Bubble 2.0

In 1999, “portals” were all the rage and advertising was going to pay for everything. In 2007, “social networks” are all the rage and advertising is paying for everything. Almost.

Thought: We have the same problem with Facebook today that we’ve had with broadcast media for the duration: their customers are their advertisers, not their users; and in fact they sell the latter to the former.

Questions: Where is the financial leverage in your social network? How does it work?

Questions: What is your relationship with your social network provider? How does that work?

11 comments

  1. Crosbie Fitch’s avatar

    I’m working on Web 4.0 at the mo – “Dgitial art and artists are all the rage and the audience is paying for everything”.

  2. Julian Bond’s avatar

    Or is it VC (or Exit Money) that is paying for everything on the current crop of Social Networks?

  3. Robert Fischer’s avatar

    We’re starting to see a breakdown in the “gated community” idea. The model simply is not sustainable, because people can run their own blogs for practically nothing, so efforts to charge them for the privilege fail. For a while, you might be able to get that to work through good marketing or technical or design innovations, but sooner or later the hype and the sheen wears off the gated community, and the open source community finds a way to replicate the innovation.

    Personally, I’m happy to see it go. I’d rather see individuals interconnecting amongst themselves (even if aided by Digg and Reddit) than some company trying to dictate the nature of that interaction.

  4. Jon Garfunkel’s avatar

    Hmm… you seem to disparage “their customers are their advertisers” — isn’t this what the TimesSelect gravedancers have been calling for, the NYT online to be fully advertising based, not subscription based?

    As I was observing Yom Kippur yesterday and not OneWebDay, I had to take a break from my TimesSelect research. But it’s coming along now, sunny New England fall day be damned.

  5. Doc Searls’s avatar

    Jon,

    There is a difference between observing a problem and disparagement. The split between users and customers has been a problem for the duration in commercial television and radio, and now it’s a problem for the likes of Facebook.

    The problem is financial accountability. You get that with customers in a way, and to a degree, that you don’t get with users or consumers that pay nothing.

    This indeed is the problem with free, especially when advertising pays for everything.

    I don’t know what to do with your insistence on the “gravedancers” label. It’s too broad, and, well, disparaging. Also not clear if you’re still pointing that label at me, at others, or both. Regardless of that, for a number of years I’ve had thoughtful criticism of the Times’ — and nearly all papers’ — decision to lock up archival editorial. And I have never argued that the Times should give everything away. Least of all the daily print edition. instead I have argued for alignment of print and online: “Charge for the news and give away the olds.” Instead most papers have gone the opposite way, in an effort to “monetize” everything.

    Yet “charge for the olds and give away the news” has done a great deal to undermine newspapers’ original business model on the print side. What does it say to subscribers that they give away online what they charge for in print? I think papers should bite the bullet and charge for the news online just like they charge for the news in print. But they won’t because they want the daily advertising money too much. And thus the New York Times lives in a world Google makes.

    That became clear when a Times person was interviewed in On The Media today. She pretty much said flat-out that the Times is all about SEO (search engine optimization) and that she doesn”t much care if they lose print subscribers to online reading because the Times is making it up with advertising.

    This is a very slippery slope.

  6. Jon Garfunkel’s avatar

    Doc, thanks for your clarification. Yes, the “gravedancers” label is kind of broad and in does indict various unnamed co-conspirators. But Dan Kennedy, a respected media critic in Boston, has fessed up to “glee” in his reaction.

    But I most certainly agree with you that it is a problem. What I was missing in your “Abandon Fort Business” post was a lament that abandoning the subscriber business meant abandoning the customer accountability model, in favor of the advertiser accountability model.

    Sorry my end of things doesn’t seem clear yet short of my article. But this has been helpful.

  7. Doc Searls’s avatar

    You’re right that some lament is required there.

    Another problem is that we’re trying to save newspapers with just two business models: subscription and advertising. I submit that there might be others in need of trying. We should look past these two long-standing choices. Keep them, yes; but look beyond them as well.

  8. Crosbie Fitch’s avatar

    A long, long time ago, before the Caxtons of this world, there was another business model.

    It was called patronage.

    It doesn’t hold much favour today because people find it difficult to disassociate from plutocracy.

    But as easily as the Internet enables diffusion of intellectual work, so it enables the diffusion of the wealthy patron – aka ‘the audience’.

    It was difficult 300 years ago to collect an advance from a large readership, but then it was difficult to distribute copies without permission, so the idea of selling copies (under monopoly) was born (whether discretely or by subscription).

    Today, you cannot sell copies. The illusion that you can is simply the business model’s momentum – the good will of its passengers pushing it along with the tank having run dry.

    Has anyone wondered if you can now collect an advance from a large readership?

    Don’t forget the volte face though. It’s not the author’s publisher charging the customer for production, but the customers commissioning the author to produce a publication.

    Of course, a nimble publisher could offer their services once again as intermediary, especially for audiences who don’t particularly care about the specific authors, e.g. newspapers. Things would appear very similar to the subscription model, after all, the demand and supply sides are still the same. However, it’s not a newspaper that is published to sell (under monopoly), but readers who commission a newspaper to be published (without monopoly).

  9. SEO’s avatar

    Doc,

    In many respects I agree. Social networks are being built with advertisers in mind, not end users.

    With that being said, there is so much money in advertising for social networks that they are popping up with out a clear view into how they will monetize. The ones who are making the most money entered the space without plans to monetize and are really still trying to figure out how to make money.

    Starting a social network with a goal to rake in the big bucks from advertisers hardly works, but social networks started for serving users, not advertisers always do best.

    Twitter, the hottest thing going right now has no revenue streams, the second the begin to sell their soul they will likely nose dive.

    Fact is Social Media is here for a long time coming and people will always try to make money. Here’s a nearly incredible video about the growth of social media: http://www.digitalbuzzblog.com/the-social-media-revolution-visualised/.

  10. Doc Searls’s avatar

    SEO, the key verb is “try”.

    It’s still a bubble, little different from the last bubble and the one before that, going back to tulip bulbs.

    Meanwhile, make your hay while the Sun still shines.

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