I’m currently reading Jaron Lanier’s manifesto called “you are not a gadget”. While I find myself nodding along with some parts, and occasionally shaking my head at others, my most common reaction to each chapter is that I’ll need several months of quiet reflection to even form a coherent opinion (which, based on what I think I’ve read, is part of the point of his book). It is unquestionably the most thought provoking body of text that I have read this year – and I hope to respond to various parts of it, if and when thoughts hit me, over the coming months.

The part I’ve been thinking about most today is “The transition” section, within the “what will money be?” chapter (page 106). The general idea is to allow people to earn from their “bits” of contributions, such as photos, music, or articles. It’s posed in response to his (very valid) concerned that society is losing its way as the value of “bits” people contribute trends towards zero in the marketplace, and all the rewards (if any) go to the people that aggregate them. If this continues, there will be fewer and fewer bits to aggregate, of worse and worse quality, in a continuous downward spiral that could have disastrous long-term consequences. He explains the consequences, and proposes a few ideas on how to avoid them – but you can read about those in the book.

Why I find this, (and Jaron’s book in general) so interesting is that it’s challenging the new orthodoxy of “the wisdom of mobs”, working in conjunction with powerful algorithms, is superior to the judgment and intelligence of individuals. At first glance, one my primary research areas – prosumer-driven innovation, or customer co-creation – we seem to be right in his line of fire. But as I’ve studied it over the years, my thinking on the subject lines up directly with Jaron more often than not (I think).

This research area was born out of the book Wikinomics by Don Tapscott and Anthony Williams. As the sub-title of the book is “how mass collaboration changes everything”, the idea is often viewed as synonymous with the “wisdom of crowds”. But I’ve went to great lengths over the years to explain how this common interpretation of this is often misguided. It’s often not about a “crowd” collaborating in any meaningful way; instead, it’s about finding the few uniquely qualified minds within the crowd that are both willing and able to make an important contribution. While not a prosumerism example per se, the first story in the book – GoldCorp – is a great example of this. Rob McEwen didn’t enable mass collaboration. He opened up the data about his property in hopes of finding those few people in the world that might know the best way to find the gold. That’s a very big difference.

Such contest models have their own problems built into them, as Lanier references regularly in his book. But at least they point towards some sort of financial compensation for the people that have the best “bits” to contribute, and have very little to do with the problem associated with the “wisdom of mobs.” This indicates a very different set of opportunities, and potential problems. The key challenge, then, is to adapt the model to instances where it’s not a “winner takes all” contest – one where a larger number of people can be rewarded for contributing “bits” to the creation of a new product or service.

I’ve been hypothesizing about this, and waiting for signs that it’s happening, for many years. While much of my research focus has recently been on marketing (which also puts me on the bad side of much of what Lanier talks about), my academic background is in economics – and I have a strong belief that financial compensation for contributors and creators is absolutely vital to the long-term success any prosumer-driven models. But examples of it actually working have been few and far between. That is why I’ve taken a relatively keen interest in Quirky – which I just recently discovered.

Quirky is a platform for social production, founded by Ben Kaufman. The core idea is fairly simple. If you have an idea for a new product, you can submit it to the site (for $99 – which presumably provides a decent “filter” for idea submissions). Each week, a winner is selected (through some combination of community votes and design team input). It then moves into the “influence” phase, where the community can weigh in on everything from specific product design to the logo representing it. Once this phase is completed, it’s handed over to Quirky’s industrial designers and mechanical engineers to create a 3D render. Next up is the pre-sell phase, where a minimum number of purchase commitments must be made before the company invests in moving it into production. If that threshold is met, it then moves into production – hopefully allowing many of the people to cash in.

Why I say “many” is that Quirky currently allocates 30% of revenue from direct sales, and 10% from indirect sales, to the community. What exactly the allocation will be is hard to say (and the company is likely still figuring out the best way to do it), but some “ingredients” include submitting the winning idea (or name, logo, etc.), making insightful comments, voting, rating, and committing to pre-sales. All of this activity is rolled up into an “influence percentage”, which is used to distribute the money. The rest goes to the company itself, which as I referenced above does a lot of the heavy lifting in actually turning an idea into a market-ready product.

Now whether Quirky itself will succeed, I (nor anyone, in my opinion) can really say. I think the biggest challenge comes in terms of scale. As one might expect, the examples provided on the site (to show how much money can be made) typically involve two key assumptions – lots of products are sold, and your individual influencer percentage is high. The end result is lots of money for your effort. Obviously not everyone’s influencer percentage can be high. As (hopefully, for the company) more and more people engage, each individual’s potential influencer percentage might decline further still (in relation to effort applied). If the percentages are small, the potential rewards are low – and thus much of the incentive to engage evaporates.

But at minimum, it’s an interesting idea, and I believe such experiments are critically important to the evolution of web enabled, and prosumer driven, business models. Someday, someone is going to figure it out. And what I find most intriguing is that, at its core, Quirky appears to be trying to find a way to reward individuals for their “bits” of contribution – which I think is absolutely key to making this web-enabled world work, and appears to be something that Lanier might approve of. But the process by which they are figuring out how to do it, which will likely involve layering some sort of algorithm on top of what looks like a “winner takes all” competition platform, seems to be tie directly to approaches he typically disproves of (or not – I’m sure there’s many nuances in the book I’ll have to re-read to capture).

So I’ll personally wait and see – and perhaps even engage in the community to get a real feel for how it works, and whether my own mind is uniquely qualified enough to add value anywhere. But in the end, I’m hoping both Lanier and Kaufman are right – there are ways to reward people for the bits they contribute, and this can be done within the context of a social production model.

That “customers are now in control” has become an increasingly common refrain in the marketing world. To be honest, I think I’ve used it a time or two myself. But the more that I think about, particularly in relation to social media, the less convinced I am that it’s actually true. In turn, I’ve been researching a very different hypothesis – that social media allows brands to have more control than ever before.

This hypothesis is at the centre of a webinar I’m doing in a few weeks – contact me if you’d like to check it out. It builds on one of the key research projects I’ve been working on – The incredibly shrinking marcom expense line – which looks at ways that marketers can use social media to reduce marcom expense, while at least maintaining current levels of impact. And what led me to the counter-hypothesis, in terms of control, were some fairly simple thoughts and questions.

In my mind, that customers are in control is not new – they always have been. What they choose to buy, or not buy, has been and always will be the ultimate determinant of success. What they say to each other has been of known importance for some time. So that leads to the question of which way the needle moves because of social media… which led me to jump into my time machine.

Go back in time ten years, and pretend you are a marketer. Somebody tells you that, in 2010, tools will be available that let you directly connect with a large, and growing, percentage of your customers, for free (or at a very low cost). Not only will the tools let you do that, but many customers will opt to allow you to do just that (often enthusiastically). Those that aren’t passionate enough about your brand to evangelize for you can opt to simply “like” you – in full visibility of their friends. At the same time, you can “eavesdrop” on many other conversations being had about your brand, and inject yourself when and where you see fit. Some customers will even co-create with you – sharing ideas for new products and services, or collaborating on new ones all together. And all of this will be happening on a variety of platforms where you can get a pretty accurate picture, increasingly in real-time, of what exactly is going on.

Would you have reacted to this by saying “wow, that’s giving up a lot of control?” Or would you have reacted with something more like “wow, that gives me the opportunity to control far more than I can today?”

I believe there’s elements of truth to both answers – but I personally think I would have fallen in the second camp. Social media offers an extraordinary number of opportunities to marketers, and taking advantage of them, in my mind, isn’t neccesarily synonymous with “giving up control”. And as my research gets into (and future blog posts will cover), I think a lot of brands that have “given up control” might find that many of their customers want them to take it back…

Last week I provided a brief introduction to the difference between loyal customers and prosumers, and evangelists and influencers. The basic idea is that while I might be tempting to look at the latter as “Web 2.0″ versions of the former, the reality is far different. It is not simply a case of using new technology to leverage similar types of relationships. Instead, it’s about new types of important relationships for companies to leverage, thanks to the new technology.

That post then focused on the key difference between loyal customers and prosumers – particularly in terms of profitability and impact on others. Today’s is shorter, focusing on a simple but important distinction between evangelists and influencers.

From a marketing perspective, evangelists are typically seen as those customers that love your brand so much that they’re willing to enthusiastically, and proactively, recommend it to friends and families. So in most cases, they’re not only your most profitable customers – they’re also the ones bringing new customers in. Most importantly for this analysis, they are – by definition – a subset of the “loyal customer” group.

Influencers, on the other hand, are definitely not a subset of prosumers. Moreover, they don’t necessarily have to love your brand in order to advocate in your favor – or even be a customer in some cases. The reason is simple. What makes influencers, well, influential, often hinges on their ability to discover and share interesting new things. If your company can come up with something they find compelling enough – a funny commercial, an interesting connection to a cause, a new and better product, whatever – they might well pick up on it, and help spread the message for you.

I find this subtle difference important. Prior to the Web 2.0, it was generally the case that a customer had to absolutely love you in order to put in the effort to evangelize for you. In the Web 2.0 world, anyone that finds anything you do even a little bit interesting might just be an influencer for you. In turn, it’s clear that strategies for engaging the two groups need to be totally different.

One of my primary research areas right now is “prosumerism” (think: producer + consumer = prosumer), which we use to describe what many people call customer co-creation: getting customers actively engaged in the innovation around, and creation of, the products and services they consume. One of the biggest questions in the space is around business models and incentives. We believe financial rewards are becoming ever-more important, and are always on the lookout for companies that might be innovating in this area.

With that in mind, I recently stumbled upon KirtasBooks, which has developed an interesting program called “invest in knowledge” – allowing individuals to subsidize the digitization of the world’s knowledge one book at a time, in exchange for 5% of of all future sales of that book through their site. Basically you pay just short of $30 to have an “out of print” book digitized, and a soft copy delivered to your door, in exchange for a cut of future sales.

Now I don’t think KirtasBooks will actually be a great success- they’ve got that pesky little competitor Google to deal with after all. But it’s the structure of the program that I find interesting, and potentially applicable to other industries. How many companies looking for new ideas and designs could have customers pay to come up with them (which helps to filter out all the crap that can come with totally open / free submission process), in exchange for offering a cut of future sales if other customers choose to buy the product? In this case, the “prosumer” isn’t actually doing much except investing money, but it’s not hard to envision it going to another level.

Has anyone seen this idea used anywhere else?

There’s a fantastic story on TechRadar today about “The Secret behind Threadless’ Success“. Like many other Web 2.0 success stories, the whole thing started as a hobby and almost accidently turned into a thriving business – with crowdsourcing shifting from something they were “unknowingly” doing to the center of their entire strategy. As co-founder Jake explained while taking a break from selling 100,000 shirts a month:

“We learned that what we were doing was called crowdsourcing about three years into the project,” Jake chuckles, “and ended up being the prime example for it. We just started Threadless as a hobby, not to be a business. Not only did we not know the business model was crowdsourcing but we didn’t know there was a business model. Today it’s the core of our business. It affects every department: the way we market, the way we do our customer service.”

But what I found most interesting from this article was his perspective on advertising – or perhaps I should say distaste for it:

“We’ve experimented with advertising pretty recently and have had mostly negative reactions to it,” Jake explains. “It’s always been something that we’ve felt is not right for us. Me and Jeffrey [Kalmikoff, Threadless' chief creative officer] used to work at four ad agencies, so we have a pretty strong understanding of what advertising means and how evil it is.” He chuckles.

“With our company it’s all about trust and honesty and we just don’t like the idea of pushing our brand on people who otherwise wouldn’t hear about it. We like the idea of it spreading via word of mouth, organically, naturally. It’s not that we don’t market, we just don’t advertise. I’d rather somebody hears about Threadless through an article in a magazine than an advertisement in a magazine.”

It’s a perspective that seems to be fairly pervasive in this space – direct advertising is some mixture of evil, inauthentic, and a waste of time. But as he notes, it’s not like they don’t market – they just don’t advertise. In other words, they like to tell their story in a genuine way, and hope the community helps them share the message – which they’ve been doing in spades. And the beauty of that model – if you have a compelling story to tell – can be mostly clearly seen when the direct marcom budget line is trending towards zero…

The proper metrics for social media have always been difficult to pin down, but I think there’s been an interesting cycle that’s emerged over the last few years. Before twitter exploded in popularity, comment counts on blogs were often used as a crude measure of community engagement  – the number of people willing to take the time to add something to a given discussion – augmenting simple view counts and link backs on the metrics sheet. As twitter has exploded in popularity, RT’s (re-tweets) and @replies have emerged as new indicators – the former having some similar properties to the “recommend to a friend” question so popular on consumer surveys, and the latter being somewhat similar to engaging in a conversation / making a comment.

One interesting piece of this in the very nature of community / engagement metrics shift a little bit – from being something within the “corporate boundaries” (i.e. on your site), versus out there in the Twittersphere (or some other ecosystem). But the big question I have – and I’d love to hear if anyone has some potential metrics on this – is simple: Does the rise of Twitter lead to more or less comments on people’s blogs?

I think a compelling argument can be made either way. On one hand, twitter makes it so easy to share information that those linking to a particular article should be able to find a wider audience. In turn, a wider audience should lead to more comments, everything else being equal. That argument would make sense to me.

On the other, there’s the time issue. If you assume for that everybody has a limited amount of time to spend each day absorbing and sharing information, an increase in one activity should lead to a decrease in something else. So one might argue that if someone is suddenly spending a ton of time reading and responding through Twitter, they might not have as much time as before to put in comments on blog posts. That argument would make sense to me.

Of course, both arguments can’t make sense. Twitter can’t lead to both an increase and decrease in comments on blogs, obviously. So which is it?

My best guess is that a pyramid structure is likely in play. Those that post the best content – say the top 1% overall, or in a given area – may be enjoying an increase in comments thanks to Twitter, as their message seeps out to a wider audience through viral promotion, etc. Everyone else may be experiencing a decrease in comments, as with so much noise out there and competition for time and attention, people just aren’t going to bother. For example, if you only *sort of* like something, for example, a quick RT with some extra characters thrown might be OK, while the time you might have put into commenting before gets diverted to other activity.

One of my main reasons for this is built on the idea philosopher Joey Tribbiani once presented on Friends – there’s no such thing as an unselfish gesture. If people are looking at ways to build their networks and influence in social media right now, I’d bet dollars to donuts that they can get more bang for their buck from a decent tweet than a detailed comment right now, thus that is where people’s attention is drifting.

But it’s just that – a guess. If anyone has any thoughts /insights into this I’d love to hear about it – in the comments, via twitter, via email, or otherwise. Not that I’m counting, of course .

Have to give props to my colleague Ian Da Silva for finding this, which is a blend of my two favorite research topics right now – Prosumerism (getting “customers” directly involved in the creation process) and Twitter – TwitShirts. If you opt in via the website, any of your wonderful tweets can be purchased as a t-shirt by other people that want to wear your thoughts on their sleeve, er, chest. If somebody buys it, you get $1 – and of course there is a handy Twitshirt tool you can drag into your toolbar to expediate your own purchases, if you so desire. Just a fun application for those that might want to give one of the people they follow the ultimate Re-Tweet… I’ll give my first shot at a twitshirtable tweet shortly. Be kind .

I’ve been looking at a variety of potential frameworks in relation to the topic of prosumerism / customer co-creation. I linked to a couple last week, and have developed a few of my own over the past few years, but I continue to find 2 x 2s to be an interesting way to explore the issue (and many issues for that matter). In turn, I’ve been playing around with a couple that I’ll be writing about over the next few weeks. Here’s one of them (some of them might have to be moved around a bit, but I think you’ll get the idea…):

The X-axis looks at what the prosumer engagement focus is on – wisdom of crowds vs. uniquely qualified minds. Regular readers of this blog will notice I bring this topic up a lot, because I think it’s very important. In some cases, companies are looking to engage a large community of people, and it is the collective action of the group that creates value; in others, companies are looking to connect with a particularly uniquely qualified mind to deal with a certain problem. “Preferred” member communities – i.e. a select group of customers that companies engage with to help develop the value proposition – fall somewhere in between.

The Y-axis builds off of the OMC report referenced last week – is the “locus of value creation” prosumer driven, or company driven? For example, the value on Digg is almost entirely created by the activity of prosumers on the site; if you look at something like the “Innovative with Kraft” program, the company is looking for ideas that they can use to create value (i.e. new products). These seem like two very different things to me.

Next in this series: X-axis the same, Y-axis focused on incentives (intangible vs. financial).

I’m currently prepping for a presentation on Prosumerism to be delivered in May, which means I’m knee-deep in various frameworks related to the topic. Below are the two I’m focused on right now – the first from OMC Group Insight, and the second from Gary Hayes. Not much to say about them yet, but I think both are very helpful in trying to articulate what’s going on in the prosumer / co-creation space.

1. Eight Styles of Firm Co-Creation (From OMC Group Insight).

2. The Myth of Web 2.0 Non-Participation (From Gary Hayes).

Similar to the Intel logo thing, there’s another graphic I like to use to get people thinking about what prosumerism really means – a bit of a play on one of the more famous political speeches of all time:

Think about how dramatic of a mind-shift that could be for many companies – instead of solely focusing on being a producer / creator of value for others to consume, you become a platform that enables customers to create value for each other. There’s lots of interesting examples of this is the Web 2.0 space, but the idea also plays very well in the “real” world…