Monetizing Value of Social Computing in Traditional Industries

Whether you call it Web 2.0, P2P, Live! or whatever, the excitement surrounding Social Computing is building exponentially. Social Computing is no longer just Wikis, Forums, Blogs, music downloads, and RSS feeds.  Social Computing has hijacked the Software as a Service (SaaS) and Service Oriented Architecture (SOA) movements and we are seeing the formative stages of a Global SOA that blends Social Computing with machine consumable information processing and retrieval capabilities.  The possibilities are almost as endless as the number of articles, columns, and blogs on the subject.

Social Computing is already hugely successful in many circles, ranging from not-for-profit networking and to commercialization in certain industries.  Yet, despite this rapid and far reaching success we see it having difficulty penetrating traditional brick-and-mortar corporations.

We recently gave an invited talk at a large corporation for their senior IT leaders.  The subject was Web 2.0 but the talk covered the breadth of modern Social Computing trends with an emphasis on monetization.  Like always there were some enthusiastic questions but no serious call to action from the room and no general agreement that Social Computing ought to be urgently pursued.

That was just one in a string of situations where we’ve encountered that response, even from groups in completely orthogonal industries.  For example, we’ve been the invited speakers at several large DoD functions where instead of hyping the monetization scenarios we outline some very compelling benefits from the perspective of collaboration and content exploitation.  Now, for those readers who don’t know the present DoD and Intelligence Community; content exploitation is a huge subject that always gets people’s attention.  You’d think they’d be all over this stuff.  We always get lots of questions and business cards; but in the end there’s no real call to action on behalf of the senior decision makers to make Social Computing a focus of future investment.

Please don’t misunderstand my observation here, I’m not complaining that nobody is hiring our firm for Social Computing projects; that could just as easily be a business development problem, market timing, bad breath, or something else.   The lack of interest seems more fundamental than a dearth of signed contracts; there’s just no interest in committing to an investment.  Moreover, the seniors in both the commercial and government sectors seem genuinely concerned about losing control, even on closed networks, making the whole concept a non-starter with many.

Why the lack of serious consideration?  There's certainly no apathy towards new technology.  Every direction we turn recently we find another SOA initiative, where by the way – most are floundering to meet any objectives.  Yet there is only minor institutional interest in Social Computing despite all the hype in the tech news and from power players like Google and Microsoft.

There are obvious and compelling monetization scenarios for Social Computing in the new industries; primarily those industries that sell over the Internet.  There are also obvious monetization scenarios for any brand or product that relies heavily on fan clubs; such as the entertainment industry, motorcycle manufacturers, video games, and etc.  In many cases consumer products are starting to fit this category.

However, these industries are but a tiny fraction of the overall market.  Most clients we meet are well established brick-and-mortar firms that sell boring things like insurance, hotel rooms, financial products, professional services, and etc.

What is the monetization story for Social Computing in these corporations?

How do you approach a VP of Marketing at a large insurance company and explain that a chunk of CY’06 marketing dollars needs to go toward this “computer based phenomena” that, oh by the way, is on a completely different dimensional plane than the self-service website they have today?

ROI is how most people would sell the idea.  Getting a grip on the “I” is fairly easy, but pointing to a compelling and yet realistic “R” is where someone needs to eat their Wheaties.

This is where the Global SOA comes into play.  What is Global SOA?  Basically, it starts by porting the back-end services that public websites sit on and making them into secure services that are machine-callable over the public Internet.  Keep in mind that this is different than simply making machine-callable services out of the functions a website offers users, it is more about the services behind the website than the services of the website. In pushing the Global SOA and Web 2.0 institutions are publishing relatively fine grain services, an API if you will, to let third party developers recreate many capabilities of their website.  The power is that a third party can mix services from your site with services from other places, creating a completely new offering that is itself a machine callable service.  With recently evolving sophistication even non-technical users are able to blend their own mixes of services.  This, theoretically, can lead to non-obvious sales channels and access to more customers through micro markets.

See the problem yet?

If you represent a hotel chain what are the scenarios you might construct the “R” out of?  Perhaps a third-party firm mashes feeds from weather services, travel services, airlines, and etc. to anticipate when travelers will be unexpectedly stranded.  The firm might take preemptive action by reserving blocks of hotel rooms, arranging van service, and pushing offerings to stranded traveler’s Blackberrys.  In this case your hotel chain might get a regular flow of non-discounted room sales that it otherwise might never have seen.  This would be a competitive advantage if your competition hasn’t yet invested in Global SOA.  Moreover, the Social Computing aspects of the third-party site might provide opportunities for discussion forums, linking & paging services, and other things that ultimately link customers to your reservation services.  It all contributes to helping you tap the micro market of stranded travelers.

This scenario sounds pretty good; that is until you consider the next scenario.  In the next scenario a third party developer represents an escort service that among other things bundles hotel reservations with what it sells.  While this could be a source of additional business for your hotel chain, it absolutely is not the market positioning your brand wants to be associated with. Moreover, if there are intermediaries it could take months or years before you ever learn of your “B2B association” with this escort service.  In fact, it might take a concerned consumer to write you a letter before you ever know about it.

To most executives, that’s nuff said. Social Computing seems too wild and out of control for brick-and-mortar industries.  In the end they gaze on it with passive curiosity but elect to wait until things mature more.

Combine the loss of control with the fact that other sites, possible competitors, or other commercial business will be using your IT systems as “their infrastructure” and that will really turn executives off!

Ultimately, I think the monetization storyline for Web 2.0, Global SOA, and the entirety of Social Computing has yet to be written.  I don’t think that we will see compelling monetization scenarios for the traditional brick-and-mortar industries this year.  In the meantime, we should expect Social Computing to flourish in other industries, and for many it is already a big factor.  Examples of commercially effective Social Computing investments range from video game firms to manufacturers like Harley Davidson and other consumer-based companies with a fan-club type marketing focus.  Fan-club marketing creates niche micro markets that are extremely effective for sales; in many cases surpassing brand-loyalty as a consumer decision factor.  We’re sure to see this exploited more in the coming years.  But what about Insurance, Hotel Rooms, Banking, and etc.?