Sunday, August 29, 2010

Anticipative demand and consumer intent prediction

Social economic networks improve the value proposition for both individual and institutional consumers since products and services can be discovered and targeted with greater relevancy.

Rich attribute information posted publicly by social media users (individual and institutional) can be used by marketers and other interested parties (for example, potential employees) to infer the values, preferences, and interests of others. In response, hyper-personalized advertisements may be presented (Reference: Shih, The Facebook Era, 2009).

Hyper-targeted-marketing, recommendations, and authentic product endorsements from friends are some of the ways that social economic networks have improved commerce relevancy.

The next obvious step would be for vendors to predict demand before it occurs, responding to customer intention.
Intention prediction could be accomplished by merging aggregate Facebook or other social media ‘likes’ and comments from high-influence users into purchase intent well before sales transactions. An anticipative demand market could arise.

Traditional economics equations could be further transformed as vendors test large varieties of targeted offerings in cost-effective ways via the internet.

The long-tail of supply and demand could meet in millions of micro-markets, possibly even at the level of individual pricing and individual offerings. Smaller lot sizes means higher margin. There are numerous entrepreneurial opportunities in facilitating product and service generation, production, and distribution at the level of n=1.

Sunday, August 22, 2010

Social currency unlocks value for individuals and organizations

Social currency, shared information which encourages further social encounters, is transacted through social economic networks.

From an economic perspective, the role of social economic networks is to unlock and monetize hidden value. This value is mainly in the form of information asymmetry as buyers and sellers hold information that is useful to each other. Both buyer and seller realize greater utility than if the social economic network did not exist.

Social economic networks are impacting both individuals and organizations at the global and local level. Transactions may be between anonymous parties or parties who know each other. For example, in the Groupon / Peixe Urbano group-purchasing model, individuals pre-commit to a purchase to obtain a discount if a minimum number of people participate.

With social economic networks, organizations can unlock intellectual capital (social business intelligence) in ways that were not possible before with tools such as prediction markets (a mechanism for collecting and aggregating opinion using market principles). The concepts are attractive on a global level and can be implemented on a local level with the democratizing power of the internet.

Social economic networks could likely grow in the next several years, particularly in the type of assets created, and in the venues and models for their exchange.

Sunday, August 15, 2010

Social economic networks and the new intangibles

Social economic networks are helping to monetize the new intangibles that arise from alternative currencies such as intention, attention, time, ideas, creativity, and health data. Individuals are starting to realize that they have more assets that have economic value besides labor; multiple currencies that are starting to become monetizable.

The new currencies have new measurement metrics for monetization such as awareness, influence, authenticity, reach, action, engagement, impact, spread, connectedness, velocity, participation, shared values, and presence. As market principles become the norm for intangible resource allocation and exchange, all market agents are starting to have a more intuitive and pervasive concept of exchange and reciprocity.

Reputation has always been an important intangible asset, and was one of the first alternative currencies cited; however it was not really monetizable other than as an attribute of labor capital. Now, there are more alternative currencies, such as social currency, that are directly monetizable through social economic networks.

Real value and real assets are being created in social economic networks. For example, products and services have higher value when they are recommended. An information asset that has been generated, largely through crowd-sourced labor, is product and service recommendations. Some examples of these information resources that facilitate shopping include Amazon reviews, Yelp local business recommendations, social shopping sites (e.g.; Kaboodle, Polyvore, StyleHive, ThisNext), and product attribute discovery and dialogue sites (e.g.; Stickybits, ClickZ).

Sunday, August 08, 2010

Long-tail economics extended to physical objects

Chris Anderson, editor of WIRED magazine, gave an excellent talk on August 5, 2010 at the PARC Forum. He explained how the long-tail economic models which have driven digital content (allowing consumers to access books, music, and movies in the 80% of the market that is not blockbusters) are now starting to appear in the world of physical goods.

The process of realizing long-tail economics in any sector is that of going one-to-many; democratizing the tools of creation, then the tools of production, and finally the tools of distribution. This is what happened with internet content such as publishing, where it is now easy for anyone to create, produce, and distribute content with blogs, twitter feeds, YouTube, etc. This has also happened with other digital content and some physical goods that are ordered and distributed via internet models (e.g.; Amazon, Zappos, etc.).

The new industrial revolution, argues Anderson, is in opensource hardware factories. The supply chain has now opened up to the digital and the small. The ability to make and distribute anything massively decentralizes traditional manufacturing and could completely reorganize industrial economies…atoms are the new bits. Matthew Sobol’s holons (communities of local resilience and sustainability) are in the works. Goods can be self-designed or crafted from available digital designs (e.g.; communities like ShapeWays and Ponoko), and then printed locally on the MakerBot or ordered from Alibaba or other global manufacturies. Opensource manufacturing is starting to have an impact on industries like auto design and construction (e.g.; Local Motors), drones (e.g.; DIY Drones), and general hardware design (empowered by the Beagle Board and Arduino).

It is likely that long-tail economics can be applied to many other areas. Medicine is the next obvious example, where health care, health maintenance, drug development, and disease treatment are already starting to shift into n=1 or n=small group tiers of greater customization and ideally, lower cost as more precision is obtained in the measuring and understanding of disease and wellness.

Sunday, August 01, 2010

The real-time economy

The encephalization of the earth (the coming together of human minds in a variety of higher resolution formats) is picking up speed. More and more people have a pass to join the information highway – Honest Signals points out that ten years ago, less than half the world’s population had made a phone call, but today, 70% of the world’s population has access to a phone for calls and texting.

Numerous collective intelligence tools have been emerging to uplevel and structure the context and quality of human interaction. The Wikipedia is the quintessential collective intelligence tool, as are wikis generally, social networks, buzzing and tweeting status updates, collaboration websites, question networks, social purchasing networks, and prediction markets.

The real-time economy
The pulse of activity from collective intelligence tools can be measured in many ways, and is importantly surfacing as a leading indicator for the real-time economy. Prediction markets and social purchasing networks could supplant traditional mechanisms for identifying economic activity and shifts.

For example, there were a number of ways to watch the real-time status of this week’s long-awaited launch of Starcraft II: Wings of Liberty (Blizzard Entertainment’s latest release in one of the highest grossing video game franchises of all time). The usual tweet stream and buzz feed provided an instant indication of activity. The next highest level was the Blippy feed of real-time purchases. Third, of greatest salience was the SimExchange video game prediction market which provided the highest resolution aggregation of opinion, and was early in calling the sales disappointment during the game's pre-launch and launch (Figures 1-2).

Figure 1: Starcraft II: Wings of Liberty, 7/28/10 (release day) (Source)

Figure 2: Starcraft II: Wings of Liberty, 7/31/10 (Source)

The next obvious step is predicting economic activity even earlier, merging aggregate Facebook likes with social network high-influencer opinions into purchase intent well before sales transactions, in fact, using the encephalization ether for market demand identification and product development.