Find me, Find You and Let's Exchange

Winter 2012

An adhoc collection of old notes on constructing a viable network business model

You are on the net but do you have a viable network business model (i.e. what we called an eBusiness in 1998)?

If you can answer these questions easily (ie. positively) then you have a viable network business model. Otherwise you have an expensive hobby that will need another income stream to support your dreams.

Q1. What is being exchanged?
Q2. What is the feedback loop that will accelerate the frequency of exchange?
Q3. What is the catalyst (i.e. Story) that will ignite the feedback loop?
Q4. How do you intend monetizing the habit (of exchanging)?

Apply this to the world circa 2015 and you could deconstruct Snapchat as an example

Q1. What is being exchanged? - Images or more accurately random photographic messages or pokes/prompts
Q2. What is the feedback loop that will accelerate the frequency of exchange? - Wind the clock back to the old media perception of (linear/real) time. By destroying the persistence of memory and non-linear asynchronous time inherent in the current generation of networked database business models (e.g. Instagram). Users need to keep posting new images to keep the connection alive. You have accelerated engagement into a habit.
Q3. What is the catalyst (i.e. Story) that will ignite the feedback loop? - Teenage Sexting
Q4. How do you intend monetizing the habit (of exchanging)? - Good Question... I'll get back to you on that. But maybe one day we can put ads on the menu?

Apply these questions to the vast majority of SaaS and Mobile App business models and you'll quickly understand why they fall well short of the ideal network business model. If an exchange does occur it is the fuel or the exhaust rather than the engine of the business model.

It also explains why MySpace, Yahoo, AOL and Microsoft didn't benefit from those self evident "network effects" of having millions of users. Web pages may have been created but nothing was being exchanged - but their email accounts remain popular). Twitter on the other hand was always an exchange. But failed to answer the obvious question how do we monetize what is being exchanged? Facebook - started as a collection of images embedded on web pages - grew into becoming an exchange. Flickr, Wordpress and Medium on the other hand are just collections.

It also explains why power users are active across multiple (exchange) networks (i.e. Facebook, Twitter, Pinterest, Polyvore, Instagram, Snapchat etc)

The key to strong "network effects" across a network or platform isn't the number of users but the frequency and value of the exchange. (the LinkedIn Challenge)

Which is to say the network economy is all about "Find me, Find You and Let's Exchange" - all else is just noise on the radar.

So, while on TV advertising brands sponsor rituals, on the web and mobile they sponsor habits. Simple, addictive and easily replicated habits. The habits of exchanging */insert your experiences here/*

This then is the fundamental difference between what I call a network business model and a scalable database or function point business model.

You see I believe the narrative around network effects is very confusing for developers and entrepreneurs aspiring to become the next */insert your preferred network hero here/*

For many the answer is as simple as "building the biggest possible audience (no matter what the cost)". Others walk around thinking I need it but what is it?... What is this magical network effect that will change everything?

The answer being it is as simple as asking yourself four questions.

If you can't answer all 4 questions pivot the business model until you can... and everybody in the room agrees with your answer.

Having said that building an exchange is hard. But that's why you need a narrative, an inspirational story - like network effects - to move the market to action.

Hence my argument it's not about counting the connections (and their endless permutations) it's about creating movement. The call to action. Or, Marketing 101.

Which comes to the question of manufacturing a social proof.

So let's begin the journey of discovering a social proof by winding the clock back a few years to something Fred Wilson wrote about the art and science of marketing.

"I believe that marketing is what you do when your product or service sucks or when you make so much profit on every marginal customer that it would be crazy to not spend a bit of that profit acquiring more of them (coke, zynga, bud, viagra)."

Now let's demonstrate what the world of social media would look like without aid of creative marketing to brand and define the customer experience.

Nothing complex. Just a simple lesson in the value of a well thought out marketing slogan and customer value proposition.

We'll begin with Facebook and work down the list of popular social networking *platforms*.

Slogans evolve as the market evolves with the brand and so it should come as no surprise to discover we have a number to choose from.

• Facebook helps you connect and share with people in your life
• Facebook is a social utility that connects you with the people around you
• Connect with friends and the world around you on Facebook

Now let's take a look at MySpace
• A place for friends
• Discover and be discovered

Twitter
• Join the conversation on Twitter
• Share and discover what's happening right now, anywhere in the world
• The best way to discover what's new in your world

LinkedIn
• Relationships matter

Google+
• Real-life sharing rethought for the web

Cross reference the slogans and a number of key words emerge: Share/sharing, Connect/connecting, Discover/discovering. Words designed to shape behavior and of course expectations. Expectations of what can be achieved with the product. Promises made.

Now let's strip these *Platforms* of their social promises by rewriting the slogans as utilitarian descriptors of the technology experience being provided.

Again, we'll begin with Facebook.

• A database that helps you connect and share with people in your life
• A database that is a social utility that connects you with the people around you
• Connect with friends and the world around you on a database

Now let's take a look at MySpace
• A database for friends
• Discover and be discovered [on a database]

Twitter
• Join the conversation on a database
• Share and discover what's happening on a database right now, anywhere in the world
• The best way to discover what's new on a database

LinkedIn
• Lists matter

Google+
• Real-life sharing rethought for a network of databases

You'll see that what I have done is *DeHumanised* the technology. And I have done that simply to emphasize that the trick in marketing social media hasn't been to associate the words Share/sharing, Connect/connecting, Discover/discovering with the act of being social. It has been to associate these words with interacting with a database. It has been to reposition the database as a social technology. The database as a default tool, just like the mobile phone, for augmenting our social interactions.

Simply by taking the techno-babble of the DBA (Transact/transaction, Update/updating and Query/querying) and rephrasing it as the socially compelling Psycho-babble of Share/sharing, Connect/connecting and Discover/discovering, the marketers have created a thriving new industry. Some would argue eco-system or economy.

The message here? The best marketing isn't the stuff that wins the awards. It's the marketing you don't even see.