NOTE: The venue is now at Stanford University, in conjunction with the United Nations Association Film Festival, and will be followed by a panel discussion on the “Future of Online Privacy.” Cullen will be there as well.
Worryingly, advertising is not well. Though companies supported by advertising still dominate the landscape and capture the popular imagination, cracks are beginning to appear in the very financial foundations of the web. Despite the best efforts of an industry, advertising is becoming less and less effective online. The once reliable fuel that powered a generation of innovations on the web is slowly, but perceptibly beginning to falter.
And the theory:
The theory of Peak Advertising relies on a simple proposition: online advertising will continuously decline in effectiveness going into the future, to the extent that it makes existing models unsustainable.This will, in turn, eventually force a broad transition in the financial models supporting the web. There are a few reasons to believe that this will be the case.
First, the changing demographics of web users do not favor advertising…
Second, ad blocking is increasingly ubiquitous…
Third, click fraud remains a severe and growing problem…
Finally, ever escalating advertising density may itself erode effectiveness.
The Theory of Peak Advertising is a working paper, so I’ll volunteer some additional sources.
Second is The Intention Economy: When Customers Take Charge(Harvard Business Review Press, 2012), which contains a chapter titled “The Advertising Bubble,” to which Don contributed some valuable research, digging deep into Harvard’s world-record-size collection of scholarly works. Here’s an excerpt:
The etymologist Douglas Harper calls mania “mental derangement characterized by excitement and delusion,” adding that it has been used in the “sense of ‘fad, craze’” since the 1680s and since the 1500s “as the second element in compounds expressing particular types of madness (cf. nymphomania, 1775; kleptomania, 1830; megalomania, 1890).”
We have that in advertising, so in a blog post I volunteered advertimania to Harper’s lexicon. Let’s unpack it here:
An overly generous infusion of liquidity, in the form of venture capital. This capital is invested both in companies that expect to make money through advertising, and in advertising for those companies and others. This was rampant in the dot-com boom, and is again today.
Faith in endless growth for advertising, and in its boundless capacity to fund free services to users.
Herd mentality—around advertising itself, and in faith that “social” media, supported by advertising as a business model, will persist and grow indefinitely. (And the herd is large too.)
Huge increase in trading. This is happening with user data bought and sold in back-end markets, employing the same kind of “quants” who worked on Wall Street during the housing bubble.
Low quality of personal information, despite the claims of companies specializing in personalization.
And that’s just on advertising’s side of the Chinese wall. Over here on our side, we can add to that list (especially the last item) six delusions, inclusive of the ones listed above by Professor Clemmons:
We are always ready to buy something. We’re not. In fact, most of the time we’re not about to buy anything. Even if we don’t mind being exposed to advertising when we’re not buying, nearly all of us do mind being watched constantly—especially by parties whose only interest is in selling us stuff.
People will welcome totally personalized advertising. Even if people allowed themselves to be tracked constantly through the world, and to be understood in great detail (a privilege that advertisers have done nothing to earn) the result would still be guesswork, which is the very nature of advertising. For customers, rough impersonal guesswork is tolerable, because they’re used to it. Totally personalized guesswork is not. At least not by advertising. To become totally personal, advertising needs to cross an existential bridge, to become a different corporate function. It must become sales, without the human sound or the human touch.
The market for tracking-based advertising is large enough to justify the huge investments being made in it. Christopher Meyer, founder of MonitorTalent and author of many books on market optimism (including Blur: The Speed of Change in the Connected Economy and Future Wealth, co-authored with Stanley M. Davis) says, “It’s a classic bubble. Investments in tracking-based advertising far exceed even the most optimistic projected returns. The whole business just won’t be that big. In fact the whole advertising category is starting to plateau.”
Advertising is something people actually like, or can be made to like. It’s not. With a few all-too-rare exceptions (such as Superbowl ads, which are typical mostly of themselves), advertising is something people tolerate at best and loathe at worst. Improving a pain in the ass does not make it a kiss. Nor does putting a thumbs-up “like” button next to an ad that gets ignored 99.9 percent of the time—as happens with display ads on Facebook, for example. (It’s also worth noting that Facebook originally put thumbs-down symbols next to ads, but quickly got rid of them. It’s easy to guess why.)
The client-server structure of e-commerce will persist unchanged. It won’t. We’ll explain why in the next chapter, meanwhile, here’s Phil Windley: “There are a billion commercial sites on the Web, each with its own selling systems, its own cookies, its own way of dealing with customers, and its own pile of data about each customer. This whole architecture will collapse as soon as customers have their own systems for dealing with sellers, their own piles of data, and their own contexts for interaction.”
Companies have to advertise. In fact advertising is not an essential function of any company. The difference between an advertiser and an ordinary company is zero. Even if we call advertising an investment, it’s on the expense side of the balance sheet, and an easy item to cut.
Each of those delusions is a brick in the Chinese wall between the industry’s mentality and the larger marketplace outside of it. You could call that wall a blind side, but it’s more than that. It’s a screen on which an industry that smokes its own exhaust has long been projecting its fantasies. It sees those projections rather than the real human beings on the other side. It also fails to see what those human beings might bring to the market’s table, beyond cash, credit cards and coerced “loyalty.”
Tim and Adi are concerned about The Future of the Web (the second half of their title) because so much of what we frequent there is funded by advertising, which is getting to be post-peak:
The central importance of advertising to business online means that Peak Advertising will impact more than just media buyers and vendors. As the value of advertising inventory collapses, it will fundamentally change our experience of the web: everything from the diversity of services that we might choose from to our notions of privacy online will be affected.
One can imagine some breakthrough innovation that eliminates this problem wholesale and maintains the status quo. Someone might develop a behavioral targeting system that perfectly delivers compelling ads to the right customer flawlessly. The current failure to do so even with massive data about user behavior seems to discount this scenario.
In the alternative, someone might innovate an entirely different business that provides margins and revenue flow comparable or better than advertising. It is likely that such a transition would require significant changes in how we experience the web. Go with the models that we know: an Internet where the most massive companies ran on subscriptions, for example, would grow significantly slower, be more subject to user demands, and would likely feature smaller user bases than the ones that we see today. This avoids the obvious issue, too, that not all existing businesses would be able to transition successfully in time, particularly those that have built the most successful businesses on advertising.
We may very well reach and pass the point of Peak Advertising without any significant innovation emerging to maintain and grow the flow of revenue supporting the Internet. What will be left with is a stagnant and ever eroding flow of revenue from the primary sources of advertising, and the inadequate substitution of new forms of advertising in its place. Of the few players that remain, they will produce a web experience that engineers the erosion of user privacy and the blurring of the line between real content and advertising.
The future we end up with is partially a matter of technological innovation, but also a matter of human choice. To those designing platforms and using those platforms, the issue is: what kind of Internet do we want to have?
Ultimately, what Peak Advertising suggests is that the fundamental economics of the web increasingly force this consequential decision on all participants, user and platform alike.
The Intention Economy sees a consequential future in which we still have advertising, but in which more Net-aligned market interactions prevail — and out-perform what we have today with Web services and sites primarily funded by advertising:
Advertising may fund lots of stuff that we take for granted (such as Google’s search), but it flourishes in the absence of more efficient and direct demand-supply interactions. The Internet was built to facilitate exactly those kinds of interactions. This it has done since the mid-‘90s—but only within a billion different silos, each with its own system for interacting with users, and each with its own asymmetrical power relationship between seller and buyer. This system is old, broken and long overdue for a fix.
The Internet, meanwhile, has always been a symmetrical system. Its architecture, defined by its founding protocols (which we’ll visit in the Net Pains chapter) embodies “end-to-end” principles. Every end on the Net has equal status, whether that end is Amazon.com, the White House, your laptop or your phone. This architectural fact is a background against which advertising’s asymmetries, and its delusional assumptions, have always stood in sharp relief. So, then
When the backlash is over, and the advertising bubble deflates, advertising will remain an enormous and useful business. We will still need advertising to do what only it can do. What will emerge, however, is a market for what advertising can’t do. This new market will be defined by what customers actually want, rather than guesses about it.
The Intention Economy also reports on work toward that future, fostered by ProjectVRM and allied work toward liberating customers and increasing their ability to engage, resulting in far more widespread and effective direct market interactions than advertising’s highly indirect Attention Economy can produce.
Remember: the commercial Web is only eighteen years old. It is easy to assume, in these early years, that the first widespread business model is the only one. It’s not. Ecommerce itself is doing fine. Subscriptions are messy and silo’d, but showing signs of widespread normalization. And we’re starting to see signs that companies value service as much as sales, which opens a vast greenfield of new economic opportunities.
Most importantly, we — the customers — are just starting to liberate ourselves. When we finally do throw off the shackles, an abundance of new solutions will also show up: ones that will do far more than just patch cracks in the walls of online advertising’s castle.
Healthy markets depend on powerful customers, not just powerful companies. Both help each other. That didn’t happen much in the Attention Economy, which valued captive customers more than free ones. It will in the Intention Economy, which values free customers more than captive ones.
Look closely at the small print. You can pay $30/mo for 3Gb of data or $50 for 5Gb. The overage charge for both is $10 per Gb. So you’re a sucker if you go with the 5Gb plan, and you use only 3 or 4 Gb. I mean, buy the 3Gb and you’ll also pay 50 if you use 5Gb. Confused? Sure. That’s the idea. AT&T, like Verizon and most other mobile carriers, is a confusopolist. See Dilbert for the definition.
AT&T runs these shell games to confuse the customer. Here’s how your mileage may vary::: If you have an iPhone, go to Settings/General/Usage/Cellular usage. See how much Cellular Network Data you’ve used since the Last Reset. Even if you’re a heavy data user, I’m betting it’s way less than 3Gb/mo, which would mean you’re overpaying. But if you want to save by paying for a lower level, there’s only one: $14.99 for 250Mb, or 1/4 of a Gb. The overage charge at that level is $14.99 per 250 MB. That means you pay 4¢ less than $60 per Gb.
Now, how many of us actually look at what we use? And what is the first cost of a bit in any case? (Operations have costs; bits cost ~$0.)
Back when I consulted BT in the UK, an executive there told me the core competence of phone companies was not telephony or communications, but billing. Or, you might say, bilking. Fortunately for the marketplace, Sprint has ceased being a confusopolist and offers unlimited data. If AT&T is truly serious about being good to customers, it should do the same.
Reasonable customers don’t just want a “better shopping experience.” They want a best possible service experience, especially from companies that bill them every month. They also don’t begrudge any business from making money. In fact there are plenty of studies — as well as ample experience in the world — suggesting that people will gladly pay more for better service and human-to-human engagement. For example: Apple stores.
Here’s hoping that AT&T’s new changes are deeper than the paint job they appear to be so far.
That data has far more use value than sale value. This use value is almost entirely untapped. Thinking about its sale value requires that you think the same way big companies do. This is as big a mistake in 2013 as it was —
in 1980 to think about personal computing in terms of what big enterprises did with mainframes; and
in 1993 to think about personal networking in terms of services provided by phone and cable companies.
In 1982 the IBM PC came along, and MS-DOS. And then the Macintosh in 1984. By 1985 there were tens of thousands of personal apps running on personal computers, doing far more than any company could do with its own computers, no matter how big those computers were. This turned out to be good for everybody, including the big companies with the big computers.
Likewise, in 1995 the Internet came along in a big way (ISPs, email, browsing, dial-up, e-commerce), and within months it was clear than anybody could network together with anybody else in the world at a cost that rounded to zero, and with a degree of freedom that was unimaginable within the systems controlled by phone and cable companies. (Eighteen years later, the phone and cable companies, with help from the copyright maximalists in Hollywood, are still trying to corral the Net’s horse back into the old barn.)
What companies are doing with your personal data today is all happening inside a B2B — Business-to-Business — context. That context is as limited as mainframe thinking in 1980 and telco/cableco thinking in 1993.
The other day in London we were talking with Nic Brisbourne about the massive quantity of opportunity and ready-to-spend money on the demand side of the marketplace — and the ironic absence (outside the still-small VRM world) of interest by developers in equipping demand to engage and drive supply. The market seem stuck inside the same old supply-driving-demand mentality. That’s what you hear coming from the mainframe-think world of Big Data mongering and analytics today.
Mind these words: Big Data talk today is as clueless about what people can do for themselves as mainframe talk was in 1980 and networking talk was in 1993. It’s big business-as-usual, in its big B2B bubble, talking itself into ever-ripening stages of vulnerability to massive disruption by the C’s of the world.
Speaking of which, we also met in Europe with Qiy, MesInfos, Midata, Intently, Mydex, Privowny and other VRM efforts (who will be insulted that I haven’t yet listed them here, but we can correct that). All of them are laying the groundwork required for unlocking the full use value of personal data — and not just its sale value, which is tiny at best anyway. Bravo for them, and for us as the beneficiaries of their good work.
She is, literally, a clean slate. And she is your clean slate. Not Apple’s. Not Google’s. Not some phone company’s.
She can be what you want her to be, do what you want her to do, run whatever apps you want her to run, and use data you alone collect and control.
Being a clean slate makes Omie very different.
On your iPhone and iPad you can run only what Apple lets you run, and you can get only from Apple’s own store. On an Android phone you have to run Google’s pre-loaded apps, which means somebody is already not only telling you what you must do, but is following you as well.
Omie uses Android, but bows to Google only in respect of its intention to create an open Linux-based OS for mobile devices.
So Omie is yours, alone. Fully private, by design, from the start.
At Omie’s heart is your data, in your own personal cloud — not Google’s cloud or Apple’s cloud or Amazon’s cloud or the cloud of any other silo’d service.
Think of your personal cloud as a place for your stuff. Right now most of the data you use in the online marketplace — what should be your stuff — really isn’t. It’s out in clouds that aren’t yours: one for every Web site and service you deal with.
Consider your wallet — the one in your pocket or purse. That’s your wallet. Not Google’s or Paypal’s. Yet right now Google, Paypal and a dozen other companies think the wallet you carry online should be theirs. Wouldn’t it be better to carry all their wallets inside one that’s yours alone? Omie is desgned to make that possible, simply because she is yours alone.
Consider your shopping cart. Today that’s not even imaginable, because eevery shopping cart you’ve ever seen belongs to a company. Amazon, Ebay, Etsy, Walmart and the rest of them all have their own shopping carts for you. Why shouldn’t you have your own shopping cart, where you can see all the stuff you’ve almost-bought from all those online stores? With Omie you can at least imagine that, because Omie is yours. And imagining is the first step toward making.
So: what apps would you like Omie to run? Once we get the first few nailed down, we’ll crowdsource funding for developing both Omie and her first apps, or at least the specs for them.
To make that easy, here are just two requirements:
Each app must be a kind that can only run on a device that is the owner’s alone. It can’t be one that only a corporate platform-owner (such as Google or Apple) can provide.
Each app must rely first and foremost on data in the owner’s personal cloud.
The box we need to think outside of is the one that starts with a company. Here we’re starting with you.
Omie should be an instrument of control — by you. That’s why we’re stepping forward with it. Our job at Customer Commons is to stand on the side of the customer. That means we want apps that work for the customer first, and not just the seller. We need something solid to hold at our end of the demand chain — rather than, once again, to hold a device that serves as the far end of the supply chain’s whip.
We’ll bring up Omie at IIW. If you’re one of the 250 people here, come to the Omie session and let’s talk about where to go with the project. If you’re not here, put your thoughts and requests below.
Let’s say this key ring is yours and you’ve lost it.
If somebody scans the QR code with their smartphone, they will see a message from you. The message can say whatever you want (such as, “Help! I’ve misplaced these, please call or text me at this number”), and you can update it any time, because the information is in your personal cloud.
You can host your personal cloud yourself, or you can have it hosted elsewhere, such as at SquareTag, the brand name on the tag you see here. SquareTag is a service of Kynetx, the company behind the personal cloud concept. (Disclosure: I’m an advisor to Kynetx.) But you can use anybody’s. SquareTag is not a silo, and Kynetx is not out to trap anybody. Quite the opposite, in fact. Kynetx is out to give you tools to connect to your world of people and things.
Phil Windley is the co-founder of Kynetx and father of the personal cloud concept. In Personal clouds as general purpose computers, Phil says personal clouds are “the successor to the personal computer,” adding, “In the personal-cloud-as-personal-computer model, owners of a cloud control it in the same way they control their computer. They decide what apps to install, what services to engage, and how and where the data is stored.”
Most of the clouds we hear about today are the big centralized kind managed by companies such as Apple, Google and Amazon. Some of these industrial clouds are pure utilities, doing storage and compute work. That’s the case with, say, Amazon and Rackspace. Nothing wrong with these, just as there is nothing wrong with electrical systems or storage facilities. Other clouds, however, are out to control you and your life — for both your good and theirs. Apple’s iCloud is one example. You can get it only from Apple, and it is not substitutable (as would be, say, a storage facility). In spite of the fact that Apple makes PCs and other personal devices, the company and its iCloud come from an old-school mainframe assumption: that one central server (or service) should contain and control what is done by many different clients. The technical term for this architecture is client-server. The vernacular term is calf-cow. You’re the calf. Apple is the cow. In the calf-cow system, you are always dependent, never fully independent.
With personal clouds you are independent. Your personal cloud is yours alone, to keep track of any thing, person or event in your life — and to manage your interactions with them. Such as, IF my keys are scanned, THEN display this message.
In an interview five years ago with Phil Windley, Craig Burton called every person an “enterprise of one.” In the past several years Phil and other developers (especially his colleagues at Kynetx) have been working on ways not only to make every person into that “enterprise of one” with connections to keep track of and control every thing of theirs as well. They are doing this through a general purpose platform called a personal cloud. You should have one, and so should the things you care about.
The design of the Internet in the first place is one of a boundless variety of end-points, with no central control of what those ends can do. Each is simply an address. Any end can connect with any other end. We have a similar system in the world called conversation. Anybody can talk with anybody else, or shake hands. They can also engage in business, and form relationships that last for moments or years. With personal clouds, things as well as people are brought into the Internet’s conversational and relational end-to-end system.
Take for example your car. Let’s say you put a SquareTag on the dashboard, next to the vehicle ID number. You can set up your car’s personal cloud so that all somebody scanning it sees is that it’s your car (or whatever you choose for it to say). But you can also scan the tag every time you have the car serviced, be taken to the car’s personal cloud, and enter whatever you like about the service event, or click on a private link that takes you (alone) back through your notes on the car’s service history. You can also set it up so the service station or dealer can connect their service records to yours, so when you look in your car’s personal cloud, you can also see those other service records. All you need for doing that are logical connections between the car’s tag cloud and the clouds of the other places where data is kept. With a squaretag, it isn’t necessary for any of your things to be “smart.” Instead the smarts are located in those things’ personal clouds.
There is no limit to what we can do with personal clouds because all of them are by nature independent, just as atoms are independent. And, just as certain kinds of atoms bond well with other kinds of atoms to form molecules, certain kinds of personal clouds (such as those of things we possess) will bond well with other kinds of personal clouds (such as human beings with possessions).
Likewise each of our personal clouds can, by mutual agreement, be social in the true and literal sense of the word — just as we are in the physical world. We won’t need to be social only inside corporate systems like Twitter’s and Facebook’s. There will still be administrative identities in the world (such as the ones on our drivers licenses and in employers’ HR systems), but among our sovereign selves we can choose to identify ourselves any way we wish. (Which others can, of course, accept or not.)
While personal clouds today are programmed with an open source language (KRL, for Kinetic Rules Language), and executed on an open source rules engine, what makes them interoperable are a new open standard: the evented API. Open standards are what allow closed (or open) things to connect and do things with each other. For example, it doesn’t matter whether you are reading this on a Linux, Mac, Windows, iOS or Android device. Open standards make it possible for all those things to communicate with each other.
We are at the earliest stage of where personal clouds will eventually go. What we can say with confidence, however, is that they will some day be the way each of us controls our lives, our personal data, our possessions, and our relationships with each other and our things.
We are born as sovereign beings, yet live in a networked world. The Internet as it was designed in the first place respected that. For most of the last two decades, however, we forgot that and built industrial-age systems that subordinated individual sovereignty and autonomy to the conveniences of large companies and governments. We built systems for capturing and controlling people and their things. There was lots of good stuff that could be done with these systems, but they were done at the expense of liberty and freedom for individuals and their possessions. Personal clouds not only promise that liberty and freedom, but provide the means for accomplishing it.
What we do with personal clouds is up to each of us — and to the countless new businesses that will show up to help out. When they do, you can bet a whole new boom of possibilities will show up too. The difference with this boom, however, is that each of us will be in charge of ourselves and what’s ours. That’s new. And it will never get old.
A lot of big companies are eager to get their hands in your pockets — literally. They want your mobile phone to work as a digital wallet, and they want the digital wallet app you use to be theirs.
Naturally, this looks like it should be a big business — and to some degree it is already. But it also hasn’t met promotional expectations. This became clear a few days ago, when comScore released Digital Wallet Road Map 2013, a $4995 report on the digital wallet business. In a press release highlighting the report’s findings, Andrea Jacobs, comScore Payments Practice Leader, said “Digital wallets represent an innovative technology that has not yet reached critical mass among consumers due to a variety of factors, including low awareness and a muddied understanding of their benefits.” Here’s how the release unpacks that:
The current digital wallet landscape remains fragmented among providers because of low consumer adoption outside of PayPal, with only 12 percent of consumers claiming to have used a digital wallet other than PayPal. However, study results indicated that the digital wallet market opportunity could eventually reach 1 in 2 consumers as consumers become more aware of the offerings and educated on their benefits.
Percentage of Total Respondents Aware of Digital Wallet
Percentage of Total Respondents Who Used the Digital Wallet
MasterCard PayPass Wallet
V.me by Visa
One clear barrier to use of digital wallets is that the concept is often difficult to convey and prone to misinterpretation. Even after being asked to review the websites of particular digital wallets, respondents across all wallet brands still scored an average of just 45 percent in terms of demonstrated level of understanding.
Here’s the problem: wallets are personal. Even if you have a wallet with a brand name on it (say, Gucci or Fossil), it isn’t their wallet. It’s yours. What you keep in it, and how you use it, are none of their business. In fact, those companies would never think of making it their business, because all they’re providing you is a place to put your credit cards, your cash, or whatever other flat things you feel like carrying around in your pocket or purse.
So far, all the digital wallets out there are not yours. They belong to some company. You merely use the app. The wallet is their business, not yours. In this respect they aren’t much different than credit cards or various loyalty cards, which are things you put in your wallet; not the wallet itself. The wallet itself should be agnostic, if not oblivious, to what you put in there. It should be like a toolbox, where you can store lots of different tools, made by lots of different companies, made for serving different purposes.
All the digital wallet companies in comScore’s chart have isolated, proprietary and silo’d ways of providing payment benefits to users. Imagine buying a tool box from Sears that could only hold its own brand of tools, which would only work with devices from companies that were partners of Sears. That’s what we have with digital wallets so far. It’s the same problem we had with online systems (AOL, Compuserve, Prodigy, etc.) before the Internet came along. They were closed silos.
The Net works because it is a general purpose system. It isn’t run by any one company. Likewise, PCs are also general purpose systems. The company making them doesn’t insist that it only works with certain other partner companies. In that respect it’s open, just like the wallet in your pocket or purse. Smartphones, on the other hand, are general purpose to a more limited degree. Apple tells you what apps can and can’t run on your phone. Google makes sure some of its own apps (such as its wallet) run only on Android phones — or run better on Android than on Apple’s or other companies’ phones (as it did for years with Google maps for Apple).
Your personal cloud is your personal space, which you run for yourself in the networked world. In it you define the ways that your personal data interacts with the world of things, and of services from companies and other entities. That may sound complicated, but it’s actually no different than the personal space you call your house, your car, and your body. In fact, you can think of a personal cloud as something akin to all three, but in the networked world rather than in the physical one. For more on this read Phil Windley, starting here; and follow what Kuppinger-Colesays about Life Management Platforms (which I recently visited here).
So, to sum up, the main thing wrong with digital wallets today isn’t what they do. It’s that they are called “wallets.” Instead they should be called what they really are, which is payment services. (Yes, they do more, but the main thing they do is facilitate transactions.)
The notion that something so personal as a wallet should be provided for you, as a service, by a company, is typical of the calf-cow thinking that has dominated computing for the duration. There is nothing wrong with this, if it’s still 1995. But it’s now 2013, and it’s time we moved on. And, to do that, I’d like to see real digital wallets — personal ones — come up as a feature of personal clouds. So, let the conversation begin. Then the development.
The Cluetrain Manifesto was a success, and remains so, because it gives lessons in manners to marketing. Thus Cluetrain is also highly sourced by manners-minded marketing folk, who have eagerly leveraged Cluetrain‘s first thesis: “markets are conversations.”
“conversational marketing” brings up about a hundred thousand results
Most of those results are generated by polite marketers. Unfortunately, there are still too many marketers of the rude sort. To these marketers, customers are “targets” to be “captured,” “controlled,” “managed,” “locked in” and otherwise treated without the full respect we grant human beings we interact with personally, in actual conversation. These marketers are the types about which the great Bill Hicks said this:
That was in 1992. Imagine what Bill would say about marketing at the dawn of 2013. Here’s how that picture looks to Luma Partners:
Rotate that thing 90° to the right, so the movement is top to bottom, rather than left to right. Then think about the combined weight of all that marketing, pressing down on the consumer.
No doubt some small pieces of that great mess of marketing are respectful of the consumer. And some of these categories (such as, for example, “publisher tools”) are comprised of companies providing tools for actually interacting with customers, rather than just for targeting at consumers. (The distinction is critical. Doug Rauch, retired President of Trader Joe’s, calls consumer “a statistical category.” He says, “We say customer, person, or individual.”)
Cluetrain was written in 1999, when — compared to the above — digital marketing was still in its Precambrian stage, and was essentially a declaration of independence from marketing. As Jakob Nielsen told me later, Cluetrain‘s four authors essentially defected from marketing and sided with markets against marketing. This was made clear by the Manifesto’s alpha clue, which was written by Chris Locke. Though less quoted than the 95 numbered theses below, it remains the most important:
if you only have time for one clue this year, this is the one to get…
Unfortunately, that clue was not yet true. Our reach did not exceed marketers’ grasp. That much became clear after Cluetrain became a favorite of clueful marketers, but remained largely unheard-of by the rest of us — who were the ones Cluetrain spoke for, and who actually needed help against marketing’s persistent bad manners.
So, in 2006, I launched ProjectVRM to foster development of tools and services that would provide the reach to exceed marketing’s grasp. As of today there are dozens of VRM developers working on the customers’ side.
We have a model for that reach in the brick & mortar world, in the form of well-mannered one-to-one interactions between vendors and customers, in what the CRM business calls the buy cycle and the own cycle. As I wrote here, “Nobody from a store on Main Street would follow you around with a hand in your pocket and tell you ‘I’m only doing this so I can give you a better shopping experience.'” But online, and through our mobile devices, we are being tracked like animals by a business that often rationalizes the (almost literal) hell out of it.
It would seem a lot worse if surveillance-fed “big data” advertising algorithms didn’t also suck at it, most of the time. One case in point: Facebook. Here is my Facebook profile picture and top-level data, plus some screen shots of ads Facebook has presented to me in the last few minutes:
Here Facebook fails to respect a fact recorded in my Facebook profile — that I’m married — and assumes I’m cool with being reminded of my age (which has edged into the final demographic). There is zero evidence that I have (or am interested in) foot fungus. (Is that something old people get? If so, is this ad how one would want to find out about it?) There is no evidence, on Facebook or anywhere in the world, that I might be interested in referral marketing, home security, or a career in hospital medicine (much less in Ohio, to which I have been just once since 1963), or that I’m up for a place in South Beach (where I’ve been just twice, long ago). I’ve also told Facebook, back when its ads came with a feedback mechanism, that I consider Classmates.com a rude pain in the ass. (I am sure they are the source of “classof1996.net” — a year off from my actual high school graduation, by the way.)
So, almost across the board, the ads I see on Facebook are rude, wrong, or both. And I’m sure, in this respect, that I’m no exception.
A couple years ago, the top guy at one of the advertising companies told me something interesting about Facebook and Google. He said they were extremely jealous of what the other could do with advertising, but that they could not do themselves — or, at least, not yet. Facebook was jealous of Google, he said, because Google could advertise all over the Web. And Google was jealous of Facebook, because Facebook could get far more personal with its advertising than Google could. Yet, because we are consumers of those companies’ services, rather than customers, we have no direct, money-backed, truly conversational mechanisms for giving them useful feedback. Such as, “Excuse me, but your manners really suck here.”
Although I am not a heavy Facebook user, I have been on the thing since 2006, and have hundreds of friends there. I am also a highly public person and not hard to figure out if you want to get personal with me. Yet I have never seen a personalized ad that appealed to me with anything I’d call accuracy. Once in awhile I’ll see an ad for something photographic, but I don’t know whether that’s because I do a lot of photography, or because the advertiser is carpet-bombing some large population, or… whatever. As Don Marti eloquently pointsout, the targeted individual in the system diagramed above doesn’t know what’s actually going on. Should he or she bother to care about an ad, the thought balloon over his or her head would say “I don’t know if your company is really spending a lot on advertising, or if you’re just targeting me.”
In Facebook and Google may be forced to ask permission to use personal data, The Guardian visits the prospect of regulatory relief. My problem with that approach is that it assumes that we, as poor “consumers,” are naturally weak. But I don’t think we are. I think we are strong, and only bound to get stronger. That’s why I invite everybody reading this to join Customer Commons, and to start using VRM tools and services. Let’s demonstrate genuine market power, for our good, for the health of the Internet we share, and to give real help to every business that wants to treat real customers with real respect.
While the history of computing and communications often appears to be one led by big entities in business and government, the biggest revolution has actually been a personal one. Each of us, as individuals, have acquired abilities that were once those of organizations alone — and have done far more with those abilities than the big players ever could — for those big players as well as for ourselves.
It started in the early ’80s, when the IBM PC became host to thousands of new applications for individuals. Personal computers suddenly proved to be a far more fertile ground for application development and new ueses than were the old corporate mainframes and minicomputers. Computing was no longer only about calculating and data processing. It was about everything one could imagine. The result was a profusion of new capabilities for individuals that also brought great benefits to organizations of all kinds and sizes.
A little more than a decade later, in the mid-’90s, the Internet did for communications what the PC did for computing. It gave individuals abilities that went far beyond those enjoyed by big organizations anywhere. Thanks to the Net, anybody could connect with anybody (or anything), anywhere in the world, using protocols that nobody owned, everybody could use, and anybody could improve. Even though there were many owned networks within the Internet, none governed the whole, and the result was a system that put every connected thing at zero functional distance from every other thing, at costs that could often be treated as zero. The positive economic and social externalities of the Internet today are beyond calculation. Again, as with PCs, this owes to new power in the hands of individuals that proved good for organizations as well.
Then in the late ’00s, smartphones and tablets put personal computing and communications advances — won by the PC and the Internet — into devices that fit in pockets and purses, running on platforms that invited millions of new applications. Once again, the increase in personal power and freedom proved essential to organizations as well. Initial resistance to BYOD (bring your own device) has ended, and companies now develop their own apps for employees and customers to use on their smartphones and tablets.
The upward trend in personal empowerment will move next to the “Internet of things,” as more of those objects and devices become equipped with computing and communication abilities — and as individuals gain the power to combine and program interactions between those things and the many services available through APIs ( application programming interfaces) and apps. Each of us will be able, either by ourselves or with the help of “fourth parties” (ones that work for us, as do brokers and banks) to control our identities, secure our privacy, and manage our many interactions in the world, without having to rely on any one platform, vendor or other enabling party. Far better economic signaling will move in both directions between demand and supply. Genuine, trusting and productive relationships will develop, and earned loyalty will prove far more useful than the coerced kind. In sum, the market will discover that free customers and citizens will prove more capable and productive than captive ones, and that this will be good for both business and society.
Progress in this direction will not be easy or even. All through the history just outlined, there have also been constant efforts to contain and limit what individuals can do with their computing and communications abilities. Large incumbent players have worked to create dependencies from which we cannot escape, and to resist competition in open markets. In spite of the many advances they have brought to the market’s table, phone and cable companies today still operate actual or virtual monopolies, and have been working from the start — aided by captive legislators and regulators — to subordinate the Internet’s boundless positive economic externalities to their own legacy business interests. Copyright and patent absolutists have also pushed successfully for laws and regulations that thwart or stop innovation and growth outside their own virtual castles.
And now, in many countries that value neither free markets nor free citizens, efforts are afoot to move Internet “governance” (an oxymoron from the angle of the Internet’s founding protocols) from organizations such as ICANN to the ITU (International Telecommunications Union, now part of the U.N.), where they can partition the Net along national lines, censor it (as in China today), and impose tariffs on data traffic across borders — enriching governments at great expense to economic growth and prosperity, and the welfare of citizens.
Yet the computing, communications and programming genies continue to do their magic for individuals and the organizations they comprise and support. Those genies will not go back in their old bottles. Thus the way to bet in the long run is on personal and economic freedom, and the general prosperity that arises from both. The only way to make that bet pay off, however, is to work on the side of individuals and the developers that empower them. That’s our job here at Customer Commons, and we invite you to join us in that work.
Back around the turn of the millennium, I attended a retail conference where two of the speakers were myself and Lee Scott, then the CEO of Walmart. We represented the bookends of demand and supply: as a co-author of The Cluetrain Manifesto, I represented the customer. As CEO of the world’s largest retailer, Lee represented his whole industry.
The location was Lucerne, and the lunch was boxed. It was a nice day, so my wife and I took our boxes outside and sat at a small table near the lake. Lee came over and asked if he could join us. I said sure, and then used this rare opportunity to pump the dude with questions. My first was “What happened to Kmart?” — which was then closing stores and heading toward bankruptcy.
His answer: “Coupons.” Some large percentage of Kmart’s overhead, he said, was devoted to publishing what amounted to its own currency, and then dealing with numerous effects, which only began with the time wasted by handling that currency at check-out. In addition to inconveniencing everybody involved, couponing also had the effect of “downscaling” the demographics of the customer base to a caste then known to the trade as “coupon-clippers.” (This population has now become so large — and expert — that the reality TV show Extreme Couponing persists into its third season.)
Walmart, Lee explained, minimized its dealings with coupons — and even advertising, which was limited (by decree of the late Sam Walton) to some small percentage of the company’s overhead. Instead they let the company’s tagline, “Everyday low prices,” do most of the work. (That tagline was also Sam’s.)
When I asked Lee if there were any large retailers he thought did an especially good job, he singled out Costco, which also succeeded through simplification. (Yes, they do publish and take coupons, but it’s a side thing, rather than the main thing. As a Costco customer you don’t need coupons to obtain the sense that you’re paying a low price for the goods they sell.)
Retailing has long had its time-sucking frictions. When I was growing up, in the 1950s and ’60s, the big one was stamps. The main driver of the trend was S&H Green Stamps, which had many competing imitators. The original idea was for retailers to differentiate from other retailers by offering sheets of stamps with every purchase, which customers could paste into a booklet, which they would later trade in for an outdoor grill, a door mat, or some other item from a catalog. It’s been said that S&H at its peak issued more stamps than the U.S. Post Office, and that the largest press run in human history was the 1966 Green Stamps catalog. Eventually, however, nearly every store offered the stamps, differentiation ended, and whole fad collapsed.
Today we have a similar fad with loyalty cards. Never mind that most retailers (or so it seems) now have them, but that they have costs to both retailers and customers. Here are just a few:
Maintaining two or more prices for items throughout the store
Forcing both personnel and customers to attend constantly to the differences in prices on “discounted” items
Partially or completely obscuring what the “real” price might be. Is the non-discounted price a surcharge for non-card-carrying customers? Probably, if the “regular” price for a dozen eggs is $3.99, and the “discount” price is $1.99 — when, say, Trader Joe’s (which has a single non-discount price for everything) wants $1.99 for the same eggs.
Maintaining “big data” systems for tracking customers and “personalizing” offers for them.
Obscuring the real value of goods gets even more than it already might be.
Coercing loyalty rather than earning it, causing emotional dissonance that can damage a company’s brand value.
All those practices, and many more, are both normative and highly rationalized within retailing today. Yet the notable exceptions, such as Trader Joe’s, reveal how much time, money and effort by both sellers and buyers in systems that are essentially coercive.
What would happen if we began to respect time as our most essential value? Would we have discounting at all? Not sure, which is why we need to talk about it. There are real costs to discounting. If our time has any value at all, then discounting is not free. And the hidden costs may be far higher than the obvious ones.