Economics fascinates me in a pretty unusual way. Its mere objectives is one of the oldest in the world, selling something in order to make profit – which in itself can be regarded as boring and at times painful for the people that are exploited in the process, i.e. all the immigrant and low-paid workers that make companies’ costs so small. Leaving aside traditional industries (such as food&drink, agricultural, building and so on) I find this recent period one of the most challenging and exciting for the industry of the Internet, all because of the phenomena of mass collaboration. If you’re reading this blog you most probably already know what I’m talking about and have participated at some point in being what is called a “Prosumer” (merging the terms consumer-producer) in one of Wikipedia, Youtube or any of the social networking websites like MySpace or Facebook.
All of this is relatively new, hardly any of the above mentioned companies have been able to make huge profits from people uploading their videos, sharing their pictures or knowledge on any subject in which they excel: but one thing is for sure, the hype is getting bigger and bigger by the minute. Just looking at the current valuation of M. Zuckerberg’s Facebook, at $15 billion, could make any kind of businessmans’ jaws drop, taking into account that the service has been online for only a year or more, and that the founder has only 23 years of age. Yes, this is without the shadow of doubt a huge bubble and over-valuation of a great social tool – but what actually is interesting in all this is the implications and effects that it has had on people’s lives and behaviour. Since going public the website has been constantly in newspapers, reported by employers as one of the biggest distractions and time consuming activites that employees engage during their work-time. Some people just log-on for a couple of minutes, others are somehow addicted and browse through every friend’s profile, upload personal pictures, play games and much more. The result in both cases is similar in how the “stickiness” of the service has proven to be much more successful than R. Murdoch’s MySpace, which is decreasing in popularity and in growth even though it was founded three years earlier than its main competitor.
The “Social” aspect of the website allows much more targeted advertising, and as it develops through time you will witness yourself how brands will pay top dollar to become popular amongst their customers – buzz and viral marketing has always proven to be much more successful and profitable than any other; a friend recommending a product will be much more convincing than any clever (or like in italy with the most naked women) advertisment.
What I will try to find out with the research for my thesis is if all this can actually mean that businesses will change their structures and eventually find a way to make profit ( a good example is how IBM became much more vertically integrated and open since it signed with Linux in the late 90s). It will also be interesting to see how this phenomena evolves with time, as the world of the internet is always undergoing change.
This was just an introduction to this fascinating topic, more in the next part.
