Earning logics. Building a comprehensive list

Henny de Vos and Timber Haaker, two senior researcher of the Dutch Telematica Instituut will publish a book at Springer this month June, 2008, about a new and quite innovative business modeling approach called STOF. STOF stand for Service, Technology, Organization and Finance and offers a comprehensive way of modeling your business. Henny and Timber were so kind to treat the research group with a workshop on the topic. I’m happy to say that not just research fellows attended class but also a number of our faculty colleagues (sorry to say that no students showed up). During our session, we’ve had the change to sneak preview the book and, to be honest, I can’t wait till it is published as I believe that the material is very relevant, also in terms of value creation in cross media. I believe that the STOF approach is very well suited for the things I’m working on: “What is the influence of cross media on the relationship between ‘consumers’ and ‘organizations’?”

As Niniane Veldhoen and Matthijs Rotte are approaching their deadline for their dissertation (their work on ‘mentality and share of voice’ is on schedule), we came across the question of earning logics in cross media. I took upon the task of finding out. That is not a simple job. Of course, we have Anderson and Rappa. But is that enough? Is there a comprehensive list of earning logics, not business models? The STOF approach may help me clear the job the next couple of days and I have set upon the task of focusing on the ‘F’, the Financial domain as earning logics are normally situated in it. I say normally because I question if all earning logics deal with finance.

The Henley Centre taught us about six years ago at the Mobile Marketing Association gathering that money is not the only scarcity people have to their availability when exchanging products and services. Time, energy and space are as relevant as money is. But time, energy and space cannot be expressed in hard cash. This made me think about earning logics from a different perspective. What is the offerer of products and services doesn’t focus on getting money as a barter but instead the consumer’s time or energy or space? But for the sake of simplicity, I will start by trying to compose a list of earning logics that deal with money as means of transaction.

We often confuse business modeling with earning logics. STOF shows us that earnings (financial domain) is just one of four domains. So now my question: Can you help me with ideas, articles, whatever to cook up that list of earning logics? I’d be obliged and pretty soon, I will publish the list on this blog. Hope to hear from you.

GRATIS. A taxonomy of the ‘FREECONOMY’.

Scanning my way through the march issue of Wired magazine, I came across an article called ‘Free. Why $0,00 is the future of business’ by Chris Anderson, editor in chief and esteemed author of ‘The Long Tail’. Somewhere in 2009, Chris will publish his next book ‘Free’ and already I can’t wait for it to read it. Chris has a remarkable talent for unveiling and connotating latent and lingering economical issues. I recommend reading the article for those who study cross media as I believe that earning logics and cross media walk side by side.

So, what’s the crux of Chris’ new observations? Well, roughly Anderson distinguishes a taxonomy of the ‘freeconomy’ with six entities; freemium, advertising, cross-subsidies, zero marginal costs, labor exchange and gift economy. This line up is easily explained.

Freemium is one of the most common earning logics online. Anderson refers to the 1% rule in which one percent of the users of a site or service, pay for the other 99%. Just think of all the premium offers like FlickR or, in the Netherlands, Hyves. You may want to pay for extra services but basically, the service is free of charge. Anderson states that this logics look pretty much like the tool of sampling but at the same time there is a difference. This is that the freemium is about a digital full service and sampling (perfume, candy bars) are miniature products. We can use FlickR forever.

Advertising is nothing new. However, today we distinguish different logics in advertising. Not anymore does the advertiser need to pay for a space in a medium. Now advertisers pay per action (pay per page view, pay per click, pay per transaction; affiliate marketing). And further on in time, paid inclusion in search results, paid listing, pay per lead, pay per post (product placement) and pay per connection. These tools try to infiltrate in social media and social networks.

Cross-subsidies is an old marketing trick. You give away something for free but only if you buy something else. Think of getting a free ticket to a movie if you buy a big bag of popcorn. Ryanair, another example Anderson mentions, offers flights from London to Barcelona for $20. The costs are $70. How do they do it? The answer is simple; Ryanair charges for everything else (catering, credit card handling fee, priority boarding, advertising exposure per flight hour and subsidies from more expensive flights. Smart thinking. People obviously believe that they only pay those $20 and spoof of the other $50.

Zero marginal costs is the earning logics that deals with stuff like P2P. The music industry will never have control of its output anymore, no matter what legal regulations it pushes on consumers. Music, like any other type of digital content can be distributed for neglectable costs. This type of industry will just have to find new earning logics. A couple of years ago, I met John Perry Barlow, one of the then internet gurus and former songwriter of The Grateful Dead. He told a story about illegal recordings of the cult band. Kids would record the concerts. Of course, the quality was awful. The record label wanted nothing of the sort and intensified security at the gates of the concert halls. The outcome was that the concerts were running empty. Then the band decided that recording was allowed. The results were spectacular. More people came to the concerts and more records were sold. I guess Grateful Dead were one of the first bands to recognize that their earning logics were based on something else than the dictatorship of the labels.

Labor exchange is about value creation of services. You, as a user, create value to the owners of a certain site (Anderson talks about bots and porn but also about Google’s free directory service 411. The value created is either (or) improving the service itself or creating information that can be useful somewhere else. So, if you are into free porn, be sure to know that your data are used (maybe to spam you with doubtful Viagra offers).

Gift economy is Anderson’s sixth entity in his taxonomy. Anderson talks about altruism and that is correct. There has always been altruism, regardless of what level of capitalism we have currently. Sharing was the magic word that we believed in when WWW (and even before) was first unveiled. And still we cannot comprehend the value creation of this tool, let alone measure it. Perhaps our research group should dig into this (taking Erik Hekman’s efforts to determine parameters for value creation into consideration, I guess we are already doing it).

Professor Michael Rappa at MIT has listed business models on the web. His comprehensive list shows similarity with Anderson’s taxonomy. His list consists of

·         Brokerage

·         Advertising

·         Infomediary

·         Merchant

·         Manufacturer (direct)

·         Affiliate

·         Community

·         Subscription

·         Utility

I strongly recommend the reader to have a look and start converging the ideas of Anderson and Rappa. Of course Anderson talks about free – gratis – services and products a consumer can obtain through digital media. Some of Anderson’s earning logics are consumer driven (empowerment, permissive marketing; pull) and Rappa’s conclusions are more producer driven. Let’s see if we can observe even more earning logics currently not unveiled yet.

 

 

 

 

An experience; content (cross media) and collaborate identity

May 4 is a very important day, specifically at 20.00. This day we commemorate all those who died or suffered the unbelievable ordeals of wars and other human crime since world war 2. I live in Amsterdam and today my wife and I went to Dam square. We hurried to be there in time. At eight o’clock the whole country respects two minutes silences. The queen, her prince of Orange, his wife and many officials were at the Dam, along with veterans (old and young), boy and girl scouts, assisting the old men and women who fought for our freedom and, I don’t know, perhaps three thousand ordinary people (I really don’t know how many people fit Dam square, but it’s a lot). Dam square was full as it had never been before.

Then there was the announcement. The officials appeared on stage to place the floral wreaths. First the queen. Then two minutes of silence. WHAT A SILENCE. All those people completely quiet. The silence of identity? I am glad to believe so because I feel so.

From my professional point of view, I experienced a cross media event I have never experienced before because I was right in the middle of it and I was into it (touched). We stood in front of a hugh screen that showed us all that was going on at the foot of the national monument, a mere thirty meters away but unreachable because of the crowd in fornt of us. Tears, wreaths, decorations. True emotions, some sentiment. Honesty. Impressiveness. Silence, that intense silence. I couldn’t help thinking about my own dad who had been professionally engaged in at least 20 wars after worldwar 2 (he came out of it as a 13 year old kid and served his life as an officer, he used call himself a peace officer. And so he was.). Other thoughts. My mother and her family, liberated by the Scottish (my aunt married my now uncle John from Perth right after the war). Current warfare. Dutch kids fighting in Iraq and Afghanistan. Fucking wars; nobody has ever given me any good reason to kill others. WHY?.

Professional again: big screens, life bobo appearances, real emotions and a crowd that was quite, collaboratively. Very quite. I would say that we experienced our identity at Dam square. We were all one, regardless of our color of skin, color of eyes, religion or any other outside characteristics that make us all unique, but better, make us an identifiable group of people who shares common values an culture.

What an experience. Cross media in its fullest and content that I experienced as real. Tomorrow is May 5. We will celebrate our victory over tyranny and our freedom.

Guess I am touched by momentary feelings. Guess I want wars to stop. Guess we can help by studying what people drive and how they communicate.

180˚. Eureka, a thought about changing consumer behavior

Again I was walking the dog and came up with an interesting thought. I was contemplating on my thesis – Harry and I are working on it, as it will be my ultimate research goal for the next couple of years. The current title is “What is the influence of cross media on the relationship between consumer and company? And/or, how does the relationship between consumer and company change under influence of cross media?” Somewhere along the thinking path, I came across 180˚. For me this seems quite obvious. The questions above imply a certain C2B; consumer to business approach.

C2B Is probably a new thought. I got the idea from Harry who gave me “Brand to community” and in our talks, it became clear that there is a tendency of consumers shifting their paradigms to receiving them to giving propositions to brands, companies, organizations. We all know the old B2C marketing and we even understand that there is a C2C; consumers to consumers, telling the world about their favorite brands. But consumers telling brands what they want – giving propositions to brands – that’s new.

I set upon the task of worming myself into these thoughts and came up with the work title 180˚. I can identify certain weak signals that consumers want to tell the brands what they expect of them. It’s not so new. The automotive industry enables individual buyers to adjust their car to their own standards. Nike and K-Swiss offer people to personalize their sneakers. And, as far as I am concerned, this trend is just the beginning of what I now call 180˚. Everything will change.

In my book Vision, Mission, Compassion, I talked about the rotation dynamics in society. And now I see that those words, given by Hans Dijkstra, are becoming reality. The rotation dynamics, or better Dynamics of Rotation is: explained as follows: Normally, the dynamics of rotation in the triad of the Mission is clockwise, from Master plan to Requirements to Concept, unless we reverse directions, i.e. move from Concept to Requirements. This dynamics – moving reversely – is hardly ever practised in organisations currently. Organisations and the people who operate within them commonly remain in the vicious circle of rules and regulations. This results in over-regulation, both in our organisations as it does in society; rule after rule (Requirements) is apparently needed to structure our living together (in broader terms, our Doing (Concept) until people are fed up by over-regulation and will, mostly collaborately, protest en act: reverse the dynamics. This dynamics of reversal will not move to Requirements but to Kernel, the start of the next phase, that of Participation. We make a very relevant reverse move; from Concept to Kernel. Kernel is the first foundation of the compassion statement. This reverse in dynamics is in fact the move we make from the Planning phase (Master plan, Requirements, Concept) to the Participation phase (Kernel, Targets, Identity). Thus, this reverse dynamics is a true milestone in the processes of Communicative Strategy.

If you have not read the book, this may sound abracadabra. No sweat. What it means is that people are constantly fed with new rules, ideas, thoughts, you name it. What happens is that we don’t see the benefit anymore. There is no added value in new things around us, whether they are rules or new things. We seem to accept new things as a given fact. But instead, we react to all these changes in a way nobody seems to be able to anticipate on; we act differently. We do so by turning things around. 180˚ in a constant pace, just like we fill a bucket with drops of water time after time, until it flows over; the tipping point.

I believe that one of the most important factors of this collaborative behavior comes from being given the opportunity to be informed and actually do something with the information given through modern media; we know so much more than before there were cross media. This idea implies that cross media (the new ones, I must insist) actually change our behavior. Let’s find out.