In the world of business, there is a concept known as the "smiling curve." This curve represents the value-adding potentials of different components of the value chain in an IT-related manufacturing industry. It was observed by Shih that in the personal computer industry, both ends of the value chain command higher values added to the product than the middle part of the value chain. In other words, the companies that produce critical components and those that provide value-added services capture the majority of the value, while those in the middle, like Acer, struggle to generate significant profits.

In the world of business, there is a concept known as the "smiling curve." This curve represents the value-adding potentials of different components of the value chain in an IT-related manufacturing industry. It was observed by Shih that in the personal computer industry, both ends of the value chain command higher values added to the product than the middle part of the value chain. In other words, the companies that produce critical components and those that provide value-added services capture the majority of the value, while those in the middle, like Acer, struggle to generate significant profits.

Acer, a company known for putting PCs together, found itself at the bottom of the smiling curve. Despite its efforts, it was the critical component makers, such as Intel and Windows, that captured most of the value on the left side of the curve. On the right side, systems integrators and value-added resellers like IBM or Accenture took the rest of the value. Acer and its OEMs faced single-digit margins and stagnant growth in the undifferentiated middle.

This phenomenon of value concentration at the ends of the curve is not unique to the IT manufacturing industry. The same pattern can be observed in the publishing industry. Traditional publishers, like newspapers, find themselves stuck in the middle, while value moves to the edges.

The rise of mobile devices has brought significant changes to the way people consume news and content. More than half of the visitors to The New York Times, one of the most respected publishers, now come via mobile. This trend is not limited to one publication; it is happening across the industry. People are increasingly getting their news from platforms like Facebook, Google, and Twitter.

When people follow a link on these platforms, the page view generated is not because of any particular affinity for the publication hosting the link. It is uncertain whether their affinity will increase after reading the article. Instead, any positive feelings are often attributed to the author, leading readers to explore their archives or Twitter feeds. Over time, as this cycle repeats itself and people rely on platforms for their news, value shifts to the ends, just as it did in the IT manufacturing and smartphone industries.

The problem for traditional publishers is that they no longer have an exclusive on anything. The Internet has provided free distribution to every other newspaper and publication. Publishers, including newspapers, have lost their ability to offer something unique to their readers. This lack of exclusivity has led to a decline in advertising revenues, despite the ability to reach audiences all over the world.

In this changing landscape, the value for writers and publications lies in doing what they do best and accruing outsized value relative to publishers. Successful writers and publications will focus on their strengths and differentiate themselves from others. They will provide unique and responsive content that resonates with their audience, rather than relying solely on the platform provided by publishers.

The Internet has removed the friction that existed in the middle, eliminating the need for intermediaries. This has resulted in value flowing to the edges. Aggregators on one side capture a significant portion of the value, while focused, responsive, and differentiated writers and publications on the other side also gain value.

To stay in the game, publishers need to adapt to this new reality. They must find ways to provide value to their writers and differentiate themselves from others in the industry. Here are three actionable pieces of advice for publishers:

1. Embrace digital platforms: Publishers must embrace digital platforms like Facebook, Google, and Twitter, rather than seeing them as a threat. These platforms have the potential to reach a wider audience and provide valuable insights into reader preferences and behaviors.

2. Foster relationships with writers: Publishers should focus on building strong relationships with their writers. By providing support, resources, and opportunities for growth, publishers can ensure that writers see value in partnering with them.

3. Innovate and experiment: Publishers need to constantly innovate and experiment with new formats, technologies, and revenue models. They should be willing to take risks and adapt to changing consumer preferences and behaviors.

In conclusion, the smiling curve phenomenon observed in the IT manufacturing industry is also applicable to the publishing industry. Value is shifting to the ends, with aggregators and differentiated writers and publications capturing the majority of it. To stay in the game, publishers must embrace digital platforms, foster relationships with writers, and continuously innovate and experiment. By doing so, they can navigate the changing landscape and remain relevant in the digital age.