Upon reflection the Laws of Crowdsong Innovation and The Crowdsong Innovation Paradox should have been called either the Laws of MobCon Innovation and the MobCon Innovation Paradox or the Laws of Networked Innovation. But I guess that's what happens when you play in a sandpit. Sometimes you don't recognise what you've built until you get up out of the sand and take a walk around. You need to see it from all the other angles before you begin to recognise its entire form.

Anyway one of the connections I failed to make was the relationship between the scale and function of innovation on the network and the wider problem of building a viable business model that feeds off the network.

But before I look at that issue in more detail I just want to look back very briefly at a couple of the other sandcastles we've been playing with here in the sandpit over the past few weeks. Specifically Marc Shillum's Brands as patterns and the old Digital Nests and Endless Lists paradigm.

The subtext behind Marc's dialogue is that in the Golden Era of TV and Radio the challenge was simply to create the most compelling message. In a network world you not only have to have a compelling message you also have to a compelling reason for people to go out and find your message.

With this in mind creating patterns may help to solve that problem but they may also help to magnify the problem. At a very fundamental level simply creating patterns doesn't address the real problem. Providing the target audience with a compelling reason to become actively engaged with the message.

This is where the Digital Nests and the List Engines come into play.

The differences between nests and lists are both obvious and at the same time subtle.

Digital Nests (e.g. Facebook and Wordpress or the iPhone or iPad) are places where the consumer gathers together the things they LOVE into one place. Contrary to popular opinion they are the real destinations scattered across the network.

The List Engines (e.g. Google and Twitter or the App Store or iTunes Store) are sign posts. They generate endless lists of (potential) LIKES that allow the consumer to roam freely around the network to discover new things to decorate the Digital Nest.

Digital Nests = Loves + Destinations

List Engines = Likes + Sign Posts

This insight in turn leads us back the four potential business models available to anyone choosing to make living out of doing business on the network.

To make this easier to understand we'll add some leading web brands into the mix and a simplified description of the business model.

Put very simply if you are operating at the platform level you are either operating a List Engine or a Digital Nest. If you are operating at the function point level you are either operating a Hit Factory or a Bling Factory.

What's the difference? If you operate a list engine you are in the business of profiting from sending the audience somewhere they probably weren't - initial at least - expecting to go. If you are a nest provider or a hit provider you make money by selling access to the audience. If you are bling factory you make your money selling digital goods and services to the audience.

Obviously hit factories are in the same business as the nest providers. However their business model is not as efficient and operates at a significantly higher level of risk.

Putting aside the mobile phone app economies and focusing on the web we discover that hit factories think they can profit from creating attractions to hook an audience. Nest providers think they can profit from letting the audience create the attractions.

Both models mirror the list engine model and its focus on selling the audience rather than the experience.

Of the four models only the bling factories makes money out of directly selling the experience to the audience.

Or, put another way the bling factory is the only model with customers. The other three deal in traffic or what we would describe as eyeballs. Now if we map the overall level of activity across the network vs. the relative ARPU’s generated by each of the business model we discover that the level of engagement or innovation across the network doesn’t translate into higher revenues. In fact the opposite occurs.

Somewhat paradoxically the new value equation appears to be the less time spent being engaged the higher the ARPU’s. Or, what was described much earlier as the ARPMOE.

In this new paradigm engagement isn’t measured in the time spent with the activity but the quality of the time spent engaged with activity. i.e. Save Time is Good. Make Time is Better.

This then is the 4th Law of MobCon Innovation .

Quality Time = Repeat Engagement = Higher ARPU’s

So what are the strategic differences between a Digital Nest and a List Engine? After all Facebook used to feel like nest (my friends/photos), now feels like [a] list.

We had a look at why Facebook's revenue model - just like the other pre-existing media models - was fundamentally flawed - by proving why Google's was so successful - when we reviewed the fauxionary ideas driving the trend towards the emergence of brands as media.

Lists are made up of actionable items. Destinations and lists are simply made of activities to keep you sticky. The problem with putting ads on the menu in a nesting space is you are actually asking them to leave a personalised place they have chosen to come to rest and play. Ads on a list are just part of the actionable discovery mix. You're leaving... so selecting an ad over a list item is just a matter of choice. Rather than a change in behaviour.

The simple answer to the question then is I suspect Facebook has discovered there is money in lists but not in nests... at least on the web.

I say that because in this post I want to explain why the emergence of the iPhone economy has changed the paradigm somewhat,

If we map the four MobCon innovation business models into the matrix we introduced yesterday we discover that apart from dominating the list engine business Apple basically owns the iEconomy... and even here with the rumours of tie ins with Twitter there is some reason to speculate on who will be the primary list provider in the Apple iEconomy.

The comparative spread between activity and ARPU's also changes significantly in favour of the Nest provider. The reason being of course that the real Digital Nests were always the apps and gadgets we buy to access the network. Not the destinations that bring us to rest on the network.

These two diagrams also highlight Facebook's growth problem within the new smart phone economy. If the new nest is the gadget where does that leave the world's biggest social network? The simple answer is it is relegated to the bit part role of the biggest DIY hit factory... or as we have pointed out before little more than a DIY Yahoo!, AOL or MSN.

This leaves it with three clear strategic choices moving forward. It either builds a phone or it becomes a list engine... or it attempts the Google strategy and attempts to do both by becoming a surrogate mOS.

Of the three competing with Google and Twitter as yet another list engine appears to be the easiest option going forward.

Hence the initial astute observation: Facebook used to feel like nest (my friends/photos), now feels like list.

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