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!
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!