Archive: social commerce

Rezession die beste Zeit für Social Media? [German]

Peter Turi hat ein Video – Interview geposted, dass er mit mir auf dem DLD 09 geführt haben. Darin stellt er solche spannenden Fragen wie:

1) Ist Rezession eine schlechte Zeit für Startups?

2) Wird sich bei den Startups die Spreu vom Weizen trennen?

3) Wird YouTube sevenload verdrängen?

4) Was ist das “nächste große Ding?”

Hier sind meine Antworten:

Interview Turi2 (2009): Interview with Axel Schmiegelow about his entrepreneurship (German) from curtis newton gmbh on Vimeo.

Viral Social Commerce for Companies

In my previous post, I tried to describe what I call viral social commerce as the commercial dimension to Web 2.0. This Blog entry will focus on the opportunities and strategic demands that viral social commerce presents to existing companies- especially such companies that have a dominant position in their market. If viral social commerce describes an increasingly commercial nature to the interaction presented by users on the web, then this has deep implications for a relationship between companies and their customers.

On the communication level, much has already been written about the need for companies to go from a broadcast model to an interactive/interaction model, and many companies have already experimented with blogging, viral marketing and other forms of “Web 2.0 marketing”. So far, these endeavors have been met with mixed success. This has a number of reasons- which I will try to sum up in 3 axioms:

1) A day still has only 24 hrs, and our wallets have not gotten fatter.

What this means, is that for all the novelty and increased value in communication that Web 2.0 methods can create in their relationship between customers and companies, engaging in these for more than a fleeting moment of curiosity will require any customer to make a sacrifice of both time and effort to the detriment of something else they’d rather be doing. What this means is that you need axiom number 2.

2) Real people seek real value.

Axiom number 2 is probably the central answer to any strategic or implementation question connected to any type of new technology. Technologies do not usually fail because of technical questions, in fact, the success of technologies is often independent of the quality of the technology involved or its implementation- in other words, abject products are sometimes more successful than perfect technologies (the old, if not entirely true, Microsoft – Apple adage).

Technologies do fail however, when they do not meet a market in a way that creates significant value for a significant value for a significant segment of potential customers. This is the Holy Grail of start-up and business success and it has often been described and is easily worded, but hard to execute.

So cutting back on Web 2.0 technology by seeking not a mash-up of all the functionalities that happen to be the talk of the town and instead looking for ways to create real value with Web 2.0 technologies requires, first, an analysis not of Web 2.0, of these technologies or even of the Web 2.0 early adopter crowd. Much rather, it requires a thorough analysis of the existing market, existing distribution communication channels in those markets and existing or potential customer segments. Then and only then, but then with the strongest impact, can the potential, use and value of a specific Web 2.0 technology be found. This is where competitive advantages are born. This leads me to axiom number 3.

3) Innovation begins with a thorough understanding of the existing weaknesses of the existing market.

This attitude best summarized and methodized in the book Blue Ocean Strategy by Chan Kim and Renee Mauborgne. This approach is at the core of most technological successes and I am more than certain that in the existing wave of new start-ups, those start-ups will succeed which have best understood this lesson.

For companies in existing markets, this means that hunting for the weaknesses of their own methods of communication, of production and sourcing, and of other interaction (for example, service interaction with their customers) and then hunting for solutions to these weaknesses which were before impossible, but can now be enabled by Web 2.0 technologies, is the key to success.

You may find that direct communication with customers or sourcing in of product or feature feedback from customers was, until now, on a snail mail or even E-mail or call center paradigm, impossible to manage efficiently and to link back to the production and design process for some products. In the environment of a web 2.0 community and / or user to user communication interface, this sourcing process, suddenly becomes manageable because of the combination of ratings, feedback and systematic analysis in a technology-enabled low-cost framework. At the very least, such a platform will bind your most active customers.

The task of sifting through all the feedback and identifying the most valuable feedback from customers now does not have to be preformed by the organization alone, but can be delegated at least in part to the community- and this can apply to almost any market.

In the following model, I’ve tried to sum up the paradigm shift that this entails for companies in existing markets. Until now, you had the classic paradigm of production and product identification followed by (retail) marketing and distribution, and the cherry on the top was communicating to customers through combined PR and advertising.

Viral Social Commerce Model

On all levels of that process, a redefinition can now take place by including interaction with customers. At the very least, the communication/advertising end of the classic model of value creation within the business organization can undergo a paradigm shift from communication to interaction that links back into the organization. This is exemplified in the drawing below- and creates a whole new set of requirements for the company including, for example, new tracking tools, new analysis tools and a new mindset in marketing. Marketing then becomes not just a communication task but becomes much more a framework for the company’s role as the

host of a community of customers.

These are the concepts that we’ve been working on for years now at denkwerk and which we try to reflect in our everyday work for our clients, such as Nokia, Obi and other retail giants. This paradigm shift leads to surprising successes each time the department of the company we are working with and we are mandated to not only think, but also act in a radically different way.

“Quo diata Diferenta”??- as Guy Kawasaki puts it.

Viral Social Commerce

These past months have, in a way that I would not have thought possible, created a start-up market situation closely resembling a certain period in time that we had in 1999. A number of new start-ups have sprung up that stem from what I call “feature-itis”, that is: their main business idea is not the creation of a value that addresses a particular market in a way that is commercially feasible, but much more the “hey- wouldn’t it be cool if it were possible to do this or that on the web” impulse.

If you sift through the business history of the first and second wave of the internet and try to analyze which companies ended up being successful, which companies were moped up as additional features to Yahoo! and bought out, and which companies simply failed, you find out that at the end of the day it’s not at all about a new economy, it’s about very old principles of

– servicing viable markets
- with a viable market proposition/value proposition
- and at an affordable price

in the widest sense of price, that is: convenience, access, time, budget and eventually price in dollars.

If we now look at what I like to call Web 3.0, that is, the commercial maturity of the social phenomena that we are observing with Web 2.0, then remembering that business history and applying the method of identifying customers for a market that are prepared to pay a given price, is a healthy mental exercise.

You’ll allow me to refer to myself and my earlier Blog entry about the distinction between Web 1.0, Web 2.0 and Web 3.0 and briefly describe Web 2.0 as the discovery that the internet is not only a repository for information and data, and a network through which e-mail and chat communication can happen, but has become a medium where

the human source of information

and human source of opinion and entertainment becomes as accessible as the data that he/she has created, that is at the core of the Web 2.0 social revolution. And as any revolution, it creates a whole new set of social behavioural changes, business opportunities, political implications and essentially an entirely new medium- which incidentally is not only confined to the Blog or Social Network phenomenon.

Stating these now commonplace insights into Web 2.0 leads me to reflect upon the Web 3.0 phenomenon, that is the commercial viability of all of these changes. As described in my Blog entry, I believe strongly that this will be the era where the source of data and information, and essentially this means the

human individual as a source of expertise,

can more and more market that expertise in many different ways- either

- by being accessible as an expert or
- by offering more in depth information or
- services related to the information
- transactions / products related to the information

for any kind of currency (this may be a social reward or a commercial reward/payment) in a variety of models that can range from subscription to micro-payments or even other forms of transaction that we may not yet even imagine (my informed hunch is “subscription” will mean many different rental models that are being imagined right now). As of now, the main focus of business endeavour in the Web 2.0 to Web 3.0 transition era, is to create and monetize exactly these kinds of platforms- much in the way that sevenload is doing for the video world.

In the future, business focus will be to harness the technologies, communication methods and social behaviour of Web 3.0 to create new value and new markets, thereby disrupting existing business structures. Increasingly, this will be achieved by individuals and small companies rather than larger companies.

The challenge is to identify these markets beyond advertising. If we look at what is happening right now in the Web 2.0 sphere, it is essentially one giant cannibalization of the editorial market, trying to supplement old media and replace them with “Facebook-”, “MySpace-”, and “YouTube-” (new) models of broad- and selfcasting and interaction with the user. That will, of course, be successful, but it is hardly imaginable that more than a productivity or effiency increase of more than 25-35% (maybe even 40% or 50% through better targeting) with relation to the advertising market can be sustained.

Even more market volume may be created by opening the advertising market to new segments that, until now, had a high cost barrier towards advertising, for example in the Long Tail of smaller and mid-sized companies, or in niche markets which had to rely on direct marketing because there was no medium for them to address at sales efficient cost on a large scale.

This disruption of the advertising marjet is of course fueled by the radically changed cost-dynamics of Web 2.0 platforms and the possibility to address the long-tail of content and offering highly specific audiences to as specific advertisers.

This opening of niche markets for advertising may one day – probably soon to come – come as far as user groups and communities centered around exotic topics such as the nuts and bolts of drilling joints (or something similar).

But by and all, if advertising is the only focus of what is happening right now, there will inevitably be a crunch at the moment of realization that there is just not enough money in these markets to create hundreds of new billion dollar companies. Even though a return to the Nuclear Winter of The Internet of 2001-2003 seems unlikely, it is highly probable that we will have a structurally similar shake-down and that just one or two more Yahoo!(s) or Google(s) will crop up, having found the holy grail of

on-demand fully trackable horizontal niche long tail CPA advertising

By the way, addressing that advertising market will also have to overcome a formidable opponent which is very well positioned to address the long-tail of advertising, and that is Google.

My point in this Blog post is that there have to be, and there will be business models beyond advertising and they are starting to emerge. Essentially these will be transaction based and will be centered either around the handling of goods in an e-commerce sense (that is already being seen in a number of start-ups) for example, by itravel, but there will also more and more be transaction platforms centered around services, much in the sourcing logic mentioned above.

The sum of these developments is what I call “viral social commerce”. It is viral in the sense that its dynamics of growth/expansion are very much word-of-mouth and very much based on the social phenomena of Web 2.0.

*I might add, that these phenomena are not new, word-of-mouth has always been the most powerful marketing instrument, it’s just that technology has enabled it to travel at light-speed, where before it was at a horse carriage pace.

It is social in the sense that, not only communication, but also increasingly parts of the production process and the definition of the product/service offered will be defined not by an entity that is producing it, but rather by a group of people or a community that adds a significant part of the value that is being created. An example for that is again itravel, where the travel community creates a lot of the product knowledge and even product sourcing that is necessary to create its catalogue of once-in-a-lifetime-experiences. Another example is ChariTees, where the community sources not only the designs, but also decides which designs will appear on t-shirts and also decides which institution would benefit from that part of the proceeds of ChariTees that is being spent on charity.

The commerce part of the “viral social commerce” idiom, reflects on what I was describing at the beginning of my post, namely that this is more than a social communication phenomenon and it is also more than pure interaction, it is in essence a whole new commercial dimension to what happens in our increasingly web-enabled society.

Viral social commerce is, for me, the essence of what will happen with Web 3.0. In my next post, I will describe how companies can confront this development and attain competitive advantages by harnessing them.

VCs are sooooo cyclical

Rumour has it VCs are downbeat again. Well, on the one hand I can’t blame them, and on the other it brings me back the structural problem of assessing innovation as an investor. I have been observing a very fashion-driven, impressionable and cyclical focus of VCs on The Things That Exit Well (TTTEW), coupled with a regularly disdainful disregard of Never Heard of That (NHoT) and Don’t Believe It Works (DBIW).

Interestingly, most acclaimed hot shots, like skype, or Social Bookmarking, or even Apple in the beginning, went through year-long phases of NHoT and DBIW before sparking real Oh God I Hope We’ll Get a Deal in That Space Epidemic (OGIHWGaDiTSE).

Now as a proponent of a few Startups That Earn Actual Money (STEAM) – I like to think of our company as having a STEAM-Engine, being STEAM-Driven, or believing in STEAM-Power, if that is not too much self-E-STEAM – I keep wondering why it is much harder for VCs to see the merits of Social Commerce models vs. simple Social Network models.

There is no logical explanation for this. And if you think of it, copying something that just exited well is about the stupidest thing you can do:

1. It has already been done
2. It has become big enough to just exit
3. It has become so big everybody actually knows about it
4. There are at least 100 other boy group founding teams and greedy-panicky Vijays (see Dilbert for who that is) funding them who are trying to do the latest GooTube thing

…doesn’t strike you as smart? It’s being done. All the time. Again. And it’s sooo 1990s, ain’t it?

So, dear entrepreneurs, stick to your guns on real innovation, don’t foray into the OGIHWGaDiTSE, avoid the Vijays, and remember MIT’s secret formula for success, as transmitted by Prof. Ken Morse:

CFIMITYM

(Cash Flow is More Important Than your Mother)

Cheers

Rocketrabbit

PS: I’m known for being a real Punster…

Busy Weeks – More & More, and selected

The past weeks have been incredibly busy. Sevenload, Qype, Oneview, and itravel are achieving their respective crests.

http://www.sevenload.de has an exploding user base, has just won nicole da silva and a number of young stars had their start on the platform. It is now by far the most used German Video and Photo Platform. myvideo is raising a stink and faking their user numbers (check by looking up a user beyond # 800), but have little to now recognition in the relevant crowd. Remember “the Tipping Point” and you’ll know why that’s relevant. Ibo’s Team is just the better team.

http://www.qype.de is growing fast, getting really useful, and closing a new financing round (no details, it’s all NDA’d) – but just this much: Qype is going to be the dominant player. Stephan is an incredible guy and has a great team.

http://www.oneview.de are preparing their gamma, and it will rock. Full google-kicking potential. We will get our revenge for having been the first social networking/bookmarking site (1998) and not getting the recognition because the business model had no market yet in 2000. Great team there too, with two additions to the developer team.

http://www.itravel.de – stay tuned for the first real long tail social commerce site, you’ll see more and more of the community in the next three months. In cooperation with Sevenload!

I’m really excited as we are preparing Upload! 2006, which we hope to become the coolest web 2.0 / social commerce / next big thing event of this and coming years.

BTW: we are desperately looking for developers, marketers, tecchies, pr guys/gals, project managers, business developers, sales guys etc etc etc…. contact me, or denkwerk @ http://www.denkwerk.com

It pays to read

Hi, I’m back @ reading the basics, which i can only recommend:

1. The Cluetrain Manifesto – the bible for “power to the customer” revolutionaries

2. The Tipping Point – winning the multiplyers is the real model for building a community / social network

3. The Long Tail Parts I and II – that’s where it’s going, folks – you can’t think enough about the implications

4. Blue Ocean Strategy – THE method for innovation

Read it. Apply it.

Cheers

R0cketrabbit

Sweden and Holland rock!

The past 2 Days I spent at Expand 06,

http://www.expand06.com

the conference hosted by my friend Ola Alvahrsson, former Founder of Boxman and Founder of Result

http://www.result.com

Here I meet Founders from the Netherlands, Sweden, even France and Spain, including bigger shots like Tradedoubler (300 Poeple, listed on Stockholm SE since november 2005, 117 Mil. € in Revenues.

The conference is ablaze with founding willingness, endeavour, and the smartness of founders intent on not spending it all. As with Lukasz Gadowksi of spreadhirt.net in Hamburg, the most exciting founder was one who founded with 0 € in VC money. Samy Liechtl is Founder of Blacksox.com

http://www.blacksox.com
or http://www.blacksocks.com

He does really smart marketing, selling “sockscriptions” of socks, to relieve “sock sorrows” by selling only matching socks, so if you lose one it doesn’t matter. He also puts small sock-shaped jelly in to his mail-order deliveries – with cheese tase! ;-)

We discussed that the exciting part about web 2.0 and social networks, is not so much the direct features you get but the potential it has for enhancing existing Business Models into the decision taking sphere (an aspect of both long tail and social commerce). Exciting discussion. More Later.

PS: Sweden is cool, the Swedes very nice.

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