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Category: economics

A Story Where Writers Are More Powerful Than Producers

Published December 18, 2007 by cgerrish

Typewriter

In the movie business, the cost of production placed power in the hands of the producers and “money men.” While essential, writers are at the bottom of the totem pole. The strike has proven how essential they are. Apparently actors don’t make up the words they say.

Writers are starting to understand how the cost of production has changed, and most importantly how distribution models have changed. After all, that’s what this strike is all about. Shows redistributed through the Internet require some payment to the writer. It would be very interesting if the point of contention became the method by which writers suddenly owned the production process.

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Facebook: Love-based Valuation & Poisoning the Well

Published December 1, 2007 by cgerrish

It’s Love (heart)

The temptation of total surveillance is always there, for government and for business. Marketers want the ability to know everything about everyone’s behavior, tastes and buying patterns to target offers and advertising at us. The more they know, the better they can target. Although most businesses need to do more than preach to the choir, they need new converts.

Facebook’s Beacon takes users for granted. Users love Facebook and they love what they can build within the Facebook platform. Love is a strong emotion, and when it is betrayed it can behave in unpredictable ways. Social networks are fragile and Facebook took a big risk with Beacon. More and more, Beacon is being viewed as a betrayal of Facebook’s users. When you think about the valuation of a company like Facebook, the real value is in the love and respect of the users. The technology is a wasting asset that has nominal value. Facebook risked everything with Beacon. The steps they take to recover at this point will determine the future value of the company.

The idea of “love” as a factor in value and valuations came to me from two directions. I heard former quarterback Steve Young talk about what made Bill Walsh’s 49er Superbowl teams so special. Young cited a number of factors, but added that the feeling of love and respect among team members as a key ingredient. It was a conscious coaching strategy that Walsh used to build a winning team. The other source is a talk given by Clay Shirky on software applications, Perl and community-based developer support. His idea is that a strong community can be a more dependable resource for application support than a commercial firm in the business of selling support services. This is certainly true of the Perl, Python, PHP and Ruby communities. It’s also true of applications like WordPress, Joomla and Drupal, and libraries like Prototype and Jquery.

You’ll often hear people joke about the special ingredient in some recipe being ‘love.’ We laugh, because we think of love as being insubstantial, in some ways without physical presence or value. But if we take it for granted, the joke’s on us.

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Hypertargeting and the Panopticon of Social Networks

Published November 26, 2007 by cgerrish

Panopticon

The rebellion against hyper-targeting continues. Doc Searls weighs in, as does Jason Calacanis. Targeted marketing always worked with fairly crude tools, and because of this it was tolerable. Marketers looked at demographics and psychographics, made educated guesses about the audiences of particular radio or television programs, and did the best they could. It was more art than science. The direct marketers were the most statistically driven. Marketers dreamed of knowing enough to target perfectly. Now with Facebook and other social networks, they’re starting to get their wish. The user inhabits a panopticon, and the data generated belongs to the system to be rented to the highest bidder.

Will the inmates rebel and demand the authority to selectively release data to the system? Will they be able release none of their data and still participate in the system? Can they withdraw their data, move it and use it to their advantage in another system? When a customer uses her data to her advantage in a system, the system benefits as well.The coarse targeting of marketing has required high frequency bombardment. We’re entering the age of smart bombs, but the frequency seems to be just as high. Shouldn’t smart marketing just be the thing I want, when I’ve indicated I actually want it? Advertising frequency goes down, but the number of transactions probably increases.

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Digg, Mixx and Viral Negativity in a Social Network

Published November 25, 2007 by cgerrish

Arrington writes that some of Digg’s unpaid editors are moving over to Mixx. Since they aren’t compensated for their work, switching costs amount to getting some of their friends to switch too. This is an interesting case study in the value of social networks. If the creators of the “user generated content” decide that the environment has become poisoned with negativity, they may decide to pull up stakes and migrate to another more friendly environment.

One Digg user makes the claim, in Arrington’s article, that:

I think Mixx has a real chance for success…Mixx has a much more positive audience than Digg. It always amazes me that even the most popular and highest quality articles can get so many negative and unnecessarily degrading comments on Digg. So far the users of Mixx have proven to be quite a bit more pleasant, something that I know will be welcomed by most users.�

Negativity can quickly become viral in a social network, especially where some kind of voting takes place. Competitive strategies can overtake collaborative strategies and then the community’s overall output starts to become skewed. To combat the negativity, the owners of the site make rules to curb some forms of competition, and before you know it– it’s not that fun anymore.

It’s interesting to watch the figures of game theory play out before your eyes. Should part of the valuation of a business that depends on social networking and voting be dependent on its ability to enforce and maintain a friendly environment? See Craig Newmark for a lesson in how this can be done.

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