The predominant economic model for social technologies has been advertising. Vying for consumer attention advertisers flocked to social platforms hoping to “capture” their share of the eyeballs and pocketbooks. The models and mindsets that attract advertising revenue is based on the old “funnel theory”.
RANDALL STROSS writes in the NY Times: When major brands place banner advertisements on the side of a member’s home page, they pay inexpensive prices, but the ads receive little attention. Seth Goldstein, co-founder of SocialMedia Networks, an online advertising company, wrote on his Facebook blog that a banner ad “is universally disregarded as irrelevant if it’s not ignored entirely.”
IDC, the technology research firm, published a study last month that reported that just 3 percent of Internet users in the United States would willingly let publishers use their friends for advertising. The report described social advertising as “stillborn.”
All Web sites that rely on ads struggle to a greater or lesser extent to convert traffic, even high traffic, into meaningful revenue. Ads that run on Google and other search engines are a profitable exception because their visitors are often in a buying mood. Other kinds of sites, however, can’t deliver similar visitors to advertisers. Google’s own YouTube, which relies heavily, like Facebook, on user-generated content, remains a costly experiment in the high-traffic, low-revenue ad business.
What Is The Alternative?
Adverting is not the value created by social technology. The value lies within the communications and relations. Kevin Kelly’s thesis of New Rules for the New Economy is that we are now living in an economy based on ideas and communication rather than energy and atoms. Further, this “new” economy has distinct laws or rules so it behaves differently than the previous industrial economy. To do well in the new regime, we need to grasp the new dynamics of information.
Kevin recently wrote: I wrote this book in the late 1990s during the dot-com boom. At that time many reviewers convinced themselves the book was about the dot-com revolution. But in fact I avoided the dot-coms, never even mentioned them, and instead focused on the communication revolution. I talked about network effects, using the free economy, sharing, social media (not called that then), and many of the other developments now underway.
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 Are The New Rules?
We will examine the new rules in detail as we enter 2009. For now we’ll summarize our own perspectives of some of the rules that drive our new economy.
- Value creation is centric to time, knowledge, innovation and relationships
- The economics of business and personal growth is driven by communications, innovation and time centric value.
- Free is the means. Value creation and delivery is the ends of optimizing opportunity
- Delivering effective value is the art and science of leveraging technology, knowledge and relationships aimed at opportunity
- Facilitating communications aimed at value creation on the fringes is where economic opportunities lie
- 5% of the crowd will create, 95% will follow and leverage the gains
These discussions have nothing to do with marketing in the traditional sense rather they have everything to do with value creation in the new economy. The networked economy will produce value from the bottom up rather than the top down. Businesses will be forced to reinvent themselves by following the new rules and those that follow will create new markets. Individuals, formed in swarms of collaborative creations, will be the creators from which new businesses and new markets will emerge.
Too deep? Too much? Stay tuned for the clarity.
What say you?