Social Networks and how to Make Money with them

Picture from Soffia on, work titled COTU 2007
Picture from Soffia on, work titled COTU 2007

In April, I read about 40 papers on technology issues for my New Technology course. I plan to post some of these papers here. The first one is by Christine Leypold and is about social networks. In this paper she tries to answer the biggest question about this emerging past time: what is the business model?

Abstract from the paper: This paper deals with the business aspect of social networks. Social networks are full of structured information and this paper tries to figure out how this information can be used to make money. The focus of this paper is on business ideas for individuals, companies and social networks themselves. Business ideas for individuals represent also one-man companies, where the business is dependent on one individual, as well as employees who want to enhance their network. Furthermore the paper figures out what kind of new marketing strategies are available for companies through social networks. The paper also points out the questions whether it is possible for social networks themselves to make profit or not. In addition to this, the paper focuses on future trends of social networks.

Social Networks and how to Make Money with them

The Technology Death List

Dead as a Dodo
Dead as a Dodo

One thing I do while preparing for my annual Technology Future Trends in my New Technology course,  is to look at technology that is dying. Of course technology never actually dies. As Hedy Lamarr said, “Technology is forever”, but at some point one technology starts to be replaced by another technology and drops out of the mainstream. When exploring technological trends, observing such transformations is one of the ways to see changes and potential disruptions to businesses and industries.

So here is my current Technology Death List:

CD-ROM: This can apply to DVDs as well. It’s important to understand that the CD is a content distribution technology. It is not the content. People sometime confuse this technology with music which is far from dying. The trend here is that CDs and DVDs are being replaced by on-line distribution. The problem for the music industry is that the payment is associated with the content distribution method. This is causing disruption in the industry. So if anybody wondered why there are no lines at the stores for buying Blu-Ray players, we must realize that using plastic discs to distribute content is competing with on-line Internet content distribution.

Hard-disk: This is not obvious but we might see Solid State Memory replace mechanical hard disks. SSMs are approaching the same price range and if they are much faster, smaller and potentially cheaper we will see them become de facto in devices. This has an interesting implication in architecture and design of software programs as many design patterns are designed around latencies in disk access. Another point is that with faster SSM fewer disks are  needed in a systems with high throughput requirements.

Adapters: Image you could by a phone with batteries that can last for months or years. It might be sometime for this but in the meanwhile, charging wirelessly will likely take of leaving the stupid adapter useless.

Newspapers: Delivering news on dead trees seems to have problems. There are many news on troubled newspapers. Subscription is going down as people are turning to the Internet for news and articles. At the same time, devices like Kindle and the Sony reader seem to be picking up.

Closed model Cell Phones: Cell phones are going though a disruptive phase. The trend is that cell phone are becoming more like a small PC. This is very much in line with the Moore’s law. According to antoher law, Metcalfe’s law, these devices will connect to the same network, the Internet. Whatever the technology used to carry voice or data, it will be IP based. All these changes will cause disruption for the phone companies and it migth be difficult for them to keep metering charges for voice and messaging.

The Social Web of Crowdsourcing

The Galaxy Zoo is a web site that contains millions of images of galaxies. These images where taken with a robotic telescope and they show pictures of galaxies in different form. Some are spiral, some are disk shape and some are rounded and some boxy. The Galaxy Zoo team has a problem: they need to classify this huge amount of pictures. Surly, it will take them years. But the team has found another way. They are asking normal web users to help out and identify the shapes in the pictures. This is an example of crowdsourcing.

When signing up, the participants look at the pictures and classify them. They identify the images according to the guidelines provide by the site. The results? According to the site, within 24 hours of launch, the site was receiving 70,000 classifications an hour, and more than 50 million classifications were received by the project during its first year, from almost 150,000 people.

Without the Internet this would be impossible. As the cost of coordination has dropped with the internet, this approach becomes possible.

Few thoughts are quickly raised about crowdsourcing. First, how can the site owners allow anybody – amateurs if you will, to classify galaxies, a task that can only be performed by the trained and professional eye of an astronomer. As it turns out, shapes of galaxies are not that hard to recognize. On August 2, 2007, Galaxy Zoo issued its first newsletter which explained that 80,000 volunteers had already classified more than 10 million images of galaxies (see Wikipedia entry on Galaxy Zoo). And it turns out that the amateurs are pretty good at it.

The second thought raised is usually about trust. What if someone with evil intent deliberately enters wrong classification and thus vandalizes the project. This is of course always a threat that is enough to kill any new effort. But as it turns out, this is not a huge problem. In fact, people are really just helping, volunteering their time for a good cause. While vandalism may be a nuisance to site like Wikipedia, the people of Galaxy Zoo can avoid the problem and decide to use only the images that have been processed by a specific number of people that all agree on the classification.

The third thought has the most surprising results. Why would people spend their time on identifying images of galaxies? Do people not have anything better to do, and this sounds boring anyways – and you don’t even get paid! To much surprise, people are actually willing to devote their time and effort to do this. They don’t have to. The are many strange forces that work here. Simply put: they do it for themselves, in their own self-interests. People usually enjoy voluntary work, it makes them feel good. And they can stop anytime. If they got paid it would be work and a boring one too.

With the Internet, sites like Galaxy Zoo can tap into a huge resource: people connected to the Internet, a pool of billion people. The numbers speak: 150.000 people devoted their time to classify 50 million images. The social web is changing the game. Changing how we  use the web and what is possible.

Galaxy Zoo is only one example of web sites that are bringing the work to people using the web. Wikipedia is the classic example. Hobby focused sites Flickr and YouTube are other examples. Google is also strong in the crowd sourcing field. Good example is the Google Map maker. With this site, users can add features to a map such as roads, labels, shops and even draw regions. Who would know a place better than the people who live there! I recently added couple of statues to a park near my house, Klambratún. Only the next day I got a comment from another user questioning my addition. So I sent some pictures to prove my point.

Even companies can use crowdsourcing as a business model. Classic example is InnoCentive that brings scientists and anybody interested together with companies to solve problems and come up with innovative ideas.

The traditional approach for research has been to form an internal group of people that will work on a give problem. And in many cases this have proved to be very successful. However there are some limitations to this approach. Companies can only enlist few people. They might be very intelligent but they will only have limited views and knowledge. If they could enlist everybody – or at least anybody, they would tap into the resources and knowledge of people that would be impossible to hire. InnoCentive claims to have enlisted more than 160,000 brigthest minds to work on solutions.

The social web is still in its early stages. We are only just beginning to understand the potential of human network connection and how people can interact.