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How we’ll monetise the conversation
By David Cushman, April 17, 2008. FasterFuture.blogspot.com Communities of purpose are the business units of the 21st century. This notion, should you accept it, has profound and far-reaching implications not only the future of publishing but also for advertising, marketing, production and the very process of the creation of value. It has implications too for how companies should organise to benefit from the new way value is created. Yes, it is disruptive, isn’t it? This paper seeks to explain why these communities of purpose are of such value and why enabling their rapid, real-time evolution unlocks the key to value creation. It will consider why this has the potential to be the greatest explosion in value ever created. And it will propose solutions in which content, conversation and communities of purpose provide the cornerstones. With them I believe we can unlock value now and into the mid-to-long term. It seeks to answer the question “How do we monetise hosting the conversation?” Translation: How does media make money in the future? Background: Self-forming non-directed groups coming together with a common purpose are able to achieve great things. Examples: The HSBC ex-student group which revolted against new charges on their student loans. Goldcorp’s (see Wikinomics) opening up of its geological data to a global community to solve their ‘where to mine’ dilemma, SecondLife (made up entirely of contributions by the community), Flickr (filled with content entirely by the community, and organised and distributed entirely by communities of purpose), the list could go on and on. We have long known that none-of-us-is-as-clever-as-all-of-us, that two heads are better than one, that the wise man asks questions. We know the value of team work, of collaboration, shared knowledge. It is why we understand the value of ‘crowdsourcing’.
How digital is different. Introducing the global hotdesk. And the emergence of two recent digital plays throws into stark relief how the digital world takes how value is created in communities of purpose and amplifies it in the kind exponential growth described by Reed’s Law (Group Forming Network Theory).* In Facebook (www.facebook.com), groups can form rapidly around a common purpose. One person comes up with the idea of a group, their friends are alerted to its being formed (through their newsfeed) and they can choose to join or not. When they do the fact that they have joined is shared (once again through their newsfeed) with their friends – a different self-formed community. At each iteration more people from different groups get to hear about the group and to select whether or not it has a purpose they share. As they do so they amplify their interest. These result in rapidly growing and evolving groups. The vast majority have little or no explicit value. Their purposes are ‘just for fun’. They do at least serve to reinforce social ties – this has value in itself. In the digital world the space between us is (potentially) zero. This is fundamental to our understanding of how the digital world creates value in new and exponential ways. It is the freedom of interactions that are possible in the digital world compared to the restrictions imposed by the physical world which is key to unlocking the value. For example: The Facebook HSBC group; haven’t students always selforganised to protest and make change? Didn’t we always go on marches and shake placards? And didn’t we have a purpose? Yes. The difference in the case of the Facebook HSBC group was that this was a (once-was) community of ex-students – scattered to the four winds since leaving university. The place where the space between them could be reduced to zero was online. Facebook’s fortune is that it enables groups to rapidly form, with a stated purpose. Through Facebook the group could grow rapidly and resulted in killing the £144-a-year charge per person the bank sought to impose. That’s a lot of value. Pity neither the bank nor Facebook could access any of that – but we’ll come back to that… (Imagine how much more effective this would function without the need to be ‘on the same platform’… but that is another story, one for the long term, the end game.). Facebook has the first building block – the ability to rapidly self-form groups of purpose. But, these groups can’t be described as true communities because there is rarely much communication between the nodes. It is communication –
conversation between nodes - that defines a community. A community communicates. The opportunity for conversation is structurally inhibited by facebook’s reliance on personal-data-heavy profiles. To start talking in any depth you need to share your profile information. Groups get a basic forum and that’s about it. This requirement for exposing your data-heavy profile in order to have a conversation limits the value the groups can have. It restricts them to being a supporter of a notion rather than a full participant in its development. And the fact that a group is formed by one person who can choose to retain control over it by selecting who can and can’t join makes it hierarchical and controlled in a way that runs contrary to our expectations of the networked world and the unleashing of the exponential growth of the Reed’s Law equation. Yet they’ve done pretty well. They have a networked world ‘hit’ with just one of the building blocks. What happens next? Twitter (www.twitter.com) happens next. Twitter doesn’t have the structural issues that Facebook faces. Twitter takes this ability to self-form groups and amplifies it. And is so doing it throws the conversation switch. Cornerstone number two. The Global Hotdesk In my professional life I move desk from time to time – and I hot desk at a variety of tables, laps and plane and train seats. Each time I move location I sit next to a different group of people. I learn stuff from this. Other people learn stuff from this. We create value simply from being in physical proximity of new nodes with which to engage in conversation. There are limits to the value that can be created. These are imposed by the physical world. I can only be in one place at a time. Today I sit next to one group, tomorrow I sit next to another. The groups don’t even intersect. In the physical world I can’t turn to my friend on the next floor to bring him into the current debate, even if I know it might interest him and he will bring value to the conversation – let alone my friend in New Zealand. But in the digital world my hotdesk is everywhere all at once. The hotdesk goes global. Of course if you could speak with the whole world at once… you’d go mad. So the value of groups self-forming within that cacophony becomes immediately apparent.
The value of self-forming communities of purpose Twitter gives us a sense of this. Twitter allows me to be in conversation with people who share my interests, globally. And because there is no need for us to share huge tranches of personal data to engage in that conversation, the edges of the groups of shared interest I am part of have fuzzy edges. Twitter is (in very quick summary) a distributed microblogging platform. While blogs enable conversation, the conversation always starts from the blogger’s point of view. They choose the content that sparks the conversation. In twitter, where you have only 140 characters to say your piece (including any urls), the conversation can start from anywhere. To talk to someone all you have to do is spot them (perhaps already in conversation with someone you are already a friend of, or on a friend’s list of followers) and click to follow. If they follow you in return the conversation is enabled. And all without revealing more than your username, a few lines describing yourself (your choice) and perhaps a url that you feel represents you in some way (typically a blog, myspace page, employers url or similar). Despite this low-level of explicit shared personal data we use plenty of implicit data to help us choose whether or not we should return the ‘follow’ compliment. It’s an important process because our twitter community functions as a trusted filter for the global conversation. We will therefore return the follow favour based on whether or not we believe the user account represents someone who has something to say in which we are interested, based on their past behaviour, their current group of followers and followed (who’s friend of a friend are they. How much do you trust that friend to share your interests), and what the url they offer in their profile tells you. And then you suck it and see and if they reveal themselves to be a bad fit with your personal fitness landscape – you block or unfollow them. If they prove to be a good fit you amplify their contribution by seeing who else they are in conversation with and where that leads you. Groups in twitter are ALL about conversation which means that they are communities in a truer and more powerful sense than we see with facebook groups. It might appear at first that the downside for twitter is that it’s tougher to make the purpose of these communities apparent.
There are three ways users make this clear: 1. Their choice of user name 2. What they choose to have conversations about 3. The content they choose to point at in order to spark conversation. We’ll return to the critical role content plays later. It’s also wrong to assume you are part of just one group on twitter – the one made up of people you follow, or who follow you. Each person you follow is part of a similar group to ‘your own’. Conversations you see taking place between a person you follow and someone you don’t may lead you to follow someone new, joining yet another ‘group’ with another purpose. It’s incredibly evolutionary – operating as a complex adaptive system which selects and amplifies according to your own particular fitness landscape. Conversations, themes, passions and purposes bubble up, emerge, get amplified and can turn into action. Tweetups are a good current example of real things emerging from the digital. But advertising and marketing is happening in there, too. But its entirely informal and with no money changing hands. Your personal filter of trust will bring you news of products you didn’t know you needed to know about. One of your community may mention they are planning to go to a conference, or have just bought a new bit of tech, or have a complaint about how something is working for them, or wants to know where a decent restaurant is close to them that their community can recommend. The conversations are about navigation and recommendation. But they are also creating demand. And the value of brands are emerging in them. I’ve written more on this here: http://fasterfuture.blogspot.com/2008/04/value-ofbrand-is-in-its-conversations.html And much of what sparks the conversation is content. Never mind that every tweet (the vernacular for your 140 character submission) is content, many use a url link to point people who trust them to something else they think will interest you. And that something is content. Content is the spark for conversation. Without it you reduce the opportunities and amount of conversation. Conversation is where ideas coalesce into action. So without content your conversation is limited and or does not exist. Without conversation you have no action. Without action nothing gets done/created. Outcome: zero value. Content is king? Oh yes. The processes of its creation and distribution is entirely disrupted - but its role remains absolutely critical.
Connecting the dots – making Reed’s Law function to its full potential. If you’re not familiar with Reed’s Law (group forming network theory) here’s a quick crash course (direct for wikipedia). “Reed’s Law asserts that that the utility of large networks, particularly social networks, can scale exponentially with the size of the network. The reason for this is that the number of possible sub-groups of network participants is , where N is the number of participants. This grows much more rapidly than either
the number of participants, N, or the number of possible pair connections, Metcalfe's law) (which follows
so that even if the utility of groups available to be joined is very small on a pergroup basis, eventually the network effect of potential group membership can dominate the overall economics of the system.” It explains the potential for exponential growth in value when you allow nodes within a network to connect up however they’d like – to self form. Simply, but somewhat irrationally, it makes the case that one additional node in your network doubles its value. “Potential” is the key word here. It’s our get-out clause for when the exponential doesn’t realise when we build our social networks. It rationalises our concern about one extra node equating to a doubling of value. To understand why the potential is not getting realised let’s consider two caveats to Reed’s Law. 1. Real value is only created by communities of purpose (there’s little point in wittering on without an end result). 2. Value is best enabled by synchronous response. Ie There have to be enough people within your community who are both enabled to, and sufficiently interested in the purpose at hand, to drop everything (no matter how briefly) to join in, right now. Stowe Boyd refers to this in his tongue-in-cheek Boyd’s Law. http://www.stoweboyd.com/message/2006/08/reeds_law_a_pos.html Now imagine a platform that has the cornerstones of content, community and conversation.
The gap between the potential of Reed’s Law and its reality is navigation and discovery. How do you know there is a conversation happening, a self-forming community is emerging that you can add real value to or from which you can derive real value? And how do you know about it in real time? And what are the effective tools for allowing you to drop everything to join in. If you could, if we all could, then the potential of Reed’s Law would be fulfilled. Perhaps the solution lies in semantic understandings of my needs and desires – a platform which learns my interests and those of us all to associate us in real time for purposeful collaboration. The global hotdesk is open. The greatest explosion in value ever created It’s perhaps worth making the point here that evolutionary drives are at play. Evolution is a complex adaptive system (http://www.trojanmice.com/articles/complexadaptivesystems.htm ). It selects, iterates, amplifies. The economy is another such complex adaptive system (at least according to the powerful argument made by Eric D Beinhocker in The Origin of Wealth (http://tinyurl.com/6nw2kd ). The internet is self-evidently a third example. Finally the economy has a production and distribution ‘engine’ (for want of a better word) which matches the way it functions. The mass production ‘engine’ gave us an effective leg up. But one which matches the world of group-formingnetwork-theory, of collaboration and purpose… the two systems have the potential (there’s that get-out word again!) to amplify one another’s effectiveness delivering a bounty beyond comprehension. It will lead to the greatest explosion in value ever created because we will all play our distributed part in it, because we will all shape it, to all our ends, to all our purposes. When creation is in the hands of the few the fit with all our personal fitness landscapes is less. When creation is in the hands of us all, the fit can be perfect. And this means the wealth will be delivered with startling efficiency. I’ll return to that particular point when we reach stage three of the model I think should deploy.
Three steps to the new business: Making money along the way. The end game the networked world leads us to is one in which there are real risks for media owners and indeed for middle men everywhere. First let me describe the steps. 1. Create a platform using the three cornerstones of content, conversation and community. 2. The global focus group 3. The new business units.
1. The platform must be built with these guiding principles (enshrined in the information architecture): a) Content as ‘conversational spark’ (primarily expressed through the ability of users to point where they wish). b) Low barriers to conversation: eg Low explicit-data intensive profiles. c) Self-forming synchronously communicating communities of trust and purpose. To fulfil the potential of Reed’s Law potential these groups must have high visibility to those users for whom they are relevant - leading to instant and easy discovering. User-led organisation through tagging of content and conversation and of personal interests combined with semantic discovery of implicit data will aid that visibility. On this platform we should offer the self-forming communities that emerge the tools to create value for themselves, to help create and select the tools, services and content that best serve their needs. Conversations about products and services will inevitably emerge among networks of trust and purpose, offering numerous and very strong opportunities for monetisation. In a way twitter already demonstrates, these networks of trust act as navigators and recommenders for purchase decisions. 70% of purchase decisions are influenced by word of mouth. A platform taking the Content-Conversation-Community cornerstones as their founding principles will enable that friend-recommendation process to happen online and therefore on a global, synchronous scale. The monetisation of conversations about products and services will come in its first stage through targeted user-supported and generated ad models. Timescale: It’s all do-able right now.
2. The global focus group It is at this stage that the platform offers more innovative commercialisation opportunities. Without wishing to detail a precise implementation, it’s easy to compare the value companies get from focus groups in the physical space to the value they could enable from focus groups in the digital space. Digital versions (where the space between us is zero) can bring together enough people with specific needs and desires around their own passions and interests to create value-enhancing feedback. Those involved in the process are likely to feel a sense of ownership, turbo-charging the spread of word-of-mouth marketing about the new version of a product they help create. Digital versions can do this in real time, too. A wise strategy would offer a share of the price paid by companies for access to these groups to the creators of the value – the users. But it would also be reasonable for the provider of the platform and the introducer (the media property owner) to take their share. Remember, you aren’t just offering feedback, you aren’t just offering R&D, you are also offering THE most effective marketing its possible to offer. Time scale: Short-term with value into the mid to long term. 3.The New business units: The ultimate power of self-forming groups is in the way they disrupt every form of hierarchical organisation. Among those is that of the producing company. Imagine on a global scale if you could pull together the right people for a project every time. That’s precisely the promise of group forming network theory. Non-directed self-forming groups should be able to self-organise to fulfil any task you care to name. And because they form when there is a demand for something emerging in an evolutionary way from the conversation among networks of trust, there’s a pretty good chance that what is created as a result speaks directly to that demand. That is seriously disruptive. Advertising and marketing fill the gap between supply and demand. If there is no gap there is no need. In this world the very notion of the company and ‘its’ (as a single embodiment) profits are challenged.
As individuals we will create and earn value but only through our connections with other individuals – in groups of purpose, in real time and because we trust one another. Perhaps there is more real stickiness about that than companies and corporations in which structures are held together by contract and tort? Step 3 is some way off. And it’s hard to conceive of how this could beat the economies of scale offered by factories, mass production and one-size-fits all economics. But example after example is showing the world is moving toward it – we want to join in the production process, we want to customise, we want to shape and select. The creation generation insists on it. Perhaps factory production will adapt to survive – automated with ever improving technologies developed by people fascinated by tinkering with it, making it more responsive to ever shorter and more focused production runs, and earning their share from this. These people will have come together as a self-formed community of purpose. They will have found each other through the global hotdesk. In this world our global focus group can now disintermediate the companies they were once feeding back to. Now they can become the producer, their own board of directors. Now consider how companies function. If they could connect their own dots perhaps they’d start the process of catching up with the reorganisation of the disaggregated skill sets that is already happening on a global scale through blogs and social networks. Timescale: Short to mid-term requirement for change in companies, mid-longterm change in how we will organise ourselves. The end game The greatest efficiencies will happen when groups can form in a platform agnostic environment. Each platform from facebook to twitter to whatever is next remains a silo, restricting the size of the group, making it tougher for that one extra node to join and double its value. The future is a world without platforms. It is where being digital will mean you can take all your subtle and complex attributes and personality facets and scatter them to the four winds to be connected with everyone else on the planet as they do the same thing. But that, for now, remains firmly in the future. Timescale: Long term
Suggested further reading: FasterFuture blog posts: The Value of a Brand is in its conversations: http://fasterfuture.blogspot.com/2008/04/value-of-brand-is-in-itsconversations.html The Death of Death: http://fasterfuture.blogspot.com/2008/04/death-of-death.html What Next for Advertising and Marketing: http://fasterfuture.blogspot.com/2008/01/what-next-for-advertising-andmarketing.html Reed’s Law and How Multiple Identities Make the Long Tail Just a Little Bit Longer http://fasterfuture.blogspot.com/2007/08/reeds-law-and-how-multipleidentities.html Why Media is the New Business Ecology http://fasterfuture.blogspot.com/2007/08/white-paper-wiki-power-of-network.html Widgets are to websites as blogs are to broadcast http://fasterfuture.blogspot.com/2008/02/widgets-are-to-web-sites-as-blogsare.html Enabling The Conversation http://fasterfuture.blogspot.com/2008/01/rich-media-think-about-enabling.html The Perfect Storm: A fourth element http://fasterfuture.blogspot.com/2008/01/perfect-storm-fourth-element.html Books: The Origin of Wealth, Eric D Beinhocker http://www.amazon.com/Everything-Miscellaneous-Power-DigitalDisorder/dp/0805080430/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1201858029 &sr=8-1 Communities Dominate Brands, Alan Moore and Tomi Ahonen http://www.amazon.co.uk/Communities-Dominate-Brands-MarketingChallenges/dp/0954432738/ref=sr_1_1/203-37433048821563?ie=UTF8&s=books&qid=1189085223&sr=1-1
Everything is Miscellaneous, David Weinberger http://www.amazon.com/Everything-Miscellaneous-Power-DigitalDisorder/dp/0805080430/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1201858029 &sr=8-1 The Cluetrain Manifesto http://http//www.amazon.co.uk/Cluetrain-Manifesto-End-BusinessUsual/dp/0738204315/ref=sr_1_1?ie=UTF8&s=books&qid=1196067175&sr=1-1 Wikinomics http://www.amazon.co.uk/Wikinomics-Mass-Collaboration-ChangesEverything/dp/1843546361/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=11960670 29&sr=8-1
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