Marketing lessons from Second Life

In 2007, Giga OM wrote a post about marketing in Second Life “Marketing in Second Life doesn’t work… here is why!“. What’s interesting is how, 2 years on, those same arguments apply to Web 2.0 and all forms of social media, not just the virtual:

Teleporting is to SL Advertising What the Channel Clicker is to TV Ads

The standard means of travel in SL is point-to-point teleportation, near-instantaneous transit from one location to another. P2P teleporting renders billboards and most other location-based advertising useless

Advertisers want to hang on to your eyeballs. In the old days of a few TV channels, it was considered an easy task – insert ads between the TV programmes. As the number of channels increased, we all became channel hoppers. Adverts start and off we click. In Second Life, the clicker is replaced with the teleport. People do a ‘beam me up Scotty’ and go direct from one destination to the other, making it hard to insert ads along the way.

But the Internet is no different. The only successful placement of ads has been discretely embedded alongside search results and web parts. The indiscrete ones are so in your face they cause an instant channel hop/teleport/link to another digital location, be it 2D web or 3D virtual world. And increasingly we hop direct via our social networks, receiving a message or shared link from someone we trust. Ads in their traditional format will struggle to succeed in this environment. It is telling that a non-advertising company (at the time) – Google – invented the current profitable form of web advertising. Advertisers did not believe a simple text box would work…

Death by Green Dots (or lack thereof)

“Every avatar in-world is represented by a green dot…Any noticeable clump of green dots attracts more dots, and as those grow, more follow– a feedback loop colloquially known as “the green dot effect”. Second Life’s most successful entrepreneurs sustain this flurry of dots by holding constant events, giveaways, and games, and even go so far to pay Residents to visit. Amazingly, corporate marketers have been slow to replicate these homegrown strategies.”

As GigaOM highlights, the challenge to advertisers here are good old fashioned network effects – dots attract dots. And where else do we see network effects? Everywhere in Web 2.0, be it MySpace, Facebook, Twitter, Bebo or any other social site. All are affected by exponential growth or complete lack of growth, there’s little in between. To sustain interest requires effort. It’s not just advertisers who are affected by this phenonemon. Journalists and other professions are also struggling to compete against newcomers often dismissed as amateurs but who offer more to their audience.

A Failure of Imagination

“To play in Second Life, corporations must first come to a humbling realization: in the context of the fantastic, their brands as they exist in the real world are boring, banal, and unimaginative”

Second Life is not the only place on the web that makes traditional brand advertising seem boring and bland. The same is true of every single site that has enabled people to have their say, contribute and be creative. Look at the videos on YouTube, compare the mash-ups being made by individuals compared to professional speeches, fan pages on Facebook versus staid corporate web sites. None of them remotely resemble traditional marketing designed for mass consumption and yet they attract viewings by the million.

Here’s a simple example. When United Airlines lost a passenger’s luggage, the passenger made a song and posted it to YouTube. It achieved 3.5 million views in 10 days. Few adverts achieve such a voluntary audience. The net effect – it wiped 10% ($180 million) off the value of United Airlines. But full marks to them, apparently United Airlines are now going to use it as part of their training.

These marketing lessons dished out to companies trying to succeed in Second Life are equally relevant to companies trying to succeed in this new Web 2.0 world that the Internet has become.

To summarise what brands need to do to in Web 2.0:

  • Find ways for your product or service to become part of the story. Product placement in a film trumps an advert in the coffee break. Sometimes, the ads in and around the search results are the result you were looking for. They succeed because they look part of the search results (i.e. mostly text), rather than trying to bling their way annoyingly into your now disrupted attention.
  • Reinvent your marketing department. Stop outsourcing work to agencies and staring at campaign statistics. Learn from individuals who have leveraged Facebook, MySpace, Twitter and others to create an incredible personal brand. Apply their lessons and understand it will take effort to achieve those network effects. (It usually involves a story…)
  • Be prepared to not understand what someone is proposing but let them do it anyway. Imagination and creativity are valuable commodities, don’t clip their wings so much. I would go so far as to say, if your marketing department doesn’t frighten you with their ideas, they aren’t good enough.

And having written this, I’m guessing less than 5% of companies will follow the advice. More may try but few will actually follow it to the letter. Instead they will customise the advice to make it feel safer, and most will fail because they failed to change. Here’s a simple example…

Reverse Marketing – Start with the discount and increase the price of products

In the real world, when new clothes come out they are sold on the high street at full price. Then, as the season ends or a new collection is due, the clothes go on sale at a fraction of their original price.

In Second Life, a virtual retailer lauches new clothes on sale for 48 hours (L$99, about $0.36) before raising them to full price (L$299, about $1.11) where they remain for as long as she wants to sell them. It is the reverse situation. She doesn’t actually call it a sale, rather a promotion. To get the promotion, you have to be a member of her group and will receive a notice when new clothes are available. Within seconds of a notice being issued, her shop will be so packed with avatars nobody else can teleport in. I am guessing more than 80% if not more of her sales of new items come from within that 48 hr period. Without the promotion, far fewer would bother to turn up on a regular basis and check out new items. The price is cheap enough many automatically buy regardless of whether they really want the item, knowing it is the only time it will be available at such a large discount.

Imagine if a retail shop could be bothered to do the same. Some do offer special store discounts on occasion, but usually for no more than 20%. It needs to be a better deal and a systematic approach to attract customers to buy on a regular basis. Create a Fan page on Facebook to announce promotions for new collections, with 40%* discounts during a 24 hour period when the stores are open. And make it a regular activity, not an occasional event. Good or bad for business? (* I’m guessing here the mark-up is more than 40%)

References

Side note: To embed the video above, I had to go find it on YouTube. The version included in the BBC article appears to be a copy that doesn’t let you embed it anywhere else. (They do include a ‘video courtesy of YouTube’ reference.) A blogger wouldn’t make it so difficult to share…

Web 2.0 will thrive but not yet a while

When economies started to collapse in the second half of this year, many blog posts cropped up heralding the death of Web 2.0. I think Web 2.0 will thrive in this economic downturn. Just not yet.

The sort of start-up that has a wafer-thin business model overly dependent on advertising will struggle and many will disappear (and quite a few won’t be missed). Investment in new ideas will become much harder to secure. But Web 2.0 is about more than creating a widget, tagging a picture or poking a friend.

Web 2.0 has yet to scratch the surface of business processes. Whilst consumer habits have changed dramatically since 2000, most organisations internally still look the same. And so they will continue during most of 2009. Going into a recession, the instinctive reaction is to freeze. Stop doing anything and wait to see what happens. Few people would start a new project or reinvent how they do business at this moment in time. And those who would ought to think twice. However, once we are well and truly up to our necks in recession (what we see right now is just the beginning), then businesses will start to rethink the management and processes that led us down down this path. It is at that point that Web 2.0 has the potential to play a significant role.

In short, the next few months will undoubtedly bring more doom and gloom stories about Web 2.0 and related technologies (let alone everything else going on in the world). But the wise will use this time to get organised for when the shock of the recession eases and people start paying serious attention to what happens next.

Technorati tags: Web 2.0 | Enterprise 2.0

Wikis in moderation

Had a great debate during a workshop last week. I was discussing how Web 2.0 technologies can be applied internally to improve knowledge sharing. Opinions (and expectations) about the use of tools such as blogs and wikis vary – from being rose-tintedly optimistic about their potential benefits through to being thoroughly pessimistic and convinced their use will be a disaster.

In this instance, the customer raised a valid and common concern – that innacurate information could be posted on a wiki page or blog and become relied upon, leading to misinformation being distributed internally and (worse) externally. It’s a fair comment. Information tends to be sticky – once we learn something, we hold onto it until we learn the hard way that it is no longer applicable or true. See previous blog post – Sticky Information.

But it is a mistake (and hence the debate) to assume that, without wikis and blogs, misinformation doesn’t occur. It does, through email and conversation. The difference is in the discoverability (or lack of). Wikis and blogs are transparent – published on a web site for all to see. If somebody publishes inaccurate information, it can be quickly corrected for all to see. The same is not true for email and conversation. But such corrections rely on people to moderate the digital conversation.

Wikis are a great way to democratise the sharing of information and knowledge, but do not consider them a labout-saving device. The reverse is usually the case. The most successful wikis balance open editing with moderators who keep a check on the quality and accuracy of information being published.

Web 2.0 one-liner

Tim O’Reilly has a timely post rebuking attempts to define Web 3.0 – Today’s Web 3.0 Nonsense Blog Storm. As he points out, most such attempts tend to describe incremental changes to the technologies that have come to represent Web 2.0 as opposed to a major disruptive shift that will define the next generation of Internet maturity.

But best of all, his post includes a one-liner that perfectly describes the potential value and purpose of Web 2.0:

“It’s all about building applications that harness network effects to get better the more people use them”

Whilst the reference is to companies building Web 2.0 applications (and why the backend – the data center – is what really matters), this definition could (and should) be equally applied to businesses looking to adopt Web 2.0 apps like wikis, blogs and social networks, particularly any solution involving the word ‘knowledge’ or ‘collaboration’. Many customers I talk to want the Wikipedia/MySpace/Facebook effect, but they are reluctant to open such tools to the entire organisation. Instead, the preference is to stay within a manageable comfort zone of ‘a few editors and everyone else is read only’. But that approach prevents those network effects from taking hold – it cripples the solution and limits the benefits to be gained from deploying such technologies. If you don’t want people to participate, stick with traditional web content management solutions… costly to maintain with content that is often out of date (or non-existent)

Technorati tags: Web 2.0; Enterprise 2.0

Will we see the Semantic Web?

The Semantic Web, in theory, is a brilliant idea. For a starting point to read all about it, check out its entry on Wikipedia. In a nutshell, the Semantic Web is about bringing meaning to data and web pages. The ultimate goal appears to be make data work without (and on behalf of) humans. At the moment, if my car starts feeling ill, the computer displays a warning light on the dashboard. I ignore the warning light until the car all but stops working. Then I phone the garage, get it towed in and they repair it. In a Semantic Web world, my car wouldn’t let me be so flippant. It might still display that warning light to humour me, but it will also send a message to the garage and book itself an appointment to repair the failing component. If fully automated driving ever takes off, it will take itself to the garage and come back home when its ready

OK, so there are probably more realistic examples to demonstrate the benefits of a Semantic Web, but the principles (in simple terms) are there:

  • a universal method to describe data (ontology)
  • a standard language to store data (XML)
  • a common mechanism to move data (web services)

In my optimistic example, cars will use a universal ontology to describe their ‘bits’ and associated information to trigger alerts when something goes wrong. That data will be stored using an agreed XML schema that all garages can read and willl be transmitted to the garage (subject to wireless network being available) using a published web service. Similarly, all garages will use a universal ontology, XML schema and web service to make their diaries available for cars to locate free slots and book in appointments… and so it goes on

Two of those principles are achievable and already being adopted in many business and consumer systems. One isn’t. There will never be a universal method todescribe all data and if there were, it would go the way of Google’s PageRank algorithm – successful for as long as it takes for the system to be gamed. Search Engine Optimisation would be replaced with a new black art: Semantic Web Optimisation

As long as human nature is involved in designing (and using) an ontology, there will never be agreement. I have just finished reading a wonderful book – Glut: Mastering Information Through The Ages. It documents the attempts to classify and organise information literally since records began, and highlights the common cause of failure – different perspectives reach different conclusions. Many people reference the library as a shining example of how taxonomy can work, citing the Dewey Decimal system. The Dewey Decimal system was first created in 1876 by Melvil Dewey. Dewey gave higher status to Christian religions (sections 200 through 280) than all others (Judaism and Islam are given just one section each – 296 and 297 respectively). I wonder what religion he belonged to? His design was not without context and therefore not universal…

And history appears to have taught us nothing about our lack of ability to work on anything universal. In the 18 August 2007 issue of the New Scientist magazine, there were two articles covering the same piece of the planet. The first article questioned whether or not a tipping point has already been reached with regard to climate change. Concern focused on the melting Greenland ice sheet and how the consequences will affect us all. In the news section, a small article covered ‘Arctic monkeying’, the race to claim ownership of a seabed structure running from Greenland to Russia. Apparently, a Russian submarine planted a flag on the seabed beneath the North Pole. Canada is building a military base and deep-water port to govern the emerging North-West passage (about that melting ice sheet…) Denmark has sent researchers to assess its claim on the untapped oil and gas reserves that just happen to lie in the region under dispute… amply demonstrating why we are doomed to suffer the consequences of climate change. For goodness sake, we can’t agree on a single currency, spoken language or even agree to all drive on the same side of the road. Diversity is a core part of what it is to be human. Universality requires human nature to exit through the door to the right (about that talk of climate change…)

So what will become of the Semantic Web?

XML and web services continue to spread through systems and applications. Even Microsoft, never the first to sign up to an open standard 🙂 has adopted XML formats in its latest Office applications, and web services are used to communicate between desktop applications and services/online services.

Ontology is the difficult member of the semantic family – unfortunate because ontology is the ‘semantic’ in The Semantic Web.. Hierarchical ‘top-down’ taxonomies continue to battle with networked ‘bottom-up’ folksonomies and history suggests such conflict is a necessary feature (not a bug) of evolving systems. User tagging has proven unexpectedly successful, thanks to Flickr and blogging, and demonstrated the value of folksonomies. But inconsistencies remain rife. If I want to Technorati tag a blog post about Web 2.0, do I use web 2.0, web-20, web2.0, web20… Perhaps that’s the trade-off we will have to accept – forget striving for a universal method and instead learn to work with local variants and their different contexts. Accept that the results won’t be perfect. Just like the real world 🙂

Without doubt, the use of metadata to enhance search results and create new systems has the potential to disrupt and is attracting huge attention. You can see some of Google’s work on multi-faceted search (pivoting results based on classification category) over at http://www.google.com/experimental/index.html. Microsoft Research published research on ‘object-level vertical‘ search algorithms although a more exciting demo can be found at TED – Ideas worth spreading: using Photosynth to combine photos (found through their tags) into a 3D virtual world.

Nicholas Carr, yes he who said I.T. doesn’t matter but can’t seem to stop writing about it anyway :-), perhaps identified where the semantic web will come to life – the real Web 2.0: the datacenters competing to host our information in the ‘cloud’. Will the providers of online services become the gate keepers to different semantic webs?

References

Technorati tags: semantic web; web 2.0

Web 2.0 and marketing

Apologies, my blogging has been abysmal lately. I’m back to my usual trick of over-committing on the work front and wiping out all spare hours in the day. I remain in complete admiration of those who manage to blog continuously on a daily basis. I struggle to find time to sleep sometimes…

Plenty of people have blogged about this already, but McKinsey has published a global survey on how businesses are using Web 2.0 (free registration required to view). The element that I found most interesting was exhibit 3 (on page 3) – Popular Bets. When asked the question, ‘Is your company investing in any of the follwing Web 2.0 technologies or tools?, web services came out a clear winner (80% responding ‘using or planning to use’ and just 6% responding ‘not under consideration’). Nothing else made it over 50%. The next two were collective intelligence (48% using/planning and 26% not considering) and peer-to-peer networking (47 % using/planning and 28% not considering. For the remainder of the list, that included social networking, RSS, podcasts, blogs and wikis, more respondents answered ‘not considering’ than ‘using/planning’. And bottom of the list… mash-ups. Despite their popularity on the Internet, only 21% of those businesses surveyed responded with ‘planning/using’ and over 50% are not even considering their use.

On a separate, but somewhat related theme, there is a great article describing in detail the challenges facing the media/publishing industry – Bob Garfield’s Chaos Scenario 2.0. It’s a long post but well worth the read. An interesting comment:

“…What is certain is that the Brave New World, when it emerges, will be far better for marketers than the old one. What is nearly as certain is that many existing ad agencies and some media agencies will be left behind. And the reason they will be left behind is their stubbon notion that they can somehow smoothly transition to a digital landscape…”

Makes you wonder how many of those ad agencies agree with the views expressed by many businesses in the McKinsey report – that most Web 2.0 technologies are not yet worth consideration.

The article goes on to give an example of what the Brave New World might look like:

“…consider for a moment Nike Plus, the joint project of Nike and Apple in which the iPod becomes a tool for monitoring running pace and style. The website combines utility, community, information and, of course, online sales. It is the marketing program, the CRM engine and the store. The sole function of the TV commercial… is to drive traffic to the site.”

Interesting stuff…

Gifts vs Markets

“Strange things happen when a gift economy and a market economy collide”

(Peter Lyman, Political Scientist, as quoted in The Social Life of Information, published 2002)

There’s been a great debate over Jason Calacanis’s offer to pay Digg’s top contributors if they defect over to Netscape to build a similar service in return for payment. Kevin Rose from Digg responded and Jason argued back. Nicholas Carr wrote about it, siding with the monetary outcome. Yochai Benkler provides a balanced response. When describing why introducing monetary reward breaks down peer-produced systems, Yochai makes the comment:

Adding money alters the overall relationship. It makes some people “professionals,” and renders other participants, “suckers.”

The challenge facing sites such as Digg is that the relationship is constantly in danger of being altered in just that way. If the owners decide to sell up and cash in on the site’s success, all participants become monetary “suckers”. It’s unlikely to be an issue when the site’s value is generated by a service that benefits all participants, such as Flickr (everyone gains from being able to store and share photos), Deli.cio.us (ditto for storing and sharing bookmarks), and YouTube (ditto for storing and sharing video). But when value is dependent on altruistic reasons, the relationship is subtly different. What do participants gain for promoting links on Digg? The system works because it is operating as a gift economy, but it is being run by a commercial enterprise in a market economy. The owners could convert the gift into money at any time – winner takes all, participants receive nothing. I think that is the nerve that Jason Calacanis has touched.

Links:

Filed on site under: Internet Economics