Companies that close networking doors jeopardize their future

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There has been extensive coverage in the Australian media today about a press release from internet filtering company SurfControl, in which they make up a spurious figure that the use of Facebook on company time is costing business up to A$5 billion a year. This is based on 800,000 employees spending an hour a day on Facebook, numbers which have appear to have no basis other than the imagination of the report’s authors. SurfControl sells software to block employees using sites such as Facebook. Their vested interest has resulted in a highly inaccurate and distorted view of the use of social networks in organizations being presented in the media.

Of course, this is not to say that there aren’t plenty of company employees working on improving their social lives while they draw a salary.

However, the more important side of the story is that in a knowledge-based economy such as Australia, effective networking is absolutely essential to corporate productivity.

As a research leader at the University of Virginia’s Network Roundtable, the world’s premier organization studying organizational networks, I both do extensive research on networks in and across companies, and have access to the best research globally in the field.

Research at institutions such as Harvard and M.I.T. has consistently shown that employees’ personal networks are in many cases the single biggest factor impacting their productivity and ability to contribute to the company.

This is why organizations such as IBM, Procter & Gamble, PricewaterhouseCoopers and most world-class organizations I am aware of are focusing on how they can HELP their employees to network and build connections inside and outside their organizations, not hinder them.

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A rapidly growing advertising segment: compelling content people flock to watch

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A few months ago I wrote a piece about new business models for content, sparked by a fascinating dream I had. In the post I mused:

My dream sparked off many thoughts about content business models, including the evident one of replicating the model in the dream – getting people to pay to skip ads. If you extend this far enough, you get to a model where you can price advertising by how much people are prepared to pay to skip it. Consumers should be able choose how they pay for content – by payment or attention. Ultimately we should be able to move to dynamic content markets, where there is a different cost depending on whose attention you are capturing, and the context in which it is embedded. Perhaps people will pay a lot of money not to have an ad inserted in the middle of a chase scene in a movie, but they will even be prepared to pay to see the ads during the break in the Super Bowl.

Now the model of ads being presented as content is rapidly gaining prominence. People are not quite yet paying to watch the ads, but they’re certainly choosing to watch them. An article in the New York Times titled Now, the Clicking is to Watch the Ads, Not Skip Them and a piece in AdWeek called Ad Portals: Will Viewers Tune In? lay out some of the current and forthcoming offerings:

VeryFunnyAds.com, an online version of a TBS show, is predicted to have reached 75 million viewers in its first year. The ads are mainly 30 second TV commercials.

Honeyshed, from Publicis and Droga5, will be an online space dedicated to branded entertainment.

Didja.com (as in ‘didja like it?’) is due to be launched in early 2008 by NBC Universal will feature outstanding TV commercials, as well as other branded content.

AdPerk is an advertising network for opt-in viewers who choose to watch ads and branded network (this model pays people with magazines for watching content, but has a similar intent, says Gregg Hano, publisher of Popular Science, which has just launched AdPerk on its site, in a Beet.TV interview )

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Marketers accepting loss of control is on the way to the mainstream

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A recent article in Smartcompany magazine titled Web 2.0: The risk, the reward, discussed the opportunities and risks of Web 2.0, focusing on the lack of control in marketing in the new online world. It quotes extensively from lawyers on some of the legal realities of dealing with negative commentary online, and then goes on to quote from me:

If you also prefer to avoid lawyers altogether, another option is to hop into the online debate yourself. Internet strategy consultant Ross Dawson says web 2.0 is really about participation – and any company that ignores this does so at their peril.

“It cuts both ways,” says Dawson, noting that companies can’t choose to be invisible online. Web 2.0 is not about companies deciding to be rated; consumers comment on whatever they like.

“It’s important to understand that web 2.0 is not just about technology. It relates to social trends, including the trend towards self-expression,” Dawson says. “We’re living in a world where people can express their opinions far more freely.”

At a minimum, Dawson sees web 2.0 as a great opportunity for companies to monitor – for free – what consumers think about them and their products, competitors and industry.

“This is an extraordinary tool that any business should tap,” says Dawson, describing web 2.0 sites as a “treasure trove” of customer feedback. “Corporate Australia has been a massive laggard – two or three years behind many countries – in terms of takeup of web 2.0.”

His advice, if people say bad things about your company online, is to avoid lawyers and old-fashioned press releases. “If you want to respond effectively you have to be part of the same conversation. This diffuses the negativity and creates a balance in the conversation.”

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The evisceration of traditional media – advertising flows to digital

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The naysayers of the dot-com era took particular delight in the demise of Henry Blodget, the Internet analyst at Merrill Lynch (where I used to work in the late 1980s) who was caught out promoting Internet stocks that he apparently privately thought were “a piece of junk” or “a dog”. As part of a subsequent settlement he is now not allowed to work in the securities industry. However Blodget continues to research the Internet industry on his blog Internet Outsider, where he has recently been writing provocatively titled posts such as Dead-tree media deathwatch: RIP Business 2.0, Running the Numbers: Why Newspapers are Screwed, and The Great Advertising Share Shift: Google Sucks Life Out of Old Media.

In this last post, Blodget analyzes the top 19 media companies (with supporting spreadsheets provided), indicating that advertising has shifted to online by 7% over the course of one year. The top-line figures are that US advertising at Google, Yahoo!, AOL, and Microsoft grew by $1.3 billion in the second quarter of 2007, while advertising at the 15 largest other media organizations fell by $280 million in the same period.

Or from another perspective, total advertising increased by 8% to $13.8 billion over the last year, with online increasing from $3 billion to $4.2 billion (23% to 30%), while offline advertising decreased from $9.9 billion to $9.6 billion (77% to 70%). Blodget comments:

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Media industry network analysis – tools for better strategic decisions

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Among the most powerful applications of network analysis is understanding industry structure and the implications for strategy. While this is still a relatively new field, we are beginning to uncover some very specific approaches and applications to industry network analysis. If you go to a large strategy consulting firm to provide strategy recommendations, you will get a thorough analysis of your industry. However this is almost always highly linear, looking at market shares, value chains, and industry trends. This hides the richness of highly interconnected industry structures. The next 5-10 years of strategy analysis will see a far greater use of network analysis to understand leverage points for

In the Future of Media Report 2007, we included some new analysis by Laurie Lock Lee. In the Future of Media Report 2006 we used Laurie’s analysis of shifts in media industry networks from 2001 to 2006, and earlier this year I featured some high-level analysis on the network structure of the Australian media industry. This new network analysis goes considerably deeper, analyzing the change in industry structure before and after a significant acquistion, by Macquarie Media Group of Southern Cross Broadcasting. An overview of the analysis is below. See the Future of Media Report 2007 for the full details.

There are a wide range of highly practical applications of industry network analysis. One, as illustrated in the example below, is analysis of industry structure before and after potential acquisitions or divestments by your company or your competitors. This can show the industry impact of major transactions, and provide further insights into their value. Another example in the media sector which we are currently exploring is examining the rich networks between advertisers, ad agencies, media buyers, and publishers. Viewing this from a network (rather than a simple market share) perspective enables very specific insights into how advertising spending can be shifted from one publisher to another. I’ll continue to post high-level views of some of this work and the kinds of benefits our clients are deriving from this.

MEDIA INDUSTRY NETWORK ANALYSIS: CASE STUDY

Laurie Lock Lee, Optimice

FoM07networks1.jpg

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Facebook begins to open up – recognizing and riding the inevitable trend

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Last week, in the heat of the grand discussion on openness in social networks, I wrote in a blog post titled Is the trend to openness accelerating? Social networks as an inflection point:

I see the trend towards openness accelerating, which makes playing the lock-in game ever more difficult. I think that the current debate reflects that today there is far greater visibility for lack of openness in offerings, and less tolerance for that. What is currently playing out in the social network space is a fantastic case study that is relevant across all business segments. After MySpace dominating the social networking space, Facebook has shifted to the front very quickly, through openness in its APIs. It is at risk of having its leadership short-lived, if others quickly leap on to people’s preference for open systems, especially when it concerns their personal relationships.

However the more likely path is that Facebook sees the trends, and swiftly opens out its systems. Any incumbent is loath to shift to greater openness, but given the players and the landscape today, I don’t think that Facebook is not going to hold on too tightly for too long.

Looking back in a year or two from now, we may see that now was an inflection point in openness in social networks. We may also find that this shift has impacted many other facets of the information and businesses worlds. The jury is still out, but I think the evidence points to the current landscape being a manifestation of the acceleration of openness.

Today, just one week after I predicted that Facebook would open out, Dave Winer writes Facebook *is* opening up, noting that he’s discovered some new RSS feeds from Facebook, including a Friends Update Status, and Friends Posted Item. Paul Thompson says that the Friends Update Status has been available since last month, while Techcrunch says that this will win Facebook a lot of friends.

Providing RSS feeds for key information in Facebook basically means that you don’t need to go to Facebook to see your updates and information. You still have to maintain a profile in Facebook, and it will still be the platform for your social networks, but you are far freer in how you use it. One implication is it’s harder to monetize, as you can’t be sure of presenting advertisement to your users. However if being freer means you can maintain the role of predominant social network, you definitely will find other ways of making money, not least because the majority of an increased network will choose to interface to their network through Facebook.

Media industry transactions are now transcending the boom years

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In our Future of Media Report 2007, we did an analysis of all media industry transactions of more than US$1 billion from 1993 to mid-year 2007. The transactions are not legible in the image below, so to get full details and analysis on the media industry transactions, click on the image for the complete Report.

mediatransactions_FoM07.jpg

Even at a high level of the general trends in activity, two things stand out. The first is the sharp rise in activity in 1999-2000, highlighted by the massive US$166 billion AOL/ Time Warner merger (remember that?), which still dwarfs any other transactions in the media sector, followed by a spectacular slump in activity in the following three years.

The second is how fast activity has risen in the last 18 months. Remember that the 2007 figures in the table are for the first half-year only. In fact if you take out the AOL transaction as an extraordinary one-off, there is a far faster pace of activity today than even in the boom years at the turn of the century. The question is, of course, whether this pace will be maintained or even accelerate, or whether it will again decline. While the answer is significantly related to stockmarket levels, since so much of the activity has been private equity-based, there is the potential for transactions to continue even after a fall in equity prices, as private equity firms snap up opportunities.

Richard Watson at Innofuture 2007

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Richard Watson, our esteemed Chief Futurist at Future Exploration Network, is speaking at what looks like an extremely interesting innovation conference in Melbourne on August 28-29, called Innofuture 2007. It has a great cast of speakers, including Tom Kelley of IDEO and Frans Johanssen, author of The Medici Effect.

The rise of e-democracy and the wonderful experiment of participatory democracy

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I was recently interviewed for an excellent article in IDM magazine titled Democratic participation ignited by the power of many, which explores the potential of e-democracy.

Here are some selected quotes from the article:

“Mass media will always exist. People will always want a common perspective on the world. But we are definitely seeing a fragmentation of media,” says Dawson.

Rather than social leaving mass media for dead, Dawson believes we are seeing the emergence of two forms of media that primarily feed off each other. “Often journalists look to online blogs and sources and commentary and will even quote them in their articles. They don’t need to pick up the phone anymore,” says Dawson. “There’s no better way to pick up on trends then to explore the world of social media.”

“Of course there is always the issue of the credibility of the source. But often for credibility, people will simply turn to mainstream media,” says Dawson.

Although citizen journalism is opening the doors for anyone with Internet access to have their say, it may not progress ‘democracy’ but it does improve on the dissemination of information and debate. “In the past we had to rely on press releases and reports for our information, now we have access to everything,” says Dawson.

“As you get input on creating outcomes, emergent results occur, emergent outlines where you can’t predict the outcome,” says Dawson. “Things get better with the more people that use them. You see what’s popular, what’s relevant, different approaches and bringing together of different data-sets.

There are many layers to the potential of e-democracy. The domain of transparency and dialogue, on which I was quoted here, is the first. In the US presidential elections, already in full swing with 15 months to go, there is already substantially improved engagement by voters over previous elections. People have access to – and often choose – far more diverse sources than the mainstream media in forming their opinions. The power of bloggers was amply demonstrated by the line-up of all major Democratic candidates at the recent YearlyKos convention of political bloggers. There is real participation in political dialogue, whereas before the messages were almost all filtered through mainstream media. This is not to say that all is rosy in American democracy, or the way in which issues are discussed. However we are far closer to participatory democracy when discussion of the key political issues is participatory.

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Ross Dawson answers six pressing questions on online social networking

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I recently created a 4 minute video in which I briefly answer six questions on online social networking:

What are the benefits of online social networks?

How do I know if my obsession with Facebook has gone too far?

What is the etiquette for ignoring invitations on social network?

How do Australians compare with others in using online social networks?

Will email die now that all my friends keep in touch on Facebook?

What should companies think about their staff using social networks?

The video was created for an Australian audience, so for others, please draw your own implications on how your country compares on uptake of social networks. See here for recent figures on comparisons of the usage of online social networks US, UK, and Australia.