Monday, June 25, 2007

The Future is Virtual Goods

On Friday, I attended the Virtual Goods Summit, and the impact that they are having on the online worlds. As noted by Eric Rice, it appears that I was the only PR person there, that I could see - and that says quite a lot - that PR, advertising and marketing might just not get what is happening online, and only wants things that they can control.

That, in itself, is a big discussion on whether or not the marketing disciplines - which includes PR - are really ready to take the step forward and embrace what is happening out there, or is it still a control issue. This was part of a Twitter conversation yesterday with Vaspers - where I noted that "yes, communities are hostile to marketing, but that's bc marketing has been unable to change. The paradigm needs to shift." That's one of the key points - the market is changing, but the marketing is not changing nor do they seem to want to change.

But, my thoughts on the VGSummit need to start with this - virtual goods do not necessarily mean virtual worlds; in fact, there are more opportunities in social networks and virtual gifting – think Facebook, MySpace, HotorNot, LiveJournal V-gifts – more so than Second Life. Yes, Second Life and other worlds are where virtual goods and commerce became big, but this has moved way beyond that.

The other thing to note is that there are massive opportunities in game networks – think Habbo Hotel, QQ.com in China – that allow people to sponsor karts, or other products. Habbo Hotel noted that they sell more furniture than IKEA, and Nexon has sold more Mini Coopers than BMW – granted, price has a lot to do with both, but there is the opportunity for branding.

What does this mean for companies? Easy – it means there are a lot of branding opportunities with gifting. Right now, you can buy a virtual rose on HotorNot for $10, and the recipient sees the flower for two weeks before it dies. On Dogster, you can buy a virtual dog bone, and the recipient will also get a real dog treat in the mail (Perry would appreciate that). CherryTap has a ton of virtual gifts you pay for in cash that hits its target adult audience. You also have to wonder how much someone is willing to pay for exclusive gifts. Could HotOrNot get away with that $100,000 ring or flower? If the price is disclosed, someone might fork it over to impress someone (a little bit too much, maybe). But, there is the value and perceived value.

Prior to the event, one of the organizers of the conference, Susan Wu, wrote up about the market for virtual goods in TechCrunch. In it, she noted how she is a gamer involved in some of the game communities that rely on virtual goods, but that the market is huge for this type of opportunity.

And, well, who is going to work in these communities? It is a branding exercise - a la Second Life - but one that has greater potential for upside, as well as greater potential for backfiring.

And, it's about becoming part of a community, and adding value to the community - something that is oft forgotten. Think of what could be done, and how it could be done in a smart and transparent way - but, remember that: smart and transparent.

Just looking at Facebook, imagine:

  • A cookie company works with Facebook to make a premium gift - $2 or $3 – that is in the shape of a chocolate chip (or other type) of cookie. As a friend, you gift that cookie to another, and they also get a virtual coupon for a free real-world cookie goodness.
  • You see a friend is sick on Facebook because they have updated their profile. You purchase a Warhol-esque can of chicken noodle soup, and also are able to download a coupon for an actual serving of the same soup to take to your friend (or send it to them, if it’s separate campuses).

Yes, these ideas are based on the fact that the majority of users on Facebook are still college students, and those are the audiences that many companies are trying to reach. But, those are just some of the possibilities that extend into social networks and communities without being overly obtrusive and are done in such a way that you are not alienating people in those networks that are also making gifts.

Outside of the virtual worlds, there are many opportunities for virtual gifts that fit the audience of the products and clients, and will be a good fit for the social networks.

And, for other great coverage of the conference, check out:

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Friday, June 22, 2007

Virtual Goods Summit: Virtual Goods Meet Entertainment

Virtual goods have a long established place in the world of quest-based and campaign-oriented online gaming. As important as this genre has been, the casual games and entertainment markets continue to attract a different demographic with different motivation. How will virtual goods impact the casual games and entertainment markets? Will the same tactics and techniques that worked in other instances drive success here as well? Our closing panel will share their thoughts on this topic and talk about what the future holds for virtual goods and entertainment.

» Jim Greer, Kongregate
» Erik Bethke, Go Pets
» Sean Ryan, Meez
» Charles Hudson, Virtual Goods Summit (moderator)

Greer: Coming from a purely game environment, when you play a game, you are rewarded by certain criteria. It's about engaging, and then showing off for your friends. Pride in accomplishments, power in accomplishments, and the virtual cycle. It's about earning virtual goods.

Bethke: Earned versus gifted virtual goods are about giving the opportunities and choices.

Greer: It's about achievement. It's time versus money, and both have value and balance.

Ryan: A lot of our items are paid for, and a big portion of our member base earns its virtual goods. You keep the enthusiastic evangelist, and the ones that keep engaged and excited. It's the heavy users and the balance of the hybrid-model. It's a mixture of prescritions and virtual goods; although it's very high percentage of virtual goods in the East, it will never be that way in the US because of past consumption practices - advertising models, etc.

Greer: We will work with brands to provide virtual goods as rewards, but it is not at the level yet.

Greer: If you look at Amazon or Yelp, you get badges for being prolific. It's an earned virtual good. It goes back to discussing if it's better to receive, buy or earn a virtual good - it depends on what is your desire.

Bethke: Virtual goods will become more like traditional Website - there are APIs and people will share virtual goods across the networks and worlds.

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Virtual Goods Summit: Are Virtual Goods the Next Big Business Model?

Online advertising has been a growth drive for many of the leading properties on the web today. Is advertising the best business model in all cases or are there situations where virtual goods can be a strong complement? What does it take to build a strong business model around virtual goods? These and other topics will be the centerpiece for this panel discussion.

» Kevin Efrusy, Accel Partners
» Tim Stevens, Doppelganger
» Dan Kelly, Sparter
» Susan Wu, Charles River Ventures (moderator)

Kelly: We are in our infancy, and can't look at transactional data and look at the market size. If you listen to what the game companies are talking about, how the market was on eBay before they shut it down - it's easily a $1.5B secondary market. If you look at the subscription market, there's an imbalance in the market that includes speed-bumps. The primary market will continue to grow.

Efrusy: When we talked to Facebook about virtual goods, he thought it was too dorky. Then he thought about it, and it was an expression of social capital. It's a material revenue stream - not to the overall revenue - but if I had a startup doing that business in virtual goods, I'd be ecstatic. It's very high-margin, no cost of sales. I've gotten a dozen virtual gifts - and I'm lame - then there must be people that are getting a ton of virtual gifts.

Stevens: It's an expression of what the item means. It's an expression of affection. We enable people to buy things virtually that they might not be able to purchase in reality. It's the same power in the virtual world that they would get in the real world. It represents not little items, but social capital that you can wear, give, gift.

Kim: It's value and ease-of-use. Look at Cyworld - they make it easy to customize your page. If you get to that ease-of-use in the US for personal pages, people are going to continue to personalize and showcase themselves on their pages, including paying.

Stevens: Half our revenue is virtual goods, but over time the advertising component will become more dominant while goods will be less dominant. The content creator creates virtual goods. Over time, you'll see the blending of virtual goods and advertising. It's inevitable.

Efrusy: Gifting was experimental, and worked very well. The real opportunity is for people to take advantage of the platform. Facebook was throwing out examples, and now what people can do is take an immersive experience on top of their social graft. It'll be rocket fuel to accelerate your community. It's more than widgets, but taking advantage of the platform. Build something immersive that's still your users - you can still own it but on Facebook.

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Kelly: There is no virtual, but there is only physical. We reward good content, and embrace them for spending time and money (beyond) on the products we are making. Publishers and developers are having a hard time with this market because of ownership, commerce - there's a lot to be fearful, but you can give consumers what they want and keep what the corporation needs and wants.

Efrusy: We encourage Facebook to be open - we want people to build in there, and become successful in there - and that's the goal. It's not a closed system. Foster a platform for entrepreneurship.

Efrusy: How much utility do you get out of real flowers? They are there for the good feeling, and some businesses are better suited in advertising. Some are immersive and good demographics, and can make money in advertising.

Stevens: Take advertising and make it integrated into the community. The purpose is integration - think Times Square.

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Virtual Goods Summit: Virtual Items: Mainstream or Not?

Virtual items are beginning to appear in many new contexts. As virtual items continue to penetrate new markets, what will it take for them to become more widely accepted? Is becoming mainstream the right goal for virtual items? Our team of speakers will share their views on the prospect for virtual items becoming mainstream.

» Jia Shen, RockYou!
» John Vars, Dogster
» James Hong, HotOrNot
» J.T. Stephens, Six Apart
» Robert Scoble, PodTech (moderator)

Hong: We were not the first company to offer virtual goods, but we were pretty close for Hot or Not. There was one other company out there.

Vars: We do do virtual gifts - free gifts that are advertising supported by Del Monte or Clorox, and we have paid gifts with virtual currency. We have an advertiser coming in that will now send a real treat when a dog gets a virtual treat. It's crossing over from virtual to real world.

Hong: You don't need to convince people of virtual goods - even though it's not a huge market in the US like it is in the East, because everyone focuses here on advertising. We started as an ad-supported model, and said screw it. Do you have to convince people a virtual good is worth it? People care about how they are perceived, and it is a differentiator. Roses cost $10, and they do die after 2 weeks - so if you want to impress the girl, you have to buy them again. It's the trophy affect of the flower, and the nice gesture.

Shen: For us, it's about social - it's not about games, but it's about social networking and personalization. People want to stand out individually, and it's the tools that you can use. It's a popularity contest, like high school.

Vars: The users of Dogster are people that watch Oprah, not gamers or virtual worlds people. It's bonding, thanking, commenting, social status - it's a way for communications. And, these virtual gifts have real meaning in Dogster. And, it's the thought that counts with these gifts. Virtual gifting is not necessarily a way to acquire users - we haven't used them that way yet - but it's a way to get users to kick ass. Virtual gifts make our users become more experienced, use the service and more.

Stephens: LiveJournal has virtual gifts - we got the idea from Hot Or Not - and we see people using them for friends that might be sick, or to cheer someone up. It's going to continue to be a big component of our site.

Shen: You have to keep up and keep doing new stuff - like the widgets for Facebook - if you are creative and set a standard for social network users. By getting a gift, and comments and more gifts, it keeps you on a site. The virtual goods and widgets - some are temporal - but it does keep you on a site, and make you grow.

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Hong: We have tested our site and the interest for people, and who wants to meet whom. Double matches are allowed to contact each other, and if you bought a flower, there was a greater possibility. Fundamentally, in an online world, online relationships are not less valuable than offline. It's about the relationships with the people. It's about giving those people time - whether offline or online - and that would involve the virtual goods. You are going to give those only if there is a connection.

Stephens: Links and comments are like virtual gifts. It's the pat on the back, that creates more of a community.

Vars: Is an MP3 virtual? Maybe a few years back, but now it is not. Some things are "physical" but they are now bits and bytes.

Shen: These sites are just a new culture, it's a way to interact and be a part of communities. It's about putting interesting, easy-to-use social media tools in a youthful market. In the end, the social crosses all platforms and demographics.

Vars: Scarcity creates more value, as has been talked about. Even though there are free gift applications on Facebook. They have not created a culture where the gifts mean something. They are just pictures right now.

Stephens: The gifts on LiveJournal are not part of a limited addition. It's the epheremal nature of the gift that is the "high" that does subside over time. It's about driving more activity and more interaction. We have added charity virtual gifts - v gifts - that was $2.99. There was a tribal, community network of people joining together for one cause.

Hong: For the tsunami, we raised $50K in three days with special roses where the money went to charity.

Shen: There's too much inventory in Facebook.

Vars: These gifts have to have a well-defined meaning, they have to be more than just a gift.

Hong: The ultimate model for us was where we set the price on a rose, and we tell the woman what you spent on the flower. The margins on virtual goods are so good, that you can give it away.

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Virtual Goods Summit: Making Virtual Economies Work: What Does it Take to Get it Right?

Whether it's the virtual or physical world, successful economies don't happen by accident. What does it take to build and foster a thriving virtual economy? What lessons can we learn from folks who are on the forefront of tackling these issues? We'll explore what it takes to get a virtual economy right by tapping into the collective expertise of our audience and panelists.

» Joshua Hong, K2 Networks
» Brock Pierce, Affinity Media (IGE)
» Raphael Koster, Areae
» John Bates, Entropia Universe
» Mark Wallace, 3pointD (moderator)

Bates: A decorative item is very funcational. Virtual worlds are interesting because they are collaborative, you have social status. It's an interesting distinction, because it's possible for goods to be both all artistic and functional.

Koster: People come to your virtual world wanting stuff. The question is what do they want, how do I make the goods attractive, are they available other places - it comes down to practical questions, like re-sale? Are the items consumable, giftable, tradable, sale-able? How much can one carry, etc. People want stuff, but it's about getting them what they want.

Pierce: The Korean government is taking some of the first steps in regulating the market of virtual goods and virtual goods, where the exchanging of game awards to real dollars illegal.

Koster: We are facing similar laws in the US because of offshore gambling. Western governments are going to have to deal with digital asset issues, where there are precedents in other industries. There are data privacy laws, who owns IP - there are a lot of issues.

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Wallace: There is a case where the Linden Labs TOS - the document to click through to get to the virtual economies, and which have protected them thus far from lawsuits - but is this going to end because Linden Lab confiscated the man's real estate, which does have value?

Pierce: Fraud is rampant on places like eBay. It is easy to find stolen credit cards / Paypal accounts, and login to a game system, and begin to pay for goods and re-sell.

Hong: If you look at advanced markets, like South Korea, the publishers do not want to get into the virtual worlds business. It's tainted to them. So, Korea, there's a Chinese Wall between publishers and secondary markets. In the US, there are innovative companies that are becoming more involved with publishers. There is a secondary market that people will work with, and make money in.

Koster: Webkinz is one of the hottest toys right now, and the model is being pursued aggressively by other companies. You have a log-in number on the bottom of the foot, and more and more companies are getting involved in this way. It's a way to get more people into the universe and networks. In two years from now, I see 50+ MMOs on the market. I see five or six more.

Bates: We are seeing the real world banks get involved in these worlds, where the economies are crossing over into the real and virtual worlds.

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Virtual Goods Summit: Why Virtual Goods Matter: What's Driving User Adoption?

Virtual goods offerings continue to garner more momentum in the marketplace. Why do consumers want to spend their money on items that only exist in a virtual context? Is it even appropriate to make a distinction between what motivates people to invest in virtual goods as opposed to real-world goods? Join us for a conversation about what motivates people to invest their own time and money in digital goods and why virtual goods matter.

» Craig Sherman, Gaia Online
» Daniel James, 3 Rings
» Amy Jo Kim, Shufflebrain
» Byron Reeves, Stanford University
» Nabeel Hyatt, Conduit Labs (moderator)

Reeves: What are the different ways that people can use virtual goods, that might not be traditional? If you are running an internal prediction market, rewarding friends - there are a lot of possibilities for using virtual goods where money is not necessary.

Kim: In gaming worlds, functional goods have more power. In a gaming environment, power-up and others that make sense for gaming have more value. In social networks, it's about social meaning that are attached to purely decorative items. Even though there is no "power" with those goods, there is a value of those goods within the social networks themselves. It's not coincidence that we are seeing virtual worlds grab hold of teenage users. It's a time of life issue, where teens are trying to identify themselves. These goods can be viewed as part of that social network and growing up, part of the identification.

Sherman: We have had rare goods be sold on eBay - we had a rare halo sell on eBay for $6000, which can be used on Gaia Online. We do create products and goods that are for a limited time only - available for one month only - and smart users learn to invest in those goods and flip for more gold. It's not an obvious or easy way to do it, but we do have that form of economy. The decorative items are very powerful in the virtual world.

James: We do both fucntional and decorative goods - the functional revenue comes from badges, which give you priviledges. The social puzzle does come into the functional goods - you have to have other sailors, even if you have the biggest boat that you bought. You can buy that boat, but you have to have others work with you. There is that balance of finding the right price. Companies in Korea have found that secret to tweaking prices for the right amount to get the best sales.

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Kim: The social maps can be affected by functional goods - what do you want to promote in your world? Then you introduce functional goods, where people work together. There is that balance that does not wreck the social balance. What game are people playing - whether real or social. If it is going to affect where people come in and want to spend time on your site, you got the right mix.

Kim: Some groups have it where the content is created by staff, while other worlds have content created by its users. We have seen some places where the audience cared more about the goods created by other users, and ignored the "brand" virtual goods. But, there were also community members that wanted the brand name goods (that were never released in the real world).

Sherman: There are quality goods versus regular user created content. It's about high-quality, and while there is the long tail, it is about quality.

(I had to leave for a phone call, so I apologize for missing the last 20 minutes.)

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Virtual Goods Summit: Virtual Goods Success Stories

The growing market for virtual goods has already produced a number of success stories. Are you curious about what it takes to build a successful community or entertainment site with a strong virtual goods component? Our panel of industry experts will share their stories about how they grew their businesses and how virtual goods played a role in driving their success.

» Paul Thind, Habbo
» David Wallerstein, Tencent
» Kyra Reppen, MTV Networks
» Min Kim, Nexon
» Justin Hall, Passively Multiplayer (moderator)

Wallerstein: Number one portal in China, by page views. The core strength of the company - started in instant messaging - and grew out of it; radiated out from instant messaging. At the core, it's about connected community with 254M active users. Number one casual gaming portal in China, with QQ.com and QZone.

What's big in China is premium instant messaging - a better IM experience with more storage, security. It's about $1/month.

All games are multi-user, no single users. And, yes, the virtual goods parts are making money, as is the company.

Reppen (Neopets): Neopets bought by MTV two years ago, and the synergy is great. It's about building loyal communities, and part of the kids and family group (like Nick.com, Nick Jr, etc.) MTV follows its audience, and it is clearly going digital. And, gaming is more than 600M a month across those sites.

More than 40M users registered, with 30K daily activated new accounts, and 11M average monthly unique visitors.

And, the working in the community reflects real life - realities in virtual world that the tweens can relate to (control, money, friends, etc.)

Advertising and sponsorships, premium subscriptions, licensing (Harper Collins for books, games), and virtual items - all revenue models.

Neopets is launching the NC Mall to sell virtual goods - in fact, Tweens have $60B of disposable income - and they are allowing kids to try before they buy (like at the mall itself).

Kim: Nexon is bigger and making more money than Facebook - $230M in sales - they have a large number of games and networks that cross male/female demographics and ages.

South Korea's largest privately-owned online game company, a casual games leader specializing in the development, publishing and servicing of online games.

The games are free - no monthly fees, nothing - but the virtual goods are sold. That's where the company makes money. Decorate backgrounds, character - there are different layers to customize the experience. Plus, you make money in the games themselves - where is it meaningful to buy something in the game.

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Kartrider just launched in the US, and they are looking at the data. Going to heavily look at ads, but they are selling the items in-game, and those continue to do well in the US as well.

In Korea, Kartrider hooked up with Coke, giving away points with Coke cans to redeem on Kartrider. Worked with Mini Cooper to make the Karts branded.

Maple Story has been brought to the US - 3.5M and $1.6M goods sold (600,000 items sold).

Thind: Real-time social networking in the hotel rooms at Habbo, and building on top of the core environment to stimulate the users.

Habbo brings in celebrity guests to hang out with the teens online, be a part of the community, without getting mobbed in real-life. It's about easy-access for every day consumers.

90 percent of revenue generated through users - they sell more furniture than IKEA.

Unique visitors worldwide: 7.5M
Average age is 15 years old.

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A lot of what was seen during the presentations was customization, and in game environments is it about gifting or customization? It's a combination of both.

The interesting part of all the businesses that presented was globalization - they are all worldwide companies. 50 percent of the users tend to be English speaking, but the paying users are not there yet in some markets, but the focus is on those markets to work with local marketing partners to express what the environment is about.

The users are different that the power of parity is different in China. There's a willingness to purchase virtual goods, and the users have accepted that not everything is free. Branded items, cross-marketed items - there is an economics question, but you can see what can be done in the US and other countries, and how the marketing opportunity does extend globally.

It's just becoming more and more prevelant, with people buying virtual goods is going hand-in-hand with more and more adoption of the Internet.

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Wednesday, June 20, 2007

Supernova 2007: Making the Most of Video

Varying the format, just notes from the discussion on Video with Robert Scoble of Podtech and hosted by Howard Greenstein. It was supposed to be on the future of video, as well as revenue sources and programming and turned into a discussion on copyrights and the Internet and distribution model.

Ranging from the traditional media and how copyrights are being fought, who does content belong to nowadays? Scoble noted that he thinks Viacom will win versus Google/YouTube, and it's a bad thing because it leads to more walled gardens.

But, there are people that are creating their own channels and creating their own distribution channels. Does this change the game, and does it make it where people are more in control? But the reality is that those individuals do not have the ability to fill movie theaters, or the numbers needed for Nielsens.

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Is the distribution channel changing? You all distribute to one person, and that person distributes to others (so, it lowers cost of distribution). We can look at what happened with Sicko, and it being distributed on different torrents. The distribution model there forced the Weinsteins to change the release date, only release in one movie theater. For an indie film, you cannot expect to be in business if the distribution model includes your movie being shared for free.

P2P networks may not have value in a commercial sense (at least for Scoble) as you are not able to measure the audience. Being ad and sponsor supported, you need the traditional numbers. My sponsor is not that into numbers, so I could possibly do a P2P distribution system.

New media created properties are starting to have the same value as traditional media, such as vidcasting, but it's about audiences. If you are reaching the right audience, you are going to be courted by big companies. There is an audience, and people will buy, if there is a reason.

Not a single company has contacted me about my new fatherhood - Scoble twittered, blogged and Jaiku'ed about it - so the companies are not getting how to reach new people.

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Supernova 2007: The Changing Forces in Advertising

A panel hosted by Deb Schultz with Leszek Izdebski of Cisco, Ted Shelton of Technorati, Dick Costolo of Feedburner, Ryan Freitas of Adaptive Path, Evan Williams of Twitter on "where's the money? If business is invested in more traditional advertising, what will happen as individuals continue to exercise their increasing power?"

Shelton: Creating a new group, the Technorati Services Group, taking the technology and bringing to agencies and brands and learn how to do advertising right, or in a new direction. Talk to people that measure the world that they live in in ways that don't make sense anymore in this new world. Continuous partial attention - people are doing multiple things at once, simultaneously, and as a marketer you have to think of the relationship in an entirely new way.

Freitas: We're seeing a lot of fear in the marketplace on what is going to happen next. People are dabbling with new ways of generating ad revenue, but there is still the old school revenue flow - keep it flowing while the market changes. There are some groups that are trying to keep it free-flow.

Williams: People are looking at Twitter as an advertising vehicle, but we only see it working for marketing as an opt-in opportunity. It can be used as a communication vehicle, which is opted in. There is no way the users will put up with it, as it is unique and real-time and mobile, and there are companies that are using it for deals (such as Woot and Dell). How do companies like Twitter get more users?

Costolo: There are a lot of attempts in conversations in the space, and a lot of people are failing. It's the economy participation now, with a lot of potential up-results.

Izdebski: It's about creating new things, and we work with media and advertising companies on creating new things and new ideas for the space.

Shelton: Public relations and advertising are interested in trying to understand social media, and the relationship of conversations with what used to be called "customers." PR would approach in a more informed way, you would think, because PR is about taking messages that are being communicated to its audience, and making it interesting, engaging. Advertising is about tricking you into something sticking in your brain. PR has grown up to being mediators between companies and relayers of information (journalists) - and there are structural problems with this - it's journalist relations, not public relations. This is about engaging in conversations that they care about, but being

Freitas: Exclusivity is what people are after. Instead of being where the conversation is, or going to the conversation, people are trying to get people to come to their conversation. The same audiences are going to come from one property to another, because they are allowing more people to do multi-platform watching (online or via television - for the broadcasting example). Take the understanding of what is happening, and apply it across the board.

Izdebski: Companies are looking at the new ways to do things, but the focus is slowing down in the budget standpoint.

Costolo: What you are disinterested in is important to marketers. There is the chance for significant ROI because there is information on the interest and disinterest.

Shelton: Attention has value, despite the cost. To get the attention of the person for a broad-based consumer brand, depending on the brand and product and audience, there is a set dollar amount. There is an annuity in attention that has not been there before - unless it's a great ad that we are still talking about (eg, 1984 Apple Ad that we are still talking about today). If you can create something that gets people to stay, the value is higher because it costs less to get the next person in because the first person stays, and you don't have to bring them back in. Can I get my audience to come to me, to my walled garden, or do I have to go where the conversation is already? You go to the individual blogs, rather than have them come to you.

Izdebski: we are still using traditional terminology, looking at the separate budgets. The world is integrating more and more - and budgets are moving. The marketing budgets look at the separate buckets, and not moving to behavorial interactions (of the individual) but rather just an entity.

Costolo: Two issues that are a challenge - the first is user generated content. Within an agency, there are a lot of folks that it strikes them as common sense that MySpace blogs and Nick Carr are the same thing. There is no distinction between the two, but the desire to protect them from user generated content. The second is that the traditional does not work - there is no connection between ads and content, such as Dell ads on Jeff Jarvis blog.

Williams: The relationships that matter are interpersonal, not to brands. The most influential things are the ones I know, that I am interested in are how user generated content is important. If you look at things like MySpace or James Hong's Hotlist - here are the brands and products that I like - it seems that it can be influential. In the future, companies might pay to be on the Hotlist (a future as PayPerPost).

Freitas: Small, dumb eager dogs that bring you new things. Either brands bring or do too much, or they are so scared - operating from fear - so you have these dumb distribution platforms where people want more control. And, the same time, opportunities to engage are being missed.

Costolo: There are companies that would love to buy personalized, geo-location media. It takes time, and it is easier to do banner ads. RSS should eliminate those problems, where you can now buy feeds and allow ads to subscribe to that content, that populates the standard ad information.

Shelton: Advertisers are way behind in attention - the spend to attention in social media, is twice as much on the Internet than is done today. Advertisers allocate a certain amount to the Internet, but when it comes to pulling the trigger, the planner and client decide to spend on the old platforms that they know and can measure.

Costolo: The agencies that we talk to, they do get it. We are seeing two things: the way it was, the way it is moving to. A lot of the agencies we talk to want their ads to be content, rather than static images. It's less brand, more content. Instead of just getting the brand out in front of people, we present marketing content to be the advertising content. We got this content that we want to get in front of the right people.

Izdebski: Ad agencies don't not get it, it's hard for them to be able to do it. It's so fragmented, it is hard to manage the costs because of the new complexities. It is trying to figure out the new complexities.

Shelton: We are all working on this on the fly, we are all working in a fluid environment. It's true that we do not have the metrics to prove what we think works will work. It's a starting dialogue that we all need to take place in, to move forward.

Williams: For transparency with HotList, I do not know how you are going to police it. I have not talked to James about the idea, but it is a natural extension and interesting possibility. But the blogosphere tends to sniff out fake things.

Freitas: Things are exposed when they are fake in the blogosphere, but when you get to MySpace, do people really care about transparency?

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Supernova 2007: Introducing the Relationship Economy

A panel discussion with two of the four Cluetrain Manifesto - Doc Searls and David Weinberger - hosted by Jerry Michalski and about the launch of the conversational market, how conversations are markets.

Weinberger: What we were seeing was that the Internet was being looked at as business-only, and looking at the Internet as only-sales driving force instead of conversation driven.

Searls: A few years ago, I noticed that marketing people were never elevated to the top level, but it was always sales people. The marketing people were politically weak because sales people had the power. It's because marketing people are seen as weak, and while both sales and marketing is "bullshit," sales has that people relationship. Marketing has an uphill battle to carry the conversations, where it has traditionally been carried by sales people.

Weinberger: I always see senior people think that they can do the work of marketing, because they do not understand the real value of marketing. There is an uptake of "markets are conversations" and done with enthusiasm, but my blood curdles because marketers have trouble entering the conversation. It's hard for them to be the bloggers, because it is hard for CEOs and marketers to be bloggers, because they have been trained to talk one way, have an interest in presenting the conversation in one way. Marketers are trying to figure out a way into the conversation, and the first instinct is to talk - they want to bring the conversation in, but it's going on already on the outside.

Searls: People take it too literally that the conversations are markets. It is not just about marketing, but about everybody. Having a loud voice, international reach, controlling the medium - it's going away, and it happened with the media. Markets are being markets, and no longer these areas controlled by large companies. It's companies with people in the middle of it.

Weinberger: There are attempts to subvert messaging - such as PayPerPost - and there are people being fired for blogging (the control by corporations of blogging), and the silliness of "user generated content" where companies embrace this, and not really understanding. We're about UGC and we're going to invite people to submit their ads ... which looks like the same crap from advertising. Or the fakeness of politicians using YouTube to announce, where it is about control.

Searls: What I know is what I am. The way we teach each other and learn is fundamental to doing business. If we reduce everything to fixed commodities - generated content - is bullshit.

Searls: If you look at what we want, versus what companies are willing to hear when we are trapped in their sealed silos (of CRM). Is there independence ways to go beyond the CRM? There should be a better way, and what we are trying to do is find a better way by discussing this out loud.

Searls: Build markets around what customers actually want, what customers actually need. Why can't shopping cart go from one site to the other - it's 2007, and we still cannot do that. It cannot be from another site, but we have to better equip the customer.

Weinberger: CRM is the tool of oppression. It's the opposite of the value, where VRM (value relationship management) is what is important - it's about both sides of the fence.

Weinberger: I really liked Amazon. No one at Amazon knows who I am. It's easy to use, it's like using an ATM, and I just press a couple of buttons and I get books. I feel an emotional attachment to Amazon, but what sort of relationship does Amazon have with me? What relationship is there with me?

Searls: You just relate to it. You trust them, they have solved problems when they have come up, and get the books to me.

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Tuesday, June 05, 2007

Communicating in Virtual Worlds

Christian Renaud, who heads up the Second Life initiative for Cisco (full disclosure, I worked with the group and events), lead the panel on communicating in virtual worlds. On the panel were Dave Kamalsky of IBM, Matt Smalls of Millions of Us, Paul Steinberg of Intel and Achim Muellers of BMW.

Smalls: The magic of physical proximity is slowly becoming less and less relevant with virtual worlds, where you CAN meet face-to-face and have interaction. With the imminent launch of voice in Second Life, it is going to be more

Renaud: First time I was in Second Life, a person came up to me and introduced himself as the head of our user group. I offered him access to the island, and it has developed into a group where they are sitting together and meeting and talking in a Cisco clubhouse on our island.

Kamalsky: With Second Life, you can build a greater sense of intimacy than just a Web page, and it is less expensive than putting together an event. There are social norms, though, that are not kept up in Second Life, but you hope that they are going to become a bigger part of the environment.

Smalls: The upside is that there is more intimacy, and it can be quite safer than an actual real world event. You can have one-on-one interaction, or group interaction, where an executive would not get that opportunity otherwise.



Muellers: The interactive part of Second Life is what we have found very popular and valuable. We can interact, and become more involved, with people in Second Life in different ways than we have before.

Kamalsky: The Web of 1994 is analogous to Second Life - it was the Wild West, and that's replicated in virtual worlds right now. We love SL right now, and we are exploring worlds that can be used for the enterprise, behind a firewall. We wouldn't mind standardizing virtual worlds via PR.

Smalls: For PR, it's a great opportunity where you can communicate with groups and people. It's direct interaction with avatars, in a way to do community relations that are dispersed across the world.

Steinberg: We have a great relationship with Linden, and enjoy working with them. What Second Life has been great about is building new networks and communities within Intel itself. It is creating more networks, and more community, within the company. People are meeting colleagues - organizational flattening - where they are finding out what others are working on, and becoming part of it.


Muellers: Right, we do have some control of the experience, but it depends on how we integrate consumers in the future for BMW. A consumer today, but maybe a prosumer in the future. Virtual worlds can potentially work in that sense - potential customers on board in the development process, something that does need to be looked at in the future. Virtual worlds are like a 3D wiki, where we get to test out ideas and share viewpoints.

Steinberg: The ability to model a mutable way in a virtual environment is exciting. It is easy to get carried away with it, and it's hard to say where it is going to go.

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The Changing Media Landscape

A panel hosted by the first blogger at Cisco, John Earnhardt who now is the lead blogger for News@Cisco with Eric Savitz of Barrons, Dan Gillmor, Dean Takahashi of the Mercury News, and Tom Foremski of SiliconValleyWatcher.

Dan Gillmor: One is not replacing the other - social media is not replacing traditional media, but it is going to be messy for a while for large media. It gives me heartache to watch what is happening at the Chronicle and Mercury News right now. These are friends who are doing good work.



Tom Foremski: An epiphany about social media, where it does barely support a man with a bedroom, but there is going to be a major reckoning. It is going to be very painful for the mainstream media. New media is going to be the future of traditional media, because it is using the same tools. It is not going to save journalism but it's about the economics about social media.

Eric Savitz: It is going to be very painful. Professionally created media versus consumer generated media. At the end of the day, it's about finding a way to make it work. A lot of media is under pressure, and you need to find a way to monetize the audience. There will still be an audience for print media.

Dean Takahashi: There is something to be said about the safe position. Not taking the huge risk, but able to explore. What is the meaning of the brand - does the Mercury News extend to the Web? Does my name mean anything out on the Web?

How do you survive in the blogosphere without editors? Is it relished because you are your own editor?

Foremski: Consistently great media has an editor that keeps a consistent voice. It helps to keep the voice.

Savitz: We have spent time in the journalism business, learned how to write a story. We all know how to edit, but an editor does keep us above the board and protection.

The threshold is different for a blog - are you pitched for the blog?

Takahashi: The blog is somewhat different - and I am trying to make it different. I write it like I'm taking you inside a place. If you can get me into a place, and talk to some people, that the readers would never get to see, those are different pitches than what I would do for a newspaper. Otherwise not that big a difference.

Gillmor: All your corporate sites are media. Monetizing audiences is traditional thinking, and what is now is that you need to assemble a conversation and community, and monetize directly or indirectly. It will be useful in a non-business model way. What is being done is that corporations are creating media, and would love it if companies approached the sites like citizen media, with the tenets of traditional media.



Foremski: The local market is the biggest market right now, but how do you get local? It's not software or algorithms - you have to be out there in the community. The future is local.

Gillmor: Placeblogger.com - helping incubate it, and got a foundation grant to help grow it. Blogs about places and aggregating them into something coherent. It can be quite remarkable, if it works - include geocaching and other local code-based items for advertisers. Google ads on local blogs tend to be fundamentally useless. But, if they can be ads connected to local places.

Do reporters need new skills - in journalism school and at newspapers. Here we have vidcasting and podcasting, what are the new skills?

Foremski: As journalists, we can barely spell and type. You have to learn new skills all the time, and it is being some coding: Java-script, HTML, creating new formats. It's the media engineer age.

Gillmor: Our goal at Berkeley is to create a product for journalism, entrepreneurial journalism, to come up with an idea of a product and launch it.



Savitz: That's like asking us to be typesetters - there is not a huge need for journalists to learn the hardcore tech. There are different set of skills, where we are forced to rethink our place in journalism. We are being forced to look at the world of journalism with a business view, just some of the people that are pushing into the new world.

Foremski: [One person brought up that the new media is the Prius media, the hyprid of media] - and people are being forced to do one or two jobs at once - blogging, podcasting and traditional journalism.

From the audience: what about shield laws and code-of-conducts for bloggers?

Gillmor: It is important to protect journalism - note that journalism, not necessarily journalists - and it is hard to say whether or not blogging needs a code of conduct. If the traditional media industry does not adhere to a code, why the hell should bloggers? People should be honourable, but what are the permutations of that?

Some code that someone enforces it - the marketplace of ideas sorts these things out pretty well.

Foremski: There is not a code that can be monitored. The market takes care of these things, and if you act in such a way that is not honorable the market, the audience, will call you on it and stop reading your blog.

Follow-up: What about the WSJ blogola article?

Gillmor: Transparency - the future of journalism is about transparency.

Savitz: If you don't have to give the camera back, it's the sunshine rule. You can then make the decision if you trust or do not trust the blogger. I even write about the News Corp bid on Dow Jones, and disclose my conflict. You need to give your readers as much information as possible, and let them make the decision (if it is going to color their views of the blog)

Earnhardt: Look at Kara Swisher's disclosure - it's personal, it's best practice.

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The Social Media Explosion via Dan Scheinman

At the BPCC event, hosted by Cisco, and the keynote is Dan Scheinman. Dan started that the ubiquity of media is coming, that it has changed from the Web 1.0 of us going to sites, to the Web 2.0 where the Web goes out to the right communities.

I'm no Eric Savitz - he wrote up his views of the talk here - but here I go.

The Web is no longer just We, but We and Me - it's a personalized experience. What you want, and what the group wants: it's a sea change, with how the media is getting consumed, and it is a big event for our lifetime.

Part of it is the explosion of broadband - all media is becoming digitized, and it is changing the landscape. It is about empowering users, and no more silos.

So, how does content find you? How does the global IP network find you?

It is about the rise of community. Currently, we all look at the same thing - it's the We and Me. We are not exploiting the power of what exists, but making people come to what is there. If you and I go to the same site - such as ESPN - we both see the same thing. Going to MySpace, though, is a different view for each person.


At the end of the day, every company is becoming a media company. The News@Cisco experience is doing that, and the disruption impacts companies directly.

We are seeing that the community is at the center of everything - look at Facebook. It is a cultural shift - it's about being in the mass phenomenon. It's the We/Me Generation.

For Cisco and the Media Solutions Group, we started it five months ago. We made a bet on community - communities for third parties, the publishers demand to have these things on their Website. And, what is happening is that media doesn't get their audiences. There are the twin sins: demography and Nielsen. Hollywood has never had a direct connection to the audience (the movie makers go through the movie theaters and the large networks go through their own or other's owned channels). Cisco is bringing tools to publishers to help them build community - and it goes to where content finds you. [To me, this is just like the Quincy Smith quote.]

Traditional marketing is very challenged, because the tools - print, tv, radio - are all challenged. The early adopters are not participating in traditional media as much as they used to. PR is the new vehicle for companies to speak to the audience - we are media / content providers / developers, and we can speak directly to consumers.

Increasingly, corporate PR and media production are going to integrate. But there is the budget question - right now, $72B is spent in TV advertising. And, we know that there is a high percentage of wasted dollars in advertising and marketing. There is the desire to integrate - take risk and do more things, but there is going to be little "adventure" budget. It's not going to be big budgets, but a big enough budget to do things that are going to get it right.

The alternative is to do nothing.

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