It forces some attention grabbing too (follow me @doverd4s).

Anyway, here are some interesting things I’ve tweeted about:

Mass collaboration picked up some old school corner-cutting in Disney films.

If you haven’t seen Auto Tune, check out this video (scroll down).

Good article about old media and a sense of entitlement.

And…I promise to be around more.

Personally I think that Facebook and Twitter have a lot of potential as fee-based services for online entertainment, enterprise productivity, intelligence mining, information distribution, and others applications that would be build upon and expand from the free service offering, while leveraging an incredibly large audience. But for now, ads are the most direct route to a source of revenue…if people pay attention to them. A big IF. One company that is serving ads on these platforms, albeit in a different way, is Magpie, shown below. This pay-per-tweet service utilitizes a Twitter users’ account to broadcast a message to the users’ followers through tweets, and although the same click-through issues still apply, its interesting that this company is using a different approach to generate attention. And yet some questions remain…let’s dive in.

Magpie: Pay-Per-Tweet Advertising

Last summer I introduced Social Spark and its pay-per-blogging platform that matched bloggers with advertisement suppliers. Magpie is similar in that it allows advertisers to leverage someone’s social media audience (Twitter followers) and distribute ‘contextually appropriate’ ads through tweets, in exchange for compensation to the Twitter account holder of the pay-per-sale, pay-per-lead, pay-per-click or pay-per-view variety. The way it works is, a Twitter user signs up to Magpie and provides them with posting privileges to your personal account, specifying the type of compensation, as well as the volume of tweets the company can use for advertising in relation to normal tweets (e.g. 1/20). Advertisers use these accounts to distribute targeted messages based on the content of the twitter user and its respective audience, as if they come from the Twitterer. The amount of money that you make as a user depends on the type of plan you’re on, detailed below, which is taken directly from Magpie’s FAQ.

• Pay-per-Sale: Here you get a cut of the sale price when one of your followers buys something on one of our customer’s sites through one of your tweets. This is perhaps the most lucrative of the compensation models.
• Pay-per-Lead: Every time one of your followers enquires about a service or joins up for a subscription or the like, you get compensated (compensation rates tend to be 15% greater than Pay-per-View, depending on the campaign)
• Pay-per-Click: You get paid every time one of your followers clicks on a link. Currently Magpie’s click rate is double that of any other online advertising.
• Pay-per-View: You get paid a base amount for allowing a tweet to be placed in your stream – this amount depends on the number of your followers and the hotness of your tweets.

While there are upsides and downsides to this model, what’s interesting is that the ads are likely to get more exposure because they’re sandwiched right between authentic tweets, and it’s less easy to actively tune them.  Advertisers are able to reach a large volume of people through this tool, and insert a (theoretically) relevant message into a discussion that people are personally involved in. These are definite pluses for the tool. My breakdown of this platform becomes: a lot of people will see the ads but its success will depend almost entirely on its ability to convert views to click-throughs.

What about Magpie’s disadvantages? As with SocialSpark, there are ethical considerations at play here. Although Magpie allows and encourages people to create a disclaimer to affix to the end of the their Magpie tweets, for transparency, the whole pay-per-tweet activity is in that gray area where people may debate whether it is appropriate to lend your personal voice and relationships to companies for money in this way. Although one might argue that this is nothing other than brand sponsorship at a micro level and online, the flip side of the argument is that the diffusion of a branded message across trusted, personal relationships crosses a boundary. Regardless of one’s philisophical perspective on this debate, I see one possible consequence to a Twitterer who follows this path – where they lead, others may no longer follow – right or wrong, people may not appreciate having a ‘bot’ advertise to them, diluting their feed of real tweets, and may protest by no longer following that Twitter user.

The key factor in this then, becomes whether those tweeted ads have any value. Even though the ads are supposed to be targeted, I remain skeptical that any keyword based tool can understand a conversation to the degree that it’s able to insert textual advertisements that match the context. Twitter seems to be used as a tool to specifically reference events or activities, so a textual ad that has no direct relationship to that tweet is likely to stand out like a sore thumb. Text that is not targetted becomes spam, and the last thing you want to do is annoy your reader base, especially when there are so many other people competing for your attention.

Personally, if I were Magpie I would be interested in exploring how Twitter users could work together with Magpie in self-selecting advertisements from a range of possible topics, which could still be inserted on behalf of Magpie advertisers, yet would benefit from the Twitter account holder’s human touch and knowledge of its readership. I suspect that restructuring the ad placement mechanism in this way, to present you with a list of relevant ads that you can insert into your respective content, would increase relevance and click-through rates, while also decreasing resistance as a result of the bot-generated ad delivery system. Thoughts?

Lots of interesting elements on the table. Would you be bothered by ads like these showing up in your tweet feed? Why?

Denis used crowdSPRING to design the logo for his chTONGUEeek website, and discussed his experience with them in this blog.  For his purposes, crowdSPRING was great – he received 69 logo submissions, the opportunity to collaborate with the designer whose proposal he liked the best, and of course, got the logo he needed.   All for $150.

So, this brings us to the issue up for debate among the SXSW panelists (in the video below).   Does spec work (in creative) devalue an industry of designers?

From the perspective of workers within the industry, it’s not surprising that established designers and creative firms would be opposed to spec work;  one panelist discussed a possible industry blacklisting of workers who engage on sites like crowdSPRING.  For more on this perspective, see the NO!SPEC website, where you can read their “Ten Reasons” against spec work, or the article Why Speculation Hurts.

On the flip side, there’s a good argument to be made that sites like crowdspring tear down barriers and facilitate entry into the profession for the young workers looking to build a resume.  As an aspiring young designer, it can be hard to build a professional resume and get your first job (this applies to most professions).  To these workers, there could be a lot of value in gaining experience through crowdspring (and other spec sites).

The panel at SXSW did a great job covering the issues of spec work in design and creative.  But what if we apply this spec work model to other industries?

One of the best perspectives on this issue came from Alan Majer, citing a great example of a family member who works in the medical profession.  Alan’s analogy actually surrounded the provision of a government grant, where $100 000 of funding was available to a company that placed the “best bid” on a given assignment – a fairly common process.  His family member (and her team) put in about a week’s worth of time working on this project.  But so did 50-100 other teams that also submitted bids, meaning that, theoretically, anywhere from 49-99 teams used up about a week’s worth of work for nothing.  If you aggregate the whole process, there was a lot of work put in (with people “dropping their day jobs”) for what amounts out to very little money.

This raises questions about sites like Innocentive, a company that generally gets very good press (in Wikinomics, in the news, and of course, in the blogosphere).  Innocentive is a great way to find innovations, and is an excellent example of how companies can use external collaboration for R&D.  But from a broader economic perspective, could Innocentive also be somewhat damaging to the science industry?  In many cases, Innocentive works well because it connects company X working on project Y with a scientist elsewhere in the world who, unbeknownst to them, has also been working on project Y; a win-win.  But what if Innocentive were promoting spec work?  If a $1 000 000 award is offered to a scientist who can solve a specific problem, and 2000+ scientists worldwide drop their current projects to spend two weeks working on it, doesn’t this seem problematic, in terms of lost production?

I would argue that in the first example (connecting Y with Y), Innocentive is fantastic.  But if it (or sites like it) start drawing too many workers away from their real value-adding jobs, as with Alan’s example above, then it probably is damaging, on an aggregate economic level. 

So is spec work evil?  For logo design on a site like chTONGUEeek, probably not.  But if this model was applied to other industries, it could certainly be damaging. 

One thing I’m willing to bet – we’re likely to see an increase in the use of spec work as more people catch on to Web 2.0, and also as individuals and companies look to cut costs in the new economy.

Dan Borge: Director, LECG, a global expert services and consulting firm. Former senior managing director and head of corporate strategy at Bankers Trust where he was the principal designer of RAROC, the first enterprise risk management system. Author of the Book of Risk.

John Hull, Maple Financial Group Chair in Derivatives and Risk Management, Professor of Finance and Co-Director, Master of Finance Program, Rotman School of Management, U of Toronto

Robert (Bob) Tapscott, interim CEO, RISConsulting

Moderator: Chuck Bralver, Senior Associate Dean – International Business and Finance, Fletcher School of Law and Diplomacy, Tufts University (former Partner and Vice Chair, Oliver, Wyman & Company)

I was chair.  We had an excellent discussion and I’m pleased to report that a video of the session is now available online.  To view the video, click here.

The discussion took place from 5:00 to 6:30pm, Jan. 22, 2009, at the Fleck Atrium (ground floor), Rotman School of Management, University of Toronto, 105 St. George Street, Toronto.

However, the discussions around growth seem misguided in a new world where virtually all resources are scarce. Due to the banking crisis, the flow of capital has slowed to a trickle. Even after banks are reorganized, it seems that leverage will be used more sparingly, raising the cost of capital for all. Human capital, despite the recent layoffs, is also expected to become scarce as the boomers retire, albeit a few years later than they were planning. All forms of natural resources, including water, timber, oil and minerals will be in short supply, especially as emerging market consumers look for ways to bring up their standards of living.

The reality of scarcity implies that economies will need to fundamentally rethink how they judge progress. It seems that efficiency will be the new mantra. How much more can you get out of what you have? This goes for financial capital, human capital as well as natural resources. While the amount of resources used stays constant (or shrinks) people will need to think of more efficient ways of exploiting them to lift their living standards. The interesting question for us is how the principles of Wikinomics can be applied to help organizations deal with scarcity.

Companies will need to shed legacy business models in order to more effectively use their human and financial capital. The practice of laying off workers in bad times and fighting for talent in good times may be suitable to monolithic and hierarchical organizations, but not the modern 21st century enterprise. Organizations need to become more fluid, agile and transparent to enable more foresight and flexibility in their operations. A focus on collaborative innovation, especially when there is slack in the organization during downturns, leads to gains when the economy picks up.

All in all, the current crisis presents an enormous opportunity to move away from exalting aggregate consumption to embracing responsible management of resources. This requires a major mind-shift, however, the burning platform is certainly there. It seems that along with Obama’s Era of Responsibility the Age of Efficiency is here. The limits of unbridled consumption are now obvious – growth will need to come from doing more with less.

Dan Borge: Director, LECG, a global expert services and consulting firm. Former senior managing director and head of corporate strategy at Bankers Trust where he was the principal designer of RAROC, the first enterprise risk management system. Author of the Book of Risk.

John Hull, Maple Financial Group Chair in Derivatives and Risk Management, Professor of Finance and Co-Director, Master of Finance Program, Rotman School of Management, U of Toronto

Robert (Bob) Tapscott, interim CEO, RISConsulting

Moderator: Chuck Bralver, Senior Associate Dean – International Business and Finance, Fletcher School of Law and Diplomacy, Tufts University (former Partner and Vice Chair, Oliver, Wyman & Company)

Chair: Don Tapscott, Chair, nGenera Insight and Adjunct Professor of Strategic Management, Rotman School of Management, U of Toronto

Highlights:

Dan Borge:  “Risk management came off the track in part because it became so technical with sophisticated analytics that got ahead of risk management knowledge and basic human judgment.  The result was that opacity became a huge part of the financial system.

“The industry was infected with perverse incentives.  For example, you had mortgage originators with no stake in the outcome.  There were no incentives to ensure the viability of mortgages, and everyone ended up fooling themselves.

“In the summer of 2007, Citigroup CEO Chuck Prince told the Financial Times that he was aware of the risks Citigroup was taking:  ‘When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.’  Well, the music has stopped.”

Dan Borge answers questions U of T Rotman School of Management session on Risk Management 2.0

John Hull:  “We saw too many people with the wrong incentives. They thought ‘well, we all know that something is wrong but nothing is going to change this year, so I’ll play the game until I get my bonus.’  The system and products became too opaque, complex and exotic to understand.”

Bob Tapscott:  “Numerous attempts to restart the engine, and they’ve all been unsuccessful. To establish trust and stability the banks need a very different model – something dramatic will have to change.  Tinkering will not solve the problem.  Government throwing money at the problem is not working to restore confidence in the system.  We need a global forensic exercise to open up the entire financial services industry.  This will take leadership and requires radical thinking, baking transparency into the system, and sharing of intellectual property, such as placing algorithms into the public domain.”

Bob Tapscott answers questions U of T Rotman School of Management session on Risk Management 2.0

Don Tapscott:  “The incentives to the industry were toxic, akin to a bacteria. A cultural change is required to achieve a healthy system.  Transparency is required to purge the system of inappropriate incentives and behavior.  It’s never been more true that sunlight is the best disinfectant.”

According to Bob Tapscott, fresh capital and updated regulations are necessary but insufficient to restore confidence. Bankers and business leaders should embrace a comprehensive private sector solution entitled Wiki Risk Assessment Process (WRAP 2.0).  The proposal would rethink the basic modus operandi of the financial services marketplace and create a new operating model.

“The Wiki Risk Assessment Process creates a global community of expert modelers and modeling resources dedicated to unlocking today’s credit and structured asset markets.  This would be achieved through an open, transparent and collaborative process for valuing and risk-assessing non-government credit securities and related instruments and contracts such as CDOs and credit derivatives,” said Bob Tapscott.  ”By tapping the ‘Wisdom of the Crowd’, WRAP 2.0 would introduce transparency and peering to value and risk measurement benchmarking.  It will invite all of the best valuation modeling minds to collaborate in the process. This would contribute significantly to restoring confidence and liquidity in the world’s credit markets.”

Bob Tapscott referred the audience to www.WRAP20.com for more details concerning his proposal.

But the actual deal between the two is less about cash then it is about technology exchange and access to their respective dealerships. Fiat, for example, is keen to bring its line of compact cars to the US, and is willing to trade access to its successful small-car platforms and fuel-efficient technologies to do so. Seems like a high price to pay for real estate, non?

Which brings us to the magic of US car dealerships:

• GM has more than 6,400 dealers in the US.
• Ford has over 4,300 in the US.
• Chrysler (with Jeep and Dodge) have over 3,300.
• And finally, Toyota/Lexus has (just) 1,400 US dealers.
• This works out to nearly 700,000 direct employees across the US dealer network.
• And with annual sales of 14-15 million new car sales per year, this works out to about 750 units sold per dealer.

For the most part, these dealerships operate as single-brand sales outlets (proprietary models one might say). Subsequently, the framework for sales across the US leaves the industry with a heavy, and somewhat immoveable burden of dealers that contributes to their inability to restructure.

But does it have to be this way?

There may or may not be precedent for something else.

Example 1 is Ontario’s Brewers Retail – the Beer Store. “Established in 1927, The Beer Store is the primary distribution and sales channel for beer in Ontario. It sells beer to the public under the authority of the Liquor Control Act and is owned by Labatt Brewing Company Ltd., Molson Canada and Sleeman Breweries Ltd.” I.e. It acts as a platform for distribution of various brands. Brewers that wish to sell through The Beer Store can pay a per store listing fee or a single fee for the entire system depending on the number of stores they wish to sell in.

Example 2 is the Credit Card – which for argument’s sake we’ll limit to Visa and Mastercard. Prior to their respective IPOs, both functioned as cooperatives, owned equally by their networks of 21,000 and 25,000 financial institutions respectively, wherein each institution would purchase a license for use of the network.

Both of these examples saw individual organizations choose the efficiencies and lower transaction costs of a distributed and shared network over a proprietary model. And while my colleague Denis makes a good point that in the auto industry the sticker price of a purchase is the equivalent of 1000 or so cases a beer, and thus makes keeping the customer as close as possible more important, I can’t help but think that a shared platform for sales would be more efficient and might just hep build a competitive and user-centred industry.

I’ll admit I’m not an expert on the industry so I’d love to know what everyone else thinks. I’ll also admit that I submitted a similar idea for the financial services industry about 8 years ago when I worked at large Canadian bank and got told thanks but no thanks! So maybe it’s already being done? Maybe it’s not possible?

Let me know.

This quote will ring true for many different people that have employed management consulting firms. In the worst cases, it appears that certain types of such companies merely send people in to work at company X for awhile, learn everything they are up to, and then go to company Y (& Z, etc.), looking to sell their insights for a stunningly high amount. Wikinomics and the “age of transparency” is clearly a direct threat to that model, and where this quote comes from is a remarkably good example of why.

The quote is from Zappos CEO Tony Hsieh, as reported in this AdWeek article. For many years companies have been invited to trek down to Las Vegas and check out how the company does business. Now, companies that don’t want to make such a trek (travel freeze anyone?) have another option to learn a thing or two about Zappos – pay $39.95 per month for a subscription to the forthcoming Zappos Insights, a subscription video service that lets companies ask questions about the Zappos way and get answers from actual Zappos employees. At such a price point, it’s easy to see why the company is targeting the “Fortune 1 Million”, instead of a much smaller range of targets.

It will be interesting to see how this service plays out when it officially launches (I learned about it from this mashable post, where a number of people were complaining about not being able to sign in, and Tony Hsieh chimed in to note they didn’t realize the Adweek article was going up so soon, so the site has been shut down until the official launch). But regardless of whether it turns out to be a bit gimmicky or not, it should at least provide people a reminder of the intense pressure certain business models are under as certain wikinomics principles continue to gain traction – yellow pages anyone?

This week, we’re renting out our upstairs apartment. So we placed a 1-week classified ad, as well as posting it in the for-rent section on craigslist. 

First some background – In the past, we’ve always had the best success with local newspaper ads. A few hundred dollars on an ad is a good deal when it means you don’t leave a suite empty for a month - classifieds were a great source of leads for the money. In contrast, we hadn’t had much luck with craigslist in the past, too few responses and no real qualified renters.

My, how times have changed. Our local newspaper advertising cost us $325 for a week of ads. Cost of our craigslist posting: zero, zip nada. Here’s how they compared:

Classifieds:
- Cost: $325
- Time before listing went live: 1.5 days
- Results (viewings): 2 viewings one late this week, one scheduled for next monday
- Results (completed applications): zero

Craigslist:
- Cost: free
- Time before listing went live: 5 minutes
- Results (viewings): 6 viewings scheduled within 24 hours (and one more later in the week)
- Results (applications): Three sets of completed applications

All I can say is: Craigslist, you are amazing, wow!

That’s why I was so happy to come across this story about Ukoonto when I read the Globe & Mail over lunch. The article is about a young entrepreneur (and soon to be former sound engineer) named Hans Eich, who builds eco-friendly wooden building block toys from his St. Catherine’s based workshop. While I can’t say that I’ve tested the products myself yet, they look great – and from a wikinomics perspective what’s most interesting is how Hans has developed and promoted his company.

As the article notes, outside of an occasional trade show, Hans relies solely on Web 2.0 tools to spread the word about his products. When he started up, he had practically no money, and no big business plan – just an idea to create a toy company. He launched it under the domain of “my toy needs a name”, created a framework online, and asked people for ideas and feedback. From there, to quote Hans:

It was all about interacting with people and trying to set up meaningful relationships. The business evolved out of that.

If you go through the article, you can read about all the interesting lessons he’s learned – from use of things like YouTube and Twitter, to why it’s so much harder to create “fans” on Facebook than create groups, to backlash he received when he tried to push his products to hard in communities he joined, rather than really engaging with the people. To quote Hans again:

You have to listen first before they start listening to you. Traditional media is about telling, but Web 2.0 is all about conversations. It’s very much about letting go of control and engaging with people.

I’ll let you learn the rest from the Globe article, but I found it just an extraordinarly refreshing read – particularly when the three articles on the previous page were “EU to get call for stimulus package”, “Easy credit, public spending fuelled boom”, and “Lost auto jobs pegged at 15,000.” Amidst all the doom and gloom, it’s important to remember that there is an extraordinary opportunity out there for entrepeneurs that can create a good product they are passionate about, and learn to leverage social media and the web 2.0 in a compelling way. As Hans noted, given that most of the tools he’s leveraging are free, his out-of-pocket costs have basically been limited to website design costs. Think about how different it would have been if Hans tried to launch his company twenty years ago…

Social media tends to pay dividends in the long-term. Social media, generally speaking, is hard to influence, but by understanding your field well and creating relationships in your niche, you can learn to create the types of content that influencers will pick up on. Like the mavens in The Tipping Point, they will spread your message for you.

Call me crazy, but I think there is a fairly large chasm between “marketing through social media is a waste of time” and “social media tends to pay dividends in the long-term”. Particularly when the article is focused (rightly) on the idea that if marketing doesn’t lead to sales, it’s useless for a company. But the value of those companies actually is the value of the dividends investors will get over the long-term, and if social media helps inflate them, then it is certainly valuable.

But that said, I did find many of his points interesting to think about. Notably:

Let’s look at the market signals. Why is it that you pay dollars per click on Google Adwords for financial keywords, yet the same keywords on social networks are priced at five cents? – Very good base for exploring the issue. The obvious answer would be that when using a search engine, you state your intent – by typing “financial advisor, Toronto”, I’m giving a pretty good idea of what I want. Broadcast ads on social networks generally can’t enjoy that same benefit, which I think would explain much of the gap.

Traffic is not an asset, it’s a cost – traffic only becomes an asset when translated into something else. I love this point. It’s far to easy to get trapped in the traffic = popularity which leads to success game, and forget about the end objective.

Social Media Marketing is Time Consuming. The point made in the article is that time = money, which people can forget. An interesting addition to this, IMO, is that this very time commitment is part of what helps make the investment valuable over the long term, as it cannot be instantly replicated. Peter points out that one of the advantages of Ad Words (etc.) is that it’s easy to scale – just spend/ bid more. But that’s also a disadvantage, and someone else can always bump you down by spending / bidding more. Do social media marketing correctly, and you might just get the “moat” around your business a little deeper.

There are others, but I’ll leave it there for now. Good, thought provoking read.

Jive’s system is called “the betty,” and is centered around ease of use. The white block in the left of the picture is a wireless router/dsl modem, it plugs into a phone jack and gives the social networking unit internet-access.

To add one another as “friends,” users exchange friend-pass cards, which contains an RFID chip that links to an account. The user takes the friend-pass and places it in one of three locations on the screen. One for the profile, one for messaging, and one to see specific updates.What strikes me most about the prototype is that it’s designed to promote social networking from the abstract into the physical: friends are represented almost by business cards, and you have something to show for the “relationship.”

There are some aspects of the prototype that I’m not clear on, such as how messages are composed, how photos are uploaded, and how the interface is used above and beyond placing the rfid passes on the screen. But, it is a great acknowledgement of the fact that older people are every bit as social as the rest of us, and they have been largely left behind by the social networking revolution.

Finally, once the unit has been purchased, connecting to the network is free. The router is pre-programmed with ISP login information, and the network connection pays for itself by displaying targeted ads to the unit’s user.

All of this makes for the beginning of a potential new social network for seniors, somehow I’m alright with that, as I’m not exactly sure how I’d feel about a facebook friend request from my grandparents…

Funnily enough (and much to my embarrassment), when I tried to send out a note about my post to co-founder Marc Lyne (who I had interviewed the week before), I accidentally sent it to John O’Byrne. Part of the reason for this was a critical lack of caffeine at the time, and I had also recently spoken with John about his company – Parlus.com. Parlus is similarly taking on some established incumbents by using a wikinomics enabled business model focused on providing incentives to top prosumers. These incumbents haven’t been entrenched quite so long, but the challenge is certainly no less daunting. You may have heard of their competitors: Facebook and LinkedIn.

Now that the brain freeze has (at least temporarily) passed, here’s the story on Parlus. The company has roots in Ireland, and is growing out of Schoolfriends.ie, a social networking site focused on re-uniting classmates from various universities and colleges. John notes that “Irish Diaspora will come to it readily, but the company has ambitions to include all people wishing to network.” He was also frank in noting the site was originally a Web 1.0 version of a social networking story. Their target market was a fairly mature age group, and one of the things they found out was they weren’t really engaged with the site – and Parlus wanted to change that. But with Facebook and LinkedIn now so strong, “change” involves the need to get people to transfer over from other very popular sites.

So that’s the key issue for Parlus: how do you get people to transfer over? Even more-so than Brownbook, they are dealing with competitors enjoying extraordinary benefits from network effects, because these ones are tied to social connections. In turn, they decided that their “best currency was the site itself.” What this means is to enthuse key people – those whom I believe Malcolm Gladwell would call Mavens – to get involved with the functionality and content on the site by rewarding them with shares in the company. Or to quote Parlus precisely:

Parlus.com aims to engage and facilitate our current and future users in a distinctive form of social enterprise, by offering the key aspects of a social network site, with an Irish focus and uniquely offering a potential share of the underlying business to all our users.

You can also read a decent summary about the company here. The article describes the unique aspect of Parlus as:

This unique aspect of Parlus.com is to encourage members to become advocate shareholders as they excel in the use of the site. This rewards users for building Parlus as a resource. So, if, for example, the user co-ordinates local sports fixtures or organises school reunions or business events through Parlus, this effort helps build the site and can eventually benefit them personally by qualifying them to become a shareholder. If they get other people to use the site then they will also be rewarded for this.

Again, similar to Brownbook, it’s about providing incentives to these key prosumers to get engaged for the long term, rather than trying to drive traffic through trivial giveaways and the like. What they really want to do is entice managers to own their own networks, and reward them for being advocates, so they become actively involved in luring people in.

The entire incentive program is linked together through a points system, and you can find the details here. In order to qualify to become a shareholder, the first hurdle you have to jump is accumulating 5,000 points. From there, “shares will be given on the basis that the applicant is providing co-ordinating skill and know how within a social networking context.”

What’s most important here, and deserves another mention, is that they are not necessarily trying to reward everyone. I’ve seen some companies try to develop a model where literally everyone becomes a shareholder, and I really don’t think it can work right now – spread the rewards around too much, and not only might John McCain have a meltdown, but the per-person amount becomes so trivial that the whole thing collapses. Reward the best of the best, however, and you might really be onto something.

I also find it refreshing that Parlus is up-front about the fact they will have to go through a learning curve. To quote the points page again:

As this is a unique process we will need some time after the campaign to absorb the lessons of the first campaign and to devise the second campaign. It is critical that we award shares to people who add value to the site and will continue to do so. So, any further campaigns will require tweaking and some more research.

Be assured that we intend to complete the campaigns but the nature will have to change as the site develops. For example, when we go to a second campaign there will be 96 new shareholders in existence. We will want to continue to offer them incentives to add value, but the nature in which we allocate points to them may have to change.

These are some very interesting times. Whatever your personal beliefs are about Parlus or Brownbook’s success potential, what I think we’re seeing here is that start of a broader trend – companies that are starting the trial-and-error process for figuring out the way best way to engage prosumers in an ongoing way, using true economic partnerships. While many will likely fail, those that succeed could accrue extraordinary rewards, just like every other wave of business innovation we’ve seen in the past. Moreover, those that succeed will also likely be protected by network effects that may be even stronger than the incumbents that they originally took on… first mover advantage has its rewards.

As the search process continues to shift online (though slower than you may think), this cozy little market position has long appeared ripe for the picking by a wikinomics-enabled business approach. The challenge is creating a model that can scale fast enough to break through the network effects, and other natural advantages, that the Yellow Pages (and others) enjoy as their own directories are shifted online.

Thanks to that little contact link on the left hand side of this page, I’ve recently discovered a new company called Brownbook.net that looks like they have the potential to do just that. One of the founders (Marc Lyne) dropped me a note a a little while back, I interviewed him about a week ago, and I must say that I’m impressed on many levels. It’s a very interesting example of an exceptionally lean, wikinomics-enabled company taking on some established incumbents… and what Brownbook is doing with prosumers in particular is something companies in many industries should pay attention to.

The basic idea behind the company is simple. The founders read wikinomics and other such books and thought “why not apply these new rules to an old industry?” Given that they had some background in the business directory business, it seemed like a natural fit. In turn, they went about creating an online business directory that anyone could edit. But they quickly realized there was a problem – how could they create enough enough initial value  / utility to get people to come to the site?

This is a common problem these days – simply starting an “anyone can edit X on topic Y” site might have been good enough a few years ago, but there is a lot of competition for people’s attention now. Recognizing this, Brownbook bought some data sets in select markets to pre-populate the site. From this base things have been going well, with thousands of listings being added each week, and traffic on the site has been increasing about 20% a week.

But this is where things start to get interesting. The business model for the company is straight forward. businesses can pay a small – and I do mean SMALL – annual fee to “claim” their company listing on the site, and thus control the messaging (users can still post their own reviews, etc.). They can also get additional services like notifications when reviews are added, videos, search priority, etc. This fee is many, many, MANY times (I can’t emphasize this enough) lower than what a company would pay to be listed in (say) the Yellow Pages – and could more or less be considered trivial for most companies. But if Brownbook can scale globally, the potential revenue for them is not trivial at all.

So great – always good to see a business model. But here’s where another tricky question comes up – why would prosumers go to the bother of putting up listings of companies, and drive up the site’s popularity, just so the founders could potentially make a lot of money? From our experience, prosumers are highly, highly resistant to doing the heavy lifting when there’s somebody trying to make a lot of money off it it – and rightfully so. This is a particular area of interest for me, and I was all geared up to challenge Brownbook on it… but it turned out they were already a step or two ahead.

Last week the company rolled out  their “User Earnings” program (you can see a video of their CEO talking about it here). It’s very simple, and quite compelling. Any time a businesses comes and “claims” a listing (i.e. pays for control of it), the last prosumer to have made a significant change is rewarded. This reward is 20% of the lifetime value of that customer. That’s where my clever title of “getting prosumers invested for life” comes from.

I think this is a very, very cool idea – for the most part, the prosumer examples I have seen either expect people to contribute time and effort for free, or alternatively for a shot at winning a winner takes all contest. There isn’t a lot out there right now between these two extremes. A model that makes prosumers a lifetime equity partner, in my opinion, has an extraordinary amount of potential – not only for brownbook, but in a myriad of other industries as well.

On this front, one potential weakness that people may cite is that the opportunity to make a couple of bucks a year isn’t enough incentive for people to engage. While this may be true on one level, it makes the implicit assumption of millions of prosumers each putting up a listing or two here or there. From our experience, a natural hierarchy almost always emerges in these communities, with a small sub-set of people creating the vast majority of the content. While a couple of bucks a year might not be interesting, a few thousand bucks a year could be.

The company may have to watch out for gaming however – one could envision a scenario where an individual does a lot of work, another makes a small edit after, and this latter person accrues all the rewards. As the company scales, they will likely have to adapt to such wrinkles. But it’s also interesting to note here that while the founders have built a big suite of controls and 30-point contingency plan in the background to help prevent against abuse, so far they’ve had to use it exactly once. Turns out people have been playing pretty nice so far.

I want to mention one other thing on this. We’ve done a lot of research on what we call “hot house innovators” – typically companies that sharpen their competitive skills in tough emerging market conditions, and unleash their low-cost models on the world. Brownbook.net is not that – they are based out of the U.K. But when I interviewed Marc last week, he noted that their total employee count right now is less than 10. Their Canadian “sales force”, for example, consists of exactly one person, who isn’t really a sales person – they are tasked with promoting the model and getting businesses and prosumers engaged. As a comparison point, I looked up some stats on the Yellow Pages Income fund in Canada – it appears that they have 1,500 people in their sales force alone.

Could wikinomics-enabled businesses that focus on prosumers be the developed economy equivilant of “hothouse innovators“?

The shockwave is moving quickly: venture capital stalwarts Sequoia Capital have been instructing their portfolio companies to prepare for a “doomsday scenario”. Cutting fat, eliminating redundancy, and finding the cheapest darn way to do business is now the imperative of all those wide-eyed, once-well-funded start-ups.

My dad once gave me good advice which I didn’t take. “Son, doctors, dentists, lawyers and teachers are recession-proof. Work smart.” For the most part, it holds true (it seems some lawyers are having a hard time). But it seems like you don’t need to be bricks-and-mortar or an M.D. to stay “recession-resistant”. Like magic, outsourcing marketplaces have been going like gangbusters despite economic woes.

The more people who take pages from Sequoia’s warning to slim down to essential personnel and services find that outsourcing fits the bill nicely. It’s like having talent attached to a spigot—you can match the resource-flow to your cash-flow (and work-flow) on-demand. A Reuters article boasts that Elance (a popular outsourcing marketplace) has increased billings by 65% this year—driven by the need for smaller firms to have a flexible, highly-trained workforce.

If this downturn finds you sitting on the couch, reluctantly watching daytime TV, outsourcing marketplaces could be just ticket to get you off The Young and The Restless and back to the ranks of the gainfully employed.

If I was writing this post a week ago, it probably would have been a feel good story about wikinomics, but the wheels have recently fallen off the proverbial bus. This is a development equally worthy of exploring in relation to the challenges that come with embracing wikinomics principles – and particularly those that emerge when you only embrace a few of them. Of greatest interest to me – if more stories keep popping up like this, it could be a dramatic blow to more open, collaborative innovation processes. That would be a shame.

TechCrunch picked up the story on August 22nd, when Ning suddenly removed all of the WL widgets, without warning to anyone, from their network. This decision which clearly angered the company, as well as the thousands of customers who had spent time and money with WL in order to optimize their offerings. Based on the emails that WL has published on the web, this is the gist of Ning’s complaint:

Over the past few months, WidgetLaboratory’s applications have caused multiple and significant technical degradations to the Ning Platform. In point of fact, your code has broken numerous times and has negatively affected a large number of Networks in addition to the Ning Platform.

This sounds fair enough – having a single company break the platform repeatedly would seem to be a problem. However, WL vehemently disagrees with this assessment. If you read through the emails they point the finger for whatever platform problems exist squarely at Ning (particularly highlighting when Ning implemented Dojo changes that broke many applications without bothering to inform any of their partner developers in advance). They also indicate the shutdown may be more about anti-competitive behavior (a.k.a. they’re making too much money and Ning wants it, and/or Ning is worried they’ll lose customers and revenue going forward). From their POV, this was a win-win-win relationship, and they don’t understand why Ning would do this unless there were ulterior motives.

What’s the truth? it’s hard to say without knowing EVERYTHING that’s gone on, but it’s even harder to say Ning has went about anything in the right way. If you work through the email train, there is an ongoing (if occasionally heated) dialog through to August 7th between Spencer Forman at WL and CEO Gina Bianchini of Ning, at which point she indicates the communication will be handed off to Jay for technical issues, Bob Goorah (general counsel) for the terms of service, and Jason Rosenthal for business conversations (who was starting on the 15th). The next email in the chain is this:

Dear Spencer,
I am writing to inform you that your network (widgetlaboratory.ning.com) and third party applications have been removed for violations of our Terms of Service. Please direct all correspondence regarding this matter to my attention. Thank you.
Bob Ghoorah
General Counsel
Ning, Inc.

So much for business and technical I guess – only the lawyer now, and there appears to be no interest in finding an amicable solution. WL, as noted, has posted the email correspondence on the web. Ning’s initial public response, in contrast, was this:

This morning we removed WidgetLaboratory, a third party application developer, from the Ning Platform for violating Ning’s Terms of Service. WidgetLaboratory provided independently developed applications that could be added to a social network on the Ning Platform by a Network Creator. While we try to be as transparent as possible, it’s our long standing policy not to comment on specific cases where we remove networks or third party developers from the Ning Platform so we will not be providing any additional details publicly.

You have to love that – we try to be as transparent as possible… but we’re not going to tell you anything. How transparent. Lawyer Bob continued to respond to several emails from Spencer, and helpfully reminded him of the terms of service:

Ning has the right (at its sole discretion) to delete or deactivate your account, block your email or IP address, or otherwise terminate your access to or use of the Ning Platform or any Network, or remove and discard any Code or Content within any Network, without notice and for any reason.

While legally this is very clear, one has to imagine that setting a precedent of unilaterally shutting down the most successful widget provider on the platform might not be good for encouraging other developers, or encouraging customers to pay for premium services that could/ will quickly be axed. If you read through the responses on various blog posts (including this one on the Ning developer platform), you see this come up repeatedly – and you notice that most seem to be on WL’s side.

Gina later posted a more thorough response which has some more positive responses – though it’s interesting to note many users seemed to be asking for Ning to offer them the applications that WL used to offer them, which is a very slippery slope indeed. It’s even more slippery when Gina notes that:

Our focus at this point is in assisting Network Creators in finding alternatives to features that they may have been using from WidgetLaboratory. If we could fill these holes today, we would. We will start this effort shortly.

There’s no way around it – this looks really bad. It’s bad to have a model where 3rd party players are encouraged to get involved, grow a business with valuable offerings they develop and prove, and then get shut down while the “parent” company and customers clamor over replacements for them. Not sure how that can be sugarcoated.

There’s also another wrinkle in this – if you check out the August 7th email, you’ll note that one of Ning’s other complaints is that WL sometimes asks for user names and passwords, which is also against the terms of service. WL points out that they do this as a service for paying customers, who WANT to provide it to them, so they can go in there and… diagnose and trouble shoot problems with their licensed and purchased products. That seems perfectly sensible, and again to everyone’s benefit – but apparently Ning does not agree. Even while complaining that WL code regularly breaks down and hurts the network. Curious.

So overall there are a lot of disconnects here, and as more information comes out it might clear up – but I doubt it. I think it’s fair to say at this point that if you want to learn how to deal with such “open” development platforms and partnerships, do pretty much the opposite of what Ning did. Even if they had to shut down WL, they could have went about it in a far better way. Secondly, saying that you try to be transparent, and then sharing nothing, is dumb. Finally, if it’s the innovation of 3rd party developers that is helping your company so much, you really have to think about what the long-term implications are when you unilaterally axe your top performer and then very shortly after that talk about replacing their offerings being your top priority.

He describes how the software as a service (SaaS) model and on-demand computing is not a gold mine for software vendors.

Anyone who thinks the software-as-a-service business is a gold mine for vendors is wrong. The economics are fundamentally different from those of the traditional software business – and not in a good way. As Lacy writes, the Web is “just as good at displacing revenue as it is in generating sources of it. Just ask the music industry or, ahem, print media. Think Robin Hood, taking riches from the elite and distributing them to everyone else, including the customers who get to keep more of their money and the upstarts that can more easily build competing alternatives.” Web apps remain a hard sell when it comes to big, conservative enterprises, and the capital and marketing costs are daunting, particularly if you’re running your own data centers. This revolution in business software will play out slowly and, for most suppliers, painfully.

Carr is right; the economics are fundamentally different from those of the traditional software business. However, they are different in a good way. Just like how utility companies changed the electric power game by drastically reducing costs, cloud computing and SaaS vendors will change the software and server game. Carr even made this same argument in his book, The Big Switch. “What the fiber-optic Internet does for computing is exactly what the alternating-current network did for electricity.”

The problem SaaS firms are having is that they are relying too much on the technology and the medium of distribution, and not on the service. Salesforce.com has been successful and the “poster boy” of SaaS because it provided a better CRM system than what was already available.

Steve Papermaster, the CEO of nGenera said at a recent SaaS panel discussion that SaaS vendors must provide new functionalities in order to succeed: “[SaaS] changes your billing cycle, but doesn’t change the game for the customer…If you’re not providing disruptive change in the positive sense for customers so they can run and lead their business very differently from before, then you’re not providing breakout value.” As soon as more vendors realize this, on-demand computing WILL become a gold mine for SaaS vendors. If the end product to the enterprise is ultimately more valuable, SaaS vendors don’t necessarily have to charge significantly less than the offerings of current vendors.

Most SaaS vendors are targeting small and medium sized businesses (SMBs) where the margins are much smaller. For SMB’s, SaaS makes more sense as they are unable to pay the high fees of traditional vendors. This current practice results in what Lacy described as Robin Hood taking money from the rich and distributing it to the poor. However, Papermaster continues, “the issue is not so much one of ‘is SaaS going to be acceptable to the enterprise,’ it’s rather how will it be possible for an enterprise not to run globally on demand?” Both large, traditional companies and SMBs alike will be forced to make the switch, as the level of service will be so much greater than what the traditional vendors are offering. For larger companies, vendors can include value-added service and consulting work on top of the basic platform to justify charging a higher subscription fee.

Current economic arguments aside, the companies soon to be staffed by the Net Generation won’t just appreciate always on SaaS applications, they’ll expect them. This hyper-connected, tech-savvy generation will not tolerate upgrade cycles, instead expecting the daily improvements and tweaks only SaaS vendors can provide.

Although both Carr and Lacy recognize that cloud computing and SaaS is the future, the future is a lot closer than they think.

Note: BusinessWeek has published special report on cloud computing.

Not surprisingly, most industry groups supported the legislation, because it takes such a hard line against sharing music. But some artists were quick to criticize:

“[The new legislation is] all locks and lawsuits,” says Safwan Javed, a member of the Canadian Music Creators Coalition (www.musiccreators.ca) and drummer for Wide Mouth Mason. “Rather than building a made-in-Canada proposal to help musicians get paid, the government has chosen to import American-style legislation that says the solution to the music industry’s problems is suing our fans. Suing fans won’t make it 1992 again. It’s a new world for the music business and this is an old approach.”

“The question is, who gains from this bill?”said Brendan Canning, a Coalition member and co-founder of the band Broken Social Scene. “It’s not musicians. Musicians don’t need lawsuits. What we do need is a government that is willing to sit down with all the stakeholders and craft a balanced copyright policy for Canada that will not repeat the mistakes made in the United States.”

To me, the concept of “owning” a music recording is outdated. The music industry needs a new paradigm. In a sensibly structured Internet-friendly music industry, consumers would no longer download songs at a fixed price per tune, but would instead pay a moderate amount each month to listen to an unlimited number of tunes streamed to them over the Internet. I’d happily pay a few dollars per month to get access anytime, on any device, anywhere, to any music ever recorded.

Big benefits would flow to musicians and music lovers. Once consumers no longer own songs, the problem of theft disappears. The record labels would stop having to view all their customers as potential crooks, and no longer haul children and grandmothers into court. Payments to musicians would be more reliable and equitably distributed. And musicians would be encouraged to use the Internet more creatively to develop stronger ties with their fans.

With high-speed wireless Internet service becoming available throughout the country, around-the-clock high-quality streaming audio is now practical. The newer cellular phones can already receive streaming television shows and videos. It would be easy to add on streaming audio as a feature. Call it Everywhere Internet Audio. It’s where we should be focussing our energies.

Artists and designers live by the wikinomics code, always have done. Well, perhaps not strictly so, but the competition model that launched Goldcorp to mega success in mining, and that is improving Netflix recommendation engine, are a way of life if you are an artist, designer or architect. For example, take a look at architecture room, a place where architects and designers go for intelligence on open competitions globally: thearchitectureroom.

It is normal for developers commissioning large new buildings to shout out for architects. Right now you can pitch for inclusion in a short list to design the new Munch Museum in Norway, be shortlisted to design the Olympic Village for Madrid’s 2016 Olympic bid, respond to Orlando, Florida’s competition to design the re-use of the American Federal Building… and there are many hundreds more.

So who is doing what right now in the corporate world? Nokia is calling for furniture designers to promote design that either removes obstacles to mobility or creates movable furniture. Lifestyle products company Muji is running its third annual Found Muji design award, and Peugeot is running its fifth concept car design award. The Peugeot competition has attracted around 3 million hits to the Peugeot website.

What does this mean for the wikinomics era? It’s possibly the best example of professions organising themselves, and the training of professionals, to work in under wikinomics conditions. It’s tempting to criticise the drift towards contests as a way for corporates to secure cheap ideas, and when you think Peugeot pays only Euro 10,000 to the concept car winner, you have to say there’s more than a grain of truth in the criticism.

Platforms that organise ideagoras, such as Innocentive, can similarly stray into the creativity-on-the-cheap territory. What’s missing that would make these contests more practical in the long term is obvious if you look again at architecture and design – the commission. Architects who win contests get commissioned to work on the building. That makes continuous competition bearable and indeed fruitful. It seems to me the Innocentive model is in its early stages and that what follows are deals that enrich winners. A P&G in future might not just shout over the walls for a few ideas but might use the ideagora award to fund the start-up and development of new suppliers who’ve proven their worth with the brighteset ideas.

What interests me most about the Internet is that it is a reflection of the physical world, and the same people, information, and problems inhabit both worlds.  In the physical world it’s easy to experience information overload but because we approach this world in a linear, case-by-case fashion (time structure), it can serve to temper how much information we are exposed to all at once.  In the virtual world, everything is non-linear (no time structure), which means that you can get access to anything you want at any time, but because of this, it’s much harder to manage information because there’s so much of it coming at you. Enter Dipity – this free, and easy to use application proposes that time can work for you on the Internet, and I’m inclined to agree.  Dipity timeline tools allow you to manage online media by ordering related content chronologically. By using Dipity you can create a slick timeline interface that allows you to keep track of videos, pictures, blog posts, and RSS feeds, and I suspect that these applications are just the beginning. We’ve created a timeline for the Wikinomics blog, and it’s easy to see how having visual feedback helps in the way we view and access information.

Derek Dukes, CEO and co-founder of Dipity was kind of enough to sit down with us to talk about this quickly growing company, and what follows are excerpts from that discussion.

Question: What’s the ‘Dipity in 30 seconds’ pitch?

Derek: Dipity was started by three friends who got together and who were long time Internet professionals, one from development, one from design, and the other from a product user and consumer perspective. We were all struggling with the same problem – the tools available that tell stories and provide backgrounds around particular topics are lacking because the web is so media rich now. If you look at the way people use information or when people write stories, they use text and don’t really integrate photos or videos and images.

We thought of a better way to create an interactive experience around topics that takes advantage of the web, people in the world, and the fact that everything is connected. Dipity allows you to easily create interactive experiences around particular topics; could be people, could be places, could be subjects like Darfur, and aggregate information in one place. This creates an easy summarization of a topic that’s easy to understand and a richer experience.

Question: What kind of world do you want to create around Dipity, in terms of creating a unique experience when people come to the site?

Derek: The goal is to become a great starting point for people when they want to understand something. Right now if you want to find something, you do a search, like you’re looking for that “needle in a haystack” right? You enter a key term and it comes back with a list of results and that’s great.  Our ultimate goal would be “hey, I want to learn more about a particular topic, I’m going to come to Dipity, get a set of aggregated knowledge that’s crowd sourced, that takes advantage of all the social services that are connected and use the power of their communities.  If I was a consumer, describing Dipity to someone or, why I like Dipity, I would say Dipity is the best jumping point for me to learn more about a particular topic.

Question: Sounds great, but how does it work?

Derek: There’s a couple of different ways; there’s a fine grained permission model so if you’re passionate, say you’re a blogger about Darfur, you can create a Darfur timeline that has your blog post, images that you think are compelling from Flickr, key videos from YouTube and throw in a couple specific news sources from New York Times or CNN or a particular journalist who covers Darfur in a unique light. You can choose whether you want other people to extend your vision or your passion for Darfur or you can lock it down and say “hey, you know what, this is my interpretation of the Darfur conflict.” But other users are able to go in and create a competing vision so they can basically clone your timeline and edit out things they don’t think are as relevant or just add to yours.

Question: What kinds of data can you use Dipity for, and what kinds of data do you think that you won’t be able to integrate Dipity very well with?

Derek: In terms of what types of data you can use, we have focussed things around one constant thing, the element of time.  That’s where we are today and it’s a stake in the ground, for now.  Going forward there might be a time when we realize oh well, there’s other type of data, it’s not necessarily time based but we want to capture and represent it the right way.  We’re not trying to be a super broad-based visualization platform. There are great pieces of software out there that will do that, like ‘SliceandDiceData’ and stuff like that.  In terms of directions we might have, there’s natural things that you might want to be able to do around a timeline, so look at a set of events and then look at some historical data as a background for that story.

Take the example of Bear Stearns; what’s really interesting is if you’re able add the background of what the stock was trading at for key points during this story, you can mashup what’s happening from a media perspective and then what’s happening from a data perspective. That’s very much in line with our vision around how time helps tell a better story so it’s a natural progression for us.

Question: Are there any plans for, in the future, automating the aggregation of data to tell these stories?

Derek: Yeah, so we collect and essentially build a huge database of events, we look at it in a couple of different ways.  The community layer is where we’ve started because it’s a great driver for just getting people to share what we’re doing and to tell their friends about it.  That’s the icing on the cake and it’s the stuff from the community that really makes the timelines shine.

Our approach is to look at different ways to connect to content.  Some of that will be indexing much in the same way a search engine would.  Some of it will be connecting to services, like with a mashup we built, but basically it’s a Dipity timeline front end on, and say YouTube back end, so you can search for a key word and it’ll return a timeline of the 15 most relevant videos that match that key word.  That’s an example of taking the best of both worlds.  You’re adding the human element, this broad based community that is YouTube, and using Dipity to pull and show the most relevant things that match that key word.  That’s one example of the API approach that we’re taking.

Question: What other kinds of mashups are you looking to develop in the near future?

Derek: We look at mashups as doing a couple of things.  It showcases the power of our API which we’re extremely passionate about. We’re a small company but we’re able to do amazing things in a short period of time. We’re a small group of folks and by putting an API out there and creating some showcase examples of what you can do, the hope is to ignite a community of developers to really go out and create.

It’s a great way for people to use the technology in a way that’s important to them.  We’ll continue to develop mashups we feel are interesting, to go around particular verticals and potentially those verticals may get integrated into a bigger Dipity, but right now we’re just viewing them as one-off exercises.  The first one, TimeTube, was designed to find limitations in our API, how easy it is to build on top of what we built and find holes in our product.

Question: On a more personal level, what’s your favourite Dipity timeline?

Derek: The Internet Meme timeline is pretty good. My favourite changes week to week because I always find something new or a new use of Dipity that someone has invested their time in.

The Internet video games timeline, that’s amazing.  The guy that created it, put it up there, left it open and people quickly started to get that they could go in and change things. He had photos, but people were scouring YouTube and different video sources and within a couple of weeks it was well flushed out.  It’s amazing to me you can just get a small set of people super passionate about something they create…it’s such a great product in such a short time.  It’s just a testament to the power of the Internet you know. I know that sounds hokey but it really is pretty cool.

Question: From a commercial perspective, what’s Dipity’s business model?

Derek: In terms of the business model, it’s pretty straight forward, what you’d expect from an Internet business.  We haven’t ruled out advertising on the site or a premium services model.  There are two reasons for that.  One – advertising is something that works best at scale; we’re obviously just getting started so ruling it out ahead of time isn’t really something we’re interested in doing.  And then the second – it’s about questioning whether there is a new model of advertising that works better around Dipity.

In terms of rolling out a premium service, again we’re new, we’ve got ideas and we’re getting feedback from the community around the features most important that are not in the product.  We’ll look to create break points in the product around storage or around particular features that attract people to a premium service model.  We’ve also had a lot of interest from organizations like companies, universities, etc., that are really interested in an organizational level of support for a product that requires some incremental development from us, so we’re looking at that revenue stream. Then as I alluded to earlier, if there is a particular use of the API that makes sense for us to monetize, then I think that’s something we’ll explore.  Right now we’re not actively looking to monetize the API.

Question: What is the most difficult part of being a small startup, and what growing pains has Dipity experienced along the way?

Derek: I’m used to a big company and with a big company you have the luxury of infinite resources and identifying ‘this type of thing’ is going to require ‘x’ number of people.  That’s great because you’re a large company. The reverse is true for us.  We’re a seed funded company, we’re a small group of guys and we’re hyper focused on what’s most important this week.  If we get off track and pulled off course for a bit, it’s really costly.  It’s costly to our users and it’s costly to what we can accomplish given the funds we have.

I’ve been amazed with how quickly we’re able to execute.  I have a good mix of  seasoned people and some junior people, so we’ve got people to point the direction out and say “okay, here are the things we need to do and we’ve got the right mix to go and execute against that vision.”  We need to be more nimble then a large company so if we make a mistake, there are no egos, we can say “hey, we kind of messed that up, we need to go back and fix it” and nobody feels like their personal ego is hurt; there’s advantages like that in running a small organization.

When you’re looking at starting a company, there’s a couple of different buckets of risk that you look at.  You know there’s technical risk, there’s execution risk, there’s team risk. The biggest risk for us and for any new company, is always market risk.  We’ve begun to eliminate market risk over the past couple of months or so and it’s been a really great feeling.  I’ve been confident about the other risks because I know the guys I’m working with, I know we’re all competent, can execute and we’ve managed to do that really well.

–

Thanks for reading and visit www.dipity.com for more information about Dipity.

It’s no secret that Google sees mobile phones as an emerging frontier for search; as smart phones (and carriers’ data plans) become more sophisticated, it becomes possible to interactively exchange data in new and innovative ways, while also allowing people to tap into existing sources of information, such as the Internet.  Google recognizes that the cell phone is developing along the same path that the personal computer did – it is a tool that we increasingly use to connect ourselves to people and relevant information, wherever we go. The question for Google then becomes, in what ways can it enable people by connecting them with the information that they need, as well as advertisements that provide relevant solutions.

The answer is Android – the open source mobile platform that Google is building (in partnership with 34 tech companies and carriers, under the Open Handset Alliance banner), to compete with Microsoft’s Windows Mobile, Blackberry’s OS, and Apple’s iPhone. Wired recently wrote a long, but excellent article on Android, which talks about its development, and how this mobile platform is expected to be a gateway for people to access Google applications (and ads) from their phone, in the most efficient way.  When it comes down to it, whenever you use a computer, people tend to use Google overwhelmingly to access or find information.  Google wants to make sure that as mobile connectivity improves, this holds true for phones as well, and that they are a dominant information distributor, rather than say, Microsoft. Should they enter the race late, Google would stand to lose market share to competitors like Microsoft, vying for a piece of a huge advertising market (estimated to be $11.3 billion by 2011).  Android itself is an interesting initiative that embraces the idea of being open, and the first phase of its $10 million contest is over, receiving numerous submissions from programmers who developed software for the platform.

But you knew all this you say, Android is nothing new!  Well what is new, is how Google is attempting to extend its brand, and create associations in the minds of the public, between Google and mobile phones.  If you check out the Google Mobile blog (started in November 2007), you can see that there’s been a lot of recent action, including the creation of a Mobile Tricks channel for YouTube, and a Google Mobile Community Group. This is a great example of the transformation that’s taking place in the world of marketing, where traditional ‘push’ based marketing is fading out, and companies learn to engage people in what we call ‘experience’ based marketing, and which fosters community growth.

Rather than telling people “we’re now all about mobile,” Google is creating a space for people to tell other people “Google’s now all about mobile…and we like it!” With the YouTube channel, people create videos that show off how they use their phones, and submit them for consideration via YouTube.  Participants create the content for free, discuss them, and also publicize the videos throughout the Internet; they benefit because they’re interested in the topic and if their video is good, it will be given a notable mention in the YouTube channel and Google Mobile blog.  Casual observers benefit because they get to learn some cool and entertaining tricks for their phones, and Google certainly benefits because anyone who checks out the channel will see their brand prominently displayed, related to a cool and people-centric contest. In addition, all web traffic to this page will be exposed to Google’s recently launched Google Mobile page, which is a centralized source of information that educates people about all the different Google tools available for mobile phones. Although the competition only began last week, some submissions have been viewed tens of thousands of times, while this video (pictured shown in this post) has been viewed almost 2 million times.  Sounds like a pretty good brand building exercise to me, at almost no cost!

As I wrap this post up, my question for you then is:
-    Can any company use this type of brand building strategy, or does the high profile Google brand name backing make this work?
-    Why do you think this is, or isn’t a good marketing activity?
-    What are some examples of other similarly effective online promotions?
-    How many times have I used the word Google in this post?!

I don’t want to rehash all of the arguments in their entirety, but rather focus on carving out a middle ground between the two POVs.

One one hand, technology is enabling a such a rapid increase in the volume of “units” being produced in certain categories (think: digital music tracks for sale) that what was previously the long tail is now being pushed into the “head” / blockbuster category based on one commonly used definition – the top 10% or 1%. I don’t think such units really belong in the “head” category.

On the other hand, I also don’t think they fit into the long tail anymore (which Chris defined in relation to availability in bricks and mortar outlets, a definition that needs to evolve in markets where b&m is rapidly decreasing in importance). This leaves them somewhere in the middle. Since the body is in between the head and the tail, I decided to go with that (after an embarrassing foray with the term ‘middle tail’) – could the body end up being more important than either the head or the long tail?

However, I realize what I just wrote might be clear as mud, so let me provide a numerical example that builds on the research.

According to the article, the entire music inventory of a typical Wal-Mart store is equal to about 10,000 tracks, which for the sake of simplicity we’ll say represents all the music options available to consumers in a pre-digital age. Let’s say you define the “blockbusters” as the top 10%, and the long tail as the rest – that would be 1,000 blockbusters, and 9,000 in the long tail, and you could map out the sales accordingly. Alternatively, you could argue that that this entire group of 10,000 represents the “blockbusters”, and the long tail is what was sold via concerts and indie distribution outlets. It really doesn’t matter too much, as you will see in a second.

Jump forward to the digital age. The paper in question used Rhapsody for their digital music analysis, which offers more than one million tracks – let’s just say an even million. Even if you redefine “blockbuster” to only account for the top 1%, this now equals 10,000 tracks – or the entire music selection previously available at Wal-Mart. If you use top 10%, it’s approximately 100,000 tracks, and thus captures 10x what was previously available to “ordinary” consumers.

This leads to a rather obvious observation: as the sheer volume of content available to consumers has increased so quickly, what might have previously been considered the “long tail” can now – statistically speaking – be counted as part of the “head”, if you use the percentage method. The HBR article notes the top 10% of Rhapsody singles account for 78% of plays (and the top 1% account for 32%), which sounds highly concentrated, until you remember – as Chris notes in his response – this accounts for 100,000 songs (or 10,000 for 1%). Does anyone really think there are that many “blockbusters”? Does the long tail really not begin until the 100,001st most popular song?

So rearranging those numbers a bit, consider the following argument. Let’s say that right now the top 1% represents the head – that’s 32% of sales. The bottom 90% capture 22% of sales, which I’ll call the long tail. In turn, that 9% jammed in the middle is capturing 46% of sales – which I’ll call the body. While I’d need further research to verify it, the cost of developing and marketing that 9% is likely significantly lower than the costs associated with the top 1%. Might this body of work end up being the most important (read: profitable) of all? Perhaps even representing the content that is so good it sells itself?

There’s obviously still an underlying definitional problem here – as content is constantly added and nothing vanishes, what is the top 10% today becomes the top 1% sometime in the future, and the dividing lines might have to be moved again. However, the underlying concept might be an attractive one – maybe it’s not the head or the long tail that ends up mattering so much as what’s in between the two.

This week’s edition of the Wikinomics Report Card will focus on General Motors Corporation (GM). In case you missed my first report card about Major League Baseball, you can find it here. Like last week, I will be evaluating GM on the Wikinomics principles of being open, peering, sharing, and acting globally.

Company Background: GM was founded in 1908 and is the world’s largest automaker and leader in global sales for the last 77 calendar years. It manufactures cars and trucks in 35 different countries under the brands Chevrolet, Buick, Cadillac, Pontiac, and many more. Under the strength of Alfred Sloan’s revolutionary corporate structure and leadership, GM was once one of the world’s most profitable companies peaking in the early 80’s with a U.S. market share of 45%. However, the legacy costs and complex accounting systems associated with the Sloan era have hindered GM’s efforts to create a more lean manufacturing process. Stiff foreign competition from companies like Toyota and poor strategic decisions like focusing on SUVs and light trucks in a rising fuel market has led GM to one of its weakest points in its history. Yesterday, its stock reached a 53-year low after Goldman Sachs changed it status to “sell”. GM is hoping that it can weather this storm long enough to introduce its new line of alternative energy vehicles like the Chevy Volt and reclaim some of its former glory.

Being Open: Traditionally, GM has been a very closed organization. Even internally, its different brands acted with a silo mentality. In the Alfred Sloan era, GM used espionage tactics to quell union uprisings and in the mid 20^th century, GM was blamed for killing American public transportation in the Great American Streetcar Scandal. In the 1990’s GM was accused of killing the electric car so that it could sell its high margin SUVs and trucks. GM had a fully functional electric car with the EV1, but scrapped the program entirely in 2003. Despite an offer of $1.9 million for the 78 EV1s already produced and a waiting list of customers, GM stripped the car of its recyclables and crushed them. However, in recent years, GM has made great strides in opening up. GM’s chairman and CEO Rich Wagoner admitted that the worst decision of his tenure was “axing the EV1 electric-car program and not putting the right resources into hybrids. It didn’t affect profitability, but it did affect image”. GM’s R&D chief Larry Burns said that “if we could turn back the hands of time, we could have had the Chevy Volt 10 years earlier.” Admitting this mistake is a big step in being open and acting with integrity in the new era. GM has started by being very public and transparent about its production plans for the Chevy Volt. Also, GM is one of the few car companies to have higher executives and “Car Czar” Bob Lutz blog on a regular basis. GM continues to act more openly, it should be able to repair its damaged reputation.

Grade: D+

Peering: Although peer production of automobiles is very difficult with today’s technology, GM has been able to leverage peering very well in its marketing efforts. From our paper on the 8 Net Gen Norms:

Net Geners are also helping develop advertising campaigns. GM invited consumers to a newly built Web site that offered video clips and simple editing tools they could use to create ads for the Chevy Tahoe SUV. The site gained online fame after environmentalists hijacked the site’s tools to build and post ads on the site condemning the Tahoe as an eco-unfriendly gas-guzzler. GM didn’t take ads down, which caused even more online buzz. Some pundits said GM was being foolhardy, but the numbers proved otherwise. The Web site quickly attracted more than 620,000 visitors, two-thirds of whom went on to visit Chevy.com. For three weeks running, the new site funneled more people to the Chevy site than either Google or Yahoo. Most importantly, sales of the Tahoe soared.

This hugely successful campaign generated a lot of buzz for GM at a very minimal cost. With GM’s negative operating margins, cutting down advertising expenses through peering could greatly reduce costs and improve the bottom line.

Grade: B+

Sharing: GM has done a great job involving itself in joint ventures and collaborative efforts over the last few years. GM is the majority stakeholder in the Korean automaker Daewoo, and has collaborated with many of the world’s auto manufacturers. This includes product, powertrain and purchasing collaborations with Suzuki Motor Corp. and Isuzu Motors Ltd. of Japan, advanced technology collaborations with Toyota Corporation and BMW AG of Germany and vehicle manufacturing ventures with several of the world’s automakers including Toyota, Suzuki, Shanghai Automotive Industry Corp. of China, AvtoVAZ of Russia, Renault SA of France, and most recently, UzAvtosanoa of Uzbekistan.

More importantly, GM has decided to outsource its battery development for its future cars like the Chevy Volt whereas Toyota has decided to develop their battery technology internally. Toyota’s closed attitude and lack of collaboration could eventually lead to a technology gap between itself and GM. While Toyota has profited from selling its superior hybrid software and technology, they may lose out to GM in the future if they remain on this path.

Grade: A-

Acting Globally: GM’s ceo Rich Wagoner expects that 75% of its car sales will be outside the U.S. within a decade. GM is the largest overseas automaker in China and is GM’s second largest market after the United States. After growing sales by 27% each year for 5 years, the GM’s China sales grew 19% last year. This success is largely due to the success of their joint venture between them and Shanghai Automotive. GM is building a new research centre in Shanghai focused on hybrid technology. This is GM’s first venture that is completely separate from Shanghai Automotive. The announcement coincided with the Chinese Government’s powerful National Development and Reform Commission disclosing that it would provide subsidies to alternative fuel vehicles under certain conditions. One major condition was that critical parts must be manufactured in China. While Toyota assembles its cars in China, the critical parts are manufactured and shipped from Japan. This should give GM a big head start in selling hybrid vehicles in China. If GM can repeat its success in China in other emerging markets, it may be able to keep up with Toyota’s sales in the future.

Grade: A-

Overall Verdict: GM is in a very deep hole right now. They are losing around $2 billion a month, and even the new initiatives outlined above won’t act as a quick fix. However, they are building quality cars once again, and seem to be making a lot of great moves. Since the stock is at a 53 year low, this (more like a year from now) may not be a bad time to invest in some GM stock. If the Chevy Volt goes into production on schedule in 2010, high gas prices should propel its sales, and more importantly GM’s corporate image. If 10 years from now, 75% of GM’s sales come from outside the U.S., and its legacy cost issues are solved, they could reclaim the crown from Toyota.

Overall Grade: B

What are your thoughts? Could you see yourself driving the Chevy Volt (above) in 2010?

For about as long as corporations have been the dominant form of value creation in society, they have been viewed as enemies by social activists. Naomi Klein’s No Logo documents the rise of a social movement in the 1990s that is specifically anti-corporation. The 2003 book and film The Corporation has taught a generation of socially concerned youth that corporations act, by flawed design, like psychopaths. “The corporate model is broken and must be changed,” is perhaps one of the most unifying mantras across the diverse range of social activists.

And here’s this guy Ben, starting a network for social change, and he incorporated it? Did he not get the memo?

Actually, I believe that this is an example of a much larger trend that is remaking the model of the corporation, blurring the line between businesses and NGOs, redistributing corporate power from shareholders to communities, and marking the beginning of a post-capitalist society.

Change.org isn’t about making money, Ben told me, but it has equity investors and a “sound business model.” The site is free and has no advertising. But rather than support themselves by raising money, they charge NGOs for some higher-end consulting services, and use that revenue to pay for the rest of their work. The hope is that their business model will allow them to become completely self-sufficient.

Change.org acts like a business, and has a business model that could be used to make money, but chooses to be concerned with social rather than monetary profit. The same idea is found in micro lending: small loans given to entrepreneurs in developing countries. These loans make money, but more importantly, they create social value.

As NGOs become more business-like, businesses are becoming more socially-responsive, because their power is being redistributed from shareholders to communities. Wikinomics argues that businesses’ value is increasingly coming from their communities. As corporations own fewer and fewer physical assets and lose their ability to control their intellectual property, employees and customers are able to bypass shareholders and recreate a business in a new image overnight. This is even more true in an era where value is created by prosumers and outside-collaborators.

In order to keep their communities, businesses need to make the case that they are contributing to positive social change. A global talent crunch is forcing corporations to compete over employees, and one of the biggest sells is providing jobs that have a meaningful social impact. Customers are increasingly making socially-informed purchases, and increased transparency is giving them more information to do so than ever before.

Naomi Klein and others saw the rise of socially-concerned brands like Starbucks, Apple, Nike, etc. as a corruption of progressive values. But what has been overlooked is the fact that, in creating these brands, these companies have handed over power from shareholders to consumers.

When Greenpeace launched its GreenMyApple campaign to get apple to become more environmentally friendly, they did not attack the company, but created a community of appreciative Apple customers who wanted the company to do a better job at espousing their values. And guess what, they won.

We are moving to an era where NGOs behave like corporations, social activists collaborate with the businesses they are trying to change, and companies get their value from their ability to attract collaborators by showing how much social good they are doing. The corporation will survive, but it will be controlled not by the owners of capital (shareholders), but by the community it serves.

The problem, however, is that most people will respond to that by saying “I have no idea how to make a game” – and if you go to the game creation details page, most people will be long gone right after they read “Visual C# 2005″ and see what they have to download. It all seems quite confusing if you’re not, you know, a game designer. However, if you want to make a far easier foray into game making, you can now go to Sims Carnival – where users can create their own games on the platform EA provides, with the site providing all kinds of helpful tools along the way.

I’ve just started the process of making my own game (Hancock’s shoot em up), and it is remarkably easy – you simply register and answer a series of questions that are provided, and next thing you know you have a game. Admittedly, the product that emerges at the end of this isn’t particularly good – my game right now has a bunch of boxes floating around, and evidently I have to shoot the black ones before they hit the green ones, I think - but I’ve been presented with a series of tools that can make it better. The first that I’ll likely try is the Swapper, which allows me to swap in any images I want to replace those pesky boxes. If I want to do more than that, I can download the game (or anyone else’s for that matter) and customize it as I see fit… and if I really get going I can download the Game Creator and do even more.

What I really like about this is the element that’s missing from a lot of prosumer platforms – you don’t have to know what you’re doing to get started, and they make it very easy to create and customize something fun for yourself (who amongst us couldn’t add a few choice pictures to a shoot-em-up game and have a blast?), but they also allow anyone that gets interested to start creating better and better games. Moreover, to entice game creators better than I, developers can upload games they’ve created outside the site, while retaining all rights and branding (as reported in this TechCrunch article). There is also the requisite contest to encourage submissions.

That’s a great prosumer platform – something for the best of us, something for the rest of us, and a relatively open platform that allows us to collaborate and make each other’s games better. Now back to shooting those pesky black boxes…

[June 19th addition: if your interested in how developers can make money off of flash based games uploaded to such sites, check out Mochi Media - a new start up that's trying to help them do just that].