Boundaries

Constraints whether artificially applied or born from forces outside of our influence, inspire us to discover creative abilities that would otherwise have lain dormant. The barrier serves as a question which challenges us to critically examine automatic assumptions and foregone conclusions. Existence is much more than rules based decision making and pattern matching, it is an endless supply of novelty. Within that novelty lay the keys to creative inspiration and freedom.

A restriction reduces the systematic degrees of freedom and acts like a shade which blocks out the sun of infinite possibilities. To utilize a constraint, we must know it. Only when we recognize a constraint for what it is, may we explore the hidden opportunities its presence reveals.

What if…

we created a digital global network which mimics features of the current internet but with a single additional law, “though shalt not advertise”? This single constraint lead to a series of questions:

1. How would that rule be enforced?
2. Do communities like this already exist?
3. How would services monetize without the ability to charge a fraction of visitor attention with interruptions and noise?

How would the balance of adless and adworld look and feel?

Enforcement

There’s no reason a new interruption-less network couldn’t coexist with all the connections we have now, but imposing this kind of restraint on an existing community is unnecessary. A simple implementation would be an opt in tag that can be used for identity and as a statement that anything under a domain or subdomain is ad free.

Without overestimating there are likely hundreds of millions or billions of adless pages out in the wild already.

I’ve dabbled with ads in the past on this blog, hosting one developed by our startup, and sharing an image and link to friends services. Yet I was never able to create an ad that didn’t feel like a tax on visitor attention.

One of the implementations of going ad free I cooked up this morning is a single button which takes a user to a Dr. Jekyll and Mr. Hyde alternate web impression of a page. Beyond a single page or domain, an alternate switch could act globally as a browser feature or plugin. The transition would be clear but in practice the adworld could take on a range of styles from a Vegas like experience to a more subtle and elegant promotional experience.

Freemium

A freemium strategy focuses on growth by minimizing barriers to adoption of a compelling product. The zero entry cost minimizes the risk consumers take when adopting the new service. Yet without a solid link to premium plans and upselling, free products force companies to rely on alternative revenue streams such as third party advertising networks. Any intermediary between a business and its (potential) customers is a strategic vulnerability.

Which Free Apps and Services Would You Pay For?

There are a number of excellent apps and services that I gladly pay for when given the opportunity. As a user of unstable free services in the past, I appreciate when companies offer paid products as a welcome signal of business health and reliability. The products below all offer free access levels.

• Instapaper: This app creates remote bookmarks, easy text versions of a pages which are synchronized to iOS devices, and associated feeds. Beyond the free app, there’s a paid app, and an optional paid subscription ($1/month)
• Dropbox: A great third party network drive that enables easy backups, collaborating, and even limited web publishing. It has smart local network synchronization as well as web sync and access. You get 2 Gbytes for free plus referral bonuses, and the first paid tier is $9.99/month or $99 per year for 50 Gbytes
• Basic Web Hosting: Free hosting from WordPress, Blogger, Tumblr or Posterous is good enough for most bloggers but there’s nothing quite as flexible as a self hosted blog with a domain you own and control. Hostmonster charges $5.99/month and enables up to 999 blogs. The one issue I have with Hostmonster is periodic downtime. I see my blogs go down a few times a month for as long as an hour with http://wasitup.com, a free site monitoring service
• Free Wifi: I maintain connectivity with free wifi, but I pay for optimum online which grants me access to a broad network. I believe wireless services are still overpriced and can’t wait for the commoditization of bits over wireless and wifi networks. I’d happily pay $40/month (total) for fast wireless network access but most phone plans start at $70 and go much higher with surcharges and larger data limits. I don’t require a voice plan, just reliable data which gives me the choice of service (Skype, Google Voice/Gizmo, etc)

Background for this post:

• Chris Dixon: Why content sites are getting ripped off
• Fred Wilson: Affiliate Marketing Undervalues The Link
• Jonathan Mendez: The Market Forces Killing Display Advertising

Chris, Fred and Jonathan have spent some cycles digging into what I see now as a great opportunity for market disruption. Advertising as we know it is about to go through a pretty heavy shift. But it’s not only advertising which is about to flip, it’s also manufacturing, online stores, warehouses, drop shippers, customer service, and sales.

Here’s the revolution I see brewing in the relation between the Net, manufacturing, storing/delivery, and sales:

I can smell the opportunity. We need to shift the system so that the problem is reframed.

1) As a content creator and affiliate you would like to be compensated for downstream purchase actions directly or indirectly related to your link and commentary

2) Those downstream (as Liad stated below) have no financial incentive to change the status quo

3) To improve the analysis of downstream actions, whether they happen a day later or a few months later, real time data needs to be collected from sites/services which opt in to a Universal Tracker (protocol/standard).

4) Simple statistical models that correlate user purchase actions with multiple relevant product referrals can fairly distribute affiliate revenue.

5) Fully decoupled manufacturing processes from single brand drop shipping (Amazon and other big online brands, are ripe for disruption), will allow the market to fairly assess the value of an affiliate sale.

6) Quantization of sales influence, versus the various steps of design, manufacture, product warehousing, drop shipping, or other segments of product to consumer flow will be optimally rewarded to benefit not only the consumer, but all parties involved.

The preceding comments from AVC (my favorite blog hangout for a good reason).

I see tracking as a HUGE part of the solution to this problem:

It’s great seeing an important systemic error getting attention. Let’s invent some brilliant tracking solutions to renew the affiliate concept and maybe make a few bucks along the way.

What we need are smarter links. First off users should see something like a shortened URL. We can do all sorts of fancy link tracking with shortened urls. We need a way of identifying user action with high confidence that was at least partially the result of earlier content sharing.

When three of my super human filters or friends all praise a service or product who should get the affiliate cut? Right now only the last one does, unless I choose to go directly to the source or puchase from another friends affiliate link.

On average the link value has the greatest value when it leads me to relevant and quality information, maybe even free of charge. How about a regular donation (user decided each month) that let’s us show appreciation for quality links and sharing.

It’s clear that affiliate link value is under rewarded, driving us to search and invent more motivating models. Victus Media’s personal ads are initially designed around affiliate revenue (via Amazon), but we’re more than happy to consider more effective alternatives.

Users could even tip us with a mini-payment if they appreciated a quality shared link, or go as far as signing up for a monthly or various per click fees to advertise their links through are matching system.

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A brief review of the rationale for organic business and career growth. I recognize there are disparate views on this topic, and fully hope to enrich my own view with your feedback.

Let’s start with sacrifices made while growing fast and furiously

1) Dominating a new market and monopolizing leaves users with little choice. Choice is the foundation of freedom, and there are few prospects with greater value.
2) Those who explosively build have a weaker corporate culture. The ties that bind the organization together are based primarily on mechanical execution and greed. We humans can act robotically for only a limited time .
3) Forerunners in a new market space are vulnerable to those who follow with better knowledge of real user/customer need.
4) Rapidly rising to the role of leadership in a company without “paying your dues” burns the capital of trust within the organization that is integral to sustainable income. Sustainable income is tightly correlated to team building.

Why Sustainable is the Holy Grail of Revenue

I’ve seen my share of arguments for explosive growth at the cost of sustained revenue. The concept of market domination by early saturation (Amazon) has proven to be effective for several hungry startups. But BIG is no longer desired in an interconnected network economy.

The ocean of wealth is deeper than a single sale.

The lifeblood of business is a complex system of interconnected relationships. That’s why my view on business (and employment) is based upon relationship building. There are a myriad of connections that we must understand and respect to prosper individually and collectively:

1) our relationship to our colleagues. Having a strong bond to our employees, our boss, and our coworkers is a priceless asset in times of crisis

2) our relationship with users/customers. By cultivating a long term relationship of friendship and service we lay the foundation for trust.

3) our relationship to business partners or others in our field. Having a working relationship with many other experts in your industry is a huge information advantage. Instantly you can be informed of changes in your industry. Other businesses may have overlapping service spaces, learning to collaborate with other like minded organizations allows for complimentary action (force multiplying)

What evidence are these views founded on?

Each day I witness a dramatic global shift in the way people think, communicate and ultimately value their precious time. There is a growing discontent rising with over sized structures that are deaf to user needs or too slow to react. The voice of one can echo through many minds nearly instantly by digital broadcast. Diverse groups are emerging that share a common passion for creating real wealth for themselves. These groups seek long term value, and will nurture the creation of wealth.

Victus Media

Our tagline: We are about providing incredible user value by doing novel things with information.

Our mission: To create tools and services that provide improved two way search, and allow for people to serendipitously discover both information and other folks who share their interests. The monetary force that will drive this mission is based on contextual, personal advertisements created from social media.

The company homepage is at Victus Media and the latest suite of tools and services is coming out of Victus1.victusmedia.com our Rackspace hosted cloud solution. At this early stage we are looking for user and site host feedback.

*Edit sorry the video was a private test for Tyler, will be publicly viewable or he’ll create a public one*

Here’s a quick intro video, thanks to the Chief Tech Tyler Gillies (it’s easier to read full screened):

We will continue working on enhancing the search aspects of the tool (current usage is limited by a split between keywords derived from twitter streams, and manually entering terms into a tool like frankensearch). In addition we’ll be using oauth to incorporate Facebook, and Google Wave (after it opens up) input streams.

Our long form semantic tool is Zemanta for RSS blog feeds, and the status form semantic tool is from Orchestr8 using the AlchemyAPI. These companies are uncovering value in an entirely new set of information tools.

The New Patronage Economy

I had the pleasure of getting referred to an article from James Governor discussing the merits of a patronage economy this morning by Hugh Macleod (who is also referred to in the piece). In it James covers the idea of the changing of portals where we seek out information, and it is best summarized in his quote of Stowe on deportalization:

It’s the movement of power from the large companies at the center to the edglings: we, the people.

Larger corporations or businesses can sponsor people or small teams to do what they do best, which is create. Whether it be writing, drawing, or creating music and sharing their art, information, or services the small time developers are free to create a form of value that is difficult within the larger business structure. For a couple of great examples consider Hugh’s work with gapingvoid or Robert Scoble‘s representation of Rackspace. The businesses fund creative individuals without hooks that force their hand or deter their enthusiasm.

It is this very force that has called me to writing. Inspiration, Enthusiasm and Passion are the foundations for unleashing our most powerful creative abilities. By promoting systems that steer away from these essential creative elements, we are inhibiting our societies potential for growth of value. Trust in yourself, and trust in the creative abilities of your employees, allow them the space necessary to find their motive energy.

One of the more fascinating trends I see happening is the hiring of talent or purchasing strategic software assets. Startup founders may find their new businesses purchased by larger corporations. The rationale for the larger corporation is generally grabbing incredibly productive teams. I think it’s important to note that generally keeping a hands off approach has proven to be the most effective way to leverage a talent or strategic asset grab. Google and Facebook have done this with purchases of

• ReCaptcha (strategic asset leverage security for improved machine translation of text) and
• Friendfeed (talent grab, but have moved the team to different areas).

The earnings or payoff  for a content creator can be enormous compared to hourly pay. Thanks to TechCrunch author Erick Schonfeld for covering MeetTheBoss’s image of Google’s historical acquisitions you can visually see how Google’s strategic purchases are unfolding (click the image to go to MeetTheBoss’s site, then click it again to enlarge for a very readable version).

Numerous Advantages of Concepts that Scale

Beyond the decrease in cost associated with mass production, there is measurable advantage to having massive revenue. Even a small increase in efficiency can increase profits by a large margin. Having thousands or millions of customers requires a different approach when minimizing customer dissatisfaction (or maximizing customer satisfaction). Beyond the guessing game of new product offerings, with massive user bases, wide data sets can be collected to understand how and why users prefer your products or services (offering). Localized demand may be low, but global demand could be enormous for our offering.

Obvious Requirements

Is there demand for your offering?

The required demand to sustain a product or service is not only dependent on the size of the user base, but on the value measured by each member. If your offering provides great value to asset fund investors or governments, you likely may only need at most a handful of customers to support a healthy revenue.

For lower cost and value offerings necessary scale may be measured in the thousands or millions. Electronic books have a low cost per copy (some are free), but when many millions of copies are sold your business can generate sustainable revenue.

Is the demand for your offering sustainable?

Will there only be a fixed event for the sale and distribution of your offering, or will there be recurring sales? Services can usually be provided on an as needed recurring basis. Some products are “built to last” and require limited replacement over time. A preferred offering requires the business to research and innovate more valued replacements (computers, Internet connectivity, communication/social media systems) instead of relying on short product lifespans (cars, tires) to drive replenishment needs.

Is your offering reproducible?

Great works of art are one of kind, Toyota Prius’ can be mass produced. Expert consultants can provide fantastic service, but their efforts cannot be scaled without getting more consultants.

Subtle Requirements

Can you manifest demand for your new offering?

If there’s not a current need for your product or service, can you leverage freemium concepts to initiate demand for your product. A classic example, the mass delivery of free cookbooks with recipes all requiring gelatin (thanks to Chris Anderson for this example). Simply mass producing gelatin was of little use to making sales, until demand was created by the widespread sharing of recipes which required it.

What makes your product or service stand out from other offers?

Quality, Convenience, Price/Value

It’s not enough that your product is better than an alternative. Adoption of a new product takes a change of inertia for large businesses. For individual customers changing brands or solutions involves a factor of risk. You must overcome this risk by having a product or service that simply doesn’t compare to what competitors are currently offering. I’ve read quotes of people noticing a 10% improvement, but when it comes to changing products or services the threshold of improvement to instigate substantial adoption could be much larger. From a recent post of Seth Godin’s Fidelity vs. Convenience:

In the words of Bill Gross, in order to win with a new product, you need to be on one axis or another, and ten times better than what you’re aiming to replace. Which means ten times more high impact or ten times cheaper and easier.

Gaining an improvement in quality or convenience by a factor of ten or making your product ten times cheaper or easier is no small task. It requires incredibly clever thinking along with brilliant execution, or a breakthrough invention.

I suspect if this was the actual requirement on successful new businesses we would see very few new companies succeed, and very bursty improvement to value offerings (this could be the case). In contrast for huge scales even a tiny improvement is valuable. Say your company helps Google improve advertising clickthrough rates by 1-2%, the net return could be a hundred million dollars and only cost Google a fraction of that improvement.

Can users of your offering increase it’s value?

Network structures increase in connectivity by the number of nodes squared. When it comes to social collaboration allowing your users to customize and share their developments within your marketspace is a gold mine of innovation. Businesses that can leverage collaborative design are positioned to benefit from the passion of it’s user base. From web programming development platforms, to utility sites with public APIs there are great examples of community building/supporting business concepts.

Is the rate of spread of your offering sustainable with the infrastructure you have available?

If the spread of your concept is so fast that you can’t possibly satisfy the need, competitors are likely to capitalize on your lack of production. Maintaining slower growth of need to match the pace of your distribution is a great way to control market position.

Relevant Links:

Product Service System

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Notional Framework Breaks the Problem Up

This framework is an extension of the ideas presented in Monetization for Web2010.

Social media provides the “real estate” for communications to happen. Whether social media is decentralized (ostatus, P2), or integrated by API and more centralized (twitter, facebook) the conversations are happening because people are connected. Without the backbone of social media this monetization would not be possible so they must be aportioned a piece of the revenue pie (20-30%?).

Web hosters (bloggers, companies, individuals) can engage in conversations on their own sites while sharing windows into the social media world. Folks that host shared media on their site empower and evangelize the social media brand (as I do with friendfeed with window real estate and twitter by content). By hosting their own content and seemlessly integrating their favorite social media “hang outs” individuals shoud see a cut of ad revenue (40-50%?).

Existing advertising networks (Google, Microsoft Ads etc.) have developed leading edge technology (algorithms) to match semantic meaning (meta data) from text to drive appropriate ads. In addition they provide a single stop for businesses to advertise to (business advertising aggregators). We can leverage their technology moving forward. (20-30%?).

But I’d like to see semantic algorithm businesses decoupled from advertising aggregators. That would comprise a four part business model allowing for greater competition and innovation within each space (with overlap). For example friendfeed could team up with wordpress to create personalized user profiles to better serve ad algorithms. Google could team up with web hosters to integrate Wave real estate directly into their web pages (like friendfeed has done).

Edit: I added input from the meta data extraction algorithms to the front end sites, as well as user like/dislike information back to the social media platform and advertising aggregator.

Should We Give Our Best Away for Free?

For several months I’ve been persuading readers (preaching) to discover work that compliments their passions. My fear is that the process of monetizing detracts from our best message. Any truly great work, be it art, functional or a mix, that comes from the core of our being and needs to be passed on has great value (at least to ourselves). But the manner of trying to cost that, profit, or putting a price tag on our creations may tarnish the work. It’s a healthy fear to keep in mind, as it channels creative energies towards coming up with revenue streams that doesn’t sully our integrity, honesty, and genuine judgement.

raw recording of some thoughts on giving our best away for free:

As you might have guessed, I’ve spent (insert large amount of time here) thinking about different monetization models for internet content/products. One of the core concepts is centered about “how best to connect internet communication tools to businesses”. The importance of this priority has been recognized by Robert Scoble. His vision for building43, manifests the principle clearly “make it easier for businesses to use the internet to improve their business results“.

The post from Fred (click image for link) got the neurons firing (thanks to Jonny Goldstein)

Fred Wilson’s #140conf conference talk

My response to Fred’s post suggests “an advertisement window/column (very Googlish) based upon the meta data (semantic) of passed links” :

Very excited about monetization potential for not only social media (facebook/twitter/friendfeed) but for web content in general. The economy of the internet is evolving. I labelled gratitude as the virtual currency in social media, but that is usually shown with thanks and a link.
I’m worried about one hiccup. If passed links are the currency, how will advertising piggy back on them. Anytime I’m paid to refer something, my genuine recommendation has had all it’s value removed.

A series of comments and replies lead to this early idea of mine:

I agree the contextual advertising isn’t there yet. But imagine if you will, updating your status on any social media you frequent. Now imagine a small box off to the side with pertinent advertising targeting the semantic meaning of your status update. For an analogy, I can lookup up dentists on Google and find one locally without ever looking at their ads (above or on the side). The same can be done within social media, I can search for a preferred dentist and ignore any ads they may have (above or on the side), plus I can get first person descriptions and feedback. The technology is rapidly developing and Google, twitter, facebook amongst other businesses are doing their best to match the semantic meaning of your searches or status updates to an appropriate advertisement/business (if they’re not they should be). See my comment about where pageviews are coming from to my blog, they’re almost all (95-100%) social media sourced referrers. Advertising dollars will follow the link passers.

Thanks to the creator of balsamiq for this awesome mockup (big thanks Giacomo ‘Peldi’ Guilizzoni)

Maybe the ads should be personalized to only the users updates/status. Mixed feelings on this, if you’re reading Scobles lifestream you might just be persuaded to get a Prius. I’ve wanted one for a while (4years) but Robert’s great feedback could be the tipping point. The advertising algorithm will have to “know me” in a historical data sense. Data a virtual assistant would have easily be able to provide.

Check out 18.5minutes in to Fred’s Friday chat with Howard Lindzon for some extra thoughts on where twitter may go for monetization.

This concept has been extended to a Notional Framework for Monetization Web2010

If you’re really interested in this topic feel free to read up on how my ideas developed, and by all means share/comment your own concepts. Previously, I wrote up thoughts on monetizing and design potential for social media:

• The Democracy of Attention, an Economy of Minds
• Ad Money Will Play “Follow the Leader” to the King of Links
• Intelligent Advertising for Microbloggers: Who will be first to swim in the riches?
• What Can Be Accomplished With Twitter
• twitter is on the verge of eating Google for breakfast, here’s why
• It more than makes sense for Google to acquire twitter, it makes money
• VCs building sand castles that float
• Social Media Will Be the Dominant Design Focus of the 21st Century