How can media owners and advertisers develop a business model?
Chair: Neil McIntosh
Steve Bowbrick, another.com
Tom Coates, Yahoo!
Robert Loch, Soflow.com
Martin Stiksel, Last.fm
Martin Stiksel, last.fm
What’s so social about our social music network? We put the users in charge. Plug-ins to track what music you listen to. Connects you to similar people, compares your music profile with that of others. Recommends music based on what the people with similar music profiles to you are listening to that you are not listening to. Aggregates information about bands on wiki pages.
1.5 million people on Last.fm.
Tom Coates, Yahoo!
Social media. Brief preamble – had blog for 7 years, online community for 8 years, worked at BBC for things like this. No idea what social media means. It’s a ‘theory object’ – something good to think with.
If you think about the internet as a communicative media, see there’s been a shift from that to more publishing-based media. Social media is a hybrid, but it’s more than that, so far, so usergeneratedcontent. The significant shifts are about helping individuals to create and make use of content, whether that’s the smallest engagement such as last.fm, whether it’s youtube where there’s more effort and creativity.
The content produced becomes part of an environment that is greater than the sum of its parts, so you get back more than you put in, as does the organisation you’re hosting it with. So I would push that as this social media idea, that individuals publishing in a social environment where you get something back.
Steve Bowbrick, another.com
Important time in the history of the medium, and the net, and this feels a bit of a throwback event, like it’s 97 or 99. Went to a lot of conferences where we heard a lot of this tuff, not just from MS, but also the kilted groover, (Ben Hammersley). I feel there’s a groundhog day effect here and we haven’t broken out of the cycle. One of the things that i see that’s exciting is social forms colliding with the net, and we might be able to break out of this.
You would have concluded from the conferences in 984 that big media would be gone, but they are still here. We are worried about media, but this is about all business. These businesses persist because they represent a storehouse of value of all kinds, not all capitalist values – capital itself – but now we’re worried too about APIs, and other resources. Businesses are full of resources, tech, attention, audiences, expensively produced over many decades.
I’m working for a media company with a product over 150 years old. They represent big pools of brand equity. They have big legal departments, and these are the departments worried about rights and libel and stuff.
How can we start to expose those resources to the communities who make use of our websites? That’s the closest we’ve come to a business model. It may be that advertising drives the whole thing, but how can we think about exposing our business to consumers.
In a few years time we’ll use the phrase ‘API’ as a term to talk about connecting with customers. And via these APIs we’ll connect consumers with resources that have been building up for decades.
What I expect big media busines to do is to support, encourage, direct and enhance the aspirations of their users, of the visitors to their website. Ebayisation – microbusinesses making their fulltime living from eBay. Tiny businesses making a living from borrowing, building on and amplifying resources provided by big media.
Robert Loch, soflow.com
You have to look at time, what people are doing with their time and how that is changing and how these sites are impacting on it.
Kids social time spent on sites, so you can’t talk to them on TV, you have to use these sites (he gives an e.g. but I don’t catch the name). People need to wake up to that. Opportunity for brands to own a category. So Mothercare could set up a site where mothers talk about this stuff, so if you’re a competitor to Mothercare, you have the opportunity to own that space.
So Nike are trying to own the social media space for football. Whether they will or not, but if they do they own it against their competitors. So football fans are spending their time on that site, not the Sun’s.
The threat is… media owners don’t even see it, but if you don’t own the space you are at a disadvantage. Yahoo! buys their social media space. There’s not a single brand in this room that has a success in this area. Look at the Guardian, their online communities aren’t what they could be. They are a difficult challenge, because your PR agency, interactive agencies, won’t know how to do it.
Neil: Tom, saw you pulling faces.
Tom: There’s a real lack of clarity of what we’re talking about. Yes, Yahoo! has been buying in talent, properties, etc, but Yahoo! is one of the biggest chat rooms around.
But i get a bit confused between online communities, or social networks, or social media, os it’s difficult to figure out what people are advocating. But one things that is true is that they all tend to be viral. You don’t get into last.fm unless someone else you know is into it. You don’t get most value from Flickr unless your friends are using it.
One of the things you often find is that social media spaces based around networks is that there are only a certain number of players that can operate. It’s easy for individuals to switch a service, but hard for them to take their network with them. So if you approach a certain demographic, get involved in their lives, then you get a network effect, and it becomes hard for anyone to take over from that.
But it takes a lot of initial investment, and it is hard to make money because you can’t charge for a system that requires the network effect. If you’re aiming for the millions of user point you need to spend a lot of time to build it up there before it can go massively viral, but you can’t just advertise.
Flickr have never advertised.
Robert: It’s not the cost, it’s just difficult.
Tom: It takes time, and time costs money. using Flickr as an example, it’s still 12 people, even inside Yahoo!, and they have over tens of millions of photos, millions of users, in two years. Need support of Yahoo! to scale, because it’s hard and expensive. But it still took them two years to get there even with the best service out there. And there probably won’t be another photo sharing site that will be as successful because it’s hard to get people to switch.
Neil: Where are the business models? You can’t charge if you’re trying to build numbers. If there’s a resistance to adverts, how do you monetise these sites.
Steve: Maybe it is advertising. It’s having a bit of a comeback. I don’t see why users won’t trade a bit of attention for the content that they are consuming. I’m still persuaded that these communities, and it’s hard to use this word these days without inserting inverted commas, but these communities have their own dynamic. Need to be instep with the communities, need to support their own aspiration and goals.
Come back to the phrase ‘popular capitalism’ – these people would love to emulate Flickr, and would love to progress from sharing to trading. Are there ways to get these people an income? Can we make a complicated rights framework available to our citizen journalists so they can start to make money from what they do? Because rights are very difficult and alienating for citizen journalism.
Tom: I agree with everything you said. There’s direct and indirect ways of making money or creating value and I think they really are very varied. My boss was talking about Yahoo! strategy about this, and one of the things Yahoo! is trying to do is create better search through people. If people do things that they find useful and valuable, and you can hang services off that then that’s useful. Social search.
Social networks that create something that’s larger than the sum of its parts, that’s really core. If you can create something that people can build upon then that’s very valuable.
Robert: Well, there’s media on one hand, and monetising media. And it’s more interesting to see how brands can start using social networking. Chance for any brand to own the media, and own the relationship.
Neil: Would your customers be angry if you used their data like this?
Martin: Well, the only thing we are doing anyway is advertising because recommendation, cover art, playlists are all really advertising and music is this social glue that holds it together. But we give the labels the chance to participate, so there’s opportunity for the music industry, from bedroom producer to Sony or Virgin, so it’s a great opportunity.
Neil: Is the industry showing interest in that information?
Martin: They are interested but we are not really interested in passing on the data, we’d rather use it ourselves to help people find new music or recommend music. We’re rather have this knowledge of the crowd from all our plug-ins rather than putting editors in charge to qualify music in genres. We’re using the knowledge of all our music fans. That’s the best way to find new music anyway.
Neil: Sure that helps the industry, but does it not underline the problem with social networks, that because they belong to the people who use them there’s a problem with passing on that data to people with a commercial interest.
Martin: We are not passing the data on, because we ourselves have a commercial interest.
Neil: Robert, about Nike owning media space. Do you think they’ll pull it off?
Robert: They are kicking off during the World Cup, but to continue it and carry it on beyond is going to be reasonably tough. It’s not easy. Interactive agencies haven’t yet done it. How do you get your community to work with your brand.
Q: Can’t work out where the money is. Where is the business model? Martin, you showed us your site, but I can’t see where the money comes from.
Martin: We started it for the love of music, but obviously someone has to bpay for our servers and bandwidth. All we are doing is displaying music all over the place, so it’s simple to put a ‘buy’ button next to it. So there’s a clear endgame to this which is to purchase it. And there is consumer revenue to be made from recommendation. We are a revenue generating company, via commission.
Q: No rational business man would invest in social media. Because the rules are give your stuff away and sometimes it will work. What you have as a business, what you have isn’t important either, it’s what the customers put in that counts. For big media, let someone else succeed then buy them. It’s so against the rules of capitalism.
Robert: We’re in the business space so we get people to sign up, they give us information about them, and they invite their contacts, then they spend time on their site discussing topics and it doesn’t take a genius to work out we’re spending nothing on advertising our service, and can put advertising on our pages.
Once you’ve got a large audience, then you can look at models for monetising, subscription or advertising etc. Any brand who does not use social media has got their head in the clouds.
Tom: I’m always suspicious of people who say ‘what’s wrong with you, you’ve got your head in the sand’. It’s easy to prophecy doom, but for many organisations the scale of social media you want to be involved in it is different. Buying in is expensive, and bad sites tend to fail. If you build a site that’s bad and it fails, that’s not social media’s fault.
Advertising is a fickle business and the money is not always available, but at the moment if people are looking at your site then you can stick ads on and make money. But there are other ways of doing it,e.g. if you create useful data that’s always be valuable.
Q: Flickr appears to be an interesting model because it’s based on me uploading my content and making it available to others that suits me. If I didn’t want to pay I could get a limited service with ads. In terms of last.fm, I’m more confused. I pay $24 a year for last.fm, but what it’s doing is taking the work of others and making money from it. Martin has not mentioned what his major costs are. But what about the music costs? Where are your PPL licences.
Martin: Only 3% of last.fm users are using the radio, so it’s the icing on the cake, but we have arrangements with the rights societies to distribute our royalties that we generate out of the last.fm to copyright holders.
Q: I’m in education and my background is broadcast, but if there is a potential for something that’s greater than its parts, surely big business must come back into education. If Apple have designed something because it’s easy, surely now is the time for people to back new oral archives and the time that it takes the academics to fuel the system, can be backed by people with a bit of dosh, because the students don’t have money but now they recognise the value of their own community. My appeal is for them to do what TV did with Jamie Oliver’s programme, and back students. Much excitement and potential and talent, but no time or kit.
Tom: Large organisations like Yahoo! are very interested in what the next generation is going to be doing, and to support and engage with that. Also get into problems when you get children to put things online, there are lots of worries about that.
I have no doubt that there are Yahoo! programmes around for youth, although I don’t know what they are doing here.
Q: Anyone who doesn’t understand last.fm as a business model should go home and study hard until they do because it is a killer app.
As someone who has been working for a print property working online. How do we avoid the errors done by print media in the past like putting content behind registration.
Steve: I don’t know how you avoid those sort of problems. Perhaps something like Content is Free, compared to the Mail where the columnists are all behind a paid-for barrier and have zero currency online. My suspicion is that we’ve actually seen the period of subscription funded, paid-for online content in the general and news journalism environment is finished.
Secondary models, which we don’t necessarily understand yet, will replace them. Because you can’t drive passion for your brand in a pay-for environment. The most powerful model is not going to be portals, or the NYT, it’ll probably be eBay which is a model to examine very, very closely.