A recent post by Mark Bertils on O’Reilly’s TOC blog captures in amazingly condensed and insightful prose a development all publishers will be responding to for years to come: the emergence of the social economy and its importance to industries that create finished goods.
In the social economy, users rule, and their connections, especially around content sources, will be a major part of what publishers can monetize. With things like Facebook Connect:
[Users] can bring their Facebook-endorsed identity (and relationships) with them as they travel the Internet. . . . It is a further claim on the permanence and importance of these platforms. And it is the clearest marker yet that the social networking boom of the last five years has beget a new Internet-wide folks-economy.
David Silverman, writing on the Harvard Business Publishing “Voices” blog, echoes some of these thoughts, but arrives there from a different starting point — the art world, and supply and demand.
Silverman’s premise is that while supply was problematic (the scarcity model I’ve talked about here before), demand was never met. This allowed for a different kind of economy to emerge — one based on pent-up demand, allowing for high prices for finished goods and the marketing of desire. But now that we’re in an abundance model with digital information, things are changing:
[T]hat’s why we’re seeing the great intermediaries in this process–record labels, movies studios, book publishing companies Borders, etc.–start to shrink, or even fail. They relied on demand being so pent-up they didn’t really need ot work very hard ot match tastes, to connect artist and audience. But now that demand can in fact be sated, their lack of connection to either artist or audience may doom them.
Now, value will be driven by what Silverman calls “intimacy” — the connections in a social economy. Delivering relevant information to connected groups and allowing them to experience it together to further reinforce the intimacy they’ve achieved around a topic or personality will drive value.
A major issue in this theory is scalability. Intimacy doesn’t scale. Can you have a business based on an approximation of intimacy?
[Facebook’s] methodically turning their user base into a huge marketing tool. Remind me again, why am I a part of all this? Ah, yeah: because Facebook is fun and addictive. That’s how you do it, folks.
Tomorrow, we’ll take a look under the hood of Facebook’s game-changing advertising system.