The next internet revolution will not be created by geeks, MBAs and venture capitalists. It will be created by you, me and everyone else. Welcome to the democratic web.
You can afford 30 staff but you’d like 500. How do you get the rest of them to work for nothing? This is the challenge faced by Canadian software firm, Cambrian House. The answer is crowdsourcing. The company is building programs and websites using a nucleus of paid staff and a wider team of collaborators who work for royalty points. If a project is successful, they share in the upside. If not, nada. “It’s like open source development. With profits,” says CEO Michael Sikorsky.
Jeff Howe coined the phrase ‘crowdsourcing’ in a June article in Wired magazine and has developed the theme on his blog. He tells the story of iStockPhoto.com, a website that sells stock photography for as little as $1 a picture. This is a fraction of the price charged by traditional libraries. It charges so little because its photographs are supplier by non-professional (but highly proficient) photographers. Anyone can submit pictures. The company only lists good photos and only pays contributors if they sell. It is the stock library for the rest of us, by the rest of us. It is good business too. They are on track for selling 10m photos this year. Getty Images recently bought the company for $50m.
The long tail
Some contributors might be happy if just one person buys their picture. Others hope for thousands of downloads. For all practical purposes, there is no limit to the number of images that iStockPhoto can store or sell. It has no warehouse or supply chain. Being able to offer a very wide selection is another part of the democratic web.
In most businesses, a minority of products produce the majority of sales. The internet allows companies to make money selling small volumes of a much wider product line. Imagine a multiplex cinema with a thousand screens. The first ten screens will show the latest blockbusters, but the other 990 will show foreign films, classic movies, films with niche appeal. This is what the internet is like.
This is what Chris Anderson describes as the ‘long tail’ in his eponymous book. Like iStockPhoto, Amazon is an example of a long tail business. It can sell a much, much wider selection of books than a typical high street shop and this means that it can profitably cater to niche audiences and make money from books that are not written by Dan Brown or J.K. Rowling.
Ricall is a British company that is exploiting this phenomenon. It is a music research and library company. Advertising firms, TV directors and ring tone companies are among its clients. If you want an up-tempo song that sounds like an early Madonna hit, they can track it down for you from among their 2.5m tracks using an advanced search engine. The more songs they have and the smarter their search technology, the better they can serve their customers. Search, whether by Google or individual websites is the magic technology that enables businesses to exploit the long tail. “Search is critical. If you can’t find it, you can’t buy it,” explains Richard Corbett, the company’s CEO.
Roll your own content
User-generated content is another example of crowdsourcing. When you see book reviews on Amazon or look something up in Wikipedia, the online encyclopaedia, you are reading user-created content. Reevoo, another UK company, provides user-created reviews for ecommerce firms such as Comet, Currys and Orange. Buyers are more likely to believe impartial reviews by other users than marketing hype by vendors. Increased trust generates increased sales.
Sites like eBay and Craigslist are the ultimate crowdsourcing businesses. They rely on users not only for content but also for stock, warehousing, shipping and customer service. They are not the ecommerce giants promised by the dotcom boosters. They are more like credit card companies because they make money by providing a forum for others to trade in and take a cut of each transaction.
Online marketplaces like eBay inspired Zopa. It is a forum where lenders and borrowers can do business. Like a bond market for the masses, it wants to supplant banks in the personal lending business. It has over 75,000 members, split between borrowers and lenders. It also embraces user content. A company blog and discussion board allow customers to give feedback, make complaints and suggestion ideas to the company. A wiki (a kind of website that allows any user to write or edit the information on it) serves as a primary source of customer support. “It’s an outsourced R&D function and the quality of input is fantastic,” says James Alexander, the company’s co-founder. “Why wouldn’t you listen to what your customers think about you?”
Social networking
New web technology makes it easy for anyone to publish their own running commentary on any subject they fancy. These are blogs. Technorati, the Google of blogs, tracks over 50m of them. The number is doubling every six months.
Many are created by the under-18s. Sites like MySpace, with over 3m users in the UK and Bebo with over 2.5m are largely populated by teenagers who spend more time with these sites than they do watching TV. However, there are many niches. For example, Facebook is a site that specialises in university students. Increasingly, companies and individual executives also blog.
Users do not pay to participate but the businesses that host blogs, such as MSN Spaces (Microsoft), Blogger (Google) and MySpace (News Corp.), make real money. Despite all the dot bomb pessimism, it turns out that online advertising is big and real. Google has a $115 billion market capitalisation on the strength of online advertising. Blog authors can easily put advertising on their sites using services like Google’s AdSense. Google makes the lion’s share of any revenue from the advertiser but shares some revenue with the site owner. It is enough that popular bloggers can make a living from their sites.
Let’s not get carried away with the idea that every internet user is a budding encyclopaedist, online trader, blogger or advertising mogul. More than two thirds of Wikipedia’s articles were written by just 1.8% of its users. In the blogosphere (another buzzword meaning the community of blogs, authors and their readers), only about one per cent actually create original postings. The rest comment, synthesise or just read. However, it’s enough participation to hint at something new and important.
Dotbomb 2.0?
Suddenly dotcom era buzzwords are flying around again. In researching this piece, I heard people talk about ‘first mover advantage’ and ‘incubators’ for the first time in six years. There are new buzzwords too: crowdsourcing, long tail, social networks, blogs, wikis etc. So is this just a case of history repeating itself?
In answering this, crowds make another appearance. Charles Mackay’s book Extraordinary Popular Delusions and the Madness of Crowds tells the story of an 18th century stock swindle where subscribers were persuaded to invest in “A company for carrying on an undertaking of great advantage, but nobody to know what it is.” In many ways, this describes the hype and bubble around the first dotcom revolution. On the other hand, James Surowiecki published The Wisdom of Crowds in 2004, which describes how large numbers of people may come to better decisions than individuals. Who is right?
Things have changed in the last six years. The first generation of internet kids have become teenagers. At the same time fast, always-on internet connections are now the norm rather than the exception. When I first wrote about the internet in 2000, my company had a 2mb/s leased line, which I shared with 65 other staff. Now I have an 8mb/s connection all to myself. In addition, the technology is easier now. Blogs can make anyone into a web publisher. eBay can make anyone an online trader. For the cognoscenti, technology like AJAX and Java make websites more interactive. Martin Turner, an industry veteran and founder of Swopex says, “The revolution is just beginning to kick off.”
There are other changes too. The original internet bubble was founded on the belief that if you build it they will come. This is only ever true if you build something people want. The big difference is that if you do, advertising revenues will follow. Today’s innovators do not need to spend a fortune building a brand overnight. It is cheap to start a dotcom company now and word of mouth marketing does the rest. Skype, MySpace, Wikipedia and the rest don’t have sock puppet TV ads, celebrity endorsers or even advertising budgets. The days of the IPO are gone but venture capital firms recognize that a small, early investment can pay off big if a technology company can build an audience and sell itself to a media conglomerate or established dotcom. News Corp. bought MySpace. eBay bought Skype.
Kiran Sandford, a partner at law firm Mishcon de Reya raises a more mundane concern. “Crowdsourcing has the potential to be the wild west of the R&D field – it may not be clear who owns the results.” Businesses may need to pay as much attention to the legal side as they do to the technology and consider taking a more structured approach to building communities of users who create content.
Trust and safety is another critical area. Wikipedia has been tainted by scandals where anonymous users have libelled individuals or deliberately distorted facts. While the system is largely self-regulating it is not policed in a conventional sense and it is difficult to sue someone who can edit pages anonymously from any web browser. Similarly, anyone who trades regularly on eBay will be familiar with its scammers and dodgy dealers (and learn quickly how to avoid them).
Blog your way to success
This article itself is partly the result of crowdsourcing. Most of the contacts and interviewees came to me in response to a request on my blog, BadLanguage.net. Some came from ResponseSource, a website that links journalists and PR companies. Others came from LinkedIn, which is to business people what MySpace is to teenagers – a networking and friend-finding site. I also did some of my research on Wikipedia (with a pinch of salt always at hand).
Blogs help with marketing too. I probably wouldn’t have been asked to write it if my blog had not already covered many of the same topics. In the UK, blogs have a slightly seedy reputation, at least in the mainstream media. Private sex lives are turned into blogs and then into summer bonkbusters. However, in the US they are increasingly seen as important marketing and PR assets. For example Southwest Airlines have a blog that draws contributions from across the company and Boeing executive, Randy Baseler’s blog has won several PR bouts with non-blogging rival Airbus.
Blogs can also have a softening, humanising effect on a company’s reputation. Microsoft has no official policy on employee blogging. It also has hundreds, perhaps thousands, of staff who regularly blog on all aspects of life at the company and its products. Although there are surely unwritten guidelines and expectations, the result is a human face for the company. In the same way, Sun’s CEO Jonathan Schwartz keeps a very popular online diary. It is hard to find similarly candid insider blogs at Apple or Google, despite their cuddlier reputations.
All these new online technologies make it is easy and cheap to experiment. There are many ways to test the waters. For example: start a blog, set up an online shop on eBay, open a customer service wiki, add user reviews of your products on your website, buy stock photography from iStockPhoto or join a networking service like LinkedIn. You don’t need a big design team, big technology or a big budget.
“Do keep a level head,” advises Richard Anson, CEO of Reevoo, “what is happening is real and there are significant opportunities but don’t get lost or intimidated by the jargon and buzzwords.” Welcome to the democratic web: internet of the people, by the people, for the people.
This article was first published in Director in the UK last month. This version is my pre-editing writer’s draft. It was written for a non-technical business audience.
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Wow!
I would like to know the sources of the statistics (1.8% wikipedia users create two thirds of content, 1% of bloggers post original content). It’s very interesting, and I would like to translate into Spanish some of your points.
Octavio Paz, a mexican essayist and poet, said that the ones who create culture are those who belong to the “immense minority”. Do you agree with that?
Off the top of my head, I think the Wikipedia stat came from their site and the 1% of bloggers is from a report previously cited on the blog. I’ve just got back from a holiday and I don’t have my notes to hand.
“Immense minority” is a really good description of the contributors to what I call the democratic web. Nice phrase too.
Thanks for commenting.
When studying journalism and media (especially the electronic kind) as a student I have often heard, and accepted, that we still have no real idea of what the Internet is capable of, or the true role it has or will have in society.
As a ‘new’ medium, despite being rapidly diffused, it is seen by most experts as being some way from reaching its potential. So, do you think this idea of Web 2.0 as the democratic web – a receiver-driven, multi-purpose, multi-platform media produced by and for its users – is something closer to what the Internet is going to be, or perhaps even what is supposed to be?
You did a good job of providing a well informed overview of the Democratic web. Overall this was a very useful and worth while to read, I am certainly going to share this amung my friends.
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