Monthly Archive for September, 2007

Understand your content

I picked up a book my parents used on their recent trip to Greece, which was a guidebook of the Peloponnese. Flicking through this paper book reminded me of my thoughts of how the content business is so rife with piracy. Especially with an online world now, people can copy content – images, text, audio – and mash it up into their own creation. It seems crazy but why do people enter a business like that?

The Information Sector is not only a big money maker, but very unique as well. Yes, it can be copied and ripped off – unlike a barbie doll where its form can’t really be manipulated into a new product. However different from selling barbies, is that information products do things that are very unique in this world and extremely powerful. In my view there are four types of information product, which can be explained under the categories of data or culture.

Data

New data
A friend and aspiring politician, once said to me that “information is the currency of politics”. Reuters, the famed news organisation that supplies breaking news to media outfits across the world – derives 90% of its revenue from selling up-to-the-minute financial information to stockbrokers and the like who profit on getting information before others. New information, like what the weather will be tomorrow, loses value with time (no many care what the weather was eight days ago). But people are willing to pay a price, and a big one, to get access to this breaking news because it can help make decisions.

Old data
On the flip side, old information can be very valuable because of the ability to conduct research and analysis. Search engines effectively fit into this segment of the information economy, because they can query past news and knowledge to produce answers. Extending the weather example, being about to find out that data eight days ago along with the weather exactly one, five and ten years ago – can help you identify trends that, for example, validates the global warming theory.

Culture

Analysis
The third category of information products, I call them simply analysis because what they are is unique insight into things. We all have access to the same news for example, but it takes a smart thinker to create a prediction, by pulling the pieces together and creating new value from them. Analytical content usually gets plagiarised by students writing essays, but its also the stuff that shapes peoples perceptions in world-changing ways.

Entertainment
One of the most powerful uses of content is the way it can impact people – entertainment type content is the stuff that generates emotion in people. Emotions are a key human trait that you should keep in mind in any decision – no matter how logical someone is, the emotional self can overtake. A documentary that portrays an issue negatively, and that can generate an angry response in a person, is the stuff that can topple governments and corporations.

Not all information is equal
If you are a content creator, you need to accept that other people can copy your creation. The key is to understand what type of content you are creating, and develop a content strategy that exploits its unique characteristics.

Information products need different strategies in order to effectively monetise them. Below is a brief discussion which extends on the above to help you understand.
New data
With this type of content, the value is in the time; the quicker that information can be accessed, the more useful it is. News items (like current affairs) fit into this category. As a news consumer, I don’t care how I get my news, but I care about how quickly I can get it. It’s for this reason I no longer read newspapers, yet through various technologies like RSS and my mobile phone, that I probably consume more news than ever before.

You should sell this data based on access – the more you pay, the quicker the access. Likewise, the ability to enable multiple outputs is key – you need to be able to deliver your content to as many different places as possible: SMS, email, RSS etc. You should not discriminate on the output; the value is on the time.

If you create news breaks, why are you wasting your time on who can access that information, because of the threat that someone can copy it? If the value is in the time, who cares who copies it because by the time they republish it, its already lost value. A flash driven site like the Australian Financial Review is an example of a management that doesn’t realise this.

Old data
A recent example of action in this space is the New York Times who have recently removed their paid subscription wall, which was previously only available via subscription but now can be accessed by anyone for free. This is a smart business move, because if you are selling archived content, you will make more money by having more people know what exists. A paid wall limits people using it which decreases the opportunity for consumption: you a relying on a brand only to create demand. If you are website with a lot of historical content – restricting access is stupid because you are effectively asking people to pay for access to something that they have no idea what value it holds for them. It’s a bit like traveling – if you’ve never been overseas, you don’t know what you are missing out on. Give people a taste of the travel bug, and they will never be able to sit still.

Unlike new data where the value is based on time, old data finds value on accessibility. People will place value on things like search, and the ability to find relevant content through the mountains of content available. Here the multitude of outputs doesn’t matter, because researchers have all the time in the world. What matters is a good interface, and powerful tools to mine the data: the value is on being to find information. You shouldn’t charge people on access to the content; where you will make money is on the tools to mine the data.

Analysis
This type of content is difficult to create, but easily ripped off by other people – just think of how rife plagiarism is with schools and universities, where the latter treats plagiarism as a crime just short of murder. You can distinguish this type of content as it demonstrates the ability to offer content that is was produced from a common set on inputs that anyone could access, and creating a viewpoint that only a certain type of person could create. The value is on the unique insight.

Despite the higher intlellect to product, it unfortunately is content that is harder to capitalise on. A lot of technology blogs feel the pressure of moving into a more news style than analytical service because news is what gets eyeballs. If you are a blogger looking to make money – the new data approach above should be your strategy. But if you are a blogger trying to build your brand – do analysis. The consequence with analysis is that its harder to do, so you shouldn’t feel pressured to produce more content. I’ve noticed a trend for example, that if I post more blog postings, I will get more traffic. But on the same token, more postings puts more pressure on me, which means less quality content. Understand that the value of analysis isn’t dependent on time. Or better said, the value of analysis is not how quickly it gets pumped out and realised, but how thoroughly it gets incubated as an idea and later communicated.

The value for analysis is clarity and ability to offer new thoughts. To look at the relationship with advertising models, new data like news (discussed above) typically gets higher viewers – which works for the pageview model (the more people refreshing, the more CPMs). Analysis, on the other hand, works with the time spent model. Take advantage of the engagement you have with those types of readers, because you are cultivating a community of smart people – there can be a lot more loyalty with that type of readership.

Entertainment
My sister downloads the Chaser’s War on Everything as a podcast. She first came across them on the radio, but she now downloads the podcasts religiously. Even though I knew about the Chaser’s efforts for years in their various products, I didn’t realise they were still around. If the last few weeks, I have been noticing my friends bring up the shows they are doing. The value in this content was the ability to make people laugh, due to their unique stunts. Their brand is built because of word of mouth recommendations.

Like analysis, entertainment can be a very hard thing to generate because it relies on unique thinking. With a strong brand, people will pay for access to that content. Although it may seem that the viral spreading of funny content for free is a nightmare for a content producer trying to collect royalties, it’s actually a good thing because it entrenches the brand: more people will find out about it. The nature of entertainment, like analysis, is that it is difficult to do repeatedly. Sure people can copy your individual tricks – but they can only do so after the fact. They can’t pre-anticipate the next thing you will do; because unlike breaking news which is on how quickly you can pump out content, entertainment content requires a unique creative process to produce it.

The key with entertainment content, is to build a relationship with an audience and to sustain it. Create a predictable flow of content. Encourage people copying it, because all it does it get more people wanting to see what you come up with next. If it wasn’t for Stephen Colbert‘s clips on Youtube, I would never have realised his brilliance. Not knowing he existed, means a DVD set of his shows means nothing to me (but which holds a lot of value now). The value of entertainment is to generate emotions in people repeatedly. Emotions are a powerful influence on human behaviour – master that and you can be dangerous!

Concluding thoughts
This posting only touches on the issues, but what I suggest is that creators of content need to look at what type of content they are producing, for them to exploit its unique aspects. Content represents human ideas, and content isn’t distiguished by a physical form. The theft of your content should be a given and can actually help you. Depending on what that content is, there may be natural safeguards that make it irrelevant (ie, the time value of news).

Climate change: forget the science, it’s real for the market

I recently sat through a two hour presentation on climate change at work. My employer this year (a big four firm) has been mobilising to respond to the market with a climate change solution for our clients – and the things happening are amazing. They want to be first-movers in what is a huge business opportunity. Even through I have had dealings with people on the climate change team, it wasn’t until I sat through this presentation that a few things clicked for me: climate change is real. And I am not talking about the science – it’s real for the market economy.

I wouldn’t be doing any justice if I attempted to explain what I learned, however I will explain something that was a big realisation for me. This guy that spoke is a world expert, and he reckons more has happened in the last eight months of his career regarding climate change than it has in 25 years of his career. To understand why, is to understand the realisation of the markets.

Increasing shareholder value

If it’s one phrase that sums up corporations working within the framework of capitalism, it’s about “increasing shareholder value”. It’s a term that is mocked because we are sick of hearing it, but it essentially explains the market: investors make money by putting their money where they can generate more value for their buck. Value creation is the centre of everything – a start-up company generates value through innovative new products that people buy; a tax agent generates value by reducing your tax expense; a real estate agent generates value because they can sell your property at a higher valuation. In the context of corporations, people make money in companies through returns: a higher share price means a higher value of that share or piece of property. Companies are judged on their profits because more profits reflect a higher return an investor gets from that entity; just like a home being sold, it reflects the additional value they can generate from that piece of property they own.

Profits reflect shareholder returns, which come in two forms.

1) dividends, which are cash payouts from profit distributions to shareholders. An investor wants higher profits, because it means more cash for them on their existing shareholding – it reflects a better return on their investment.

2) retained earnings, which is when a company doesn’t pay the dividend but holds it so they can fund future growth. More profits, means extra cash to invest to generate more growth in the entity, which ultimately means more value. If you buy a share for $1, and the company grows and your share is now $2 – you are a happy chappy because you’ve effectively doubled your money.

How climate change now has a price

Lets say we generate x amount of carbon tons a year. The objective of climate change, is that we can reduce the amount of x with time, and then get to the stage where we can grow sustainably, which means for every x we generate, we can offset that bit of carbon so as to to generate a net of zero on the environment. That’s called sustainable economic growth.

Lets say y is the amount it costs to remove a ton of carbon dioxide. Meaning y represents the expense of generating carbon. So if you times x with y – that equals the amount it will costs to remove the carbon dioxide we generate so that we have a net impact of zero on the environment (or at least, the cost to reduce emissions). If the government forces you to reduce your emissions, like they force you to pay taxes, that expense has now become very real.

How much a ton of Carbon Dioxide will cost is a big issue yet to be settled, but as you can tell y is an important number because it determines how much it costs for you to reduce your carbon footprint. A very conservative estimate is that it costs 25 US dollars to remove 1,000 tonnes of carbon. The reason I say conservative is because more recent evidence suggests it is actually a lot more than that (I think he quoted 40 euros). Using the $25 figure, he said that it will cost us $15 trillion to remove carbon dioxide. There is so much pressure on governments from voters, lobby groups and the like, that governments (like here in Australia) are going to mandate that you offset your carbon emissions each year. The Kyoto agreement is saying a 60% reduction from 1990 levels by 2050 for example.

Now as an investor, I am thinking my investments have a share of the pie of a $15 trillion expense that they have to pay each year. That’s expensive. Expensive stuff reduces my profit. Reducing my profit means lower returns for my investments (ie, lower dividends, lower retained earnings to fund growth). Holy crap – this climate change thing is eroding shareholder value. Crap crap crap – I want to start knowing what my investments are doing to tackle this future expense. I want more accountability, alongside the financial reports that companies are mandated to provide (and which tells us about profit).

And that is exactly what the investors that control $41 trillion dollars – one third of the worlds money -are currently saying.

So much more to say, but I just want to share that point: climate is real economically and the environmental cost is being built into the market mechanism. There are a lot of issues that are yet to be resolved, but you’d be stupid to start ignoring the massive developments occuring, because its getting nearer to an agreement where it will affect every transaction we make in our economies.

5 observations of how social networking (online) has changed social networking (offline)

Just then, I had an image get shattered. A well respected blogger, whose online persona had me think they were a very cool person offline, is infact, a fat geek with an annoying voice. I can pretty much cross off the list that he can relate to experiences of how Facebook is mentioned in trendy nightclubs on the dancefloor.

Another thing I have noticed: all the major commentators & players of the Internet economy, are usually married, in their 30s or 40s, and almost all come from an IT background.

Don’t get me wrong – the industry has a lot of people that are a goldmine with what they say. They challenge my thinking, and they are genuinely intelligent. But although they are users of web services like Facebook or MySpace – just like the rest of society – they are people experiencing these technologies in the bubble of the technology community. Their view of the world, is not aligned with what’s actually happening in the mainstream. No surprises there – they are the early adopters, the innovators and the pioneers. It’s funny however, that comparable to other services (like Twitter) the adoption amongst the tech community for Facebook has been slow: it was only when the developer network launched that it started getting the attention.

What I want to highlight is that most commentators have no way in the world of understanding the social impact of these technologies in the demograghic where the growth occurs. We all know for example, Facebook is exploding with users – but do we know why it’s exploding? A married man in his 40s with a degree in computer science, isn’t going to be able to answer that, because most of the growth comes from single 20 year olds with an history major.

So what I am about to recount is my personal experience. I am not dressing it up as a thought-piece; I am just purely sharing how I have seen the world take to social networking sites and how it has transformed the lives of my own and the people around me. I’m 23 years old, the people in my life generally fall into the computer clueless category, and I have about 500 Facebook friends that I know through school, university, work, or just life (about ten are in the tech industry).

1) Social networking sites as a pre-screening tool
Observation: I randomly was approached by a chick one night and during the course of our conversation she insisted I knew a certain person. Ten minutes, and 20 more “I swear…you know xxx” – I finally realised she was right and that I did know that person. For her to be so persistent in her claim, she had to be sure of herself. But how can someone be sure of themselves with that piece of information, when I had only met her 30 seconds earlier?

I then realised this chick had already seen me before – via facebook. I know this is the case, because I myself have wandered on a persons profile and realised we have a lot of mutual friends. In those times I would note it is bound to happen that I would meet them.

Implication: People are meeting people and know who they are before they even talk. They say most couples meet through friends. Well now you can explore your friends’s friends – and then start hanging around that friend when you know they know someone you like!

2) Social networking sites getting you more dates
Observation: I met a chick and had a lengthy chat with her, and although she was nice, I left that party thinking I would probably never see her again as I didn’t give out any contact details. That next day, she added me as a friend on Facebook. In another scenario, there was a girl I met from a long time ago and I hadn’t seen her since. We randomly found each other on Facebook, and I’ve actually got to know the girl – picking up from where we left off.

Implication: Social networking sites help you further pursue someone, even though you didn’t get their number. In fact, it’s a lot less akward. Facebook has become a aprt of the courtship process – flirtation is a big aspect of the sites activity.

3) Social networking sites helping me decide
Observation: There was a big party, but I wasn’t sure if I would go because I didn’t know who would go with me. I looked at the event RSVP, and I to my surprise found out a whole stack of people I knew were going.

Implication: Facebook added valuable information that helped me decide. Not knowing what people were going, I probably wouldn’t have gone. Think about this on another level: imagine you were were interested in buying a camera, and you had access to the camera makes of your friends (because the digital photos they upload contain the camera model – as seen with Flickr). Knowing what your friends buy is a great piece of advice on what you want to buy.

4) Social networking sites increasing my understanding of people I know
Observation: I found out when a friend added me on myspace, that she was bisexual – something I never would have realised. Being bi is no big deal – but it’s information that people don’t usually give up about themselves. Likewise, I have since found out about people I went to school with are now gay. Again – no big deal – but discreet information like that increases your depth of understanding about someone (ie, not making gay jokes around them). I know what courses my contacts have studied since I last saw them, and what they are doing with their lives. I also know of someone that will be at one of my travel destinations when I go on holiday.

Implication: You are in the loop about the lives of everyone you’ve met. It’s nothing bad, because these people control what you can see, but it’s great because there are things you know, things you know you don’t know, but now you can find out things you didn’t know that you didn’t know.

5) Social networking sites as a shared calendar
Observation: My little sister is currently going through 21st season – back to back parties of her friends. One of the gripes of 21sts when organising them, is overlap with other peoples. Not only that – but also the physical process of contacting people and getting them to actually RSVP – it’s a pain. However unlike my 21st season experience from a few years ago, my sister has none of these issues. This is because Facebook is like one big shared calender. Another example is how I send my congratulations to birthday friends a lot more than I have in the past because I actually know its their birthday- due to fact our calendars are effectively pooled as a shared calendar.

Implication: Facebook has become an indispensable tool to peoples social lives.

6) Bonus observation – explaining the viral adoption of Facebook
I have a few friends that don’t have Facebook. You can almost count them on the one hand. And when you bring it up, they explode with a “I’m sick of Facebook!” and usually get defensive because so many people hassle them. In most cases, they make an admission that one day, they will join. The lesson here is that Facebook is growing because of peer pressure. The more people in someone’s network, the more valuable facebook becomes to them. When they say 40 million users, it’s actually 40 million sales people.

God bless the network effect.

Don’t get the Semantic Web? You will after this

Prior to 2006, I had sort of heard of the Semantic Web. To be honest, I didn’t know much – it was just another buzzword. I’ve been hearing about Microformats for years, and cool but useless initiatives like XFN. However to me it was simply just another web thing being thrown around.

Then in August 2006, I came across Adrian Holovaty’s article where he argues journalism needs to move from a story-centric world to a data-centric world. And that’s when it dawned on me: the Semantic web is some serious business.

I have since done a lot of reading, listening, and thinking. I don’t profess to be a Semantic Web expert – but I know more than the average person as I have (painfully) put myself through videos and audios of academic types who confuse the crap out of me. I’ve also read through a myriad of academic papers from the W3C, which are like the times when you read a novel and keep re-reading the same page and still can’t remember what you just read.

Hell – I still don’t get things. But I get the vision, so that’s what I am going to share with you now. Hopefully, my understanding will benefit the clueless and the skeptical alike, because it’s a powerful vision which is entirely possible

1) The current web is great for humans; useless for machines
When you search for ambiguous terms, at best, search engines can algorithmically predict some sort of answer that partially answers your query. Sometimes not. But the complexity of language, is not something engineers can engineer to deal with. After all, without ambiguity of natural languages, the existence of poetry is impossible.

Fine.

What did you think when you read that? As in: “I’ve had it – fine!” which is like another way of saying ok or agreeing with something. Perhaps you thought about that parking ticket I just got – illegal parking gets you fined. Maybe you thought I am applauding myself by saying that was one fine piece of wordcraftship I just wrote, or said in another context, like a fine wine.

Language is ambiguous, and depending on the context with other words, we can determine what the meaning of the word is. Search start-up company Powerset, which is hoping to kill Google and rule the world, is employing exactly this technique to improve search: intelligent processing of words depending on context. So by me putting in “it’s a fine”, it understands the context that it’s a parking ticket, because you wouldn’t say “it’s a” in front of ‘fine’ when you use it to agree with something (the ‘ok’ meaning above).

But let’s use another example: “Hilton Paris” in Google – the worlds most ‘advanced’ search engine. Obviously, as a human reading that sentence, you understand because of the context of those words I would like to find information about the Hilton in Paris. Well maybe.

Let’s see what Google comes up with: Of the ten search results (as of when I wrote this blog posting), one was a news item on the celebrity; six were on the celebrity describing her in some shape or form, and three results were on the actual Hotel. Google, at 30/70 – is a little unsure.

Why is Paris Hilton, that blonde haired thingy of a celebrity, coming up in the search results?

Technologies like Powerset apparently produce a better result because it understands the order of the words and context of the search query. But the problem with these searches, isn’t the interpretation of what the searcher wants – but also the ability to understand the actual search results. Powerset can only interpret so much of the gazilions of words out there. There is the whole problem of the source data, no just the query. Don’t get what I mean? Keep reading. But for now, learn this lesson

Computers have no idea about the data they are reading. In fact, Google pumping out those search results is based on people linking. Google is a machine, and reads 1s and 0s – machine language. It doesn’t get human language

2) The Semantic web is about making what human’s read, machine readable
Tim Berner’s Lee, the guy that invented the World Wide Web and the visionary behind the Semantic Web, prefers to call it the ‘data web’. The current web is a web of documents – by adding this extra data to content – machines will be able to understand it. Metadata, is data about data.

A practical outcome of having a semantic web, is that Google would know that when it pulls up a web page regardless of the context of the words – it will understand what the content is. Think of every word on the web, being linked to a master dictionary.

The benefit of the semantic web is not for humans – at least immediately. The Semantic Web is actually pretty boring with what it does – what is exciting, is what it will enable. Keep reading.

3) The Semantic web is for machines to interpret, not people
A lot of the skeptics of the semantic web, usually don’t see the value of it. Who cares about adding all this extra meta data? I mean heck – Google still was able to get the website I needed – the Hilton in Paris. Sure, the other 60% of the results on that page were irrelevant, but I’m happy.

I once came across a Google employee and he asked “what’s the point of a semantic web; don’t we already enough metadata?” To some extent, he’s right – there are some websites out there that have metadata. But the point of the semantic web is so that machines once they read the information, can start thinking like how a human would and connecting it to other information. There needs to be across the board metadata.

For example, my friend Michael was recently looking to buy a car. A painful process, because there are so many variables. So many different models, different makes, different dealers, different packages. We have websites, with cars for sale neatly categorised into profile pages saying what model it is, what colour it is, and how much. (Which may I add, are hosted on multiple car sites with different types of profiles). A human painfully reads through these profiles, and computes as fast as a human can. But a machine can’t read these profiles.

Instead of wasting his (and my) weekends driving around Sydney to find his car, a machine could find it for him. So, Mike would enter his profile in – what he requires in a car, what his credit limit is, what his prior history with cars are – everything that would affect his judgement of a car. And then, the computer can query every online website with cars to match the criteria. Because the computer can interpret these websites across the board, it can evaluate and it can go back to Michael and say “this is the car for you, at this dealer – click yes to buy”.

The semantic web is about giving computers the information to be able to interpret data, so that it can do what they do really well – compute.

4) A worldwide database
What essentially Berner’s Lee envisions, is turning the entire world wide web into a database that can be queried. Currently, the web looks like Microsoft Word – one swab of text. However, if that swab of text was neatly categorised in an Excel spreadsheet, you could manipulate that data and do what you please – create reports, reorder them, filter, and do whatever until your heart is content.

At university, I was forced to do an Information Systems subject which was essentially about the theory of databases. Damn painful. I learned only two things from that course. The first thing was that my lecturer, tutor, and classmates spoke less intelligible English than a caterpillar. But the second thing was that I learned what information is and how it differs from data. I am now going to share with you that lesson, and save you three months of your life.

You see, data is meaningless. For example, 23 degrees is data. On its own, it’s useless. Another piece of data in Sydney. Again, Рuseless. I mean, you can think all sorts of things when you think of Sydney, but it doesn’t have any meaning.

Now put together 23 degrees and Sydney, and you have just created information. Information is about creating relationships between data. By creating a relationship, an association, between these two different pieces of data – you can determine it’s going to be a warm day in Sydney. And that is what information is: Relationship building; connecting the dots; linking the islands of data together to generate something meaningful.

The semantic web is about allowing computers to be able to query the sum of human knowledge like one big database to generate information

Concluding thoughts
You are probably now starting to freak out and think “Terminator” images with computers suddenly erupting form under your computer desk, and smashing you against the wall as a battle between humans and computers begins. But I don’t see it like that.

I think about the thousands of hours humans spend trying to compute things. I think of the cancer research, whereby all this experimentation occurring in labs, is trying to connect new pieces of data with old data to create new information. I think about computers being about to query the entire taxation legislation to make sure I don’t pay any tax, because it knows how it all fits together (having studied tax, I can assure you – it takes a lifetime to only understand a portion of tax law). In short, I understand the vision of the Semantic web as a way of linking things together, to enable computers to compute – so that I can sit on my hammock drinking my beer, as I can delegate the duties of my life to the machines.

All the semantic web is trying to do, is making sure everything is structured in a consistent manner, with a consistent dictionary behind the content, so that a machine can draw connections. As Berner’s Lee said on one of the videos I saw: “it’s all about creating links”.

The process to a Semantic Web is boring. But once we have those links, we can then start talking about those hammocks. And that’s when the power of the internet – the global network – will really take off.

Facebook is doing what Google did: enabling

The hype surrounding the Facebook platform has created a frenzy of hype – on it being a closed wall, on privacy and the right to users having control of their data, and of course the monetisation opportunities of the applications themselves (which on the whole, appear futile but that will change).

We’ve heard of applications becoming targeted, with one (rumoured) for $3 million – and it has proved applications are an excellent way to acquire users and generate leads to your off-Facebook website & products. We’ve also seen applications desperately trying to monetise their products, by putting Google Ads on the homepage of the application, which are probably just as effective as giving a steak to a vegetarian. The other day however was the first instance where I have seen a monetisation strategy by an application that genuinely looked possible.

It’s this application called Compare Friends, where you essentially compare two friends on a question (who’s nicer, who has better hair, who would you rather sleep with…). The aggregate of responses from your friends who have compared you, can indicate how a person sits in a social network. For example, I am most dateable in my network, and one of the people with prettiest eyes (oh shucks guys!).

The other day, I was given an option to access the premium service – which essentially analyses your friends’ responses.

compare sub

It occurred to me that monetisation strategies for the Facebook platform are possible beyond whacking Google Adsense on the application homepage. Valuable data can be collected by an application, such as what your friends think of you, and that can be turned into a useful service. Like above, they offer to tell you who is most likely to give you a good reference – that could be a useful thing. In the applications current iteration, I have no plans to pay 10 bucks for that data – but it does make you wonder that with time, more sophisticated services can be offered.

Facebook as the bastion of consumer insight

On a similar theme, I did an experiment a few months ago whereby I purchased a facebook poll, asking a certain demographic a serious question. The poll itself revealed some valuable data, as it gave me some more insight into the type of users of Facebook (following up from my original posting). However what it also revealed was the power of tapping into the crowd for a response so quickly.
clustered yes
Seeing the data come in by the minute as up to 200 people took the poll, as a marketer you could quickly gauge how people think about something in a statistically valid sample, in literally hours. You should read this posting discussing what I learned from the poll if you are interested.

It’s difficult to predict the trends I am seeing, and what will become of Facebook because a lot could happen. However one thing is certain, is that right now, it is a highly effective vehicle for individuals to gain insight about themselves – and generating this information is something I think people will pay for if it proves useful. Furthermore, it is an excellent way for organisations to organise quick and effective market research to test a hypothesis.

The power of Facebook, for external entities, is that it gives access to controlled populations whereby valuable data can be gained. As the WSJ notes, the platform has now started to see some clever applications that realise this. Expect a lot more to come.

Facebook is doing what Google did for the industry

When Google listed, a commentator said this could launch a new golden age that would bring optimism not seen since the bubble days to this badly shaken industry. I reflected on that point he made to see if his prophesy would come true one day. In case you hadn’t noticed, he was spot on!

When Google came, it did two big things for the industry

1) AdSense. Companies now had a revenue model – put some Google ads on your website in minutes. It was a cheap, effective advertising network that created an ecosystem. As of 30 June 2007, Google makes about 36% of their revenue from members in the Google network – meaning, non-Google websites. That’s about $2.7 billion. Although we can’t quantify how much their partners received – which could be anything from 20% to 70% (the $2.7 billion of course is Google’s share) – it would be safe to say Google helped the web ecosystem generate an extra $1 billion. That’s a lot of money!

2) Acquisitions. Google’s cash meant that buyouts where an option, rather than IPO, as is what most start-ups aimed for in the bubble days. In fact, I would argue the whole web2.0 strategy for startups is to get acquired by Google. This has encouraged innovation, as all parties from entrepreneurs to VC’s can make money from simply building features rather than actual businesses that have a positive cashflow. This innovation has a cumulative effect, as somewhere along the line, someone discovers an easy way to make money in ways others hadn’t thought possible.

Google’s starting to get stale now – but here comes Facebook to further add to the ecosystem. Their acquisition of a ‘web-operating system‘ built by a guy considered to be the next Bill Gates shows that Facebook’s growth is beyond a one hit wonder. The potential for the company to shake the industry is huge – for example, in advertising alone, they could roll out an advertising network that takes it a step further than contextual advertising as they actually have a full profile of 40 million people. This would make it the most efficient advertising system in the world. They could become the default login and identity system for people – no longer will you need to create an account for that pesky new site asking you to create an account. And as we are seeing currently, they enable a platform the helps other businesses generate business.

I’ve often heard people say that history will repeat itself – usually pointing to how 12 months ago Myspace was all the rage: Facebook is a fad, they will be replaced one day. I don’t think so – Facebook is evolving, and more importantly is that it is improving the entire web ecosystem. Facebook, like Google, is a company that strengthens the web economy. I am probably going to hate them one day, just like how my once loved Google is starting to annoy me now. But thank God it exists – because it’s enabling another generation of commerce that sees the sophistication of the web.

John Hagel – What do you think is the single most important question after everything is connected?

I recently was pointed to a presentation of John Hagel who is a renowned strategy consultant and author on the impact the Internet has on business. He recently joined Deloitte and Touche, where he will head a new Silicon Valley research institute. At the conference (Supernova 2007), John outlined critical research questions regarding the future of digital business that remain unresolved, which revolved around the following:

What happens after everything is connected? What are the most important questions?

I had to watch the video a few times because its not possible to capture everything he says in one hit. So I started writing notes each time, which I have reproduced below to help guide your thoughts and give a summary as you are watching the presentation (which I highly recommend).

I also have discovered (after writing these notes – damn it!) that he has written his speech (slightly different however) and posted it on his blog. I’ll try and reference my future postings on these themes here, by pinging or adding links to this posting.
Continue reading ‘John Hagel – What do you think is the single most important question after everything is connected?’

Study finds people would not pay for privacy options

A 2007 study by researchers at Carnegie Mellon and the University of California at Berkeley found that most subjects were unwilling to spend even a quarter [25 cents] to keep someone from selling sensitive information about them — such as their weight or number of sex partners. “People prefer money over data, always,” says Alessandro Acquisti, assistant professor of information technology and public policy at CMU. Source: Wired

Is privacy really that big a deal? In short – yes – but paying for paid privacy options is not something I am sure of. Rather, I would expect the forces to swell up like a hurricane that will require political action to enforce privacy as a legal right. As a business, you shouldn’t think of privacy as a revenue stream, but rather, a branding tool to build trust. It’s users ignorance of the truth, not acceptance of the consequences, that has people giving away their data. Don’t abuse that trust if given the opportunity.

Understanding the Facebook poll feature

A little while ago, I was lucky to catch a Facebook poll, as a way of advertising its new poll feature. As a follow up from that experience, I thought I might purchase my own poll to validate its effectiveness. Here are a few of my observations:

1) Answers appear to be clustered

One of the interesting things about the poll feature, is that it is real time. You are getting answers as people vote. You select what type of people you want to target, and Facebook will then quiz users of that criteria by putting the poll on their homescreen. Something I noticed however, was that answers seemed to come in together followed by a gap. I also noticed that these answers that come in groups, usually have similar responses.
clustered yes

I appears that users are highly responsive to a poll. If it appears on their survey, a lot of people appear to answer it. I know this because I specifically targeted my poll to Australians, in the middle of the day when I wouldn’t expect people to be using facebook.
The placing of the options seems to affect the results. I suppose anyone that has studied polling before, would probably know the order of a ballot heavily influences the poll. This appears evident here. Usefully however, Facebook allows you to randomise the poll so that different users see a different order. However as is demonstrated above, with this clustering, its groups of users that see a different order, not individuals

2) Facebook users appear to be more male, and younger
Something I noticed in my previous blog posting on the poll feature, was that there appeared to be more males answering. This seems to have happened occur with this poll as well, and indicates to me that Facebook’s population of users have a higher male base – which is unusual given that women generally outnumber men in society.

fcfb2

It should also be noted that there is no age groups option for people above 50 years old.

3) Takers of the poll appear to be a genuinely random population
The reason I picked 200 people, was that that is the minimum amount a poll needs to be before it can statistically be considered accurate to represent a population. However as I was able to obtain data as the poll was running, it gave me insight into how random (and representative) the population that took the test was.

Below is a screenshot half way through, as well as the final result

results half wayb

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The results for the poll are almost identical. Without reading too much into it, that tells me the conditions of the test were genuinely random.

There are a few other things I noticed, but this isn’t me trying to promote a Facebook service, and will leave to make your own analysis in combination with the other Facebook poll I blogged about. I just want to highlight that for absolutely nothing, you can get an insight into a market in literally hours.

IBM recently released a report saying that the Internet has overtaken TV, changing the dynamics of the advertising industry, and that they see the role of advertising agencies in the future to go “beyond traditional creative roles to become brokers of consumer insight

Facebook is an amazing company because of the amount of data it holds about the population in various societies. And for a fee – the rest of the world can take advantage of this as well. Welcome Facebook – the world’s most competitive agency for consumer insight.