May 21st, 2006

The Unbearable Lightness of 2.0 Business Strategy

by

Umair Haque and Jeff Jarvis are engaged in an ontological debate about what constitutes “the edge” and what will ultimately be the winning business strategy at the edge. What struck me about their debate is how little clarity there is on how money will actually be made at the edge — and this despite Umair and Jeff working at the absolute bleeding edge of current strategic thinking (pun intended).

Here’s a point from Umair:

Fox’s acquisition thesis is a bit more complicated – but predicated on a much deeper understanding of the new media value chain. Fox invests in domains which are hypersocial (discontinuous shifts in social connectivity) or hypercultural (discontinuous shifts in cultural specificity): sports, karaoke, music.

Further, Fox invests at the edge of the new value chain: at the interface with consumers.

Here’s a counterpoint from Jeff:

Now I’m not denying the incredible power of MySpace. But I am wondering whether it is really fully at the edge — yet. In fact, I questioned here whether there is a disadvantage in trying to own a community — because then you become responsible for the community’s actions and its worst (i.e., the molester’s home page). And so I wonder, in turn, whether the real relationship play in the future is not to try to own community but to enable it. And enabling is sometimes known as infrastructure. That’s the point I want to probe. If they’re still “consumers,” is this really the edge? I say the edge is all about control by creators: That is, I control my own space, this space at the edge, Buzzmachine; I am subject to no one’s rules; I hold responsibility; I reap the benefits, if any; I have relationships as a result of having this presence online; this is mine, all mine; thus I can also relinquish control and, for example, put out full text on RSS and I can realize that the real conversation is not just the one in the comments but the one distributed across others’ sites. That is qualitatively different from a community destination: You go there, you benefit from their infrastructure but you are subject to their rules, you live in someone else’s space.

And now Umair again:

The bigger point I wanted to make was that it’s not technology, but the social and cultural that counts. And being social/cultural is vastly different in, say, cosmetics, than it is in sports. So I think generic infrastructure plays are the wrong approach.

Now I’ll be the first to admit that I enjoy this kind of intellectual debate, for the same reason, I suspect, that I enjoyed critical theory in school. But what I find absent from this an all other 2.0 discourses (including my own) is a clear explanation of WHO is going to pay WHOM how many DOLLARS for WHAT. How does the money change hands here?

There are two sources of revenue — companies and consumers. You can sell them content, services, advertising — the list is not that long.

Maybe people like Umair and Jeff operate on a different plane where they can see the dollars even though they don’t reference them explicitly. But if you read News Corp’s quarterly report, MySpace’s ostensible success at the edge is still not reportable in dollars and cents.

Maybe I’m just slow. But I still worry that the sea change that is upon us will lead to fewer dollars in the market and Google-like monopolization of the dollars that do remain. I worry that there’s no way to monetize either “owning” or “enabling” the community — both assume a 1.0-like role for a middleman. It still assumes control of something. AdWords is fully distributed, but it is an intermediary — Google OWNS the system, they control it, and they can make it do whatever they want — unless, of course, it’s being exploited by botnets. Maybe cybercrime is the real edge.

Oh man.

Maybe I just worry too much.

UPDATE:

If this post depressed you, read Jeff’s follow-up post on networks. You’ll be suicidal by the time you’re done:

My point, in the end, is only that we are entering uncertain and uncharted waters in fluid networks. It’s not clear where the value will be captured and how it will be shared.

I responded in the comments to Jeff’s post:

What if media isn’t a business anymore? What if it becomes like poetry — lot’s of people do it, but nobody ever expects to make any money from it.

I know, just because there aren’t obvious answers yet, doesn’t mean somebody won’t figure it out, but for the moment we all sound like the horse and carriage industry 100 years ago. Or the US manufacturing industry 20 years ago. There isn’t always a solution to structural decline.

  • There are many ways for super-nodes to monetize, if they haven't done so already. The idea the people (readers) cluster but ultimately move on is nothing new. Tastes change, habits alter - it's part of growth. Why try and shoehorn variations on an advertising model that remains rooted in the idea of brand reflective influence? In the past, media would spend fortunes promoting and building playlists of readers to wave in front of advertisers. Today, that's an irrelevance. But then when was it any different? My sense is that if a particular piece of media is held to be influential at a point in time, then monetizing through advertising is legitimate. But only at that point in time and not for all time.

    Otherwise, we end up agonizing over something that does not exist - post-20th century media advertising models.

  • Excellent use of the word "ontological," Scott -- and you could probably have thrown "epistemological" in there too, just for fun :-)

    Seriously though, you continue to raise an interesting point about who is going to pay for all this new media, and how. Will it all be AdSense-driven or some similar pay-per-click model? Micro-payments? If we could just come up with some believable answer to that question, I suspect we could become very rich. Perhaps we will all have to find wealthy patrons, the same way most of the early poets and playrights did.

    Mathew

  • I think it's an interesting debate because in a way it is at the heart of my own personal conundrum: I create content, but I recognize that it's harder for people to find "lone wolf" content. To that end, I am trying to aggregate smaller content creators who do something similar to my material, such that I can present a better "package" either to networks seeking content, advertisers looking to write a reasonable check instead of micropayments, and consumers looking to find material worth their time.

    I wrote Content Networks are the new Blogs for that reason at my personal site, too. I'm really wondering about that same debate. Is it a good time to be in the gold mining business, or the picks and shovels business?

    Thanks for your great post.

  • Oh, and in regards to prose's better half, don't forget the words of Wallace Stevens: "Money is a form of poetry."

  • Nice article, Scott. I see my unbearable lightness title is catching on... ;-)

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