April 15th, 2006

Exploitation 2.0: Web 2.0 Wants to USE You

by Scott Karp

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There’s so much uncritical, blinders-on optimism in the Web2.0sphere that I savor the rare occasions when I stumble on a skeptic/contrarian after my own heart, in this case Rob May, who writes for businesspundit.com:

A small percentage of the population enjoys doing things just for the sake of learning, exploring, helping, etc, and we hold them up as examples of why Web 2.0 is the future. But that isn’t altruism, it’s selfishness. Those people do those things to fill personal needs of ego, knowledge, or whatever. Altruism happens when there are selfish reasons to be altruistic (i.e. to go to heaven, to take the tax write off, to look good in your social class, to support a cause you personally want to see advanced).

The point of all this is if your business model is built on the goodness of people’s hearts, it is going to fail. The real Web 2.0 isn’t about wisdom of crowds, new models of behavior, or being more social. And it certainly isn’t about altruism and giving valuable things such as knowledge and time away for free. The real Web 2.0 is about control. It’s about letting each user control their own interactions, and that is why people like it. At the end of the day, Web 2.0 is about being selfish, and the projects that will succeed are the ones that are embracing that fact.

This reminds me of a comment that another of my favorite cynics, Seth Finklestein, deposited on my post about “user-generated content”:

For “User-generated content”, I’m partial to the term “Unpaid freelancers”. The latter seems to capture what many people really mean when they say the former.

But I think Yahoo exec Bradley Horowitz said it best in reference to Flickr:

“With less than 10 people on the payroll, they had millions of users generating content, millions of users organizing that content for them, tens of thousands of users distributing that across the Internet, and thousands of people not on the payroll actually building the thing,” says Yahoo exec Bradley Horowitz. “That’s a neat trick. If we could do that same thing with Yahoo, and take our half-billion user base and achieve the same kind of effect, we knew we were on to something.”

If WE really are the media now, and if all the value really is being created at the edge, at some point WE the citizen users creating social content at the edge (blah, blah) are going to wake up and realize that Web 2.0 is all about making money off of the fruits of OUR labor, and we will rise up and demand fair compensation.

It’s all so ridiculously marxist, isn’t it?

But in all seriousness, if social media really is a REVOLUTION, there’s still another (much larger) shoe waiting to drop. If the first half of the revolution is about participation, user-generated content, metadata, ajax apps, tagging, commenting, etc., then the second half is going to be about the business model shake out.

Think about it — all the Web 2.0 companies from Google on down still have a completely 1.0 approach to the business of 2.0 — they think they can have US do all the work while THEY keep all the money. Can there really be “edge competencies” without “edge compensation”? (Help me out here, Umair.)

Now one might argue that the utility of web service/application (e.g. Google search, Flickr tagging) is fair compensation, but think about how quickly consumer expectations are changing. Is it really such a leap to imagine that consumers will eventually become aware that companies are using them as a cog in the social media network. and that someone will figure out a way to exploit that sense of exploitation?

Imagine a Robin-Hood-like application that could somehow take a percentage of the revenue that we generate through our attention and redistribute it to us. Imagine if Google had to pay YOU for the attention that you give each AdWords advertiser when you click.

Root.net and AttentionTrust.org are pointing in this direction, but I don’t think even they have imagined the massive economic disruption that would result from individual consumers demanding fair compensation for their attention.

Still think Web 2.0 is all about the “generosity“?

Then I suppose you probably think Microsoft has found religion:

Redmond has big plans for tools and partnerships that will let users consult a circle of friends when conducting Web searches

Microsoft is desperate to get that stock price moving again — why don’t you help them out of the goodness of your heart.

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Topics: Business Models | Media Economics | Web 2.0

  • martinlindner
    being too late for the discussion, i just want to emphasize that i do not find this "cynical" at all. the "sociality/generosity" theme is just the complementary side of "business models 2.0": basically outdated patterns of reaction to a complete change of the whole media ecosystem. i have no idea what exactly will come out of this development, who will or will not make money, but tit sure will make a lot of difference for everything: the markets, the cultures, the people, the world we're living in. the new media revolution will dramatically change cultural life and the cultural environment itself. a lot will be lost, something will be gained, as always at epochal turning points. but there's no other possibility than to hang on. to live and think different.
  • Please....Use My Data - my comments here:
    http://www.blogs.dhenderson.com/David_Henderson/?p=136
  • brett schultz
    Somehow, everyone here seems to have forgotten the intrinsic social rewards that users glean from these services.

    Would I expect monetary compensation for my time spent in a packed Manhattan bar with all of my friends? Only in my foulest mood... And I'd probably choose that bar most any day over some miserable, empty dive, even if the latter were cheaper -- or paid me to drink, for that matter.

    Why? Because we go to bars to meet people, chat, generally socialize and have fun. Meeting interesting new people and staying close to old friends is reward enough for most people and if the bar owner is pulling in the big bucks off of our "user generated content" ... well, that's quite alright by me.

    As long as Flickr and MySpace remain the hippest spots in town, I don't think their users will be panhandling at the gates.
  • I completely agree with Scott. Systems should be designed so that affiliates/content creators, etc gain benefit from it. If it is financial benefit and we can enable more entrepreneurs and business owners, that'd be ideal. So, I don't think we should ever be discouraged by fraud and gaming that occurrs in current systems. We have a lot more systems to build that can ultimately discourage fraudulent activity by affiliates.

    I'd also like to respond to the "revenue share corrupts" mantra in relation to ROOT because I think they have an interesting approach that engineers out fraud from affiliates.

    Of course, we all click on our own adsense ads once in a while just to make a few extra cents and to see what google thinks matches our content. And of course, there is malicious click fraud that is at a different level. But, google obviously still provides a measurable ROI to advertisers.

    Root is taking this another step by entering the lead generation market. If an affiliate submits their own contact information as a lead, it will be determined pretty quickly whether that converts into a sale. While ROOT has no intention of guarranteeing a sale from every lead generated, the quality of the leads generated are monitored. This makes affiliate fraud a lot more difficult.

    Great post, Scott! Keep up the good work.

    Disclaimer: I am the official blogger for ROOT.
  • Alex Farran
    Umair has actually looked at this topic see How Free Culture is Subsidizing Google. His solution is to replace the publishers with a free culture equivalent and distribute their margins between the producers and the consumers.
  • Wikipedia is a nonprofit. People feel good about themselves when they donate to a good cause. But that doesn't mean we're going to work for for-profit enterprises for free.
  • Marshall Poe
    Okay, Scott, now explain Wikipedia...
  • Drew
    It's about time someone talked about this. You are absolutely right, Web 2.0 is about tricking users into generating content without being paid. When Yahoo bought del.icio.us what were they really buying? Definitely not a technology; they already had that (and it's trivial anyway). What Yahoo was really buying was a list of users who are so gullible that they'll create content for free, but still savvy enough to be on the cutting edge. That is a very valuable combination! It's an instant editorial staff of thousands of experts who will work for free!

    Quote from above: "If you have to pay someone directly to be your customer then perhaps your service simply isn’t good enough."

    Except that the users are not the customer. The users are the product. The advertisers are the customer. Paying users just means paying for your product (the way every other industry works).

    Web 2.0 is hot because of the dirty little secret of "other people do the work, and we get the money." Think of sites like Digg, Metafilter, Flickr, del.icio.us, MySpace, Craigslist, etc. The overwhelming majority of the value of those sites comes not from the technology platform, but from users creating content for free.
  • Mark, I agree that there may not be any new business models under the sun, just like there are no new narratives in literature. But then who could have imagined that Google could make $5 billion with their twist on the old theme.

    On the other hand, your deconstruction of my semi-satirical riff jives with my distaste for the hype eminating from many corners of the Web2.0sphere.

    Pete, good for you, Josh, and Alex, but tell it to Doc Searls. The idealism of Web 2.0 altruism is still pervasive despite sobreity and realism from some corners.
  • Indeed, but it's hardly a revelation. All successful social software is selfish - we call it the del.icio.us lesson. The rev share model has been on the table for years, but as Mark mentions, it has an inherent adverse selection issue that needs to be tackled.
  • When people are compensated by receiving benefits from a service they have little reason to distort the system. When you compensate users directly with money then people who are not interested in the service will game the system for their personal gain.

    In your Adwords example you would find that people would be clicking on ads that have no value to them just to earn personal revenue. This would devalue the entire system. You would have attention spam.

    If you have to pay someone directly to be your customer then perhaps your service simply isn't good enough.

    Let's stop thinking that there is a holy grail web 2.0 business model that comes with new technologies. The business models of the most successful online businesses are no different from those of the past -- collect groups of users by offering shared information and monetise them through subscriptions, advertising or transaction fees. Technology may change, but business remains the same.
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