Networking Economics: The Required Imperative

by Jay Deragon on 09/23/2008

Networking Economics: An ImperativeWhen we think in terms of an economy we often think about money. Money fuels economics, markets, businesses and our choice of lifestyles. As businesses approach the social web they often ask the question “How can we make money?”.Questions such as these reflect a focus on the results desired rather than the methods required.

For businesses to understand the economic opportunities of the social web they need to understand the methods that are required to obtain the results.

In Kevin Kelly’s book, The New Rules of The New Economy” he states “This new economy has three distinguishing characteristics: It is global. It favors intangible things—ideas, information, and relationships. And it is intensely interlinked. These three attributes produce a new type of marketplace and society, one that is rooted in ubiquitous electronic networks.”

Because communication—which in the end is what the digital technology and media are all about—is not just a sector of the economy. Communication is the economy.”

“The new economy is about communication, deep and wide. Communication is the foundation of society, of our culture, of our humanity, of our own individual identity, and of all economic systems. This is why networks are such a big deal. Communication is so close to culture and society itself that the effects of technologizing it are beyond the scale of a mere industrial-sector cycle. Communication, and its ally computers, is a special case in economic history. Not because it happens to be the fashionable leading business sector of our day, but because its cultural, technological, and conceptual impacts reverberate at the root of our lives.”

Kevins perspectives lead us back to the issues of what methods create the end results, money. With any transformational changes in society and businesses a trail of issues can be tracked which drove the emergence of the new order of things. In the world of networks the trail is hits which represent activities, communications—- traffic.

Traffic represents attraction which creates engagement of people and things, a transaction. Today much of economic gains from traffic is through advertising models such as ad sense where clicks create transactional exchanges for economic gains to advertisers and distributors, i.e. our web page and the merchants web page is where the user lands when clicking on our ads. Google’s whole economic value is driven by the hits economy.

The old order of the web was aimed at providing people with access to things and economic engines to buy things. The new order of the web has started with people connecting with people and sharing for free. People are sharing, communicating, exchanging ideas, posting opportunities i.e. jobs etc.

The next wave will be when people and things are inter-connected and enabled with economic engines to exchange things, products and services, for an economic return. The next wave will require one or more financial institutions to provide the engine that enables people to exchange things in exchange for economic value and to manage their returns.

Does The Financial Industry Understand this?

There isn’t a bank today that doesn’t promote the value of relationships as a common marketing message. However most do not provide the means or the medium for enhancing relationships. Instead they create barriers to ongoing relationship opportunities.

The social web is creating massive traffic from people connecting with other people. Financial institutions use the web to facilitate transactions, not relationships. Which model creates more traffic? Lets look at the charts in this post. Do you see the obvious? Traffic precedes relationships and transactions follow relationships.

If the social web is to grow up and become meaningful to businesses and people alike then exchanges of value for economic returns must be integrated for ease of use.

The next wave that will draw businesses to the social web is when the network is combined with financial transaction engines that connects people to things and things to people where either can exchange something of value for economic gains. We’re not talking about a PayPal account rather fully functional and integrated economic transaction engines for businesses and individuals. When will the financial industry awaken to the opportunity?

Kelly says: ” This new economy represents a tectonic upheaval in our commonwealth, a far more turbulent reordering than mere digital hardware has produced. The new economic order has its own distinct opportunities and pitfalls. If past economic transformations are any guide, those who play by the new rules will prosper, while those who ignore them will not. We have seen only the beginnings of the anxiety, loss, excitement, and gains that many people will experience as our world shifts to a new highly technical planetary economy.”

What say you?

{ 12 comments }

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Michael Pokocky December 20, 2007 at 12:01 am

Its all about following the paper trail; in this case the electronic money trail.

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