New Media Disintermediation of Traditional Business Structures

The Boston Consulting Group, in their Harvard Business School publication examines the impact new information technology will have on business strategy. The authors of the work, Evans and Wurster (2000, p 72) describe the disintermediation wrought by the new media as a “technology [that] allows for the richness/reach curve to be displaced, allowing new players to offer greater reach and greater richness simultaneously.” This results not in a re-segmentation of the old business but in an industry transformation to a new model.

This is happening with newspapers, a dismantling and reformulation is underway driven by the relentless economics of the new media. In their consulting work with Newspapers, The Boston Consulting Group (p 42) has observed that “Newspapers exist and can survive and profit as intermediaries between journalists and readers, because of the economies of scale in the printing press.” Journalists had no direct access to readers.

Newspapers are vulnerable to new media at critical points in their value chain. The most critical being classified advertising, which is a natural for on-line publication. As Evans and Wurster note (p 42) “classifieds account for about 40% of a newspapers revenues and only 10% of its costs…. If classifieds are lost, most newspapers would become financially unsustainable.”

This is the impact of new media on the existing business world. When its existing value chain is unraveled, companies in general, but newspapers specifically for this post can no longer subsidize poor performance of editorial or political commentary by combining them with other links in the chain. The profitable links of old that at one time were capable of carrying dead weight are now under relentless profit pressure.

Reference
Evans, Phillip and Thomas Wurster (2000). Blown to Bits. The Boston Consulting Group. Harvard Business School Press.

Prisoner’s Dilemma in Web Data Mining and Direct Marketing

Morse and Morse have recommended a virtue theory framework to govern the impact Internet data mining and direct marketing have on privacy. They argue that corporate financial interests must be moderated by obligations to the society that gives the corporations their existence.

Their solution is for business to be temperate, a key virtue factor in their proposed framework. Temperate behavior for Internet data mining and direct marketing involves a balance between the two roles inherent in the new business empowering technologies. These technologies act as both social agents and as economic agents (Morse and Morse, 2002, p 93).

In a standard MBA text on ethics, Business Ethics, DeGeorge (2005, pp 498-500) reinforces the Morse and Morse argument for temporance with the observation that the assumption of anonymity is not valid with the Internet yet it is the intuitive expectation of consumers based on their brick and mortar experience.

Additionally, like them DeGeorge advocates informed consent as a primary prerequisite for Internet marketing activity in general, and this of course includes data tracking and data mining in particular. Both DeGeorge, and Morse and Morse conclude that privacy risks on the Internet are serious enough to have precedence over economic benefits.

I believe that the Prisoner’s Dilemma Model can provide a complimentary perspective to clarify aspects of this argument. Data mining and its resultant direct marketing have created a Prisoner’s Dilemma between corporate marketing and individual’s who surf the Web.

Game Theory has been integrated into economics and allows for the expression of social goods in equilibrium analysis. Velasquez (1992, p 321), gives a good definition of one model in Game Theory, the Prisoner’s Dilemma, which is a relationship between at least two parties where each party is faced with two choices.

They can cooperate with the interests of the other party(s) or they can compete with the interests of the other party(s). The payoff is no gain if everyone competes with each other, a stalemate. If all parties cooperate with each other there is a moderate but steady gain. If one party chooses to cooperate but the other party chooses to compete instead, the competitor makes a substantial gain.

This seems to be the state of Internet tracking and data mining today. Consumers are implicitly cooperating with Internet data mining companies. These companies on the other hand are choosing to compete and risking the cooperator’s privacy for the sake of greater, one-sided financial reward.

According to Cooter (see Berkley), repetitive transactions with informed consent are less likely to result in competitive behavior. Instead, they will have the more efficient long-term solution of both parties cooperating. I believe that here is where informed consent will change the nature of the tracking and data mining activities on the Internet.

As this relationship matures, consumers will become more aware of the risks data mining is taking at their expense. Tracking and data mining are repetitive transactions, with a potential benefit and risk. The benefit is an economic good while the risk is a social good. When both sides are aware of what is taking place, the cooperative option of modest but mutual gain is favored in the Prisoner’s Dilemma model. The temperance suggested by Morse and Morse is the favored outcome that grows out of full disclosure.

References

De George, Richard (2005). Business Ethics. Pearson/Prentice-Hall.

Morse, John and Suzanne Morse (2002). Teaching Temperance to the “Cookie Monster”: Ethical Challenges to Data Mining and Direct Marketing. Business and Society Review, Vol. 107, No. 1, pp. 76-97, Spring 2002

Velasquez, Manuel (January 1992). International Business Morality and the Common Good. Business Ethics Quarterly. Retrieved from Taking Sides, 9th Edition. Newton, Lisa and Maureen Ford Editors. McGraw-Hill

A Pirelli Short Film

Pirelli has always had attractively pioneering marketing. It is characterized by facility and skill among tire companies, front running many with flamboyant calendars (see Pirelli Calendar ). Adopting short films is not such a leap for them and The Call is certainly more interesting than watching the Michelin Marshmallow Man try to get his Marshmallow Dog.

Pfanner (2006, pp1-2) gives some insight into this campaign. It was the first time Pirelli worked with Leo Burnett and behind it was concerns with the declining effectiveness of traditional media advertising. Traditional advertising seems to be dissolving before our eyes. It is no longer the altruistic industry that gives us free TV, but now has an appearance more like a monolithic parasite draining money from its corporate host.

Pirelli backed its bet on short film marketing with 60% of its marketing budget according to Pfanner (2006, p1). Why?

"Many advertisers are worried that traditional ways of reaching consumers, including the 30-second television spot, are losing their power to persuade."

Their tag-line “Power is nothing without control” is catchy. However, to build long-term relationships, the slogans should be consistent with the customer’s experience with the company. Duncan (2005, p 15) says that “ interactions with customers send some of the most impactful messages that customers receive about a brand.”

Curiously, Pirelli has had some scandal related to its level of concern for safety. Lawsuits allege that it had foreknowledge of safety problems but did not take action. Many complain, see AllAutoWorld .

All in all, though, the campaign was a hit. They even have a short film out now with Uma Thurman (see Pirelli on YouTube ). Same theme.



References
Duncan, Tom (2005). Principles of Advertising & IMC. McGraw-Hill
Pfanner, Eric (January 29, 2006). On Advertising: Film or Ad? Ask Pirelli. International Herald Tribune. Retrived on August 23, 2008 from http://www.iht.com/articles/2006/01/29/business/ad30.php

The Cluetrain Manifesto: Should Anarchy Replace Structured Communications

First published online and then as a book, The Cluetrain Manifesto (see their website) was an apocalyptic warning. Things were unraveling. Systems were broken. The Internet unleashed long-term trends that would assert themselves.

“Networked markets are beginning to self-organize faster than the companies that have traditionally served them. Thanks to the web, markets are becoming better informed, smarter, and more demanding of qualities missing from most business organizations.”


Many acted. Microsoft and IBM both have employees talking directly to customers. In fact, Joe Cox reports (see Microsoft Watch) that Microsoft has over 5,000 employee blogs and quite often Microsoft makes major product announcements only on these blogs, not incorporating one or another of its marketing agencies.

How effective are the differnet implementations of the Cluetrain Manifesto?

John Cass is a marketer and a researcher at Forrester and has made a startling finding (see his blog ). Dell and Macromedia use a dedicated approach, and control communications that uses Social Media rather than take the wide-open approach of IBM or Microsoft. Dell and Macromedia are doing quite well with such an approach. Cass notes that

“Macromedia and Dell empowered employees with resources, while IBM and Microsoft give only verbal encouragement without the backing of cash and resources. There may not be a difference in strategy between the dedicated approach and the cluetrain manifesto, just in tactics.”

He highlights two of the manifesto theses, 48 and 51:

48. When corporate intranets are not constrained by fear and legalistic rules, the type of conversation they encourage sounds remarkably like the conversation of the networked marketplace.

51. Command-and-control management styles both derive from and reinforce bureaucracy, power tripping and an overall culture of paranoia.

But he concludes that anarchy does not work. While the Cluetrain Manifesto helped focus attention on change that is needed for marketing communications because of the Internet and Social Media tools, "[it] did not provide a really effective road map for how to open up a company.”

Marketing communications is a discipline. By focusing their Social Media efforts on smaller groups capable of effective marketing communications, and providing them with support, Dell and Macromedia have been effective. Microsoft succeeded when it provided the logistics to trained communications professionals like Robert Scoble. Cass says:

“Maybe in the process of encouraging open conversation, companies like Microsoft and IBM have failed to give the training, tools and tactics necessary for success. While, Macromedia and Dell’s focus on a smaller group of dedicated people has produced more results.”

John's book is:

The New Media Collaboration Project

The Collaboration Project is a vibrant community of public administrators working to improve government services through the use of social media. The Project works in conjunction with the National Academy of Public Administrators commissioned by Congress to provide an independent perspective for resolving the most complex problems facing large organizations. While primarily focused on government, the Collaboration Project can provide insights to commercial uses of social media as well. It is located at CollaborationProject.

The Pillar Post for the Project’s blog expresses the Project Mission, to foster a “conversation about Web 2.0 and how it can be used to solve some of the critical problems facing America.” It also gives an overview of the database of case studies on the use of new media, as well as the content section of the site with detailed research, some by the Project and some by the New Paradigm organization.

Some highlights in the Case Studies database include:

American Solutions For Winning the Future
"A wiki site to draft proposals, create teams, post comments and rewrite proposed solutions to the problems America faces."

Federal Enterprise Architecture Data Reference Model Working Group
"Uses social media for information exchange processes to enable national information sharing."

Flu Wiki
"The purpose of Flu Wiki is to help local communities prepare for and cope with a possible pandemic influenza."

NASA World Wind
"Social Media as a way to continuously expand the data and imagery available in World Wind."

National Institutes of Health on Second Life
"Second Life, the virtual world filled with avatars, creates opportunities for members of the NIH community to become more accessible."

NOAA Virtual World
"Thanks to Second Life, people can now be educated about the Earths' environment in a myriad of ways."

Office of the Director for National Intelligence Intellipedia
"Intellipedia is a peer-to-peer online collaboration network built on the same open-source software used by Wikipedia which allows intelligence analysts to share information."

Peer-to-Patent Project, US Patent and Trademark Office
"Social media organizes public participation to improve the quality of issued patents."

Washington D.C.'s Citywide Data Warehouse
"The District of Columbia was searching for a way to improve service delivery, drive efficiencies, enhance public safety, and reduce costs."


In addition to the case studies, research papers are published. These are located at ContentLibrary. A Blog has been deployed and its latest post is titled Most Companies use Games; Shouldn’t You?

This site has promise and is well worth tracking.

WordPress Blog: Closed Nature of an Open Source New Media Tool

There are a variety of new media software applications that provide blog, wiki and forum functionality on intranets. Open Source new media tools offer a platform independence advantage when compared with the comprehensive Microsoft SharePoint Portal Suite. SharePoint is tightly integrated with Windows and Internet Information Server (IIS). Platform independence has proved true of CanvasWiki, Galleon, and Mango Open Source.

WordPress surprised us.

It requires MySQL to operate (see WordPress Support Post) Database independence through ODBC has been available for 17 years so it is surprising that an open source design would not have considered it.

That aside, the installation process was a breeze, the famous five minute install. The software is located at WordPress Download.

Our platform is Windows 2003 Server with IIS. Our database is SQL Server so we needed to install and configure MySQL, available from Sun at MySQL Download. Again, the MySQL installation was very straightforward. We use a graphical user interface to administer MySQL available at Kovocs. Our installation steps were:

1. Install PHP. An MSI file for the Windows version of PHP can be downloaded from http://us3.php.net/get/php-5.2.6-win32-installer.msi/from/a/mirror


2. Once PHP is installed, we added index.php as index page in IIS.


3. Create a folder in Inetpub\wwwroot to hold the blog


4. Create a database in MySQL


5. Change wp-config_sample.php to wp-config.php


6. Edit wp-config.php and add db info


7. Start Firefox and open Inetpub\wwwroot\thefolderyou justcreated/wp-admin/install.php
   

WordPress has proved to be full-featured, and very flexible. It lends itself very well to a professional appearance.

What happened to MSN?

The nature of the competition between Google, Yahoo and MSN is search market share. Site Seeker notes “Market share. Google, Yahoo! and MSN are all competing for our attention. More users equate to more revenue via pay per click ads and other advertising opportunities.“

There is a rolling might to Google, which has been completely unaffected by either Microsoft or Yahoo. The explanation is ethics.

McLaughlin (2002, p 117) notes that 60% of adult Internet users are unaware of search engine marketing and that only 1 in 6 Internet users can tell the difference between unbiased search results and paid advertisements. Furthermore, 80% of these users when informed, ask that search sites disclose the practices of paid placement and paid inclusion.

The FTC (see Wouster, 2005, p 3) mandates that “clear and conspicuous disclosure” is necessary for both paid placement and paid inclusion. Truthfulness and disclosure is also part of the commercial world's view of social media ethics prescribed by David Scott (2007, p 205):

• Transparency - Never pretend to be someone you are not.
• Privacy.
• Disclosure - Tell people about any conflict of interest.
• Truthfulness.
• Credit.

From the perspective of the government, and from practioners like Scott there is an admonition for truthfulness, and therefore disclosure.

Is there an impact of ethical advertising on the bottom line that would discourage businesses from applying moral principles? McLaughlin (p 119) notes that “MSN seems to serve the companies [who advertise] corporate needs as much as searcher’s interests.” On the other hand, Google is “the best of the bunch at identifying ads.” What has been the impact on market share? Stepforth has charted MSN market share for the year 2005-6.

What’s it look like over a longer haul? Worse!

Search Market Share

Year/Source ............................Google ......MSN

2004 (see Yahoo) .....................36.5 ........15.5

2005 (see Highbeam) ...............41.4 ........13.7

2006 (see Seroundtable) ..........53.7 .........9

2007 (see ReadWrite Web) .......67 ...........5.25

Conrad (1904, p 212) said, “Anything merely rational fails.” Ethics attempts to deal with the complexity of the real world. Our rational models, in order for us to think with them, are abstracted and focus on only some aspects. What we leave out can drive us to the desperation of trying to buy Yahoo.

References

Conrad, Joseph (1904). Nostromo. Wordsworth Editions Ltd (January 1, 1998)

McLaughlin, Laurianne (2002). The Straight Story on Search Engines. PC World.

Scott, David (2007). The New Rules of Marketing and PR. John Wiley.

Wouster, Jorgen (June 9, 2005).STILL IN SEARCH OF DISCLOSURE. Consumer Reports Web Watch.

Service Level Agreement for Social Media Services

Social Media tools can enhance the collaboration and relationship building an organization has with its various integrated communications publics. Marketing aside, functions such as employee relations, investor relations, government relations and vendor communications can all be enhanced through these tools. Both commercial packages such as Microsoft Sharepoint Server and Open Source software such as Mango, CanvasWiki, Galleon, WordPress, TypePad and many others are also available. Software as a Service blogs such as Blogger.com can be used as well.

Groups using commercial or Open Source social media need to enlist the services of information technology professionals to support the system. To eliminate misunderstanding and wrong expectations, a service level agreement should be executed between the IT support professionals and the group using the social media.

The service should be described and the functions provided should be listed. These should include the maintenance functions that will be needed and the time windows when maintenance will be performed. Also those functions that are specifically excluded should be listed. Another important point is to identify who is responsible for customizing the site.

The high level information technology architecture should be described and this should include the security model. Performance goals to get a blog site back in operation should be established , and a set of response performance measures should be agreed to.

An example agreement is located at Social_Media_SLA

New Media Will Challenge Intellectual Property Claims

New media allows each of us to publish our own works, with the illusion that we have copyrighted the material published. However, only the legally proficient will be able to truely establish an enforceable copyright. They know how to properly register the idea and define its scope, and also to discover and contest unauthorized use. Although, there is talk of a poor man’s copyright, “the United States Copyright Office makes clear that the technique is no substitute for actual registration.” (see Wikipedia Copyright)

Powerful companies are preparing defenses against accusations of copyright violations of other’s intellectual property. They are buying and building huge copyright and patent portfolios, and using them in marketing communications. Because of their skillful legal council, they have been able to gain ownership of very fundamental processes. This is especially true in the computer field. For example, Microsoft has patented the understanding of music (The Day the Music Died)

Subtle marketing communications will scare corporate procurement away from weak patent defenders to the strong. For example, in its public relations Microsoft contends that Linux has stolen and violated 235 of its patents and copyrights (see Fortune ). Corporate procurement now faces future charges of knowing violation of intellectual property protections and the ISO 19770 standards on Intellectual Property if they switch from Windows to Linux.

The Open Source community is intransigent in its position. Richard Stallman says software should be free. The community deftly argues that ideas in the computer industry are communal mathematics and should be treated as such (like Folk Art).

Microsoft parries Stallman and says that open source has been reckless with intellectual property. Microsoft has additionally formed a relationship with SuSe Linux and as part of that relationship, SuSe Linux now pays Microsoft royalties on the 235 violations (see Money Mag ), establishing a precedent, and undermining the other Linux vendors and the Open Source Community in general.

The Open Source community has been outflanked by a combination of marketing communications and partnering relationships, which one could argue are also part of marketing communications.

In the end, Microsoft is now accused of stifling Open Source with “patent warfare” see (Patent Colonialism ) Folk culture is indefensible because it cannot hire the marketing communications expertise to lay out effective strategy and legal talent to execute winning tactics. Powerful multinationals will own all human ideas and moralize that we, the great unwashed are ethically violating their intellectual property rights when we try any innovation by our lonesome.

The New Media will accelerate this confrontation by enabling the masses to publish. Many will wonder how you can patent the concept of music. The Open Source community understands the legal intricacies the powerful companies are employing and work within that framework. Not the masses. I suspect they will want common sense.