Economics of Social Media

Arrives at LAX

Looking around the room I saw nothing but trendy pinstripe suits, Banana Republic blue shirts, and $200 haircuts. It looked like Wall Street auditioning for an Apple commercial. I was invited to the first Economics of Social Media conference (EconSM) because of a post I wrote examining how serious online media sites (like Global Voices) can ensure financial self-sufficiency after the first few years of foundation grants and corporate sponsorships. I was skeptical that I’d find an answer, but this seemed like the right place to look. But now, getting settled into my seat as the CEO’s on stage introduced the themes of the conference, I wasn’t so sure. On the second page of the conference booklet was an ad from Yahoo. It read: “socializing for money is usually frowned upon. At Yahoo!, it’s encouraged.”

The night before, I hung out with an old high school friend, D. About 13 years ago we took my parents’ car out and got in big trouble when they returned from vacation a day early, we got chased around Orange County by low-riding gangstas, we figured out how to change our report cards before our parents saw them, we’ve seen each other cry, we’ve been through it all. And those bonds of memory and time keep us together even if we don’t have much in common anymore. D is out to make money; to make money and to have a good time. Los Angeles is perfect for him. As we drove through Hollywood’s lonely weeknight streets looking for a trendy place that still serves food at 11 p.m., he listed off the 50 or so celebrities he’s hung out with since we had last caught up. I recognized a couple names.

“It’s all about who you know and how many people you can email.” He was explaining his new business: selling vendor booths at a lifestyle expo he’s organizing. “And then of course, you’ve got to get some real celebrity speakers. They call them magnet speakers, because once they’re booked, then everyone else wants to come too.”

D is a master at networking. He never forgets a name, nor a face, nor a biographical detail. In all honesty, he probably remembers more about my life than I do. And using MySpace, email, IM, and text messaging, he’s been able to build a huge mental database of the right people for all the right situations. Just in the few hours I was with him, he was able to raise $8,000 from friends to help fund a small food booth at Coachella that might make $10k in profit over a single weekend.

Session One: CEO’s Speak Up:

Rafat Ali | Barak Berkowitz | Michael Birch | Tariq Krim | Richard Rosenblatt

Bubble 2.0‘ everyone is calling it. The Internet bust (which, thank god, made rental prices in the Bay Area somewhat reasonable again) is fresh in everyone’s mind. The difference now, of course, is that some online websites are starting to make money: MySpace, Facebook, WordPress, MovableType, and the dozens of others that have been bought out by either Google or Yahoo. Twitter is clearly the latest success story and it will most likely be sold to some larger online company for an overvalued amount. The thinking goes, get the huge userbase first and try to figure out a way to make money off it later.

Much of the first session’s conversation focused on widgets and digital identity. Observers have noticed that internet users like to have one central place for their online profile. For the majority of people, that central place is either Facebook or MySpace. For others, like myself, it’s their personal blog. But the point is, we all want a “digital home.” Widgets than give us a way to import our other online activities (our pictures, music, movies, books) onto our main profile page. One speaker called MySpace the ‘new college dorm wall’ where we try to assert our identity with digital versions of college dorm posters.

Session Two: Social Media Meets Marketing:

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Jimmy Gutterman | Simon Assaad | John Battelle | Shawn Gold | Tina Sharkey | Rishad Tobaccowala

It’s interesting that the question of ethics never entered the conference discussion. There was no question of whether viral/conversational marketing was acceptable or not, the question was how to measure it and what to pay for it. As one panelist put it, comparing viral marketing to Google Ads, “so far, no one has developed an algorithm for conversation.”

Two of the panelists seemed like more than just marketing talking heads. John Battelle, author of The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture, is someone I’ve come across lots of times. Rishad Tobaccowala isn’t, but his arguments about how established corporations should embrace new media struck me as sensible.

Marketing departments of major corporations like to think that they are solely responsible for the reputation of their products. The logo they chose, the colors they used, the brilliant marketing campaign with 18-year-old models in low-riding jeans. They dictate the personality of a product, which makes consumers want to buy it.

But Tobaccowala (which, interestingly, means “tobacco seller” in Hindi) tried to reframe the conversation. “The most important part of marketing is listening to your customers.” Indeed, why do companies need to tell their customers anything? Why can’t they just listen to them? Battelle added, “no one owns a brand, but companies’ marketing departments are their ‘chief conversationalists’ – engage your supporters and answer your critics and detractors.”

This is exactly what Doc Searls has been saying for years now. Fortunately, newer, younger companies are starting to get it, which eventually will force the old giants to adapt if they want to stay competitive. As Tobaccowala put it, ‘most companies don’t need marketers any more; they are already self-marketing, we just facilitate that.’

The conversation then turned to SecondLife, which all the panelists agreed is, so far, a bunch of hype. One panelist said that Second Life is usually empty except for marketers. I was immediately reminded of Jose’s post about Second Life Brazil – it seemed crowded out with advertisers before any sense of community or purpose could be established.

Social Media Meets Hollywood:

Staci K. Kramer | Ilene Chaiken | Alan Citron | Carson Daly | David Eun | George Kliavkoff

The tone for this session was immediately set. A bunch of experienced TV insiders were going to let us in on how they’re trying to integrate their programming with the Internet. Carson Daly was apparently the stock celebrity who lectured about how the Internet is the most accessible and searchable talent agency. He explained that he has booked bands to his show after just discovering them on MySpace and that encouraging viewers to get more information online doesn’t take them away from the TV set, but rather, gets them coming back. NBC ‘Chief Digital Officer’ George Kliavkoff also focused on “creating a cycle between the computer and the living room sofa.” I’m not much of a television watcher myself, but I have seen others go to the internet at commercial break to get more info about a particular episode and then come back to the TV.

All of the panelists kept lauding the fact that any Joe Schmoe can make a song or YouTube video, put it up on the Internet and get seen by someone ‘as important as Carson Daly.’ How it is so great that there is this new stepping stone between the ordinary masses and the stars of Hollywood.

Then, finally, someone asked the exact question that I was about to: “You are all talking about the internet as though it’s nothing but a big audition space to get on TV or radio. Do any of you see the Internet as its own medium which is a threat to TV and Radio?” Open Source Radio likes to call itself a “weblog with a radio show” and I really think we’re going to see well-produced programming move in that direction over the next 10 years. The internet is, frankly, much cooler than TV, radio, and print and has much more room for advancement.

My hope is that the notion of celebrity and fame will also change; that less people will do anything to be famous for 15 minutes and more people will work hard for what David Weinberger calls “being famous for 15 people.”

Social Media Meets News:

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Tad Smith | Vivian Schiller | Rich Skrenta | Ken Stern | Kara Swisher

Again, with the possible exception of Topix Co-Founder Rich Skrenta, these were all media insiders discussing their experiences with the web. The ballroom was mostly empty as all the cool kids were in the parallel “Social Media Meets Music” session.

This was the most relevant session to my own work and interests, but I found little of value as most of the discussion focused on the same rehashed topics that have been talked to death over the past few years. Journalism vs. blogging, will newspapers survive, is their a place for quality content on the web, will reporters find new jobs, etc.

There were few answers and many shrugs, but Ken Stern did make the point that “it’s a good time to be in non-profit journalism, which is why everyone is discussing it as a model for journalism.” Indeed, the costs of running a media outlet are falling to very little while philanthropic and corporate sponsors are excited about the idea of innovative online journalism and all the free marketing that comes with it.

One of these days I’d like to see a conference session specifically discuss the repercussions of having media outlets funded by foundations rather than the market.

Which is to say:

There were two other sessions to close the day: “Social Media Meets Mobile Media,” which made the very obvious and apt point that the next space for social media is the cell phone, and “Social Media Meets Deals,” which set the stage for the real reason most people were at the conference – to get investing for what they believe will become the next MySpace. Unfortunately, my computer stopped working just then and I lost my notes for those two sessions.

The conference was very well produced with lots of flashy lights, tech assistants, and free stuff. There was nothing of the amateurish mistakes that characterize most blogger conferences. And that’s probably because this wasn’t a blogger’s conference. This was a place for media insiders, most of whom have taken to the net because it’s been good for their careers. Dozens of times throughout the day I heard the annoying use of ‘eyeballs’ to describe the millions of internet users just like you and me who pay for services like Flickr via subscriptions or pay for services like MySpace by creating content which then attracts advertisers.

Which brings us to an entire other level of questions. Is it OK for sites like YouTube, MySpace, Facebook, and WordPress.com to make lots of money for content that they didn’t produce?

Steven makes a very persuasive argument that we shouldn’t be uploading our text, photos, music, and other creative works to for-profit websites because we’re making them money off our work. But then, don’t those companies deserve to make some profit for the time they’ve put into developing websites and tools and for paying the hosting and bandwidth fees? And what about for users who don’t want to take the time to learn how to build their own website or who don’t have the money to pay the $10 a month that most hosting services charge? Don’t these websites make self-publishing easier and more accessible to more people?

A criticism can also be made of Global Voices. Much of the value of the website comes from the unpaid bloggers we quote and translate and the daily contributions from our volunteer authors. While we’ve been wanting to pay those contributing authors for some time now, the money hasn’t yet come from sponsors to make that a reality.

What we’re starting to see now is a middle tier of websites pop up, giving users more control over how they want to publish their text, music, photos, and video. For example, a freelance documentary filmmaker could publish her film on YouTube for free and get lots of exposure, but not make any money. Or she could create her own website, stream the video so that it’s not pirated and run ads to make a profit. Or, as a middle ground, she could use a service like Revver to publish and host her documentary for free and share profits. Of course, she has less control about how the video is displayed and she makes less of a percentage on the ad revenue, but the benefits might outweigh those factors.

Beyond Broadcast

To borrow a phrase, we are way ‘beyond broadcast.’ Now anyone can make compelling content – be it text, photography, music, audio, or video – and distribute it in various ways. TV, radio, magazines, and newspapers still have the largest audiences, but the internet, mp3 players, cell phones, and outdoor multimedia displays are gaining leverage as the endpoints of content creation. The people who are making the money are the ones who are situating themselves between the content creators and the content consumers, or, as they see it, between the fingers on a keyboard and the eyes on a screen.

8 Comments

  1. Tried to leave an audio comment but Software Update was eating up my bandwidth. Please elaborate on what you mean by “free stuff”.

    Reply
  2. Remember how I was telling you that I needed to find the right bag to hold both my camera and laptop? No longer.

    Reply
  3. Thank you for reporting on this.

    As a content creator (video shorts, photography), I’ve made the decision to go for audience by using open licenses on YouTube and Flickr. My purpose in making art isn’t about making money (and usually when it is, it seems to lose its core). Part of it is that the effort it would take to market my own work can’t return any profit (lets take that as a reflection on the art market, not that my stuff sucks).

    I think it’s completely reasonable that companies make money for providing services free to users. To have real control over ones personal site, you have recurring payments for domain and hosting. And I don’t generate enough traffic to recoup those costs in sensibly placed google ads. You, on the other hand, probably could.

    The interesting part to me is the journalistic side. News makers know they need to get “2.0″ but know one seems to have a proven “how to” list for them, so they’re all taking stabs at it. It seems like news organizations need to figure out how to open the doors to the public, letting them produce/report stories and pay them for it, like freelancing. It would be great to see the huge corporations get that amateurish quality that community stations have, because broadcast audiences like seeing ‘real’ people.

    What will this blog look like in 10 years?

    In 10 years, will non-trained people be performing journalistic acts with their [ insert name of future personal media device that can broadcast via broadband ] on the side of the road as the first person on-scene of an accident? TV stations would love that footage. Where will those clips go? Will a site collect them and license them? Will the company that manages the [ insert name of device ] create personalized uploads pages and host all the media?

    Reply
  4. 10 bucks a month

    Sorry, that should ready ’10 bucks a year’. :)

    Reply
  5. Interesting post and discussion. I find myself on the far end of the digital home, a digital homebody. I’d rather not have to deal with all the crap around hosting my own site, but I want all my junk in one location. Some of that is ease of use. But ultimately, I don’t really trust a company to manage my content, even though they would probably do a much better job of it.

    Reply
  6. David,
    great, informative post. audio comment didnt work for me either.

    Reply
  7. Steven,

    Like I said, I agree with you completely and for the next couple years I’ll be doing all I can to spread the use of open source tools for content creation and production. However, while GIMP, Audacity, and Jahshaka are great, they’re not installed in most internet cafes around the world. I’d like to see open source programmers start moving to the web and thinking offering online image, audio, and video production tools.

    ChrisN,

    Can you imagine how pissed off the old school del.icio.us and Flickr users are going to be if those sites become Microsoft owned?

    Ndesanjo,

    Thanks for stopping by. I’m attaching an audio comment to this to see if it works. Sometimes the uploading goes really slow for me too.

    Reply
  8. Steven,

    I only said “content creator” because it was a shorter way to say photographer, filmmaker, writer, artist, etc. But I see what you’re saying, nonetheless. Feature film (Tarantino) and music (Timberlake) are solidly established and extremely commercial formats today, so it makes me ask, “What kind of online “content” (meaning interactive slideshows, podcasts, Flash animation, etc) will establish itself as commercially viable?”

    ChrisN,

    I agree 100% with you in philosophy, but am willing to compromise for the time being. Maybe I’m a sellout ;) but Flickr has facilitated a lot of rewarding sharing (lots of comments, encouraging interactions, networking, etc). I use Creative Commons licenses for everything, and it’s allowed my stuff to travel. Today, I took a couple minutes to count up all the different venues that have opened just from Flickr:

    I’ve been published on CNET.co.uk, an online publication at MIT, a student magazine in Sweden, a travel book, an exhibition in Spain, another in New Zealand, a German magazine, four requests to NowPublic.com, two independant documentary films, a non-profit magazine in Washington, a corporate office in Tijuana, and a community publication in New Jersey. My only financial gain was $150 from the corporate office in Tijuana. I got a request from Travel Girl Magazine (commercial publication that didn’t fit my CC license) but they weren’t willing to pay so I said “no.”

    Oso,

    At the Rensselaer Polytechnic Institute arts department, there was talk about migrating away from Final Cut, Protools, etc and to only teach using open source programs. I don’t know how much progress they’ve made in the past few years, but it seemed like an honorable goal. Someone needs to fund a non-profit think tank to solve all these problems :)

    Reply

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