Why paid-for ads are incompatible with the web

Facebook - and social networks like it - succeed when they make it easier for people to form communities of purpose - groups. They lower the transaction cost of finding each other.

In the case of Facebook they have removed the heavy-lifting of manual discovery by using profile data and content shared by individuals to 'auto-suggest' friends you should connect with.

LinkedIn has similar functionality.

It makes sense. (image, Getty, via Zemanta).

(This paragraph updated May30, 2010 in the pursuit of clarity - on the suggestion of Jay Rosen)
Lowering the transaction cost of group forming is fundamentally what the internet is for. This becomes ever more evident, even for those who would have you believe the web is one large conduit for content/knowledge sharing, when you add consider the dawning of the ‘web of things’. In the web of things each element of content is another node capable of expressing its meta data to all other things and all other people. Both content and people find each other – forming nodes in a group; a community of purpose.

The problem for the likes of Facebook is that lowering the transaction cost of group forming is incompatible with charging for advertising.

How so? You have to attempt to create an artificial scarcity in our ability to discover each other.
ie An advertiser must pay to connect (via the brutal interruption of an ad) with a person for whom their advert is (at least they believe) relevant. The advertiser is paying a third party, a mediator, for the connection, the ability to form a group with you (he'd obviously like the group to be rather more than just you and he...)

Why can't the advertiser just go searching for people who will find their product relevant?
Ah, that'd be why the artificial scarcity gets deployed. To prevent them from doing precisely that. It is the flipside of the Facebook privacy issue.

Privacy - or who controls who gets to connect with whom - is the artificial scarcity Facebook relies upon to create value for its ads (and it is now the clear and dominant leader in display advertising online).
It's got there through artificial scarcity. But the web - and its driving group-forming purpose - equates to the imperative to go round artificial scarcity; barriers, paywalls, copyright etc

I think Facebook understands that and, in its constant push-back against privacy, is seeking to remove the artificial scarcity it has created to seek new business models ('Like', for example, or even the platform-thinking solution I have previously suggested).

But to return to my original thought, ads are always an example of one party charging another for access to connect. In the group-forming world of the web, mechanisms to limit that access (create scarcity) must always be artificial. So they can only ever enjoy a limited lifespan.

Artificial scarcity has no future on the web. And without that, online advertising has no future either.

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Facebook is not a media owner - it's an enabling platform

Image via CrunchBase

The whole Facebook privacy thing reveals a large strategic problem Facebook has created for itself.

It has become popular precisely because people feel they can trust in the control over the level of sharing they have - and the limitations on what each individual regards as 'going public'. For most Facebook users going public means sharing with friends. And for most Facebook users friends mean friends (which is why the vast majority don't have hundreds).

It's structurally a collection of hard-edged networks - silos - self-limiting communities rather than the adhoc, fuzzy-edged self-forming communities of the kind that Twitter (and the blogosphere for that matter) enjoys. It was built for privacy - so the hard-edges are a natural outcome.

I have written about the risk Facebook has built into its model, previously: Hoarding Data Can Seriously Damage Your Wealth and How Twitter is Going to Beat Facebook

I think the guys at Facebook understand this problem more and more as they scale. And I think that's why they keep introducing the Twitter-like conversation elements. But it's also why they keep pushing what they can get away with on privacy.

While I do believe in the longer term our notions of private/public will shift over time, that's not what the vast majority of their 500m (that's a guess) users have signed up for. So when what they, very seriously, regard as their private data starts getting used for FB's own purposes - serving unwelcome ads, for example - things kick off.

The guts of the problem, it seems to me, is that Facebook is developing business models as if it's a media owner. ie we've got all this great content - let's sell ads on it. Let's flog wasteful, ineffective ads on it (remember kids, click-thru rates are somewhere down round your ankles, even in uber-targeted Facebook-land).

But Facebook isn't a media owner. All the media on it is yours. You made and shared it. It's yours not theirs.

Facebook is an enabling platform. Indeed it has the potential to be a collection of any number of enabling platforms. And if it could only start believing that (Zuckerberg and co must know it) then it could start to earn a crust in an appropriate way.

When it recognises that it'll spot its business model. And it sure as hell ain't ads.

It's much closer to this kind of thing...

Facebook needs a business model in which it is working with brands and orgs to bring together people who care about the same issues to work together to fix them - and to enable them - creating real RoI (making stuff and making stuff better - think Salesforce-style Dell IdeaStorms) rather than messaging the hell out of the harvested eyeballs (that'll be ads).

And only Facebook has the data through which it could find people who care about the same stuff across all the friend-to-friend silos, and reach out to them to bring them together to surface the wikifixes for products and surfaces the brands need. No one else could do this.

That's quite some competitive advantage.

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Will I see you at Being Social?

I'll be attempting the equivalent of the Reduced Shakespeare Company tomorrow when I'm one of four keynotes speaking - very quickly - at Being Social.
Don't be late (we kick off at 1:45pm, registration at 1pm) - and don't blink - you may miss me. I'm talking about The Death of Advertising (at least a 7min summary of it).
Seriously; scheduled time for my speaky bit is 2pm. I'm then part of a panel straight after with my good friends Antony Mayfield and Chris Thorpe et al. We'll be talking about “How Social Media is changing how we communicate”.

The full slides in support of my speaky bit (in case you need to go back and fill in the blanks) are as below. Tommorrow I'll be focusing on the end section - discussing the need to change the focus of innovation.

The Death Of Advertising: Omexpo Madrid 2010

View more presentations from david cushman.

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It Was Twitter Wot Won It....

There are many preparing to put TV back on its pedestal thanks to the perceived influence of the Leader's Debates on tomorrow's (May 6, 2010) UK general election.

But just before we get too excited by a resurging all-powerful broadcast medium, let's pause to think about what's going on here.

The leaders debates have acted as social objects. There are many more people who have been influenced by the conversations of their peers in response to the debates than can possibly have been influenced by watching the debates directly themselves. (Image courtesy Dean Terry)

Influence in isolation is a tough ask. We derive our understanding, our opinion of, our view of - our emotional response to, the leaders debates not through our direct individual experience of them, but through our social interactions with those around us.

The value of a social object is in the interactions it inspires - far beyond that first-generation direct encounter between user and object that we had broadcast at us in our lounges.

Don't believe me? Then why does one group see David Cameron 'winning' a debate while another calls it clearly for Gordon Brown? The content was the same for both sets of observers. The qualities of the social object are not intrinsic in it; they are extrinsic in our response to it (recommendation is in the eye of the receiver). The qualities of the social object are generated by our social interactions.

Which is why the biggest impact on the election result is in the interaction between peers - made so rapid and easy by the social tools at our disposal.

It is not TV wot won it - victory, if it derives from anywhere, is overwhelmingly to be found in social media's ability to connect and amplify our social selves. The ubiquity and simplicity of those tools is what has changed since previous elections.

So it was Twitter wot won it, it was Facebook wot won it. It's your friends wot won it.

We're all publishers now, My Sun.

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Platform Government cuts costs AND improves services

Who ever wins, loses (or draws) the UK's General Election next month, we are in for a world of pain.

But that may equate to the single biggest opportunity we've ever had for fundamental, structural, governmental change (not the small c 'change' you may have heard the politicians tell you they want - theirs is the kind of change which leaves them in both command and control).

The leaders can tell you they will cut a smidgeon here to invest a little there but the reality of the burden of the UK's record breaking deficit and debt is that we must expect both a reduction in services AND an increase in the amount we all have to contribute for them.
If you had a contract between you and UK plc you would be quite within your rights to tear it up and take your business elsewhere.

Unfortunately we don't have that option (yet... the when of that 'yet' is quite another story which we must leave for another day. Suffice to say the networked world doesn't recognise geo-political borders).

Government, does however have an option which can both better target resources AND engage voluntary effort which will have the net effect of both cutting costs AND improving services.
And just as businesses require crisis to change (excellent performers, or flat-line ones like the Ad Industry tend toward head-in-the-sandism) so perhaps our crisis of cuts and tax rises will provoke just the kind of strategic shift in how we govern ourselves that we so clearly need.

I'm talking about Platform Government of course.
To reiterate: an organisation should use its available resources to discover people who care about the same issues they do, bring them together, surface what they think needs fixing and work with them (enable and join with them) to fix it.

Government - or 'resource allocation against the needs of the people' to give it its full name (ok, that's my definition) has:

• Never had a better set of tools to discover the real time needs of people.
• Never had a better set of tools to engage with people.
• Never had a better set of tools to enable people. I'm talking about social networks, technologies and tools of course.

Government must be redesigned to meet the needs of, and take advantage of, this networked world.

Our current process of Government, like mass media, has been built to serve the lowest common denominator needs of a mass production world. It's resulted in one-size-fits-all policies, resource allocation (and, incidentally, political parties).

That world is ending.

Now we can all find people who care about the same stuff we do in real time. We can come together to discuss an issue. We can surface what needs fixing. And in engaging in the conversation we discover that we care enough about this thing that we are prepared to act to make it better (at least enough of us to make change). The Government can be a platform for exactly this kind of collaborative innovation.

Apply this to things such as policy development: Instead of a small group of Government appointed experts beavering away; share the aim.

• Expect that there are more people outside of government who care about the issue than inside.
• Expect that there are more people outside of government who are more expert than those inside.
• Expect that will be the case with every single issue confronting the UK.

A platform government approach would open its doors to that freely given expertise and insight.

And how about that issue of resource allocation? Ongoing online listening will not only reveal where the people who care about each issue are (so you can invite them to participate), it'll also reveal what the issues that matter are, where, and in real time. And it'll reveal this in a long-tail, rather than lowest common denominator, way - ie it will reveal all the niche interests that need serving, rather than the single biggest need.

The result of this is a wikifixing approach to resource allocation - to make Government services a better fit with actual, real-time need. That equals less waste and more effective services for more of the people they are meant to serve. Real efficiency.

The flipside (other upside of this remarkable win-win) is that in engaging people in the change they want, you get an army of volunteers to make the change happen. More people willing to take responsibility instead of leaving it to 'the government' to sort out. More people willing to put their action where their conversation is.

And that means better services can be delivered at lower cost because more of us get involved in making, sharing and delivering them.

We could maintain taxes at current rates, provide better services at lower cost, and pay off that deficit.

Oh, and we'd also end up with a Government people felt part of - which is kind of a good thing, since it was meant to be ours all along.

Who knows, we may even start trusting politicians again? Ok, maybe that's an ask too far...