Andres Hervas-Drane
Begins by noting the long tail in the market share of products. There’s empirical evidence that this is happening online. Why there? Standard answer: Supply side. But he wants to look at factors on the demand side that can affect this distribution.

He sets up a case where consumers have difference preferences and come to the market uninformed. In the offline world, search happens through word of mouth. They can search with evaluations or with recommendations. Recommendations come from consumers who searched with evaluations. Word of mouth results in a high concentration of sales.

Almost a third of Amazon’s sales are generated by recommendations. These are generated by users as meta-content, finding consumers who have similar preferences. This is taste-matching and it reduces sales concentration.

Then there are “artistic markets”: that increase the demand for niche producers and results in long term cultural variety.

Peyman Faratin talks about a case study of prediction markets. His main point: Scarcity is at play even in the UGC system. The new scarcity is of attention.

An incentive engineering problem is at foot in prediction markets. When you can’t bet real money, the incentives go down. The reward streams are delayed. You have to search for the market. There are significant transaction costs [which he goes over in some detail, but too hard to capture briefly…sorry]. That’s why prediction markets aren’t going very well; they’re lonely.

Solution: Reward the big hitters. Let them transfer their reputations. Give them content management rights. Rank markets and reputations. “Invisible hand of the algorithm: Recommendations.” Use widgets to let the market come to the user. [I missed the end of this. Sorry!]

Chris Derllarocas talksabout “Your Operations hvae become your New Marketing.” “Every customer is a potential brand ambassador or a lethal bran assassin.” E.g., in 2006, Comcast spent $100 M in advertising, wiped out by the youtube of a sleeping technician. UGC can make or break your business.

Most influential UGC occurs spontaneously and represents non-representative experiences. Companies need to take preventive measures. Consumers use UGC to decide if they should consume a product. Once they have, they decide what to report. Companies need to “Strategically re-engineer the consumption experience to spontaneously provoke the right mix of consumer content.”

Rules: Pay attention to extreme events. Move towards a culture that pays attention to outliers, positive and negative. “Redesign your monitoring practices and career incentives to accentuate the positive and eliminate the negative.” Also, “reasses yesterday’s yield management practices.” That is, make sure you do not systematically produce a small number of unhappy customers” (e.g., but routinely overbooking, or by routinely selling undesirable hotel rooms at very low rates). Also, get to know your power customers, i.e., the ones more likely to be vocal. They should receive “the special teratment that loyal big spenders used to receive ten years ago.” Also, not sock puppetry. Also, maybe have a Chief Perception Officer.

Q: You’re proposing an operational hit since we won’t be selling all the seats or rooms.
A: Yes. That’s the decision to be made. We need to make these decisions holistically. We don’t have the complete answer, There’s room for innovation.

Q: [me] This morning we heard that the population is not nearly as adept at using these tools as some of us (= me) would like to believe. This afternoon we hear about markets that are adept. How did you hear this morning’s research?
A: It varies by market. And consumers aren’t necessarily savvy. The UGC has effect even when they’re not savvy. You need to tier your efforts, taking account of the consumers’ Web savviness.

Q: How’s it work in other countries?
A: We haven’t done that research. Happy collaborate…

Q: How does this apply to B2B?
A: More limited.

Anindya Ghose will talk about combining textmining with econometrics. Firms want to know if there’s any economic value to social networks and UGC. How can they monetize UGC?

There’s economic value embedded in the content. E.g., product reviews, geo locations, online purchase behavior. His software mines the text and assesses the economic value of, say, a positive review and even more particular comments. E.g., “good packaging” lowers the value by $0.56 because customers expect superlatives. Particular keywords have particular monetary effects.

Hypothesis: The increasing availability of UGC is reflected in sponsored search metrics. And, yes, he found a correlation between the frequency with which key words are used in blogs and their cost-per-click on search sites. He’s researching whether there’s some sort of causal effect, but it’s not an easy problem. Hence, UGC can be monetized through sponsored search.

[Posted without re-reading. I have to prepare for my unprepared comments. I’m on a panel that’s supposed to be reflecting on the day.] [Tags: ugc ugc3 marketing cluetrain advertising textmining advertising prediction_markets everything_is_miscellaneous ]

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Scott McDonald of Conde Nast gives the lunchtime talk. He reminds us of how big CN is: magazines, websites, events, digital apps.

His numbers show that lots of people are creating content.

UGC issues for “traditional” [the quotes are on Scott’s slide] media: Brand compatitiblity (vs. “snark/coarsening”. Commoditization of content (all gets treated the same). Value as “listening post” (media can hear their readers). DRM when everyone is an aggregator. Monetization.

Advertisers are reluctant to jump in, Scott says. They worry about brand. UGC video is cheap and plentifu. but it’s not selling. The CPMs are deeply discounted. Ad revenues are not going to UGC and marketing execs are pessimistic about this; only 22% think UGC is a “high-growth opportunity.” 73% of advertisers say they definitely will not run ads on UGC.

So, what are the other models? You can incorporate UGC on a site as a “retention device.” [CNN’s turn-the-channel “iReports”?] Authentication fees on microblogging sites? E.g., Twitter charges DominosPizza to assure that it in fact represents Dominos Pizza. How about sponsorships on crowdsourcing sites such as Digg? E.g., at Reddit, maybe a sponsor could be an “amplifier” that announces that each thumbs up counts 5x. [Wha??? Wouldn’t that destroy Reddit’s credibility?] Finally, there’s cross-platform marketing. Only 10% of visitors to a mag’s site are subscribers. So, cannibalization isn’t a worry. But how do you make money on the web site? Ads only work for very big sites. But,” online subscriptions sales are sweet.” People who subscribe that way have higher value than subscribers through other means: They’ve sought out the mag, they pay with a credit card, they are more likely to take an automatic renewal contract, they get added to the email list, etc.

He points to Conde Nast examples of UGC. Contests for designs, NYer caption contest, GQ tips on good grooming. [These are as much UGC as a man-in-the-street interview.]

He points to Reddit, a CN site. He acknowledges the bad language on the page. It produces no subscription revenues. They’re starting to have sponsored posts that still can be voted up or down.

Q: Are people dropping subscriptions because they can get the content for free online?
Scott: In general, no. The conditions for reading mags are special, e.g., reading one on the subway to create zone of privacy. [A good e-reader will destroy this.] For news mags, that’s more of an issue.

[Tags: ugc ugc3 conde_nast media mainstream_media advertising marketing ]

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I have not unmixed feelings about T-Mobile’s “spontaneous” dance fest in London’s Liverpool Station. (You can see it here. You can see the making of it here.) On the one hand, it’s a very cool event, and people seemed to like it. On the other, I think I’d feel a bit betrayed if I found out that my joyous dancing was actually part of a commercial.

So, overall, thumbs up, and kudos for creativity. But just a bit of pucker of distaste for commercializing the flash mob vision. Not that anyone asked me.

[Tags: flash_mob t-mobile marketing cluetrain ]

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Doc Searls is giving a Berkman lunch called “The Intention Economy.” [Note: I’m live-blogging, missing points, paraphrasing badly, making spellping errors, etc.

He begins by talking about some problems. E.g., “the people vs. Comcast.” Customers are unhappy. “Comcast can’t fix itself alone.” Or, customer loyalty cards that are the Green Stamps of our time. “They leverage something that’s broken about e-commerce.” E.g., the Harvard Co-op gives a 10% “discount” if you join. But they make you enter a ton of personal data, the same data you enter at every other e-comm site. Or public radio: Everyone in the room listens, but only about half give. Doc would like to be able to give to support particular programs.

The problem in all these cases is Customer Relationship Management (CRM). CRM is not about relating. “The problem is that most big businesses think that the best customer is a captive one.” “That’s why the free market is still your choice of captor.” But “we’re now about three minutes into the Big Bang” when it comes to the Net. The challenge is to “prove that a free customer is more valuable than a captive one.”

So, Doc has started Project VRM (vendor relationship management) to provide ways for customers to drive relationships with vendors. “With VRM, the individual is the point of integration for his or her own data” and is also the “point of origination of what’s done with” that data. There have been VRM meetups across Europe and North America.

VRM is an open source project (although there are some commercial projects underway also). Doc talks briefly [too quickly for me to keep up] about some of the people involved. Likewise for projects: Personal health info. “Personal RFPs” where a customer sends a query to vendors for bids on things the customer wants to buy. The user wouldn’t give away any unnecessary info. Also: Making terms of service readable and user-focused.

Doc spends a little more time on creating a new business model for free media that isn’t advertising. Free media first means non-commercial media, but ultimately for blogs, etc. The model is temporarily named “PayChoice,” and is based on letting individuals pay how much they want when they want for what they want. The Public Radio tuner is one result. 1.3M have downloaded it into their iPhones already. It turns your iPhone into a radio tuned into public radio. It enables listeners to hold up their end of relationship. The “R” button lets a user pay for what she wants. But it’s not just for paying. It could also represent an intention to buy, and intention to sell, etc.

So, what happens when customers get real power?

– “Customers get their own pricing guns” [i.e., the “guns” that print out price labels].

– “The intention economy” will get real because it’s based on what customers really want, as opposed to the attention economy that’s based on guesses.

– “The advertising bubble will burst.” There will still be ads, but they won’t be the “communications method of first resort.”

– “Cluetrain will finally be right.”

Q: What about eBay?
A: There are lots of sites that do this, but why should we only have sites? Your eBay reputation is only inside eBay. Why should it be stuck there? We want service portability.

Q: What will be the method conveying your desires to companies? A third party service? A non-profit?
A: On the public radio tuner, the “listen log” keeps track of what you’ve listened to. Ideally that would sit on our own computers in encrypted form. Some of that we’re solving with Ian Henderson’s personal data store, some with Lukas’ The Mine. But let’s say we have that solved. Right now, we use “third parties,” which generally live on the vendor’s side. We see a fourth party business, driven by users. E.g., with music, it’d be good to be able to set a price on the music you stream. Some fourth party business will pull that money together. We’re working on a chapter-based association for user-driven services.

Q: So you create sort of a DNS service…?
A: One model is RSS. It’d be good to be able to advertise your needs, possibly through RSS. Maybe it’s tag-based, maybe it’s anonymous.

Q: What do you envision for traditional companies dealing with this?
A: Let’s we have our own loyalty card. As customers inject more intelligence into the marketplace about what they’re willing to say about themselves, we’ll see things like fact-checking of vendors’ claims against us; it’d be cool if the customer could as a data backup. I don’t see a downside for traditional customers. More intelligence and more good will in the market will benefit everyone. It’s a fallacy to think that people only shop on price. Starbucks proves the contrary

Q: [me] Situate this in micropayments and tipjars, and identity management.
A: We’re doing micro-accounting, not micropayments. Small payments are accumulated. Micropayments haven’t worked for anyone except the phone company, and they abused it. WRT identity: I’ve been interested in that for a long time. Along the way, Andre Durand (of Jabber) once said that we have to get identity worked out. Identities are given to us by other corporations: what the DMV, the library, Visa (etc) tell us who we are. Andrew thought this was backwards. We have to reverse it. I now think that that’s important, but it’s separate from VRM. There are times when identity isn’t used at all. My wife about 15 years ago asked why we can’t take our shopping cart from one site to another. And when I was working with the ID management folks, my wife said she wants less identity, not more. Adriana Lukas’ The Mine project is intended to work independent of any identity system. The whole identity movement is a separate thing that overlaps VRM somewhat. VRM isn’t part of the identity space.

What happens on the aggregate level? A lot of CRM is about companies aggregating anonymized data and using it for recommendations, etc.
A: Companies will continue to gather intelligence about us. Companies can improve that. Amazon’s recommendations are the best, but they’re still broken. Your kids use your computers and your recos go off track. Or you buy one book and Amazon thinks you’re interested in the category. Those recos are still guesswork. And they don’t know what only you know, and what’s outside their system.

Comcast is actively providing what I don’t want because they want to sell more on-demand. Do you see VRM breaking down those monopolies?
A: Cable TV is really broken. We have Verizon FIOS. The TV is fantastic. But they only provide 20MB for Internet. For us that’s backward. I tried canceling, and they came back with an offer that reflects their real costs. But we don’t watch TV, so we still said no. I offered to pay a la carte, but nope.

Q: What are the enabling technologies for VRM? If companies still haven’t figured out how to do this, what do you have to provide?
A: Money. If there’s money left on the table…We’re doing field of dreams here.

Q: Thinking about Linked Data/RDF for putting this data out in a much richer way? It’s the rich, decentralized model you’re looking for.
A: The short answer is no, but the longer answer is sure. We’re in touch with those folks. It’s a matter of who shows up.

Q: Is this more generational?
A: I don’t know. It’s whoever shows up. We need to make stuff that benefits everyone.

Q: What about characterizing the ecosystem you’re trying to build with certification levels of VRM? Companies could advertise that they’re at different levels of VRMitude.
A: We have a draft of this, on the wiki: ProjectVRM.org We also want a list of core principles.

Q: How do you balance the explicit data sharing in advertising intent (“I’m looking for a car”) with the fact that sites are selling that data to vendors?
A: The whole VRM idea came out of one use case: car rental. The variables are never what they’re offering. E.g., I want to be able to get a car that plays MP3 CDs. As more customers can advertise their needs, it will change those businesses, and probably discourage the profligate sharing of information.

Q: What about customized fabrication, i.e., making products in response to customer desires. What does this do to branding?
A: Some companies are going to succeed by giving people what they want. We’re all different and want different things. That’s what the Net will come down to eventually.

Q: Insurance companies and lendors have competitive vendors markets. Imagine that for car rentals…
A: That’s an example of a personal RFP. It’s an example of a substitutable service.

Q: Individuals will never be on an equal basis with, say, Verizon. What about collaboration?
A: I avoided that. We don’t want to start with the collective and move to the personal. We want to start with the personal. We need lots of individuals doing VRM for it to work. We want this to be a victory for Verizon as well.

Q: It’s going to be hard to get businesses out of the captive customer mindset. Is VRM a pipe dream? Will companies fail and VRM-ish ones arise?
A: All of the above. Some leopards won’t change their stripes. They’ll also have to wake up and smell the coffee.

Q: What about the cultural domain? NGOs?
A: Huge opportunities. Britt Blaser is working on Government Relationship Management. A lot of great opportunities came out of the Obama campaign. There’s a great outfit in the UK with a site called fixmystreet.org: post photos of potholes and the local gov’t patches them. Being able to express what you’re looking for will work with any type of organization. Take Relationship Management and stick another letter in front of it. We want the demand side and supply side to get along. [Tags: doc_searls vrm ecommerce business public_radio ]

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Jeff Howe of Wired is giving a Berkman lunchtime talk on his book Crowd Sourcing. (He coined the term in 2006.) [Note: I’m live blogging, making mistakes, missing stuff, paraphrasing inappropriately, etc.]

From the beginning, he says, he’s been ambivalent about crowd sourcing. His book is a series of stories showing crowdsourcing’s promise and perils. The book is short on quantitative data, he says. As he was finishing up the edits, he came across a survey of 650 iStockPhoto.com photo contributors. iStock was one of Jeff’s main examples, a stock photo agency that undercut competitors by 99%. They were able to do this because amateur photographers were willing to upload entire libraries of their photos. iStock culled them. iStock runs its corporate decisions past the community. The survey showed that contributors had a rich mix of motivations. He’d like to revisit this question.

Jeff gives his 45 minute book talk in 20 mins: He got interested in crowdsourcing by watching Myspace. “User generated content” doesn’t begin to tap the change that’s taking place. (Plus, he adds, he hates the phrase.) He spent a night searching for user-generated anything to show that it was about more than teenagers making “content.” E.g., John Fluevog Open Source Shoeware names shoes after designs contributed by users. He wrote an article for Wired in June 2006. The term took off.

As an example, he tells the story of the Two Jakes who created a crowdsourced t-shirt company, threadless.com. It created a community of designers and people who like to vote on designs. Revenues in 2007 topped $30M. The community provides the designs, does the marketingt, and Threadless has a mechanism that lets them gauge how much they need quite accurately.

iStockPhoto was bought by Getty, and revenues have continued to climb…over $100M in 2008, with 50% profit margin.

Another example: The way amateur ornithologists have transformed the way ornithology works, Current.tv, the Elements restaurant in DC…

Why did crowdsourcing happen? Lots of amateurs, open source, tools, online communities. The cardinal rule of crowdsourcing: “Ask not what your community can do for you, etc.”

Jeff ends by asking about the study of iStock contributions’ motivations. 80% of iStockers religiously visit the site. The study shows the primacy of the financial motivation. Only 4% of the contributors make their primary living off of photography. The forum gets 37 posts per minute. 80% consider their work profitable, and 20% consider it extremely profitable. iStockers are largely not out to make friends or to network with others. iStockers are unsure that other iStockers can be trusted. This runs counter to how the company portrays them.

Q: I just had a logo made for $250 through LogoTournament. 30-40 designers worked on it from all over the world. The contestants all see one another’s designs.
A: Anectodotally, people seem to love it. There’s also CrowdSpring and 99Designs.

I used worth1000 for cover design. The Berkman folk loved it, but when I posted about it, I got flamed.
A: I understand that crowdsourcing is disruptive. It’s an emotional subject. Creatives can shape the transformation by embracing it.

Q: Your examples largely focused on highly creative forms of work. People do these things on their own as hobbies. How about crowdsourcing that has people transcribing podcasts via MechanicalTurk. Are these two types of crowdsourcing the same phenomenon?
A: MechanicalTurk is for repetitive, boring tasks. I don’t know how to encompass this. This makes the motivation for crowdsourcing more complex. That doesn’t dismay me.

Q: Is the difference about passion?
A: My catchphrase is that passion is the currency of the 21st century.

Q: [me] You position this as a contradiction. But it’s not if you define crowdsourcing as the action of a crowd, etc., and stir in economics: Those with leisure will do it for passion, while the rest will do more boring tasks for money. Unless what matters to you, and to the media that took it up, is that it’s a statement about human motivation.

Q:[eszter] You’re putting too much faith in the study. It’s only 1% of users and the methodology isn’t necessarily rock solid.
A: I called iStock’s founder and he has the same problems with the study.

Q: When I got the book, what was exciting was the possibility of solving altruistic problems. Do you have any examples?
A: GlobalVoices. Transcription services from a mobile phone for nonprofits.

Q: ReCaptcha is a great example. Also, spamornot.org.

Some of the crowdsourced stock photo sites are scams.

Q: Is crowdsourcing exploitative?
A: Sure could be. Professional stock photographers certainly think so. [Tags: berkman crowd_sourcing everything_is_miscellaneous ]

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David Berkowitz has a terrific post at MediaPost about why Skittles has removed its own content from its Web site and is instead featuring the Wikipedia page about Skittles, a page that aggregates Skittles-mentioning tweets, and its Facebook page. David writes:

Here’s the message Skittles is sending: What consumers say about the brand is more important than what the brand has to say to consumers.

…

By just about any rational indication, Skittles went too far. Highlighting Twitter Search in particular seems absurd, especially since Twitter tends to skew older relative to other social media properties, and Skittles seems to target a younger audience. I came home and showed Skittles.com to my wife. Her first reaction, before I even told her why I was showing it to her, was, “That’s it?” Then she added, “What happens if you don’t care about Twitter or don’t know about Twitter? It seems like it’s only for people who are really technical. I just wouldn’t care.”

But why would anyone care about what Skittles has to say? What, pray tell, could Skittles ever say that was so important, unless we woke up one day to find out that eating Skittles is the world’s tastiest cancer cure, or alternatively that Skittles lower men’s sperm count. Then, perhaps, the world will listen.

It goes on from there. And I say: OMG, I actually went to — and enjoyed! — Skittles.com. Awesome!

[Tags: skittles twitter marketing cluetrain ]

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I read David Ogilvy’s “Confessions of an Advertising Man” when I was a kid and was greatly impressed, I think by the subtlety with which humans could be influenced. It was also quite entertaining. Here’s David Susskind’s hour-long interview of him from 1983.

(Thanks to Richard Pachter for the link.)

[Tags: david_ogilvy advertising marketing ]

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I wish I used Godaddy.com so I could switch my sites off of it. Last night’s Superbowl ads weren’t “edgy” or “irreverent.” They were sexist.

KD Paine posts about twittering for alternatives in real time.

If you want to see what the twitterverse thought of the ad as it unspooled, check this time-constrained search at twitter.

The ads apparently get GoDaddy new users. But:

1. We don’t know how many more new users GoDaddy would get if they ran better ads that didn’t write off at least half of their market

2. Low-cost providers ought to worry about making their customers embarrassed to admit that they’re customers. How much squirming will customers with little loyalty take?

3. GoDaddy is hurting our daughters, and making our world worse. So, screw ’em.

[Tags: godaddy superbowl superbowl_ads cluetrain ]

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Every inspirational moment — well, 40 of them — you will ever need, all wrapped in one maudlin, ridiculous package:

All I can add is: Hang in there, baby

[Tags: victory mashup ]

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Bob Walsh at Avangate posts about two companies using Twitter to talk with customers. Zappos is a particularly fun example. (Via Graeme Thickins.)

[Tags: twitter marketing market_conversations cluetrain zappos ]

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