Web 2.0 progress is held back by Web 1.0 business models

I’ve often wondered how web 2.0 is really different from web 1.0. Most seem to agree that web 2.0 was an evolution in which we went from portals and destination to data and interactions. Web 2.0 is about interaction, social media. Everyone connecting in one big network. Data is the currency. It’s all true and sounds great to me. But why do we then still have huge destination sites? Why is there still a battle over users, eyeballs and visitors? Why is Facebook essentially a vacuum service, sucking everything in, and letting nothing get out? Why does Techcrunch report Friendfeed has a million unique visitors? We mash data up, connect it everywhere, but still force people go somewhere to fetch it.

If you think about it, the sexiest services right now are nothing more than old fashioned destination sites with some conversation added to it. In terms of business models, nothing new there. Business wise it’s not web 2.0 but web 1.0++ in disguise. I believe that the main reason behind this is that, although technology wise we have innovated many aspects of the web and its services, our online business models haven’t evolved with this change.

Just to be sure, I’m not talking about the huge impact online business models had on offline business models (e.g. tradition print getting killed by online media). I’m talking about online business models that existed say 5-8 years ago, compared to the models used now. Essentially investors and web entrepreneurs seem to be web 1.0 thinkers. They think in terms of destinations, eyeballs, unique visitors, traffic, advertisement, CPC, CPM. All of these elements have been around in online business models for ages. Nothing new there.

As a result of this there is no fundamental revolution taking place, it is more of a logical evolution. A tiny step given the potential that is really out there. Don’t get me wrong. The way the web presents itself to us, and the endless possibilities for us to connect online, has changed our online experience considerably. The question remains though. What if business models would evolve with that technological and behavioral change? What if we would stop thinking in terms of advertisement display or cpm, and would focus on other value drivers? What if we would care less about keeping users sucked into a database, and set them free because you don’t need to hold on so tightly to make revenues? It is this ‘old school’ thinking that inhibits us from starting true revolutions. Technology wise we can revolutionize our experience on the web. Business wise we are held back and forced to take smaller steps.

One could argue it is because current web business models are perfect and need no change. But that seems  incorrect as many companies have problems creating sustainable revenues. My biggest concern however is that current (often advertised based) business models are in most cases network centric instead of user centric. By that I mean that the business model works when the network that is being exploited gets larger. As a result the company executing that business model is forced to think in network value. I prefer business models that focus on user value. It is the cleanest and simplest business model. It works out best for the user (as he gets most value), and the company (as they receive revenues based upon that user value).

But here is the catch. Since 99% of current business models are network based and most web investors and entrepreneurs are trained to think that way, we can’t easily make the switch to a user value business model. And because of that we are stuck in our own trap of web 1.0 business models and unable (yet) to unleash the full potential of our technological capabilities to create user value. We end up with more destination sites and customer lock in. Customer lock in fits really well, wouldn’t you agree?

There are counterexamples of companies that did make that switch (e.g. 37signals, smugmug) and generate sustainable revenues. But we need more leadership in this direction. We need investments that step away from current practice and take a more user-centric approach. It would set us all free and help us build a User-Centric web.

It is naive to think our online lives are not connected to real-life

There seems to be a strange disconnect between our online and offline lives. Different rules, norms and values seem to apply. It is as if our online personality is not connected to our real life. We act differently and feel a sense of freedom online that seems to compensate for the restrains we might feel in real life. We are all actors in this massive online play and it allows us to do things we wouldn’t consider doing in real life.

Examples?

We wouldn’t allow anyone, not even the landlord you rent a house from, to put web cams in our houses and record every conversation inside the house “to make our experience better”. Yet we throw our privacy principles over board when we get online and join sites like Facebook or MySpace.

We wouldn’t show a stranger arriving at our doorstep our family photo album. Yet we publish and annotate these same photos online so that the whole world can view them.

We protect our children against danger in the real world. We supervise their first steps into the world.  We don’t let them talk or walk with strangers. We don’t let them bully others. Yet we let them get online unsupervised and unprotected, explore the web and social networking.

We do not divulge private matters concerning illness, lost jobs, winning the lottery, fights, love, etc. to strangers we bump into on the street, yet we disclose all of this online in social networks where half of the time we don’t even know who is listening in.

We wouldn’t tell complete strangers where exactly we live, when we are going on holiday or business trips (what if they rob us), yet you can find all of that information, and more, online.

In real life we have opinions, but we do not disclose these opinions everywhere. We might even be inhibited to do so as it might turn on you at some point in time.  Online we join every conversation and start opinionating immediately. And we forget it gets recorded and will never disappear again.

The people we call friends in the real world is limited. A friend is something different from an aqcuaintance. Online we have thousands of friends. You may argue these are not your real friends, but why then do we disclose so much about ourselves to these ‘friends’? Why do we spend so much time engaging with people we really don’t know?

We do not tell anyone about our bank accounts, our passport numbers, social security numbers or birth dates unless there is a real need to do so. Yet online we sign up for any service that pops up and disclose happily our e-mail addresses, passwords, birth dates etc. In most cases these turn out to be the exact same pieces of information we use for online banking and financial transactions. Every once in a while we get scared of phishing, but soon enough we forget about it again.

We don’t trust new insurance, banking, or telephone companies that tell us we can use a service for free if we allow them access to our private information, and listen in on our conversations.  Yet online we let social networks have access not only to our own profiles, our annotated baby pictures, our families and friends, but also to our interactions with all of them.  We allow all of that private data to be exploited commercially.

We protect our privacy and family in real life, yet we let social networks protect our privacy online? Who protects us then from them?

I could probably extend this list further and think of more disconnects between real life and online behavior. But the real question is, do we care enough about it to actually deal with it? The ability to connect and interact with anyone online has brought us a lot of freedom. It has many positive aspects to it. It has freed us from many real-life constraints. If you can afford to be part of this online experience you will find that it tends to level things. Everyone can be a pop star.

But I would like to urge you to think about this for a minute. As real-life and online behavior become more and more connected, entangled, you will find that it is less easy to separate them. Online and offline become the same life. While we see our online behavior as play now I doubt it will still be play in a few years. And yet we act as if these worlds are not connected. We disclose almost anything about ourselves online and do not think or understand the possible consequences in real-life. With viruses spreading across the world and a network of computers that spans the entire planet harm can be done in a split second. Where wars are still fought on the ground, they will also move into cyberspace. Where commercial exploitation of your private data now leads to display ads you can safely ignore, it might lead to less harmless forms of commercial activity in the future. Where your next job interview might now depend on your previously achieved results. In the near future it will depend on what a Google search result will reveal about you.

Am I being too negative about this? Maybe, considering current behavior in social media my views aren’t exactly popular. But I also firmly believe that we are formed and shaped by our own actions. My advice would be that you start acting online like you would do in real-life. Thinking these worlds are disconnected is naive.

Freemium is better than Free

A few interesting posts drew my attention this morning. First there was Dave Winer who predicts that on-line advertisement will be dead. Not because it will completely disappear, or that it’s growth will slow down considerable. But because it will be replaced by something more valuable, commercial information. Interesting thought. I’ve always felt that on-line advertisement only makes sense when the advertisement itself has value to its user. Dave takes that thought one step further and explains why commercial information is more relevant.

Erik Schonfeld at Techcrucnh shows statistics that advertisement growth is grinding to a halt. He uses the results of the 4 major advertisers (Google, Yahoo, Microsoft, AOL) to show that growth is slowing down considerably. Together they still create a staggering $ 8,2 Bln revenues per quarter, but what would interest me is to know the total market value right now. It would most likely show that more than 90% of all advertisement revenues are generated by these four companies. Why there are so many startups still executing the free advertisement based business model is beyond me.

Chris Anderson explains about the metrics behind a business model I like a whole lot better, Freemium. In this business model you provide most of your service for free and generate revenues from a small part. The model works only in cases transaction costs are nearly zero. You can have a huge distribution at near-zero costs and at the same time convert some of your users to paying customers. As your user base grows and you become more effective converting some users to paying customers you can have a successful business model.

Chris provides some market statistcs on this:

But that was just a hypothetical percentage split, to make a point. In the real world, what’s the right balance? The answer varies from market to market, but some of the best data is in the games world.

In online free-to-play games, companies aim to structure their costs so they can break even if as little as 5-10% of the users pay. Anything above that is profit. Which is why these numbers from Nabeel Hyatt are so impressive:

• Club Penguin: 25% monthly uniques pay, $5/mo per paying user
• Habbo: 10% monthly players pay, $10.30/mo per paying user
• Runescape: 16.6% monthly uniques pay, $5/mo per paying user
• Puzzle Pirates: 22% monthly players pay, $7.95/mo per paying user

As the blog notes, that compares very well to the 2% of the casual downloadable game market that pays, or a 3-5% that a lot of “penny gap” free trial web startups get. Estimates for the number of free Flickr users that convert to paid Flickr Pro range from 5-10%. Ning says 3% of its 500,000 social network creators pay for the premium version. And shareware software programs often see less than 0.5% of users paying up.

If you can get 5% of your user converted to paying customers then your business case can become profitable. As your business keeps scaling (due to the FREE component), 5% quickly becomes an interesting number of paying customers and a healthy stream of revenues.

What I like best bout Freemium is that it combines the best of both worlds. You have excellent distribution possibilities while at the same time you ask customers to pay for the value they receive . It is the most straightforward business model there is. So those of you that are thinking about starting a new business, why not forget about the FREE advertisement based business model and concentrate on Freemium instead. not only is it a proven business model. But it will force you to think and act in terms of user value instead of network value. And that strategy is better for your customers and therefore better for your business. To me, Fremium is better than Free advertisment based business.

Old fashioned advertisement tax gets in the way of our desire to view online video

Interesting post this morning on a new technology by Auditude that allows the identification of online video using the video content itself to create electronic signatures. This technology is more reliable than tagging as video’s that are posted on networks like MySpace are often tagged with “Cool”.

Using this technology MySpace can now identify the video’s that are uploaded and instead of treating them as piracy it has set up a deal with MTV to display overlay advertisement on video’s that belong to the MTV network.

While this has many advantages over the piracy view where MySpace is forced to take down video’s that have been placed without approval, I can’t help but think that this advertisement trick mostly benefits MySpace and MTV.

Advertisement is hard to get right. In most cases it is merely a way to create revenues without getting the end user to pay for a service. It acts like a 3rd party currency. Advertisement only provides direct value to the end user in a search context. I can understand the need from a content owner/producer point of view to be able to generate revenues. At the same time  one of the strengths of the web has always been its power to share. By sharing content gets an audience. Much faster and more powerful than any old fashioned media channel, like a TV station can accomplish.

This sharing didn’t lead to direct revenues for the content creator. It might have lead to indirect revenues because the content gets out there. It’s something every media distributor has been struggling with. And the end result was predictable. While it uses modern technology, the end result is old-fashioned. MTV now has the technology that allows them to add an advertisement tax to all video’s uploaded. Its understandable, but old fashioned. It generates revenues, but it ignores the fact that no user is waiting for this advertisement tax. It generates advertisement revenues, but the advertisement is ignored by the user.

We have seen this business model before. It’s what made TV virtually unusable. Watching a full length movie on any TV channel has become impossible to do without technology that allows the user to skip commercial breaks every 5mins in the movie. A movie of one and a half hour can take twice as long to be broadcasted as we all need to sit through advertisement tax.

It’s a joke of course. Advertisement money spend and flushed down the drain as users have found ways to ignore them. And while Auditude may have found ways to identify video’s online and therefore provide the means to re-introduce advertisement tax, we already know that the advertisement is mostly ignored. You can already predict the next step in this process. Someone will invent a remote control or Tivo-like solution that allows users to view content online without any form of advertisement. And the drive to do this is inherently part of the business model. Advertisement sits in the way of the content we are trying to view.

How 475Bln customer views can lead to ZERO value

Advertisement: What a waist

I noticed a TechCrunch article this morning talking about lay-offs at one of the top 5 advertisement networks Adbrite. It’s always sad when a company has to let people go, but that wasn’t really what drew my attention. It was actually this part:

There is a silver lining to the layoffs, or at least for those who still have a job at Adbrite: The company will now be cash flow positive and profitable, CEO Iggy Fanlo and Levine said in a phone conversation. The company had gross revenues of $32 million in 2007. He won’t discuss current revenues, other than to say it continues to grow, and that October will be a record month.

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Adbrite is a top five advertising network according to Comscore. They sell advertising for 70,000 websites and serve 1.3 billion ad impressions per day.

I may not be a top financial expert, but if these numbers are anywhere near the truth then we can conclude that one of the top five advertisement networks makes extremely low revenues per advertisement served. You would need an electronic microscope to find the revenue that they earn when they display an advertisement. I bet there are particles found at Cern that are more easily detected under a microscope than this revenue.

I do not mind that people are making a living out of advertisement. I think lots of web 2.0 startups would be willing to cut of an arm to earn 32Mln a year. But if we compare that number to the number of ads being displayed I cannot help but feel this is such a destructive, non-value creating business model. A staggering 475Bln times a year people are exposed to advertisement so that Adbrite can earn 32Mln a year. A perfect example where the transaction costs to display advertisement have dropped to zero, but the accompanying value that is being created too.

I do not know a SINGLE company that has 475BLN interactions with customers a year and only make 32Mln in revenues. It’s moronic. If you can have that much views of your product and you are unable to convert that to revenues it tells me that the business model creates ZERO value.

When will people finally begin to realise that this whole shift in advertisement from traditional media to the web doesn’t necessarily mean that the web user is really interested in advertisement. Just because you can harass people on the web doesn’t mean you should? A business model that doesn’t build value is the worst kind of model there is. And yet 90% of all web startups still seem to be struggling with advertisement a their main business model. I can’t help but think that it only leads to crazy valuations, but not to value creation. Big difference.

Let’s hope this financial crisis will put some sense into investors, entrepreneurs and advertisers. I hope they will focus on user value business models. Not only are they value based, but thy are also so much more fun to execute! I’d rather have 100.000 enthusiastic customers than 475BLN hits being ignored by the world.

A shakeout of unhealthy advertisement sponsored web 2.0 businesses

There is some talk this morning on the possibility of on-line advertisement collapsing due to the current financial crisis. Svetlana Gladkova notes that when looking back at the Great Depression advertisement spent remained healthy and asks herself if we are sure there is going to be an advertisement collapse.

Mathew Ingram writes a good post on it too. He notes that the web advertisement business was one of the few in the ad sector that has show growth this year.

Are ad-dependent businesses going to sail through the economic turmoil without a care? Hardly. But an online-advertising apocalypse doesn’t seem terribly likely either. If anything, it seems as though traditional media should be the one feeling twitchy at this point. The competition could be intensifying.

In my opinion the on-line advertisement spent has been misused as unhealthy sponsoring of crappy web 2.0 startups. Anyone with a “web 2.0″-ish idea has taken the easy route to success. Use the FREE advertisement based business model to grow the business and try to get advertisement dollars to hide the fact that no one was really waiting for that service in the first place.

The “old-school” media and advertisement companies ended up paying for this mess. They didn’t really understand web 2.0 but were effectively talked into a state of depression by entrepreneurs, investors and the success of Google. Old school media doesn’t work, you need to be on-line to make it happen. As a result billions of advertisement money has been invested to create the largest on-line billboard money can buy. Which is weird as “old-school” companies should have realised that if billboards don’t work in old-fashioned media channels such as tv or newspaper, it’s hardly going to perform any better on-line.

If anything, this current crisis will lead to a shakeout of unhealthy web 2.0 businesses. There is nothing wrong with spending advertisement money on-line. But just like in real life, a business will only be healthy if it provides user value. You can spend all the advertisement dollars you want to sponsor web companies or advertisement networks. But if the service sucks, then your money simply lengthens the road to an inevitable crash. And the FREE advertisement based business model doesn’t focus on user value, it focuses on network value.

I think there may be some good coming from this mess. In my opinion we will see less attraction to the FREE advertisement based business model. Entrepreneurs, investors, media and advertisement companies. Everyone will be asking questions about the value that is being created. And that is a healthy thing. As a result we will get more focus on business models that monetize user value. It’s the cleanest and best possible business model. And it will benefit the one that it should be about, the user.

The best business models focus on user value

Fred Wilson just wrote a post called Free versus Paid. In it he says:

It’s much better, in my opinion, to go with the freemium model, give a version of the service away for free to all comers, get a lot of users, get good market feedback, then develop a premium version of the product/service for sale to enterprise customers. If your free version is popular with a lot of users, your customer base is the target for the upsell and you might be able to live without an expensive sales force initially. And, of course, keep your costs really low until you start to get revenues.

In summary, freemium is far from dead, in fact it may be the business model de rigueur.

Fred’s look on Freemium works in the consumer market too.

In my opinion FREE work best when it is not mixed with advertisement, especially if you are in the social media or social networking business. FREE is just a cleverly concealed trap. It doesn’t focus on user value. It focuses on having a large user base and ensuring the value is monetized on size. It’s an indirect business model that by default makes it hard for the service provider to provide real user value to the user. It might give a service provider distribution because the service is free. But the advantage of distribution is diminished by the lack of revenues and the negative impact advertisements have on the user experience.

“Hey, you get a free service so you’ll have to put up with advertisement” somehow doesn’t feel right as a business model. And if you do the math then you will find that few companies make lots of money in on-line advertisement. Google takes more than 75% because they alone have a free ads based model that actually provides the user direct value. MySpace and Facebook take a few % and the rest is spread as leftovers for the thousands of companies running the same business model.

I prefer a business model where the user gets value, and you monetize on that value. It’s the cleanest and best business model there is. Ask yourself this. Would you prefer a few hundred thousand enthusiastic customers that pay for the value that they receive, or would you prefer millions of users that get a free service, aren’t really getting the value they deserve and end up with advertisement too because you need to make a living? Investors and entrepreneurs wanting to rule the world or become a “new”  Google or Facebook, will use the second model. anyone else should focus on the first.

I feel Freemium has a good chance of revenue creation. It focuses on user value, creating a community of enthusiastic users, and eventually adds more value to that community by delivering paid premium services. It is not the easy road to success. It may not easily scale to millions of users or “sound” good to investors. But maybe times are changing now. Maybe investors and entrepreneurs will step away from the default and start experimenting with new business models.

Right now the basic business model is to grow as fast as you can (focus on size and provide the service for free), advertise to give “old media” the feeling that something important is happening out there. Finally get some “old school” media company to pay way too much money to take over the company, which then allows them to find out that earning advertisement revenues is something very few companies are able to get right. It’s a lose-lose scenario. The user loses because the focus of the business model is on growth instead of user value, and the sucker that ends up paying for it loses because it will never generate enough revenues.

The Free Ads based business model has another problem. As if focuses on growth it doesn’t answer the most important question technology needs to answer for any user: “what does it do for me”? I call that the First Use experience. It’s dead simple to understand, but incredibly difficult to get right.

First use is about creating the best possible user experience when you deploy your service for the first time amongst your target users. First use is about answering the question,”Is a user willing to put in the effort to learn about this new technology and incorporate it in his current habits”?  The answer in any case is that willingness is related to either solving a problem or creating another type of value for the user. If this isn’t obvious from the start, then the user is not committed to put in the effort of integrating this technology into his life.

A startup that uses a business model that focuses entirely on monetization of user value needs to address the First Use question. It might not get it right immediately, but through interaction with its user community it will get there in the end. I hope that the FREE advertisement based business model is slowly replaced by business models that focus on user value. Freemium is just one way of doing that. But it will help us build a User-Centric web.

Beacon and other forms of advertisement have no place in Social Interaction

Facebook is bringing us back Beacon again. According to Nick over at All Facebook Beacon had not really disappeared. It was just less intrusively in sight. A little storm appeared on Techmeme over it.. For the very few of you that failed to hear about Beacon before. It’s Facebook;s attempt to monetize the user data and social graph from their 100Mln users. Facebook is, just like almost any other web 2.0 site, unable to create enough advertisement revenues to justify their $15Bln valuation. Beacon is their attempt to create more advertisement revenues.

Personally I believe that the future of on-line advertisement lies outside of social networks. If I’m connecting with friends, whether I know them in real-life or just on-line, there is no room for advertisement. It sits in the way of our interaction, adding zero value to the conversation. I don’t see the difference between on-line or real-life behavior.

Let’s make this Beacon and other social advertisement projects a bit more practical and project it to your normal life. What would you do if you found out that while you were sitting at your rented home taking to a friend, the house owner is recording your conversation, your relationship with this friend, the way you have decorated your home, what movies you like, what political views you have, the coffee brand you are using.  What if that house owner takes all this information from you and then uses it to provide you a better advertisement experience?  Would you enjoy the commercial message? Think wow, what a cool brand, this is just what I need? Glad that I know this house owner who brings me this cool stuff?

Somehow I doubt that. More likely you would either sue the house owner for breaking in to your privacy. Or, you might find your copy of the rental agreement only to find out that somewhere on page 12, buried deep in incomprehensible juridical language it says that the house owner is allowed to do all this. Would you stay in that house? Or get out of there to find a place that is yours?

People often react a bit uncomfortable when I provide this example. I am always surprised how little people understand about the way they are tracked and traced on-line. I’m also amazed to find that  tech savvy people often don’t seem to mind. We seem to have a fait accompli attitude towards free ad based business models. You get stuff for free right, so don’t complain about it. I find that attitude dissatisfying. As if there are no alternatives and we just have to live with it.

So why do we not accept this in real life but are we willing to be tracked and traced on-line? I believe that there are two basic reasons for this behavior.

The first one is naivety. I believe a huge part of the people on the web do not realise nor understand the length at which they are watched. I doubt many have ever tried to read the terms of use or privacy policy of any web service. Too much unreadable text, so why bother. But there seems to be another reason, and it is more subtle. I believe that people aren’t concerned as much with protection of their privacy on the web because their real lives aren’t taking place on the web.  It seems a less real place. A place where your digital self can travel around, play, have fun. But that digital self seems to be partially disconnected from real life for most. As a result we tend to use different behavior or values when we go on-line. It isn’t real so it’s not as important. We seem to find it justifiable that anyone on the web can invade our privacy and use our data, our interactions and our profiles for commercial reasons.

Facebook does this particularly well. They provide you privacy controls to set your privacy level. This provides any naive user the comfortable feeling that he and his privacy are safe with Facebook. But what this user doesn’t seem to understand is that Facebook merely provides you privacy controls against third parties. The question no one ever asks or gets answered is, “who is protecting you from Facebook”?

The answer is no one of course. Facebook offers privacy controls for everything but Facebook. Once you sign on your soul is theirs, and they get to commercialize it any way they can. They tell marketeers that a new era has begun in advertisement. Marketeers see advertisement wet dream appearing (what do they know, marketeers are idiots). The user is left in ignorance, providing him a false sense of security as Facebook protects their privacy. And in the end old school advertisers get to pay for this mess as users continue to ignore advertisement that provides them no value. A great business model. Such a waist of energy, of creativity, of user value and of advertisement money spend.

Privacy is the most under discussed, underestimated and undervalued theme of what we now call web 2.0. Even Tim O’Reilly feels that we’re not doing ourselves a favor with these business models. But I would take it one step further. if Tim gets his way data will be the future. But who is going to control that data? If we go on like this it sure isn’t going to be the user. No one is building services that help the user get a grip on his digital tracks. There is no business model for it. We need to open up, give the fellows even more data to ensure that they can all live a prosperous and wealthy live as web service owners.

I’d like people to challenge that line of thinking. We need think more about privacy and start thinking user value. We need developers to build tools that help users control their privacy. And we need entrepreneurs ad investors that build user value based business models. Chris Messina provides a good example of this line of thinking in his Diso project. He is doing the right things there.

I am a bit behind on my reading. While I finished this post I noticed that Skott Karp has a very similar post up now in which he questions why Facebook doesn’t make more advertisement revenues. His conclusion is the same as mine. Advertisement doesn’t provide the user any value in social interaction.

A recipe to the elixer of life

Read an amusing post this morning by Kevin Kelley. In a post called “Temporary becomes permanent” he muses about how some things end up becoming permanent, even if it wasn’t intended that way:

Most permanent things begin as a temporary fix. A footpath becomes a road becomes a highway. A quick hut becomes a house becomes a hotel. A doodle becomes a logo becomes a brand. A patch becomes an operating keystone. A camp becomes a city.

He goes on and talks about software development:

One could imagine that in 5 centuries, parts of unix will be found operating in servers.  But it is clear that no one would be more surprised than the creators of unix. Most creations, including software, are written in less than optimal conditions. Creators always have the idea that they will go back later to fix the many known imperfections. Of course they are never fixed because the shipped rev is “good enough” — and so the temporary good enough becomes a permanent good enough.

It got me thinking about what happens in the current web. In the early days the web wasn’t a very public place. It was a library of information that you could visit. But it was hard to add your own books or information to it. The most important “social” media then (still now I’m betting) was e-mail. E-mail was private too. Your send and received mails were stored on a server (usually at an ISP) and this data lived as long as you kept paying the service provider money for the e-mail subscription. As a result of this your on-line presence was focused around a single place, your inbox. This on-line presence distributed to some extend into other people’s inboxes.

But things have changed since then. Everything has become social. As a result, we leave traces of ourselves across this ever expanding social web universe. We have blogs, profiles on multiple social networks, we buy stuff, sign up for services, we interact in public. Every single action we take on the web is not only recorded, analyzed and stored for later use, it is also increasingly related to your identity.

The funny thing about this is that you once had to pay to keep your on-line data alive. Now it is not only free, it’s impossible to delete any of it. I can (like in the old days ) delete my e-mail account, but I can’t get rid of my on-line interactions. There are servers listening now as I type. They record everything I do and never forget. My on-line presence, interaction, and even identity is spread across uncountable data servers and services. We are all Googled, Yahoo’ed, Facebooked and so on. With the democracy of the web comes along the machines. They listen, analyze and store, potentially forever. There isn’t a delete button possible.

The data becomes pretty much useless after a while of course. My life changes, my habits, my preferences. But everything remains on those servers, even when I’m long gone and dead. Google, Facebook, all web 2.0 Orwellian services and their successors can’t forget.

It makes me feel good that even when I’m gone I’m still here online. Parts of me will be on those servers, driving costs, being useless to those that have stored it. Serves them right, following me around online and never allowing me to delete anything that they stored. Give them more useless information, let them store all trivial stuff in the knowledge that if millions do so there isn’t a way to delete it, ever again. They give me a free services so that they have the right to track and trace me for advertisement purposes. I’ll give them data, it’s useless anyways. But it will cost them to store it, to analyse it, to make money off of it. Spam those data hogging bastards. And it’s our recipe to live forever.

And part of me probably likes the idea that in 500 years or so someone might stumble across this van Elsas dude in some forgotten part of some giant data server. Maybe some musings he wrote about this crazy, ancient web 2.0 world we lived in then. It’s temping, this idea of an eternal life

The Tech elite creates its own web 2.0 bubble

Kara Swisher created a little storm on TechMeme with a post called “Twitter, where no one knows your name“. In it she noted that no one really nows what Twitter (she asked a few friends). This created the usual river of replies. I liked the replies from Steven Hodson and Frederic at the Last Podcast best. The post isn’t a masterpiece of fundamental research, but Kara hits something that I have been thinking for quite a while now.

The web 2.0 industry, I thin we may call it an industry by now, is becoming a mature and therefore inert industry. The speed of innovation is dropping fast, just look at the number of truly innovating or new services you have seen the past few months. There are thousands of startups working on great idea. But most of these ideas are small improvements or tiny nuances in things that already exist. I tried to compile a list of services that fundamentally changed the way things work right now, but couldn’t make it a long list.

This is a pretty normal phenomenon. Someone starts the cycle with a great idea, starts killing the “old school” market leaders, and then others jump on the bandwagon and a new industry is born. This is a pretty healthy way of working.

The thing that I find interesting about this is that the web 2.0 industry differs a bit from that. I believe there is a web 2.0 industry (the massive amounts of people and companies working on it), but I am not so sure there is an equally large market. There are a few huge players making loads of revenues, but the rest is burning up venture capital. The web 2.0 industry in my opinion is by large a bubble that needs deflation pretty quickly. There are way too many startups working on the same ideas, the same services, the same small problems that need solving. Too many of these initiatives are based mostly upon technological capabilities, not so much on user value. It leads to an incredibly fragmented playing field where everyone tries to survive. And this whole thing is pretty much fueled by the Tech Blogosphere.

There isn’t a single day without “breaking news” or  a “cool” new startup being mentioned on TechMeme, TechCrunch, or any other news source. Everyone, eager to be the first, jumps up to review and write about the next thing, which often turns out to be the same thing. Everyone copies the same stories, brings it as their own. It’s a death grip fueled by traffic, advertisement, personal glory, whatever.

It seems venture capitalists don’t know where to invest their money anymore. There is too much and at the same time not enough of it. We get all crazy about the next idea concerning video, pictures, social things, desktop air thingies, aggregators, aggregators of aggregators, which all ad up to the same “freemium” business model. Everyone looks at traffic (wow, Friendfeed just saw a huge spike last month), only to find that it is that same Tech circus creating that traffic. Most innovations don’t get to leave Silicon Valley. They start there, using the tech blogging elite to build up pressure and create the “aura of success”. But very few of them actually get to leave this bubble and conquer the rest of the world. Most of them remain in the bubble, buidling up pressure with traffic created by the Tech Elite. Never making a buck from a real customer outside this bubble.

And who is paying for all of this? To me it seems that the old industry ends up paying for this mess. Venture capital is used to take the risk, to create the pressure. But the main ingredient of most business plans isn’t customer value. It is getting prepared for a take-over. You can’t build an industry on that premise. If a company’s sole purpose is to get investment after investment in order to get sold at the highest bidder, then there isn’t any value created. There is only destruction. And the sucker that buys it last is the one that pays for the mess. Often old industry trying to become hip and cool in the new world, only to discover that they didn’t really understand this new world and bought something quite useless for too much money.

Does that mean that all efforts in this web 2.0 industry are futile, that if you are in a startup there isn’t value being created. Of course not. I’m pretty sure there are lots of great teams out there working their heads off to create the next miracle. But before you think about leveraging the Tech Elite Blogosphere for your own success you might want to think again. Getting into the web 2.0 bubble might be an easy thing to do. But the question is, who is going to let you back out into the real world and real customers? You might see lots of attention in the blogosphere, venture capital poured into you company, traffic spikes. But can you make it outgrow Silicon Valley? Can you break through the barriers of the web 2.0 industry and make the jump to the consumer or business market? Can you resist the tech blogosphere screaming hurray, or demanding new functionalities that any normal person would never need. I hope so. Because in the end, in the outside world is where the real value is being build. The rest of it is just a lot of money and hot air being pumped around the same isolated web 2.0 bubble.

Does anyone have a needle

5 ways Facebook can leverage their platform and start justifying a $15 Bln valuation

Paul Buchheit wrote an interesting post a few days ago called “Facebook knows who you are, and that is worth more than you think”. As an ex-Google employee and now one of the founders of FriendFeed, he knows what he is talking about.

It’s very fashionable to declare that Facebook is an over-hyped fad and will never make any real money, certainly not enough to justify it’s insane $15 billion dollar valuation. At first glance, it’s easy to understand why some people might think it’s a toy — most of the activity there seems to involve biting, poking, and joining groups with funny names.

However, I think that assessment misses out on something very interesting: Facebook is capturing everyone’s identity and relationships. Of course there’s some noise caused by random friending, but by examining the larger graph as well as other details such as location, affiliations, interactions, and of course explicitly entered relationship details (”how do you know Paul?”), they can get a pretty good idea of which people are actual friends and acquaintances.

He goes on and writes that people that rant about Facebook and its business model aren’t using enough imagination.

Perhaps a people directory doesn’t seem terribly valuable, but if you can’t imagine how to make money from knowing everyone’s identity and trust networks, then you aren’t being very imaginative.

I believe that this last sentence is important. It not only discusses opportunity, but it also shows how incredibly vulnerable such a business model is (will get to that in a second).

Facebook stores one of the largest social graphs in the world. With their incredible user base, and their viral methods to gain more insight in users and their relationships they are building an unprecedented people’s directory. Facebook asks users that add friends about their relationships, it has viral applications that only work if you “infect” your friends with it too, and it seems to be moving in the direction of interaction, providing its users with chat functionality. Every action of every user on the Facebook platform is stored, analyzed and added tot the social graph they are building.

The database must be immense by now and growing every minute. From the perspective of Facebook this database with identities and relationships forms the value that is to be leveraged. The Facebook business model depends entirely on that leverage.

The information stored in the Facebook databases must be a marketeers wet dream. Instead of working with “old-fashioned” demographic information to reach customers, Facebook provides the marketeer with a platform that allows almost any kind of dissection of user groups into specific customer types. Talk about possibilities to target customers (what a terrible phrase that is). Marketeers are idiots of course (no I didn’t mean you ), so they won’t really be able to leverage the possible value.

There are a gazillion ways to use the information and create value from the Facebook database. Targeted advertisement, brand campaigns, specific customer interactions, targeting specific customer types, “social” search, “friend referrals” (Beacon was a very poorly implementation of this), etc. etc. But having all of this data does come at a cost. Facebook has created a perfect conceiled advertisement trap, but it’s a trap they had better not fall into themselves. The trap is formed because Facebook has chosen to make the social graph the most important aspect of their business model. Instead of directly leveraging customer value, they are leveraging network value.

The problem with this choice is trust of course. You have to be extremely careful that you aren’t leveraging too much of the data you collect for commercial purposes. The users, often unaware of the data collection and purpose of it, will not see the added value in that. They will most likely lose trust in the service that hosts their user profile and friend network if it turns out to collect data for commercial purposes. Facebook already has to deal with this problem with the increased friend spamming that is taking place, for example with 3rd party developed applications trying to collect their own social graph data.

A great example of a friend spamming application I received. I have to forward it to other friends to see its content (didn’t do it BTW).

So what can Facebook do to leverage their social graph data? How can they turn Facebook not only into a success in terms of nr of users and traffic, but also in terms of revenues? Here are my 5 tips how to make Facebook more valuable to its users and more profitable at the same time:

1. Focus on user value first, then leverage the data, no the other way around. It means getting rid of advertisement in user interactions on the Facebook platform. It doesn’t add value to the interaction and it often hurts the trust relationship Facebook has with its users. Alan Stern writes about the poor quality of the ads in Facebook. Its sits in the way of interaction. It also means getting rid of the 3rd party applications that have the purpose of collecting user data. Especially stop the friend spamming apps.
2. Focus on interaction. Social networking isn’t about user profiles or social graph data, it’s about interaction. Stimulate interaction, provide services that allow users to interact in ways they couldn’t before. That’s user value. And advertisers have no purpose or any value in interactions between friends. They aren’t part of the conversation, they are trespassing.
3. Think mobile. What is the single most successful business model that is entirely based upon interaction and user value? It’s mobile of course. People love to interact. They use their mobile many times a day to call and send SMSes to each other. And they are obviously willing to pay a lot of money for it. I can’t understand that a service with such web presence isn’t capable of mobilizing its users. The applications are there, but they aren’t being used. Facebook lacks focus on mobile, a possible revenue generator.
4. Open up the walled garden. Even though a lot of users aren’t aware of it, there are bound to arrive new competitors that provide valuable social interaction services without locking the customer in. Human nature will always find a way out. We don’t like to be trapped. Opening up has two important upsides. It forces you to think in terms of user value, because now you have to deliver a better service than any competitor. And it makes you have to trust your customer, and not ruin that trust by doing something evil. Opening up is also needed to be successful at point 5.
5. Leverage the social graph data outside of the Facebook platform. The future of Social Advertisement lies outside of the network. There is no value in trying to become commercial within Facebook. Facebook should be about interaction, remember. But outside of the Facebook platform these users will perform actions where the social graph data becomes handy. Think about it for a moment. The real value comes only within the context of a user searching or buying something on-line. That is where the data becomes valuable. Why? Because it helps the marketeer to provide me with advertisement that, in itself, has value within my context. I don’t want advertisement in my social interactions. But I do want them when I’m searching or buying stuff. It’s a knife cutting both ways. The user gets value, and Facebook can maintain it’s trust relationship with its user base. I’m not so sure automatic friends recommendations will work the way everyone hopes it will. if I need a recommendation from a friend, I’ll ask. No automation needed there, unless I can find it at the place I’m buying (e.g. finding a bookreview at Amazon written by someone I know). The newsfeed and beacon implementations of it do not even get close to real life recommendations. We need conversations, not Orwellian messages telling us about the shopping behavior of a friend.

I agree with Paul Buchheit that with imagination there is a lot of value to be gained from knowing the identity and relationships of people. But I also believe that leveraging that value is pretty difficult and requires a constant balancing act. Facebook has the users the traffic, the data. But it remains to be seen if they will be able to convert that into enough revenues to justify a $ 15 bln valuation.

I’m sure there are many other ways possible too. Let me know what you think.

5 reasons why Facebook sucks

So Facebook allows its users to import content into their newsfeeds now? Competing with aggregators like Friendfeed? Big deal. The service is already loaded with features that provide no value, so adding a new one isn’t going to make it any better. Let me provide you with five reasons I personally don’t like Facebook very much (hey, it’s just my opinion).

Facebook is a large walled garden that allows users in but never, ever let’s them out.

Even after deletion fo an account your data is still within the Facebook databases. Moving to another service with your data is impossible. Getting your data out leads to account deletion (not data deletion, that remains with Facebook). I don’t like customer lock-in, I want customer freedom.

Facebook is based upon a flawed business model.

They use the free but ad-based business model which is fine when you are a giant search company, but really sucks when your main objective should be allowing your users to interact. There is no place for ads in interaction. It’s merely trespassing in conversations between friends.
Facebook newsfeeds are highly overrated.

They might have been the first to implement them, but the newsfeed sucks. I recently took a picture of my own newsfeed and it has learned me that one of my friends is playing Scrabble, three people added an application, someone had changed his profile picture (which was sort of obvious as I could already see that it had changed), and some advertisement for large Facebook groups I should be in. I’m not interested to read ‘Alexander went to movie X”. I’m interested in personal message like “Hey, I went to movie X last night. Had a great time, you should go see it too”. The first message was an Orwellian Facebook Big Brother is watching you headline. The second one was a personal message from a friend. Pick the one you like best.

Facebook is spam.

Can’t say it any clearer. While a lot of Facebook’s intentions (and those that create Facebook applications), might be to provide the user a good time, it is spammy as hell. I get a lot of requests to look at things my friends send me, only to find out I need to forward it to other friends too. Often even before I get to see the content. I don’t want to harass my friends with that. Which reminds me that I need to talk to the person sending me that stuff too

Facebook is about data hogging, not about user value

Facebook isn’t there to provide its users with value. It is there to collect all the data it can get out of you, your social graph, your actions inside and outside the walled garden. It needs to do this in order to fuel it’s business model (that is why the business model is wrong). Facebook shouldn’t be hogging data, they should be providing user value. Instead of customer lock-in, they should be thinking about customer freedom. Instead of importing feeds from other sites, they should be opening up themselves to third parties. Instead of locking me down they should allow me to leave if I want to and taking my friends and data wherever I want to go. But they don’t, and you already know why.

We need a revolution in ads, but this ain’t it yet

The Wall Street Journal just published an article written by  Esther Dyson, called “the Coming Ad Revolution”. It is an interesting article. I think Ms Dyson starts out right when she discusses the current bombardments of ad pressure that ultimately leads to users ignoring ads. She says:

This market will get more competitive, and users will be barraged by ads to which they will pay less and less attention. Call that public space, a world of billboards and cacophony. Even though the ads will be more “relevant” than ever, users will increasingly tune them out.

So far so good. But I don’t agree entirely with the rest of her article. She continues with:

Now consider the new world of social networks. Facebook, unwittingly or on purpose, has been teaching people to manage their own data about themselves. Facebook’s launch of the Beacon service — which informs Facebook of members’ activities (i.e., purchases) on other sites — was a PR fiasco. But it still familiarized millions of users with the notion that they can control information about themselves online — and determine to whom it is visible.

What might seem like a horribly complex and tedious task to their elders — categorizing “friends,” managing news feeds, handling intersecting communities of contacts — feels natural to the Facebook users of today. They want more granularity of control, not less.

I agree partially with Ms Dyson here, people need more granularity of control. I doubt everyone understands that yet. Once people become less naive and begin to understand what Facebook and other social sites do with their profiles, more people will want to control which aspects of their digital lives can be used or not. But she goes on to explain how this behavior will help change the advertisement scene and provides us with a traveling example.

So what’s the business model? I’ll “friend” British Airways, which will say, “We see you’re going to Moscow next month. Why not fly through London and we’ll give you 10,000 extra miles?” I’m no longer in a bucket of frequent travelers, my privacy protected. I’m an individual with specific travel plans, which I intentionally make visible to preferred vendors. British Airways, of course, will pay Dopplr a handsome sponsorship fee to be eligible to be my “friend” (just as a Nike rep might pay to sponsor a basketball game and be part of the community). Someday NetJets may show up, offering to ferry me and my friends to a conference we’ll be attending together.

I’m far more likely to respond to BA or NetJets within a trusted site, and for a specific offer, than I am to heed their ad while reading a newspaper article on the troubles in Russia. (As for Orbitz, my old standby: After five years, it still doesn’t acknowledge my preferred airlines.)

I couldn’t agree more with her that this is a good example of a commercial message adding value to my actions. But there will be a long way ahead to reach this excellent fitting proposal from an airline. It assumes that not only I have taken action to allow British Airways to provide me offerings, but it also assumes that British airways, or any other advertiser for that matter, knows or can infer enough from my on-line behavior that they can provide me with a matching proposal.

The power of search is that when I search using a search engine, I essentially tell the advertiser that I am looking form something. In that case, providing me with an advertisement or commercial offering that matches what I’m looking for is not a difficult task. Hence the success and domination of Google. But, if computer systems are going to predict or analyze my on-line behavior and try to match that with an advertisement or commercial offer that comes at the right time with the right content is much more difficult.  It is precisely for that reason that Beacon failed before it even launched (privacy aspects not even included). Even if Facebook has found out that I have an interest in cars, a commercial message or offering for a new car will only be useful if I am looking for it at that specific time. If I happen to be talking to a friend on Facebook and we chat about cars I would probably be annoyed if a car ad would pop up in that conversation. It would likely make me distrust Facebook. If I start looking at car sites, because I’m looking for a new car, then it wouldn’t be a problem. It isn’t just about content, previous behavior or profile. It is also about context, trust, and things I’m doing right now.

I believe that Ms Dyson is right about the user getting fed up with advertisement. Advertisement is simply one company yelling at a user, who does his best not to listen. Targeted advertisement doesn’t really change the underlying issue, it doesn’t matter how sophisticated it is. It is still one way traffic, and the user can and will ignore it if the context isn’t right.

Providing the user with value is the best way to go as the example from Ms Dyson above shows. But the question is if there is enough context in which this value can be provided when we look at the amount of advertisement money spent on-line. Current on-line advertisement is old-school billboard thinking, translated to the on-line world. Facebook SocialAds and Beacon are potentially powerful advertisement tools which happen to be in a totally wrong context where friends interact. And friends that interact don’t want or need commercial interruptions.

There is still one area in which targeted ads, behavior, preferences, interactions, profiled information can help.

It is in search of course. If I am looking for something I’m essentially opening up the door to advertisement and commercial offerings. Who is going to build me a tool in which I can deliberately contact advertisers to tell them what I’m looking for? Sometimes a direct interaction can be so much simpler than all these indirect behavioral mechanisms to find out what I want. Why not let me ask for it? Now that would be a revolution in advertisement.

 

Current web 2.0 thinking is mediocre, lazy, and opportunistic

I had a great time reading though blog posts this morning. I am going to try and combine a few of the things I read and explain to you why web 2.0 thinking is becoming more and more mediocre.

Let’s start out with a TechCrunch post on a new product called MicroSocialAds from a company called Ads-Click. MicroSocialAds allows any Facebook user to display advertisement on his Facebook page, thus being able to spam any of the friends he might have left. There is an upside of course, you get a revenue share. Each time a “friend”clicks on an ad, you get a stunning 80% of the ad revenues. WOW. Erik Schonfeld from TechCrunch ends the article with:

In fact, MicroSocialAds are not limited to Facebook. The personal ads also work with MSN Messenger, and will soon be available on Twitter, Yahoo IM, Skype, and OpenSocial. If you have no problem spamming your friends, or if the ads could be micro-targeted by you to the point where they don’t feel like ads, but more like personal product suggestions, then they might actually work out. The concept, though, certainly blurs the line between the social and the commercial. They need to be social enough so that they are palatable to the people expected to add them to their social communications, but commercial enough that they offer a return for advertisers.

Let’s get one thing straight. Spamming “so-called” friends with advertisement is a bad, bad, bad idea. Not just because you won’t earn a decent living out of it (any fool can do the math on that, you would need HUGE amounts of traffic to earn a living). Not just because you would lose all trust and credibility from the people that are in your network and subjected to your ads (lets call them “Facebook friends” for the lack of a better description. And trust and credibility seems a bit important when a company tries to leverage “Facebook friends referrals”. Not because the company that brings you this marvelous revenue opportunity is named Ad-click. Ad-click, the name of the company probably describes their business model perfectly. Any investor investing in a company that optimizes ad clicks (unless the company is Google) should be rethinking it’s investment.

But the real reason this is a bad, bad, bad idea is of course that the ads within Facebook provide the user no real value. Making it the worst possible business model you could get involved in. A business model without the slightest idea of user value creation is a faulty business model. I was therefore relieved to find a posting by Howard Linzon who talks about a web 2.0 company that does understand user value. They have stayed away from the free but ad-based business model and actually charge customers. These customers are happy to pay of course, because they receive value. Can’t think of a better business model. And as Howard shows, they still have all the advantages any web 2.0 company has, like for example being able to create viral campaigns.

Then I read (yet another) great post by Doc Searl, one of the people I watch closely when it comes to envisioning the next step in web evolutions. He writes an excellent post called “the only real social networks are personal ones”. In this post he answers the question “should a brand join or create a social network?”. He says:

Forgive me for being an old fart, but today’s “social networks” look to me like yesterday’s online services. Remember AOL, Prodigy, Compuserve and the rest? Facebook to me is just AOL done right. Or done over, better. But it’s still a walled garden. It’s still somebody’s private space. Me, I’d rather take it outside, where the conversation is free and open to anybody.

And he continues with four reasons why social networks and brands don’t ft together:

First, I’m not sure a “brand” can get social at all. The term was borrowed from the cattle industry in the first place, and will never escape that legacy, now matter how much lipstick we put on the branding iron.

Second, the notion of “brands” either “building” or “joining” social networks strikes me as inherently promotional in either case, and therefore compromised as a “social” effort. Speaking personally, I wouldn’t join a social network any brand built, and I wouldn’t want any brand trying to join one I built. But that’s just me. Your socializing may vary. (And, by the way, if I wear a t-shirt with some company’s name on it, that doesn’t mean I belong to that company’s “network”. It means I’m wearing a t-shirt that was clean that morning.)

Third, I’m not sure social networks are “built” in any case. Seems to me they’re more organic than structural. Maybe I’m getting too academic here, but I don’t think so. Words have meanings, and those meanings matter. When I think about my social networks — and I have many — I don’t see them as things, or places. I see them as collections of people I know. The best collections of those for me aren’t on facebook or LinkedIn. They’re in my IM buddy list and my email address book. Even if I can extend those two lists into a “social graph” (a term that drives me up a wall), and somehow federate them into these mostly-commercial things we call “social networks” on the Web, I don’t see those “networks” as structures. I see them as people. Huge difference. Critical difference.

Fourth, the thing companies need to do most is stop being all “strategic” about how their people communicate. Stop running all speech through official orifices. Some businesses have highly regulated speech, to be sure. Pharmaceuticals come to mind. But most companies would benefit from having their employees talk about what they do. Yet there are still too many companies where employees can’t say a damn thing without clearing it somehow. And in too many companies employees give up because the company’s communications policy is modeled on a fort, complete with firewalls that would put the average dictatorship to shame. If a company wants to get social, they should let their employees talk. And trust them.

I think Doc is right about this. I have written before about the $16 Bln advertisement trap web 2.0 has gotten into. The free but ad-based web model is the most used web 2.0 business model, but if you are not Google, you might as well stay away from it. There are few companies that make a good living out of it and Google currently takes up 75% of that market. Not just because they execute so well. They provide the user with ads when it actually serves a purpose. The Google ad itself has user value. Ad-clicking is a terrible revenue driver, unless the use intentionally is looking to find or buy something.

Jordan Mitchel writes about the earlier released eMarketer figures saying that the on-line ad-revenues will increase to a stunning $42 Bln in 2011. Another eMarketer study also reveals that ad-spent in social networks will increase 37% to almost 4Bln in 2011. What strikes him, and me, is that the value of a click on an ad in an social network is very low.

Current web 2.0 thinking is mediocre and born out of laziness and opportunism. We have seen some companies growing remarkably fast in social networks, leading to crazy valuations. Web entrepreneurs all seem to have found the same holey grail. Providing a free service and stalk the user with ads, in the hope of becoming large and valuable very quickly and then getting the business sold to Google, Yahoo or Microsoft. While this certainly has helped a few of them becoming extremely rich, most businesses started this way are not sustainable. I’m not against ads at all. But you need to think about where to use them. Web 2.0 entrepreneurs seem to ignore the most basic rule to earn a living, forgetting to provide the user with value. And if you do that, you might just get other people to notice that and produce hilarious video’s (unfortunately with ads included ) about that. And that is sad, really.

Freedom to the people (part 2)

In a previous post I talked about some major changes I would like to see happening to the current web. The most important aspect of that is to provide the user freedom again. I said:

More than 2006, when Time Magazine unfortunately called YOU the most important person of the year, I think and hope 2008 will be the year where the user gets his long-wanted freedom back. 2008 will be a year in which we will see the first brand/portal/network/social graph/device- agnostic services pop up. What does all of that mean? It means that the portal or network concept we are so used to is slowly replaced by initiatives where the user isn’t locked in, but viewed as a traveler reaching a place where service is required.

To reach freedom for the users we need new business models. No one will freely remove the existing “customer or advertiser lock-in”, walled gardens, locked user data unless there is a new economic engine that can really set the user free. At the same time we might question the user’s comprehension of what it means to be locked in or set free. Millions of people are already locked into walled gardens and exploited for advertisement reasons without really knowing it or even caring about it. The same thing holds for advertisers. They are locked into a promise that a new era in media has arrived and that it will bring endless new possibilities to reach a targeted audience using tools like Beacon and SocialAds on Facebook.

At best an advertiser reaches a semi-targeted and somewhat ignorant audience. But most likely these new ways of reaching targeted sets of people will lead to indifference by the user. A new business model or economic engine isn’t enough, we also need to show the user that being free has advantages over being locked in. We need to show the advertiser that advertisement only makes sense if the advertisement itself provides the targeted user value. And we need to convince service creators to work on user value monetization instead of network value monetization.

What would such an economic ecosystem have to look like? What benefits should it address? Difficult questions with difficult answers. Chris Messina points this out very well when he says:

We need instead to frame the discussion in terms of real-world benefits for regular people over the situation that we have today and in terms of economics that people in companies who might invest in these technologies can understand, and can translate into benefits for both their customers and for their bottom lines.

The discussion is continued with Anne Zelenka at GigaOM.

Real-world benefits for the user

What could be real-world benefits for the user to be free? Although some obvious advantages like data freedom and privacy control come to mind immediately, we might need to look beyond that. Let’s face it. There are currently hundred of millions of people locked into social networks like Facebook and MySpace and they do not seem to care that their profile data, friends data, relationships and interactions aren’t their own. It is impossible to export any of that into another service thus providing the user choice. But he doesn’t seem to mind much. His privacy isn’t guaranteed and his data is being used to target advertisers onto his profile. Users are often described (and often behave) like ignorant, lazy, “entertain me” like people. Some even predict it is human laziness that will burst the web 2.0 bubble.

I am a more positive thinker about human nature. People need to interact, and they want to do this as conveniently as possible (we are a bit lazy right). Freedom is about having a choice. Being able to say I can choose it the way I want. I believe that if a user is offered choice between spending time within walled gardens or traveling around as a free man, the choice will be on freedom. Freedom would provide the user the possibility to integrate real-life experiences with “cyber” experiences. In a way that is convenient to him.

I wrote about the web being a surrogate of real-life interactions. But if you can integrate real-life interaction with the ability to share and interact with people who are not physically present it would add value.You should be able to decide how, where, when and with whom you would have that interaction. Regardless of device, technology or platform. That is what freedom is about.

You can use Facebook and the friends you have there, but if you want to do something else, then it should be possible as well. Without you losing the ability to interact because some platform locked your friends away behind some wall. And freedom is a blade cutting 2 ways. If you have the choice to interact in the way you want, a service provider that wants to service you needs to provide value. For it is only that user value that makes you want to use that service provider. So freedom for the user leads to user value innovations, everybody wins.

And with this freedom comes the ability to be able to identify yourself anywhere with one means, and the ability to perform transactions anywhere using a simple mechanism.

Benefits for the advertiser

If a user is free he will choose to interact with a brand or an advertiser. It will be a positive choice, one of free will. It provides the advertiser with a meaningful interaction with the user, providing him valuable opportunities to build a brand, advertise or sell stuff that matter. The advertiser can learn more about the user in a way more targeted than a Facebook profile or Beacon message.

It means letting go, stop waisting enormous amounts of advertisement spendings on large groups of users. Instead the advertiser will have to learn to interact on an almost individual basis with users. Microbranding. Scary, but also potentially very powerful. It also means that advertisers will have to deal with the user being on the move (for he is a traveler). It will focus the attention of the advertiser to add value to the experience of the traveler. Not just broadcasting a message to him, but understanding what the travelers needs are when using a service, and adding value to that user experience by providing brand or advertisement that actually matters.

Benefits for the service creator

If the service creator would be able to let go of the concept of “customer lock-in” and think about his business in terms of serving a free traveling customer he would be forced to think in terms of user value. There is no need to put up walls and lock customer or advertiser within those walls, as the user is free to go wherever he wants to. Instead he needs to work on his main competitive advantage, providing the user more value than a competitor could do.

Service creators need to let go of their proprietary platforms, the lock in of users and their data, the free but ad-based business model. They need to participate in a user-centric web, become a gas station next to a freeway servicing the traveler passing by.

There are clear benefits for the service creator. Most importantly, instead of providing services for free and creating revenues through ads, the user will pay for the value he obtains. This leaves the service creator to concentrate on user value and monetizing that. It implies that the service creator should not focus on page rank, page views and user clicks but instead focus on meaningful interactions of the user via his service. Interactions to buy or sell things, to find help or provide help, interactions with friends or strangers, search information. Each of these interactions can be monetized if they provide the user value. We are happy to pay for sending an SMS because it allows us to interact with our friends. We pay for a professional Flickr account because it provides us more freedom and value than a free account. We should be paying Twitter when sending an SMS for it adds value to my interactions with others.

This is not an easy step to be taken by the service creator. Right now he is in control, he owns the platform, the data, the social graph, the connections to the advertiser, and yes, even parts of the user in some way. They have to believe that freedom in the end benefits us all. A user that willingly chooses to go to a service creator will be more valuable than a user that is (unwillingly) locked into the service by the service creator. As Milton Friedman, Economics Nobel prize winner, has said rightly:

“Underlying most arguments against the free market is a lack of believe in freedom itself”

I have only provided an outline or framework in which an economic engine might be redefined allowing the user to become free (and taken too many words for it already). More and detailed work needs to be done to define the benefits for all. Then again, courage and the willingness to start is all it takes to set the user free and and the same time making huge amounts of money on the monetization of user value. Any takers out there?

The art of becoming successful

Fred Wilson has written 2 excellent posts on his personal success/failure rate as a venture capitalist, and on the reasons why early stage ventures fail. It is good reading material, especially if you are not in the venture capital business yourself. His most important reasons why ventures fail are:

1) It was a dumb idea and we realized it early on and killed the investment. I’ve only been involved in one investment in this category personally although I’ve lived through a bunch like this over the years in the partnerships I’ve been in.
2) It was a decent idea but directionally incorrect, it was hugely overfunded, the burn rate was taken to levels way beyond reason, and it became impossible to adapt the business in a financially viable manner.

He goes on and talks about his most important lessen drawn fro these failures:

So it’s pretty clear to me that most venture backed investments don’t fail because the business plan was flawed. In my experience at least 2/3 of all business plans we back are flawed.

Most venture backed investments fail because the venture capital is used to scale the business before the correct business plan is discovered. That scale/burn rate becomes the cancer that kills the business.

There is so much truth in this. Most of us have had a “great” idea before, thinking this would change the world we are living in now. I know I have, many times. But the interesting thing about it  is that it really isn’t about the idea or the business plan that matters. It is about execution and discovery. Willing to let go of your initial idea’s and discovering what actually works. Setting up a successful  business is really an art. It takes great skill  and adaptation to become successful. While I write this, I’m listening to Michael Hedges in the background. Talking about skill, check out the way he masters his guitar.

One of my favorite books is “Good to great” written by Jim Collins.  In his book Jim explores why some companies are able to make the leap from being a good company to becoming a great company. One of the things I always remember about this book is the idea that great leaders first create a great team of people, before they figure out where the bus(-iness) is going. He goes on and describes 3 key characteristics of companies that made the leap, in a concept which he calls the hedgehog concept:

More precisely, a Hedgehog Concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles:

1. What you can be the best in the world at (and, equally important, what you cannot be the best in the world at). This discerning standard goes far beyond core competence. Just because you possess a core competence doesn’t necessarily mean you can be the best in the world at it. Conversely, what you can be the best at might not even be something in which you are currently engaged.

2. What drives your economic engine. All the good-to-great companies attained piercing insight into how to most effectively generate sustained and robust cash flow and profitability. In particular, they discovered the single denominator—profit per x—that had the greatest impact on their economics. (It would be cash flow per x in the social sector.)

3. What you are deeply passionate about. The good-to-great companies focused on those activities that ignited their passion. The idea here is not to stimulate passion but to discover what makes you passionate.

I was thinking about these things this morning, after a long weekend of Facebook backlashing. Mark Zuckerberg and his team are having a hard time at the moment, and a lot of bloggers are getting into the “after success comes the backlash” modus.  I wonder if Fred, who is not very hard on them, would consider investing in Facebook a success or failure. My guess is that it is a success, given the enormous growth and valuation of Facebook. But It might become a failure if Facebook isn’t able to turn the sentiment around.

Their main concern shouldn’t be the user walking away at this point. Their concern should be advertisers turning away. Advertisement is the main business driver for Facebook, and if companies like Coke are now “reconsidering” others might follow. And what to think of the questions Dana Boyd asks herself in “who clicks on ads and what might this mean“. In her post she writes about a study done by Global Advertisement Strategy:

What did we learn? A lot. We learned that most people do not click on ads, and those that do are by no means representative of Web users at large.

Ninety-nine percent of Web users do not click on ads on a monthly basis. Of the 1% that do, most only click once a month. Less than two tenths of one percent click more often. That tiny percentage makes up the vast majority of banner ad clicks.

Who are these “heavy clickers”? They are predominantly female, indexing at a rate almost double the male population. They are older. They are predominantly Midwesterners, with some concentrations in Mid-Atlantic States and in New England. What kinds of content do they like to view when they are on the Web? Not surprisingly, they look at sweepstakes far more than any other kind of content. Yes, these are the same people that tend to open direct mail and love to talk to telemarketers.

What does all of this mean? It means that while clickers may be valuable audiences, they are by no means representative of the Web at large. Focusing campaigns to optimize on clicks means skewing campaigns to optimize on middle-aged women from the Midwest. If these folks are not your target, then you should be ignoring the click-rate and looking deeper, to what audience your impressions are being delivered, and what audiences are converting (there is a large body of evidence that shows that click-rates and conversion rates rarely correlate with each other).

If your business model is about advertisement and click throughs, then you better figure out a way to extend this to other populations than just middle-aged women from the Midwest.

I have always felt that the metric itself is becoming less useful. With all of these things in mind I wonder if Facebook has the strength to work on their own hedgehog concept. They are already a good company. Few have seen such an incredible growth rate in such short time. But the question to be answered is, will they become a great company? I think they have a lot of great things in place. An incredible user base, application API’s, great people on board. And there is a huge advertisement market in place, where unfortunately Google right now takes up 75% of all ad revenues. All they need to do is figure out where to take their bus. If SocialAds and Beacon aren’t it, they better figure out what it should be. I vote for opening up their platform and resetting the balance between user value and advertiser value. That is really what their business should be about. It’s a balancing act.

Anyone care for a free lunch?

Chris Anderson, of the long tail, wrote a nice post about the “free” business model. He gets a lot of questions on that, as people are often confused how it works (someone has to pay the bill, and someone has to earn revenues). He provides 5 simple examples:

1) Giving away things for free and make sure the bill is payed by advertisement. He accurately  points out that the master of this game is Google.

Think of these markets not as a two-way relationship between buyers and sellers, but a three-way relationship where the third party can be drawn in by something free that creates the product to be sold  (in the case of advertising, this “product” is the fabled “eyeballs” that advertisers buy).

2) Redefine the market you are in. Easyjet is the example here. They do not seel airplane seats, they sell transportation. A flight can then cost only 5 pounds.

They sell hotel and rental car reservations to passengers. They sell tourists to the smaller cities the carriers serve (the payment is in the form of the huge discounts they get on landing fees). They sell cargo shipment to the companies that put packages in the hold (which is why the low-cost carriers tend to charge extra for baggage). They even make money off the food and drink they sell on board

3) His third point is interesting because he talks about the truly free services now competing with the “free but ad-based” services. This is the part where Facebook is wandering around in my opinion. Their business model makes them vulnerable to consumers that don’t want ads. Under the pressure build up they are now retracting their original beacon ad model and providing the user (an inefficient) opt-out possibility. Facebook will be stretching the limits on this one, but I bet, if users have to opt out every time for different applications they will get even more annoyed than when they didn’t even know they could opt-out. Oh boy, this is like a boomerang catching up.

Chris ends with the observation that since transactional cost on the Internet are virtually zero anyone can use it as a distribution mechanism.

Finally, is this a trick? Well, yes, sometimes it is. But not a deceit, just an appeal to psychology. “Free” has a power to entice. It grabs the attention, and no more so than when it really does appear to involve some sort of magic. And let me tell you, a flight across Europe for five pounds is indistinguishable from magic. Not quite free, but close enough to fire the imagination. What else could cost almost nothing?

I have taken a stand against the current web 2.0 free but ad based web model so far. I was thinking about the article Chris wrote and if it would change the way I feel about it. It hasn’t. Not really. Chris actually does a great job pointing out the successful cases. In my opinion in all of these cases the business model was driven by user value! Google’s revenue streams are ads, they take 75% of ALL ad revenues on the Internet. And they provide everything for free. But they are so clever with ads. You never associate Google with negative feelings about ads because they serve them at the right time. Why others even bother to get their advertisement business up and running against such a large competitor is beyond me, unless they can provide user value like Google does.

Easyjet, Ryan air, they provide appealing user value. Travel around the world (almost for) free. You take the small seats, the lack of service, the small hotel rooms, pay for drinks on the plane, because Easyjet provides you value. You know that if you get out of the plane you are in the centre of Rome, having the time of your life!

It did get me thinking on one aspect I have been talking about. I tend to advocate that in your business model you should focus on user value, and make him pay for that. This is a valid, and often much preferable business model than the free but ad-based model. But, Chris nicely pointed me to another option. It is an option that goes beyond the buyer-seller relationship. It is the option that involves 3 parties, as you can read in the quote of Chris I provided earlier. But this option only works if the user gets (or perceives to get) value.

Given the commotion on the Facebook strategy, small ripple turning into an avalanche which will gain strength over time, I think they got it wrong. They are providing the user value with the Facebook functionalities. But they aren’t providing value with either Beacon or SocialAds. And that is where they get it wrong. It is just a billboard scheme in a new coat. People will recognise it for what it is, and ignore it.

Thanks Chris, your observations have made me think again about business models. User value remains the single most important driver in any business model. Anyone care for a free lunch?

It’s about interaction stupid!

Yesterday I wrote about the problem I have with the Facebook business model (actually, it is a web 2.0 business model flaw).  I am not concerned about advertisement in general. Advertisement is fine. It is a way for a brand to expose itself to its customers.  Its a way for Google to become the most successful company ever.

But the common mistake most web 2.0 companies are making is that they treat advertisement as the main  revenue stream or even as venture capital. They try to leverage the need for a brand to expose itself into a business model. It sounds like a great plan. It provides the web 2.0 company a stream of revenues by providing the advertiser with a podium. And it provides the advertiser a “cool” way of exposure towards potential customers. But the flaw in the business model comes with the third actor on the platform, the user.  It is easy to step over the needs of a user, when your business plan clearly shows sky high advertisement revenues and potential acquisition by one of the biggies like Google or Yahoo.

But the user is not always in need of exposure to advertisement.  That is where things go wrong. We are building these great advertisement podia, but the fans aren’t there to see them. The easy way out is to provide the user with something else that is valuable to him, and then hassle him with the advertisement anyways, cause that’s what the business model says we ought to do. The user gets free social networking capabilities, free storage, free profiles, free social graphs, and a free podium to express himself. That’s great, honestly, but it doesn’t resolve the main business model issue. As a consequence, the web 2.0 company starts monetizing the social graph, the profiles, the platforms by introducing “targeted” ads to its users.

But what happens to things that contain no value to the user? Exactly. They get ignored. And there is your catch 22. The web 2.0 business model is financed by advertisers who pay Facebook and others over $16 Bln advertisement this year, with a false illusion of reaching their targeted audience. The harder they try, the more they will be ignored.

And the user? He doesn’t care. He gets all spoiled with “free” stuff, that isn’t free at all. But the bill isn’t payed by him, so who cares. It is the most worthless driver for a business model. The Facebook user doesn’t mind SocialAds, is the tech blogging community fighting a lost cause? I don’t think so! If ignorance and indifference were the main driver for a web 2.0 company I’d fire the CEO and proclaim the main investors to be idiots!

I just don’t get it. The people I admire most are always those that think in terms of user value. But do we really need icons to tell us what is right? Do we really need marketing research telling us what the customer thinks? We only need a basic understanding of human nature. And as we are all part of this, we can always ask ourselves what is important, what matters.

Following Rolf Skyberg’s idea to keep Maslov’s hierarchy of needs in mind people have physiological, safety, love/belonging, esteem, and self actualization needs. Lets skip the physiological needs for now as the web can’t really provide any solutions (other than e-commerce) for that. Look at the other needs.

I would argue that it is interaction that drives most of these needs. Love and belonging, self esteem, respect from others or for others, self-actualisation. These needs are fueled by our interactions with others. Interaction is the most important thing that defines us. My interaction says more about me than any profile. We invented transport, the telegraph, and the telephone to break through physical barriers and interact with others far away. We invented the mobile phone, e-mail, chat, social networks, blogs, twitter to break physical barriers and reduce transaction costs of interaction. These virtual tools bring us new barriers, but technology always finds a way to clean up its own mess.

E-mail brings us spam, and an asynchronous demand of the sender to get an answer of a receiver.  Chat brings us synchronous on-line conversations, demanding our immediate and full attention. Social networks bring us the social graph and a poor excuse for interaction called a newsfeed. It also brings us privacy and data portability barriers. Twitter brings us easy sharing of thoughts and emotions, but at the same time, due to its asymmetrical relationships, sometimes makes me a groupie instead of a friend.

But these barriers can be overcome. And it starts with the acknowledgment that the current web 2.0 business model has got to be replaced by something better. No more free ad-based services leading to walled gardens, user and data lock -ups or -ins, indifference, waisted advertisement spend, the illusion of providing value to a user.

Instead we need business models that are user centric and monetize user value.  And the great thing about such a business model that it solves the current issues with data portability and privacy automatically. It’s what Chris Messina calls the citizens web, I prefer calling it the user centric web. If user value is the core of your business model, then privacy controls are included, and your data is your own. We wouldn’t need Tim O’Reilly calling out rightly “It’s the data stupid“,  or Doc Searl pointing us to VRM, because service providers thinking user value would make it a priority to put the user in charge. We wouldn’t need Dick Hardt to call for privacy and identity 2.0 because it would be in the genes of the business model to implement this correctly across the web. And we wouldn’t be thinking about mobile advertisement but concentrate on mobile interaction, because that is what the device is really about.

All it needs is investors with balls, willing to invest against the mainstream  but deteriorating web 2.0 business models. And entrepreneurs who build user centric services and aren’t afraid to let go of the $16 Bln advertisement trap. It also takes courage from the advertiser, who needs to understand that spending all that money on social networks is a total waist. It is an illusion to think you are adding value to the interaction, that you are adding value to Maslov’s hierarchy of needs. Forget it, you are merely trespassing the conversation. Instead, use that money to build your brand by improving your products  and services thus providing true value to your customers. And use real interaction with your customers to ensure you know how to improve your products or services. And finally, it takes courage from the user. To understand that “free” always comes at a price. And that, even though you seem trapped in your favorite social network, someone will come along and set you free.

I want us to work on the user centric web. But first, we need to get rid of the web 2.0 business model. We must break through this immense tough barrier to become free again. I know I will give it a try, because it is the right thing to do. If there are investors out there willing to give it a shot, or service creators that think user value is the way to go, you know where to find me!

Let Facebook be a data hog. User centric thinking will win in the end

Facebook is under fire, this time over data portability. A lot of debate is going on right now, but few address, in my opinion, what is the real issue. More on that further down the post, first a short overview and some comments.

Jason Calacanis has given Facebook a final warning this weekend and is now preparing for a (tech blogging) war. In his post called “The wonderful horrible life of Facebook users and their data (or, ‘data hogs get slaughtered’)” he lashes out to Facebook.

He starts with:

All of this comes up because Facebook has done three things that are at once extremely innovative, extremely rude, extremely helpful, and extremely disconcerting:

1. They are collecting and republishing user data on a level not before seen by users.
2. They are allowing advertisers to use this data to reach these users.
3. They are not giving this information–information that has put their value at $15 billion–back to their users.

He goes on and focuses the rest of his post mainly on the problem of Facebook collecting data, but not giving it back to the user:

Facebook is pushing themselves into a position of being viewed as ungrateful data hogs: amassing tons of information, selling it under false pretense, and not sharing it with the folks who gave it to them.

Not good.

You can get away with this kind of behavior for a short period of time, but not for the long run. There are just too many folks out there like Doc, Dave Winer, Marc Canter, Robert Scoble, Steve Gillmor, and Leo Laporte out there today who will call you on it.

Again it comes back to bloggers and their influence of the marketplace… I love it.

The message from bloggers to Facebook is clear: if you’re a hog you’ll be slaughtered. 

His post, triggered by Doc Searl, started a series of responses making the topic end up high on the TechMeme list. Jason addresses some valid points, but Frederic, from the Last Posdcast, downsizes the rawl noting that Facebook users don’t seem to care about data portability or Facebook trying to monetize that data.

FactoryJoe has written an excellent post on the subject of data portability. He writes about the Citizen centric web (he has written about it before, look it up on his blog):

This notion is what I think is, and should, going to drive much of thinking in 2008 about how to build better citizen-centric web services, where individuals identify themselves to services, rather than recreating themselves and their so-called social-graph; where they can push and pull their data at their whim and fancy, and where such data is essentially “leased” out to various service providers on an as-needed basis, rather than on a once-and-for-all status using OAuth tokens and proxied delegation to trusted data providers

In response to the commotion Nick O’Neill from AllFacebook writes:

If I choose to use someone else’s service and enter data into it, they own it. That’s why I call it “someone else’s service.” If you want to own a bunch of data, go create your own service and get people to use it. Suggesting that Facebook let a user export all of their data in XML or CSV format as Jason Calacanis suggests, is slightly ridiculous. I can understand having ownership of my own social graph but that’s where it ends. Even that would be a huge step for Facebook.

……

In theory this makes a lot of sense but personal user data is a competitive advantage for many services. If a user invests hundreds of hours rating movies, books or anything else, they aren’t going to want to go somewhere else. Letting users own their data will force competing sites to compete on services alone. This could be a good thing but it also could be a bad thing when the technologies developed by many of these sites are ultimately commodities. Letting users own their data could be the downfall of many web 2.0 sites.

Oh boy, Neil, either you don’t get it, or your defending a lost cause. You feel threatened by customers that want to own their own data? I wonder what Neil would do if he knew an insurance company is sponsering his local supermarket and analyzing all his buying behavior to see if Neil has the optimal insurance package. And when Neil finally decides to go for a new health plan he gets the “What’s up with the unhealthy food you bought last weekend…..?” treatment. Fear is a lousy motive for defending a flawed business model. Who cares f it is the downfall of many web 2.0 businesses. They probably aren’t providing true value, otherwise there wouldn’t be a downfall.

I think that data ownership, portability and privacy are all sub problems of one main issue. The one issue that doesn’t seem to get addressed as much as I would hope it to be. The issue is not data, the issue is Facebook’s faulty business model.  If you are going to provide a “web 2.0″ service for free you need other ways to earn revenues. Someone has got to pay for all those servers zooming and that data being transferred. The current web 2.0 free (but ad-ased) business model is the easy way out. But I have noted before that it is fuelled from the wrong side. It isn’t based upon user value. It is based upon network and ad monetisation. And although this can be a perfectly legitimate business model in some cases it doesn’t work in social networking. It has a few major flaws that make it a terrible business model:

1. It enforces walled gardens because ad revenues must be protected. If you are “on” the network, Facebook makes a living, if you are “off” they don’t
2. It enforces network value thinking (or social graph if you prefer a more sophisticated term) not user value thinking
3. It provides the user no value, and it provides the advertiser an illusion of value
4. It spoils the user, thinking everything comes for free, thus making business models that are based upon value creation hard to implement

I could make this list longer if needed, but the point is that the fundaments of the business model are not based upon user value or user centric thinking.  I don’t agree with the idea that the user doesn’t care. Of course he cares. But right now there aren’t serious alternatives for Facebook or MySpace. And because they protect their data so fiercely the user is trapped into a $ 16 Bln advertisement trap and is unable to get out. I have called out for a revolution before, to get out of this trap, but I wonder if that is really needed now.

What we need now is people that think user centric. People that build and invest in user value business models. Models in which the user pays for value, thus ruling out the need for a flawed advertisement business model.  You know it is the right business model, because it inherently solves the”who owns the data” problem. Data portability would be a standard asset of the business model, as would be privacy controls, and user value services.I’m not against advertisement, there are $20 Bln reasons to get advertisement right. 

I say we leave Facebook alone to do its thing. Let them exploit the user and make a living out of advertisement. If the user doesn’t care? Fine, let them be. Let us then work on a new web, a user centric web in which the user gets value, controls his data and privacy, and in which he is willing to pay for it. Let’s see how long any walled garden can survive once the user finds out there are much better alternatives around!

Maybe Howard Linzon predicts it right when he says:

But, we can count on this ‘who owns my data issue ‘ to be resolved much quicker now that Facebook has to monetize. Tempers will continue to flare and something is going to give.

Getting the turkey ready for Thanksgiving

A lot of fuzz this morning about Facebook’s SocialAds and Beacons. Charlene Li from Forrester got her first personal, unexpected and unwanted encounter with Facebook ads as she found to her surprise that in her Facebook newsfeed there was a reference to a purchase she had made at overstock.com. Her biggest complaint about Facebook ads is the lack of transarency.

There is a whole movement arising now that want to put the pressure on Facebook. MoveOn.org is taking on Facebook Beacon ad strategy. They think it is a violation of Facebook user privacy. Facebook has respondend, saying the information is only shared with your friends, so no privacy issues there. Josh Catone responds to this and says that MoveOne.org might not be making a point that really concerns Facebook users, as it only has 8.000 people joining up right now. He is not so concerned about the Beacon project, but warns that a better and global opt-out switch (which isn’t there) would be good for the user. But he comes with another privacy issue, Facebook applications now seem to have access to your e-mail address.

I feel privacy is an issue, but not a major one. Lets face it, if you join Facebook and assume your personal information is only shared with your friends then you are, to say it nicely, a bit naive. I have to answer numerous questions these days about my relationships with friends on Facebook. This is all part of the Social Graph exploitation model in Facebook. I don’t answer any of these questions. Not because Facebook would use that information for SocialAds, but because it doesn’t provide me any value as a user. I already know I went to high school with you dude, no need to write it down.

Looking at the different comments sections the readers are at least widely spread in their opinions about Facebook SocialAds. Going from “They got to make a living” to ” I’m leaving this overhyped crappy service”.  Mathew Ingram gets it right (yet again), stating these woes are overstated.  He says:

As Justin notes, 100 times as many people got upset about the news feed as joined the Moveon protest, and that one blew over eventually. Maybe Facebook will tweak things so it’s more obvious, or give you the blanket opt-out ability — or maybe not. I think it’s mountain and molehill territory myself. Will I have to ignore news feed items about people like Charlene buying coffee tables? Sure. Just the same way I ignore people telling me they just added the Zombie application. Big deal.

And that is exactly what will happen. People will ignore it. It doesn’t provide them any value so SocialAds and Beacons will be yet another play toy for the advertisement industry that is ignored by the consumer! The business model just doesn’t work, as it isn’t based upon user value. I always like reading e-Bay’s Rolf Skyberg about user needs. He breaks it down into things that matter to a user. And that is still the best business model there is.

We are all getting ready for thanksgiving dinner. I wonder who is the turkey to be served by Facebook. Is it the user, or might it be the advertiser who has  spent $16 Bln in 2007 and will be spending $42 Bln in 2011 in on-line advetisement and thinking he gets  targetted audience from Facebook? I think Mark Zuckerberg will have a great meal, either way.