When social software isn’t
Once again, Facebook has wandered into a minefield and then acted surprised when it lost a leg. In response to user protests, the company has reversed its policy regarding retention of personal data (as we all know, something of a bugbear of mine), in similar fashion to the reversal of policy regarding the Beacon advertising system. Why does this keep happening to Facebook, and why does it point out the fundamental flaw in Web 2.0 business models?
I’m a fan of Andrew Keen‘s critique of Web 2.0 as a viable alternative to existing media, but it’s hard for me to work up too much concern over the death of old media – as far as I’m concerned, it’s just a phase transition that we’re going through. In Chapter 4 of Predictably Irrational, however, Dan Ariely nails it when he describes the difference between social norms and market norms:
So we live in two worlds: one characterized by social exchanges and the other characterized by market exchanges. And we apply different norms to these two kinds of relationships. Moreover, introducing market norms into social exchanges, as we have seen, violates the social norms and hurts the relationships. Once this type of mistake has been committed, recovering a social relationship is difficult.
The problem for web businesses – and particularly for Web 2.0 businesses – is that people enter into them on the basis of social norms. They’re free and they’re friendly, and everybody is welcome to the party, and so when we’re using them we assume that they’ll treat us in the same way as our friends would, keeping our confidences and not abusing our trust.
As soon as those businesses introduce market norms – i.e. as soon as they try to monetise the relationship, which every Web 2.0 business must do sooner or later (and preferably before the venture capital runs out) – then the bond is broken. The fundamental basis of Web 2.0 business – community rather than customer relationships – is not financially viable.
There are people who believe that Twitter (for example) can make money, but it’s telling that for all the wonderful suggestions made by bloggers over the last year, precisely none of them has been implemented. That doesn’t mean that Web 2.0 is dead, but anybody expecting to make any money from their investments is probably going to find their friends leaving the party to go next door.
February 18, 2009