Uneven Distribution.

PubCamp. Part III

June 25th, 2008

Matt Moore on Value Networks

“The difference between the $4 bottle of water and the water that comes out of your tap is the intangible”

This idea of the intangible is appearing more frequently in the world of digital advertising. The reason for this is the transition of digital (or more precisely, how marketers view digital) from a space to sell your product to a place to talk about your product, and have your product be talked about. The intangible is what sets your product apart from your competitors, and the best place to create the intangible is online.

Analysing a value network and optimising your business for it requires addressing each exchange your business has with anyone and asking:

• Who is involved?

• What does each role get and how does it benefit them?
• What does each role give
• Are these exchanges tangible or intangible

The above can apply to everything from selling mobile phones to creating a viral video.

Social media has turned the intangible (conversations in pubs) into the tangible (conversations on blogs).

Once you have analysed your value network, it’s important to understand that you only own your role in that network. Do that as best you can, and don’t try to own roles you can’t control. And therein lies a major hurdle with brands entering the digital space. There are roles that the marketing department must let go of if they want to succeed.

Ian Lyons on putting the consumer at the centre of the universe

If a company is valued at $3B, and I am a core element of that companies business model, why am I not getting a cut? Why shouldn’t I get 10c for every ad that appears on my Facebook profile? If a service was created that followed this model, how much would it influence people in their choice to leave something like Facebook and join up to your service?

All of these questions revolve around one central shortcoming of the 2.0 revolution. The social web has redefinied almost every aspect of modern business, but it hasn’t redefined the shareholder. Users are considered users, when they should be considered shareholders. When any socially based service is valued at some ridiculous figure, that figure is determined partly by a value per user, and yet the user sees no return whatsoever.

If Mark Zuckerberg turned up to your neighbourhood and started throwing you crazy block parties, while at the same time mining your backyard for gold, wouldn’t you want a cut of that gold?

Comments

Quite an interesting post!

The next logical leap is that users are not valued purely based on their own individual attributes and merits, rather on the number of like-minded people that they can influence. Ads are worth more when they appear in front of people that have more Facebook friends.

Thanks to 2.0, users become shareholders… then, those with a voice become brand platforms.

We are all slowly becoming Paris Hilton.

Michael - I am slowly becoming Jean Luc Picard, not Paris Hilton (and very slowly).

Great post Nic. Agree with and have explored many of the same concepts in “Introducing Social Capital Value Add”, an MBA thesis that will be released as a ChangeThis.com manifesto in September if everything goes well. It is the 8th most demanded manifesto in ChangeThis history and I do not have a previous following, so I think there is some indication that there is a need to understand how social media impacts future earnings and a more general desire to evolve a more socially motivated corporation.

I agree that social networks are not owned. But social network services like Facebook are privately owned so there is a transaction, service for terms of service. A problem can emerge when companies like google and Facebook and others are becoming so entrenched in social networks and our old watchdogs like government and journalists are not motivated or equipped to help us bring the implications into focus.

I believe that the most important thing that we can do to cope with these potential problems is to establish the link between social capital and corporate valuation, to motivate corporate competition, bring into light the true sources of value and make them accountabel to investors, markets and users/consumers. Then the regulators and press gallery will be all over it.

Let me add one more thought to your discussion …

Social networks can not be owned. Agreed. That is why I think it is very useful to distinguish social capital from social networks. I think social capital, i.e. the resources that are embedded in social networks are fundamentally individual assets.

By connecting with you I get flow of information, the exertion of influence, certifications of individual social credentials and reinforcement of individual identity and recognition. (this is Nan Lin’s stuff from Duke University).

Aggregation of individual returns result in collective assets and properties such as trust, norms, reputation, authority, sanctions, culture, network structure (open, closed, density, clustering, diameter, average path lengths, degree distribution,
bridges, weak ties, betweenness and other forms of centrality, etc.) and location (structural holes, structural constraints, etc.), which are extrinsic variables that contribute to the formation, access and use of social capital.

ah … there it goes again, for the second time in my life … comment becomes post. Over at http://www.socialcapitalvalueadd.com

cheers, mc

Thanks for bringing up some great points. The task of motivating the key players and creating awareness of social capital as a key component of valuation is absolutely huge, and it’s good to see that you’re really pushing this idea. But considering most of the players are yet to actually work out a long-term business model that accounts for and understands the role of all stakeholders (participants included), it could be a long struggle.

The idea of social network ownership is probably worthy of an entire new blog. In my brief post I consciously avoided expanding on this, but I think there is an entire area that is being ignored in most discussions on the topic, and that is the real-world user’s reactions to an awareness of the ’social capital value’. I think once there is awareness of the value of social capital within a user base there could be significant cognitive dissonance, possibly enough to change the entire landscape of social networks.

But that’s for another post. Thanks for a great comment (you too Michael B), and please let us know when your ChangeThis manifesto is released.

Nic, Michael (x2),

I think network awareness on the part of individuals is critical. I also love Ian’s idea that co-creation also implies co-rewarding.

How do you raise the network awareness of individuals?

Hi Matt, thanks for dropping by and thanks again for a great talk (albeit holding your laptop up as a projector). The interest in this topic and the comments so far have answereda few questions and asked some even greater ones.

I guess the key thoughts for me now are focused on social capital and as you mentioned, network awareness. I think these two things combined could really impact the current direction of the social web. It’s also worth a lot more time than the comments of this post, so I’ll put some thoughts down and hopefully have a post up in the next few weeks.

[...] Hodges has a thoughtful post up down under.  Thanks to John Maloney for flagging it.  Nic [...]