Monthly Archives: August 2009

Social Media Currency = Attention (and contributions)

Brad Burnham of Union Square Ventures makes a good case in his recent post about the economics of social media… gibes with what we’ve been saying about Front Porch Forum for some time…

My frustration with the debate about Free is that it seems like a last ditch effort to fit the internet economy into the familiar framework of the industrial economy. That isn’t going to work. Free is not a pricing strategy, a marketing strategy, or the inevitable consequence of a market with low variable costs. It’s a symptom of a much more fundamental economic shift. Until we agree on what resources are scarce and have a framework for how they will be allocated in the future we are not just talking past each other, we are talking about the wrong things…

…in an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients…

In a world where the scarce resource is some combination of time, attention, relevance and insight, those commodities become the medium of exchange in a parallel economy alongside traditional currencies…

The much more interesting conversation is about the appropriate economic model for a social network that depends on the contributions of its participants and increases in value as more people use it. One possibility is that the economic models of these networks will look more like Craigslist than Yahoo. Recent estimates peg Craigslist’s revenue at more than $100,000,000. Not much compared to Yahoo’s billions, but Craigslist still employs only 28 people. Even allowing for substantial bandwidth, and server costs, it is still hard to imagine how their costs are more than $5,000,000. Since Craigslist collapsed a multibillion dollar classified advertising business into a fabulously profitable $100,000,000 business, perhaps we should be talking about the potential deflationary impact of more “zero billion dollar” businesses. As the radical efficiencies of the web seep into more sectors of the economy, and participants in social networks exchange attention instead of dollars, will governments at all levels need to make do with less tax revenue?

Of course, the other “currency” of social media is the posting.  Web 2.0 sites must attract people who post and people who pay attention.  Then earn dollars around that.  But you’ve gotta have both readers/viewers and content contributors… often two very different beasts.