Jazz Age sensibility. He was also willing to bet that American attention spans were shorter than anyone fully appreciated. The New York Times, with its eight-column format, was, to quote the New Yorker writer A. J. Liebling, “colorless, odorless, and especially tasteless.”*1 By contrast, Time would be a digest of the weekly news, or as Luce put it in a 1921 letter, “all the news on every sphere of human interest, and the news organized. There will be articles on politics, books, sport, scandal, science, society, and no article will be longer than 200 words.” During its first years, Time ran more than one hundred short articles each week, none longer than four hundred words.

  Time was, however, not the only news digest launched in the 1920s, and the key to its eventual success was in all likelihood a different insight of Luce’s. The news, he believed, could and should be told through stories about people—the day’s most interesting and famous personalities. “People just aren’t interesting in the mass,” Luce once explained. “It’s only individuals who are exciting.” And so he launched his new venture based on celebrity, by which he would profit immensely. This is not to say that he had any interest in the merely famous, or what we today might call the “famous for being famous.” The important personalities to his mind were men of great power or other significant achievement. (Women would appear only rarely in Time, and even more rarely on the cover; another exception was made for a dog once.) As historian Alan Brinkley writes, “Major public figures—statesmen, business leaders, generals, and the royalty of the worlds of art, entertainment, and sport—were the staples.” To emphasize this philosophy, Time would, from the beginning, put a different notable face on the cover every week, and late in the autumn it would announce a “Man of the Year.” The magazine had its favorites: by Brinkley’s count, Stalin appeared on the cover twelve times in its first half century; Roosevelt, Churchill, Franco, and Mussolini eight times each;*2 Hitler seven; and Ch
iang Kai-shek ten. And for years, Time would faithfully detail what the president had done that week, no matter how trivial or insignificant. The relentless focus on personalities was a different way to do news, but Luce played down his innovation: “TIME didn’t start this emphasis on stories about people,” he insisted. “The Bible did.”2

  Heiskell’s idea harked back to these origins, but it would go a step further. The reporting in Time and its offspring, though personality driven, had always had a topic of some seriousness, whether in politics, sports, the arts, or business. Heiskell would do away with that limitation. While it may seem obvious now, in the 1970s it was daring to part with even a pretense of newsworthiness and devote a magazine to nothing more than famous people and their lives. He named his idea the “People of the Week.” As the new title’s managing editor, Richard Stolley, would later explain, “A lot of American magazines had gotten away from the personality story; they’d become more issue-oriented. We intended to reverse that idea with People.”3

  Now, in truth, Heiskell’s idea was not quite the innovation he would claim. Celebrity magazines long pre-existed People; gossip and scandal rags about Broadway stars and society swells had been around since before Luce established Time. More recently the National Enquirer had occupied the niche once filled by publications with names like Confidential or Hush-Hush and cover lines like “We tell the facts and name the names” or “Uncensored and off the record.” But these had been coarse, down-market operations, devoted to exposing salacious stories with little regard for the truth. People’s real innovation was as an upgrade of this format for a mainstream audience.