Written by Frank Kochenash, head of Strategy and Insights in Avenue A | Razorfish’s Seattle office, the article stems from the company’s 2008 Digital Outlook Report (PDF). In the piece, Kochenash addresses the role of users ‘as advertising models evolve on social networks, and [...] how users should be compensated as the economic models on these properties mature.’ I specifically note the following predictions of what’s going to happen in this field which Kaplak operates in :
Expect to see increased competitiveness and specialization among social media sites and utilities, each trying to differentiate the network through perks available to members. The fragmentation of social media sites implies four other effects:
1. Advertising networks that can effectively leverage social information will become marginally more important.
2. Widgets, as vehicles to carry a message effectively within and across various social media environments, will become more popular.
3. Exchanges or clearing houses will arise to provide compensation in some form (e.g., cash, rewards, points, status) for users. [wouldn't call this compensation though, as 'users' rapidly converge into 'producers', but rather to connect and facilitate transactions between users]
4. Niche social media will become attractive places for brands to engage in SIM [Social Influence Marketing] because relevance can be increased.
Emphasis and comments in square brickets are mine.
Kawasaki was allowed to make the complete report available on his blog – he recommends getting it before they change their mind. Like Kochenash’s piece, the full report is stuffed with the kind of insights and backed up data which can make any online entrepreneur drool, because they can use this stuff to back up their business plans and their otherwise very-hard-to-document assumptions.
Please enjoy this recent video with Chris Anderson, introducing the ideas of his forthcoming book FREE: The past and future of a radical price, at Nokia World 2007 in Amsterdam :
Thanks for the tip to Guy Kawasaki. You can find the video in a slightly better quality here (where you may be better able to pick out Anderson’s slides).
I venture to say, that the ideas of Anderson’s next book at a first glance seem a lot less radical than those of his first (The Long Tail (2006)). By giving something away for free, which is abundant, you can sell something else, which is scarce. This is not a new business model, but just one, which can help create interesting and astonishing things, when used cleverly in combination with the internet. According to Anderson, technology have opened this model up to a wide range of industries – this is what makes it interesting. Nokia and the rest of the mobile phone industry can give away their phones, because there’s money to be made on talk rates and services connected to the phones.
Anderson’s model on the scarcities of the economy on the internet seems, however, too simplistic. He divides these into four broad categories : time, money, attention and reputation, in which the attention and reputation (hyperlinks + PageRank) converts into traffic and money to be earned on advertisments. True, this is the ‘conversion mechanism’ used by Google and others today. But I’m not sure I buy that attention and reputation are really scarce ressources, independently of the technological architectures, which shape attention and reputation on the internet now or in the future.
The attention span of any individual may be limited, but then we may be attentive towards very different things. This is a central point of Anderson’s first book. And reputation may simply, also according to The Long Tail, be a question of technological architecture, of ‘bringing customers down the tail’, as Anderson puts it, in the way Amazon recommends titles ‘other users also bought’. Attention and reputation on the internet are artificial constructs. Our current architectures make something more visibile to someone, than something else. This is only a problem, in so far, that the someone wants the something else before the something.
The internet is used for lots of spam, scams and tricks, which aim to make a quick buck and nothing else. Most tricks are easily seen through, however reckless they may be, and can be dealt with. There are also online businesses, which are less blatantly destructive than outright spam and scams, but yet fail to contribute constructively to what the internet is and could be.
By this I mean to hint at entrepreneurs (some even apparently successful) who dream of finding some magic way to repeat the ‘Google trick’, i.e. the golden solution, or more likely, a shortcut, to solve the problems of the net, and become the millionaires of tomorrow, like Larry Page and Sergei Brin did, when they launched Google, or more specifically, when they launched their Google Ads program.
Paradoxically, these are companies and entrepreneurs, who blindly go where others have gone before. They follow the latest trend, be it social software or video-blogging, in the hope of repeating the successes of those who went before, but without really thinking about internet users’ problems. What is at stake is money to be made on the traffic. By exploiting the vast masses of free information online in some way, one may earn a quick buck from all the ad clicks.
This model leads others, more careful types of entrepreneurs and businesses, to carefully seek to uphold and preserve intellectual rights (if any), or worse, to stay away completely from the internet as a serious avenue for business. By withholding and safeguarding information, if necessary with the help of Digital Rights Management (DRM), one can maintain greater value for those few, who can afford to obtain it. Theoretically, that is. This, of course, is the ‘Intellectual Property’-road of businesses of eons before us.
Guy Kawasaki talks here about making meaning for a business :
How does Kaplak want to make meaning? We want to make information make meaning.
We want to create sense in the world. In this sense, business secrecy (in the way of hiding information) makes little sense. It also makes little sense for us to decrease the value of our products for our customers, by adding technological restrictions which regulate their uses.
What we (and you, in your business) want to do is create value for customers and visitors, which make it worth their while to come by our particular spot and accept our particular offering.
This is quite different from tricks and ways to ‘figure it out’. Creating a surplus of value comes from hard, sustained efforts to deliver a service, which creates actual value in the other end of the economical food chain. This you can sell. Which makes your end of the food chain make money too.
There are no tricks to keep secret (at least, not forever) in a world abundant with information. Indeed a world in which the amount of accessible information increases exponentially each month, there is and will be a desperate need to make sense of all this information, in order to find anything.
The challenge we face, then, is how to create sense and surplus value, not in our end of the chain, but in our customer’s end.
One obvious way to do this in the information trade is to attribute greater value to the context of finding information, rather than on any particular piece of information. The strategy here is not to withhold information, but to create a valuable context, which makes it easy to get what you need. In this case, you’re willing to pay, because of the ease and comfort, by which you can obtain something, which would otherwise be a hazzle, and not the least, time-consuming and expensive.